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explain the risk/return trade-off

explain the risk/return trade-off

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Risk / Return trade-off :

The trade-off which an investor faces between risk and return while considering investment decision is called risk and return trade-off. This is due to relationship between risk and return. Higher risk results in higher return and lower risk means low level of return. There is direct relationship between risk and return.

  • It determines how aggressive an investor with their assets in the portfolio. It is most important in modern portfolio theory.
  • Long-term strategic decisions will help the organization to maximize their return and net income from its portfolio investments. So that they will able to meet their debt obligations in the future.
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