I went for an evening walk earlier and during that one hour, I thought about many things. Well, that isn’t unusual for me. I think too much, many tell me. One of the things I thought about was the issue of debt used in investments.
For example, how risky is an investment for which the debt is meant to fund? People always wonder how to measure risk properly and there are people who are paid to study and manage risks. I am not a professional in this area and I only have a very simple understanding of the matter.
One consideration which is probably universal is that of time. Time? Yup, time.
Basically, the longer a business investment makes me wait before I am rewarded, the riskier it is. The prospective returns will have to be much higher to compensate for this risk. So, if debt is used to fund …