The risk-return tradeoff

The risk-return tradeoff is a fundamental principle in investing that means higher potential returns usually come with higher risks. In simple terms, if you want to earn more money from your investments, you often have to accept greater chances of losing some or all of your money. Conversely, safer investments tend to offer more modest returns. This balance helps investors choose investments aligned with their comfort level and financial goals, understanding that maximizing gains involves accepting a proportional level of risk.