What criteria constitute highly reliable rates of return?

Highly reliable rates of return are characterized by the presence of liquid and transparently priced securities with minimal external cash flow.

This reliability stems from a few key factors: When securities are liquid, it means they can be bought or sold in the market quickly without causing a significant impact on their prices. This ensures that the rates of return are not only reflective of the inherent risks associated with the securities but also less susceptible to manipulation or mispricing that can occur in illiquid markets.

Additionally, the transparency in pricing provides clarity and reduces uncertainty for investors about the value of their investments, allowing for more informed decision-making. Minimal external cash flows further contribute to reliability because they limit the number of variables influencing the return, making predictions more straightforward. This stability is essential for investors seeking consistent performance rather than erratic or speculative returns.

Other approaches such as investing in risky securities with high volatility can lead to returns that are more unpredictable and thus less reliable. Similarly, focusing on securities that go through regular market fluctuations can also introduce greater uncertainty, as their value can significantly vary over time. Long-term investment strategies may enhance the likelihood of positive returns but do not intrinsically ensure reliability without the context of market conditions and security characteristics.