but the risk for equities remains in general significantly higher then the one for e.g. government bonds
I would agree that this is true, but I’d caution against thinking of even government bonds as a textbook “risk-free” investment. There seems to be general agreement that balancing government budgets would create economic tragedy, but in that case the only reason to expect your bonds to be repaid is because someone else will buy more bonds later (because he expects to be repaid by someone else buying even more bonds even later). This reasoning has been correct for US bonds for several decades, but it’s still a little too close to “housing prices always rise so who cares if some mortgages default” or “I’ll resell the stock after it goes up more so who cares if the company is making a profit” for my liking.
On an unrelated note: has nobody mentioned tax issues yet? Canadians now have Tax-Free Savings Accounts available, and avoiding taxes on capital gains may be nearly as important as avoiding fees from overly expensive financial institutions. Keep enough liquid savings for emergencies and unexpected expenses, though.
I would agree that this is true, but I’d caution against thinking of even government bonds as a textbook “risk-free” investment.
Correct consideration, I personally know a greek guy who bought decennial bonds from his own country five years before the collapse and got heavily screwed. This should be a more remote possibilitie for e.g US bonds, and it’s kind of a “second order consideration” for someone who is just approaching the idea of investing money.
I’m not sure of the taxing policies in the US, so I can’t really help, but the priciple it’s true. One of the reasons why I was suggesting Insurance Companies in another post is that they usually are subjected to a different (lighter) tax regime.
I would agree that this is true, but I’d caution against thinking of even government bonds as a textbook “risk-free” investment. There seems to be general agreement that balancing government budgets would create economic tragedy, but in that case the only reason to expect your bonds to be repaid is because someone else will buy more bonds later (because he expects to be repaid by someone else buying even more bonds even later). This reasoning has been correct for US bonds for several decades, but it’s still a little too close to “housing prices always rise so who cares if some mortgages default” or “I’ll resell the stock after it goes up more so who cares if the company is making a profit” for my liking.
On an unrelated note: has nobody mentioned tax issues yet? Canadians now have Tax-Free Savings Accounts available, and avoiding taxes on capital gains may be nearly as important as avoiding fees from overly expensive financial institutions. Keep enough liquid savings for emergencies and unexpected expenses, though.
Correct consideration, I personally know a greek guy who bought decennial bonds from his own country five years before the collapse and got heavily screwed. This should be a more remote possibilitie for e.g US bonds, and it’s kind of a “second order consideration” for someone who is just approaching the idea of investing money. I’m not sure of the taxing policies in the US, so I can’t really help, but the priciple it’s true. One of the reasons why I was suggesting Insurance Companies in another post is that they usually are subjected to a different (lighter) tax regime.