High risk does not equal high return.
We have often heard some version of the phrase high risk equals high reward.
But if simply taking on more risk ment getting a higher reward, then it wouldn’t be higher risk.
This is best examplified in the commonly shared chart at the top of the image below.
This chart is very misleading, it implies there is a direct correlation between the amount of risk you take on and the amount of reward you will recieve in return.
The second chart at the bottom of the photo is a far better representation of the actual risk return dynamic.
The bell shaped curves on this chart represent the distribution of likely probabilities as you work your way out the risk curve.
Simply put, as you take on more risk, sure the precieved probability of gain should increase, but the probability of loss also increases significantly along with it.
If you look at the first curved bell on the left side, low on the risk reward axis. We can think about that as a 10 year government bond which Warren Buffet said is about the closest thing you can get to the highest risk free return. Probablily of loss is low, upside capped and not very high.
If we look at the largest curved bell on the right side of the chart, we could think about that as a speculative stock or crypto coin. Probability of a pecieved outsized return should be present, but the probability of investment going to effectively 0 is also high.
When it comes to property, we like to think about this in a variety of different ways using this framing.
Single industry town versus diverse economies in major capitals.
Brand new versus established
High rise tower versus single family home
Perceived long term reward needs to be balanced with perceived risk and we try manage this as effectively as possible in our business and tailored to clients own risk profiles.
All posts on here are written entirely by myself.
#risk #investment #brisbanebuyersagent #brisbanerealestate #melbournerealestate
When people say house prices could never double from current levels…
Estimated price points for houses in 1977 and median house prices in those suburbs as of March 2026.
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Brisbane house prices over time.
Looking at the difference between house prices in the year 2000 and the typical value of houses in those suburbs today.
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Dwelling value growth…
Growth rate in home values since the RBA began raising the cash rate from 0.1% in May 2022 to a high of 4.35% and currently sitting at 3.85%.
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Risk is not a function of asset quality.
A high quality blue chip asset can be priced so high that it is high risk and a low quality asset can be priced low enough to make it low risk.
I would class this type of risk as Entry risk in property investing. Separate from long term risk.
Risk needs to be thought of differently in property investing than say shares. Thats because the cost of getting in and out of property is so high.
Entry price risk needs to be balanced with long term risk, which is different.
This is why as a business we prefer to purchase under valued blue chip real estate in our major capitals.
We feel major capitals with large diverse economies will provide lower long term risk and ultimately higher capital gains over the coming decades than smaller regional markets, especially those smaller markets that are reliant on one or two industries.
Of couse, major capitals have thousands of suburbs and only a few areas meet strict investment criteria from a long term risk perspective.
When it comes to entry risk then, we have found that there is generally only a dozen or so suburbs that are investable at any given time.
We are only investing in 6 suburbs in Melbourne currently, out of the 600+ suburbs there, as an example.
Doesn’t mean there isn’t plenty of other great areas to invest in Melbourne, there is, but we feel there is just more value in these suburbs today.
Risk is pretty boring to think about and never really talked about in relation to property investing. I always find this strange as every investment needs to be adjusted for risk and individuals own risk tolerances.
#brisbane #brisbanerealestate #melbournerealestate #brisbanerealestateagent #brisbanebuyersagent
Don’t be the person on the left…
Most people will never buy an investment property, despite the fact that every adult at some stage says they will.
9% of the population will buy an investment, roughly 70% of those investors will purchase only one property. 90% of all investors will only ever buy two or less.
A tiny fraction of the population will purchase 3 or more investment properties. Aim for the less than 1% who do.
#brisbane #brisbaneproperty #melbourneproperty #queensland #sydneyproperty
Should you buy here?
Not financial advice, educational and entertainment purposes only.
Before buying any investment properties in any state or suburb, contact your financial advisor for advice.
#Brisbane #brisbaneproperty #melbourneproperty #brisbanebuyersagent
Median income to median house price ratios
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