Risk-return trade-off

Definition

The risk-return trade-off is the principle that potential return on an investment increases with the level of risk associated with it. In other words, investors expecting higher returns must be willing to accept more risk.

Related terms

Investment: The act of allocating resources, usually money, with the expectation of generating an income or profit.

Portfolio Diversification:

A risk management strategy that mixes a wide variety of investments within a portfolio to minimize risks.

Financial Manager:

A professional responsible for managing an organization's financial health by developing strategies and plans for the long-term financial goals