Modern portfolio theory has a fair amount to offer: Combining investments with different properties really can outperform a concentrated portfolio
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I had assumed equal durations on the two investments, as otherwise the shorter one has an obvious advantage. If one has a shorter minimum investment time than the other, then liquidity preference is relevant, yes. The observed pattern is that the markets tend to overpay for liquidity ... which is, of course, outside the scope of straightforward Modern Portfolio Theory.
In short, a lot of things matter about an investment, and trying it distill it down to a small set of numbers loses something important.
As Jon commented, I think he assumed the same time frame for both investments, but even still, in investment #1, if you reinvest everything and "let it ride" each time:
For investment #1, lets say the time horizon is 5 years to get
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In short, a lot of things matter about an investment, and trying it distill it down to a small set of numbers loses something important.
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For investment #1, lets say the time horizon is 5 years to get ( ... )
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