Investment Fundamentals
Risk-Return Trade-Off
Definition
What is Risk-Return Trade-Off?
The principle that investors generally require greater expected returnThe probability-weighted average of possible future returns or an estimate of future return. for accepting greater uncertainty or potential loss.
Example in practice
How This Looks in Practice
A risky corporate bondA bond issued by a company. normally must offer more yield than a short-term government bill.
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Related Terms
Investment Fundamentals
Principal
The original amount of money invested or lent, excluding later returns.
Investment FundamentalsCapital
Money or other resources committed to produce income, growth, or another economic benefit.
Investment FundamentalsInvestment
An asset or commitment of money made with the expectation of future income, growth, or both.
Asset ClassesAsset
Anything with economic value that can be owned or controlled.