Risk-Reward Trade-off

The risk-reward trade-off is the idea that higher potential returns on an investment usually come with increased risk of losing money. Essentially, if you want the chance to earn more, you must be willing to accept more uncertainty and potential loss. Conversely, safer investments tend to offer lower returns. This relationship helps investors decide how much risk they're comfortable taking for the possibility of higher gains, balancing their financial goals with their risk tolerance. It's a fundamental principle that guides investment decision-making.