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Reward and Risk in Alternative Investments
The point of investing is to make a profit. Some folks are happy to stay a percent or two ahead of inflation and simply not lose any of their hard-earned money. And others would prefer to multiply their holding every few years. How do you find success in making more money and not taking on more risk? One of the approaches that have worked is to pool assets and then invest in a broad range of more risky but better paying alternative investments. In regard to reward and risk in alternative investments, we would like to look back a few years to Michael Milken and junk bonds and then fast forward to today and a company that is selling alternative investments and wants sell them to masses.
Michael Milken and Junk Bonds
When he was only a 20-year-old student at the Wharton School of Business, Michael Milken read something written by a member of the Federal Reserve Board and over the years put the idea into action. Companies that were poor investment risks had to pay much higher rates of interest in order to sell their bonds. Investors demanded a higher return because of the increased risk that the company would default on its debt. But, if an investor purchases a wide range of these bonds, the rate of return was such that, even with defaults, the total investment made a better return than high grade bonds.