Risk and return

Is it better to invest in higher risk assets (e.g. equities) or lower risk assets (e.g. bonds)?

Here is my answer:

a) If you wish to get a higher return, you should invest in equity
b) Over the long term, equity gives an annual return of 2% to 4% higher than bonds

You can reduce your risk of investing in equity as follows:

a) Invest in a diversified fund
b) The fund should be invested in only shares of blue chip companies, i.e. the largest companies in the market
c) Choose a low cost fund (i.e. expense ratio less than 1% per annum)
d) Invest for the long term (i.e. 10 years or more), so that you can average out the good and bad years.

Be ready to take "diversified" risk and get a better return. There is no need to invest in highly speculative asssets, such as emerging markets or highly priced commodities, to get a higher return.