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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.



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