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Username: Maria

Rating:
Guru Stars

Asked to: Dara Madee

Date Created: 25 Dec 2018
Category 28
Tag Financial
Question Please give the definition of Eat Well, Sleep Well.
Advice from Guru
Hello Maria,

"Eat well, sleep well" is an adage that, referring to the risk-return tradeoff, says that the type of security an investor chooses depends on whether he or she wants to generate high returns or have peace of mind. This tradeoff can be thought of as balancing return needs and risk tolerance.

Investing in securities with high expected returns offers investors the potential to generate large earnings (eat well), but the high risk and volatility associated with these securities might lead to losses, or, at best, a great deal of volatility along the way. By contrast, investing in low-risk assets can minimize the potential for loss and generate smoother returns (sleep well), though the expected returns will be lower.

Investors often must balance their return needs and goals with their individual risk tolerances. This tradeoff can be referred to as “eat well, sleep well.”

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