Question

How to solve problems of tradeoff between risk and money?

Answer 1

Risk-Return Tradeoff

WHAT IS THE 'Risk-Return Tradeoff'

The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if the investor will accept a higher possibility of losses.

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