Let’s say an investment has a 20% return and your calculation gives a 0% default chance for the first four years. You can structure your investment to compound for the first four years and get back your initial capital after the fourth.
You are essentially now (4 years later) on a risk free 20% return. Your initial capital can be reinvested somewhere else.
If there is something I learned trading the financial markets is that structuring is the only thing that matters and what will bring your returns. The other thing I learned is that real 20% returns with little risk are abundant if you are looking hard enough and comfortable executing exotic trades.
It slightly misses the point that actual threshold depends on inflation. 20% annual return on an insured bank deposits is absolutely normal for currencies with 25% annual inflation.
I suppose another piece of financial knowledge is "check whether figures are in real or nominal units (i.e. inflation adjusted or not) and apply adjustment".
This has been greatly simplified by inflation being low for a very long period until the recent transient bump.
So true. Vietnam offers ~7% on bank accounts and inflation is much higher than that. Although, of course, the government doesn't admit that either and reports it at ~4%.
Let’s say an investment has a 20% return and your calculation gives a 0% default chance for the first four years. You can structure your investment to compound for the first four years and get back your initial capital after the fourth.
You are essentially now (4 years later) on a risk free 20% return. Your initial capital can be reinvested somewhere else.
If there is something I learned trading the financial markets is that structuring is the only thing that matters and what will bring your returns. The other thing I learned is that real 20% returns with little risk are abundant if you are looking hard enough and comfortable executing exotic trades.