You may have heard of the “turkey drop” — the phenomenon of couples returning home for the holidays only to break up. The same reasoning behind whether or not to stay in a relationship can also apply to the “efficient frontier” of investing. So what exactly is this efficient frontier? It’s the ideal risk-to-return ratio in an investment portfolio. And it can apply to relationships just as well as stocks! In both cases, you’ll need some risk and excitement in order to reap the rewards, but you don’t want too much.
For example, is your relationship is stable but incredibly boring? You may want to call it off. Same for your investments. After all, you can’t get great rewards without a little risk! On the other hand, is your relationship exciting, but too emotionally risky? Maybe it’s time to end it. Similarly, you don’t want to make investments that are too risky, even if they offer great returns.
The opinions expressed in this article are those of the author alone and do not necessarily reflect the official policy or views of CentSai Inc.