posted on 06-06-2019

Eat Well, Sleep Well

Updated October 1, 2019

What it is:

The phrase "eat well, sleep well" refers to the risk-return trade-off that most investors must make.

How it works/Example:

When investors decide which securities to buy, they also make a decision about the risk they are willing to bear. Buying high-risk securities offers the possibility of earning high returns and big profits ("eating well"), but buying low-risk securities offers the possibility of earning reliable returns ("sleeping well").

Why it matters:

The risk-return trade-off is one of the most fundamental decisions an investor must make. Through diversification and a variety of investing strategies, most investors try to eat well and sleep well -- but few succeed.