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Barry Ritholtz

Low Returns Stoke Investor Appetite for Risk

Yes, the returns can be big, but the odds of underperforming also go up.

What are the odds?

What are the odds?

Photographer: Jean-Francois Monier/AFP/Getty Images

 “Investing is a problem that has been solved,” Dave Nadig, managing director of ETF.com, likes to say. Keep it simple, hold down costs, diversify, invest for the long run and let the magic of compounding work for you. For most investors and money managers, statistically speaking, it is a high-probability solution.

Despite this, more and more people seem to be ignoring those investor-friendly moves. Instead, they have been embracing higher-risk strategies that hold out the theoretical possibility of higher -- and in some cases, much higher -- returns. Among the approaches: using leverage, buying farmland or timber acreage, betting on commodities and buying into private-equity and venture-capital funds.