What is a risk-free investment and does it exist?

A riskfree investment is a type of investment that guarantees the return of the principal amount and offers a fixed rate of return. In theory, a riskfree investment does exist, but in reality, all investments carry some degree of risk.

The most commonly considered examples of riskfree investments are government bonds and treasury bills, which are issued by the government and backed by the full faith and credit of the government. These securities are considered to be nearly riskfree because of the government's ability to raise funds to pay off its debt. However, even government bonds and treasury bills are not completely riskfree and are subject to inflation risk, interest rate risk, and currency risk.

In general, the lower the risk of an investment, the lower the potential returns. Investors should carefully consider their financial goals and risk tolerance before deciding on any investment strategy, including those that involve riskfree instruments.