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Chapter 12. Managing Your Investments > Investing Is Not a Two-Dimensional Proc...

Investing Is Not a Two-Dimensional Process

Earlier in the book, we talked about investments being three-dimensional. This remains an important concept as we look at managing assets. The first two dimensions are time and returns (value). Time itself is one dimensional, meaning that we don't influence time—we can't speed it up, and we can't slow it down. Returns are not one dimensional. Because they can be affected by any number of factors, some macro-economic (like how our country or the world is faring) and some micro-economic (like the status of a given industry or market sector). As you consider risk and return, try to consider this dimensional element of investing, and keep it as a visual.

Figure 12-1. Range of Risk

* Variable annuities offer almost all of these investments, so the risk is the risk of the underlying investment, not the annuity itself.



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