Investing is an almost prototypical risk versus reward activity. The higher the likelihood of things not working out as planned, the larger the share of the profit is demanded in return. Stable financial ventures that have returned a steady profit for decades have no need to pay severe risk premiums compared to other investments. Startups operating out of somebody’s garage must offer much higher payoffs in the event that the ship does come in rather than sink. The investors who risked money on a Microsoft or HP when they were just getting started ended up as zillionaires. The ones who backed their startup competitors likely ended up with an investment loss deduction on their taxes.
When it comes to investing in Europe today, the issue is really one of correctly judging the downside risks of the euro currency rather than simply looking at the financial prospects of the company under consideration. Even the best European blue chipper contains an unanticipated element of increased risk due to the travails of the currency in which their stock is denominated. As the euro continues its gradual slide downward against most other currencies, investors need to ask themselves if the risk-reward ratio needs to be adjusted in their favor due to this creeping devaluation.
Since much of the proposed remedy for the Eurozone involves retrenchment and budget cutting in nations that carry a very high percentage of public sector participation in the GDP, there are certainly growing indicators of recessionary pressures on any company heavily involved in Europe. Worst of all, the possibility of a sudden catastrophic currency event is not as much of a black swan as government officials and European stock brokers would like for everyone to believe.
While there are many solid European companies that will be around for a long time to come, their current price needs to be adjusted on the basis of current events. There is an ongoing and accelerating risk of currency devaluation. There is an ongoing and accelerating risk of recession. Under those circumstances, European stocks need to be offering a substantial risk discount over their normal price trend lines or else it would probably be best to ride this particular storm out in some other port of call.
This is why you can search for Canadian company on Stocktipr and find better low risk investment.
What about you? Let me know what you think in the comments!
Nicolas
