Why do investors not get compensated for diversifiable risk?

One of the tenets of modern finance is that risk is seen from the perspective of the marginal investor[1]. In publicly traded firms, it is highly likely that the marginal investor is well diversified[2] and hence concerned about only about market risk[3]. It follows therefore, that all investors must also consider only market risk no … Continue reading Why do investors not get compensated for diversifiable risk?

Why you should think beyond fixed deposits

This is a story of two friends – Katrina and Deepika. Both of them got married in the year 1980. Katrina comes from a conservative family whose members mostly "invest" their hard-earned money in a bank fixed deposit. The reason was simple – fixed deposits are “safe”. There is no fluctuation and you consistently earn interest … Continue reading Why you should think beyond fixed deposits