Definition Of Risk Return Trade Off

The risk return trade off is the concept that the level of return to be earned from an investment should increase as the level of risk increases.

Definition of risk return trade off. The risk return tradeoff is an investment principle that indicates that the higher the risk the higher the potential reward. Risk return trade off is the relationship between the risk of investing in a financial market instrument vis à vis the expected or potential return from the same. Risk return trade off definition the relation between risk and return that usually holds in which one must be willing to accept greater risk if one wants to pursue greater returns. Definition of risk return trade off.

Conversely this means that investors will be less likely to pay a high price for investments that have a low risk level such as high grade corporate or government bonds.