The Finance Industry’s Most Prized Theory: Tarnished

Unless you live under a rock, I’m sure you’ve heard a variation of this investing maxim:

“To earn high returns… you must assume high risk.”

There’s an ounce of truth to this saying… but it mostly leads investors astray.

Today, I want to show you how three specific low-risk investments helped my subscribers turn $20,000 into $40,010 – between January 19 and March 22 of this year.

Before I do that, though, let me explain where the “high risk = high returns” idea comes from. And then I’ll show you why, in some market environments, the relationship is exactly the opposite.

It all starts with the finance industry’s most-prized theory: the Capital Asset Pricing Model (CAPM).

Introduced in the 1960s, the Capital Asset Pricing Model was the first major theory to explain the relationship between investment risk and return.

The idea is simple…

If Stock “A” is twice as volatile as Stock “B”… then Stock “A” should provide investors twice the return as Stock “B.”

After all, why else would an investor suffer through twice the volatility… if they aren’t fairly compensated for the excess emotional torture?

The theory is surprisingly simple and intuitive – so much so that financial professionals and investors alike have “bought it” for the last several decades.

And even though a slew of research has since discredited the simplistic “low risk = low returns” relationship, most investors still think you can’t make big money in low-risk investments.

I’m here to tell you: YOU CAN!

Earlier this year, I recommended three low-risk stocks in my trading services. And even though these stocks were definitely “low risk,” they generated much bigger gains than the overall stock market – eventually turning a $20,000 investment into $40,010 in just two months.