r/PeterExplainsTheJoke • u/Melodic_Judge_129 • 9h ago

Meme needing explanation Petah?

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u/extinct_cult 7h ago

Investing carries risk. Sitting on your money does not. The rational choice is not just to maximize returns, but to also account for risk.

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u/OpenRole 6h ago

Expected returns account for risk. If expected return is > 1, rational move is to invest, despite risk

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u/eternal-limbo 3h ago

Expected return accounts for risk neutrally, but (for a lot of rational reasons) people are risk averse. As risk increases, expected return also must increase to be a “good investment”.

This is why, for example, stocks have a higher expected and historical return than bonds, which have a higher return than T-bills

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u/OpenRole 2h ago

So this is objectively a lie

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u/eternal-limbo 23m ago

Sorry, what’s objectively a lie?
Do you think investments with equal expected returns are always equally good?