Question

When we speak of return and risk from investing in a financial asset, what do we mean?

Answer 1

Return in Investment : It simply gives an idea about historical return or future expected to return when investing in a financial Asset. We can check past performance or historical data to check returns of any financial assets on any time horizon.

Risk  in Investment : Risk is the scenario when your Investment will deteriorate in the future. Simply an investor always wants some positive returns on investment. But chances are there return becomes - negative. Risk try to measure those scenarios. What are the probabilities it will become negative?

Risk and Return: An investor can not reduce his risk to zero. There are chances that his invested capital may deteriorate in time. That's why he has to trade-off between risk and return. Higher the risk higher will be return.