Risk is to your advantage

I advise investors to invest in a large, well diversified mutual fund, such as the combined fund operated by NTUC Income. They ask, "is it risky?"

I reply, "yes, but risk is to your advantage". Here is my reason:

- if you invest $100,000 to earn 2.5% for 10 years (ie a safe investment), you will get $128,000

- if you invest to earn 6% (ie a risky investment), you will get $178,000.

- risk can work both ways - you can get more or les than $178,000 at the end of 10 years

- if you get more than $178,000, you can realise your investment

- if the market is bad and you get less than $178,000, you can wait 1, 2 or 3 years for a better time to realise your investment

- risk is to your advantage, if you can wait for the right time to realise your investment.

Many people who attend my educational seminar agree with my statement, "Risk is to your advantage". They choose a fund that has a higher proportion invested in equities.