Saving, Managing Debt, and Budgeting
Risk / Reward
What is a “risk/return trade-off?”
A risk/return trade-off is the principle that the higher the level of uncertainty as to a potential return, the higher the reward. An investment with a relatively predictable low level of uncertainty will have a lower return. This is why individual investors must clearly understand their personal tolerance for risk in order to make the right choices when investing in individual stocks.