Is investment really so difficult?

Do you hate mathematics when you're studying in school? Maybe.
Investment is all about mathematics and numbers? Not really.
Is investment really so difficult? Well, not that, but this is up to yourself to determine :)

What a mess here?

Let's play with some equations today.
And some simple equations forward.


High reward, short time = High risk
High reward, low risk = Long time
Short time, low risk = Low reward

Looks pretty simple? Don’t worry, it revolves around this few constants.

So how to deal with it? Frankly speaking, the answer varies pretty much for the different situation. 

High Reward + Short time = High Risk

So you want a high reward in a short time frame? You will need an extremely volatile market in order for that to happen. With an extremely volatile market, you will be exposed to a greater risk and prices are bound to swing and bounce up and down. If it goes up, congratulations. The risk you’ll be facing here is IF it goes the other way.

Speaking of short time frame, you should be considering on trading and not investing. This will also mean that you’re buying and selling for the capital gain.

Examples of tools or investment that will be able to help you with it: Cryptocurrency, Leverage, Technical Analysis.

Now a good question you should ask yourself is: Can you stomach the risk and sleep soundly at night? Or perhaps you may not even be holding it through the night!

High Reward + Low Risk = Long Time
Now, it does not necessarily mean LONG. But for sure, you must have the mentality to hold onto it for a decent period of time. It might be months, years or even decades. By saying low risk here, it does not equate to NO RISK. Disruption might come kicking the ass of the company you own, causing the growth to slow down or even travel southwards!

To mitigate or to further lower the risk, the key here is diversification. The more diversified you are the lesser the risk. Diversification does not only mean diversifying your equity holding to hold stocks of different sector but beyond it.

If you’re a DIY investor, handpicking your basket of stocks from the market, it will be good that you pay attention to news and reports of the company you hold for a clearer picture of what is going on. 

There’s many types of investment that will satisfy this criterion such as bonds, stocks etc. and one good tool you can here is fundamental analysis.

If you are looking for even lower risk, go for fixed deposit. The additional risk that you’re taking for investment in the stock market will be compensated with a greater return. 

Short time + Low Risk = Low Reward

Now this is related to point number 2 up there. With a shorter time-frame, the returns will not be as significant when you compare to a longer duration. Needless to say too much about this.

The most important part is the decision making part towards how much you allocate to each part.
Diversify your investment to these 3 areas and you'll be benefiting from each of the scenarios. 

How you want your investment to go will determine on how much you "risk" and allocation you place into the type of investments. But please remember that, regardless of situation, nothing beats sleeping soundly at night :)