Risk and reward have an inverse relationship and forms the base of investing in any security or asset. Generally, the higher the risk, the higher the expected reward and vice versa. If this is not true, market forces, bring back the asset price to an equilibrium where the price reflects its risk proportionately. This is also important as different investors have different risk profiles. A risk-seeking investor would purchase different assets (with higher risk) than a risk-averse investor. This relationship also forms the base of portfolio management, where securities are added according to their risk-reward profile.
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