risk-return tradeoff

risk-return tradeoff definition - business

risk-return tradeoff

The direct relationship between the risk of an investment and its expected return. Businesses and investors will generally avoid a risky investment opportunity unless the expected return is high enough to justify the risk. Stocks are generally considered riskier investments than bonds, but can still be a desirable investment choice because stocks offer higher expected returns. Low-risk investments such as money market funds, certificates of deposit, and U.S. Treasury securities typically offer low returns compared to more risky investments.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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