What is the relationship between risk and return?
Expected return describes possible reward; risk describes uncertainty and potential loss.
Definition, calculation and mechanism
Higher expected returns often compensate for uncertainty; no product can guarantee high returns without risk. Volatility, default, inflation and illiquidity are different risks. Past performance does not ensure future results.
Interpretation, examples and limits
Time horizon and capacity to bear loss matter. Diversification can reduce single-asset dependence but cannot eliminate broad market declines. Fees reduce net return.
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