Is there anyone in the world who can win a marathon and also be in the top three in a bodybuilding competition? Definitely not. This is because long-distance running causes the body to secrete a substance that inhibits muscle growth, and it can even break down muscle tissue. The title of marathon champion and the status of a bodybuilding expert cannot be achieved simultaneously.
In investment, there are three key elements: liquidity, safety, and profitability. They also cannot be obtained simultaneously.
Liquidity: It refers to the ability of an asset to be quickly and without loss of value converted into cash. High liquidity means that assets are easy to buy and sell, with little or no transaction costs and time delays.
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Safety: Also known as risk, it refers to the risk of capital loss in an investment. High safety investments mean lower risk, and the principal of the investor is relatively safe.
Profitability: It refers to the returns that an investment can bring, usually measured by the rate of return. High profitability means that investors can obtain higher profits from the investment.
In investment, there is a "impossible triangle" theory. That is, in one investment, at most two of the three elements of liquidity, safety, and profitability can be obtained at the best, and it is impossible for liquidity, safety, and profitability to be the best at the same time.
From the perspective of financial product selection:
If an investment has high liquidity and high safety, it may not provide high returns. For example, demand deposits in banks and money market funds, bond funds. They can be withdrawn at any time and are very easy to preserve the principal, but the rate of return is relatively low.
If an investment can provide high returns and high safety, it may lack liquidity. For example, three-year deposits, securities income vouchers, antique transactions, etc., their returns are relatively high, but they have very poor liquidity, that is, they cannot be sold for many years.
If an investment has high returns and high liquidity, it may have to bear higher risks and lower safety. Representative financial products include stocks, futures, options, junk bonds, and so on.From the perspective of stock investment methods:
Short-term and medium-term trading, characterized by high liquidity and the pursuit of high returns, is doomed to lose the element of safety. That is, it has to bear a higher risk. High risk means that most people will fail. Therefore, it is destined to be a way that only a few people can make money.
If you want to make a lot of money safely and retain safety and profitability, there is only one method - that is, to sacrifice liquidity at the cost of long-term value investment. Holding for five, ten, or even more years is a very counter-intuitive thing, so only a few people can do it, and this also determines that only a few people can make money.
In stock investment, if you adopt a method with high trading frequency and low risk, this kind of "sheep shearing" operation method includes intraday trading, hedging strategies, quantitative trading, and so on. According to theory, they must have a lower return. If, on the other hand, this method has a high return, then its method must be kept secret, and it is also destined to be a method that only a few people can make money.
So, I can see that there is no way in the world to make money quickly, a lot, and with low risk at the same time. Even if there is such a secret method, due to its high difficulty or threshold, only a few people can master it. Therefore, there is no method in the world that can make everyone make money.
Then is there a simple and stable way to make money?
Yes, there is. Only by sacrificing liquidity and maintaining long-term patience, investing in broad-based index funds for years and decades like a day. Of course, this is also something that most people can't do.
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