How a rational investor chooses
Two investments, one simple rule: more return for the same risk.
For educational purposes only. Simplified illustrations to help you understand how things work. Not financial, investment or tax advice, and not a recommendation.
The rule: for the same risk, take more return. For the same return, take less risk.
Investment A
Investment B
Rational pick: A. Same or better return, with the same or less risk.
- Same risk? Take the higher return
- Same return? Take the lower risk
- Otherwise it's a trade-off that depends on you
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