What is the risk-return tradeoff in investing?

The risk-return tradeoff in investing refers to the principle that potential return on an investment increases with an increase in risk. Investors must decide how much risk they are willing to take for the chance of higher returns. Low-risk investments, like government bonds, typically offer lower returns, while high-risk investments, such as stocks or startups, can provide higher returns but come with the possibility of greater losses. Balancing risk and return is crucial in creating an investment strategy that aligns with individual financial goals and risk tolerance.