Which concept is about the relationship between risk and potential reward in investing?

• A. Risk-Reward Tradeoff
• B. Yield
• C. Saving
• D. Buy and Hold Strategy

Answer: (A)

The risk-reward tradeoff explains why investors balance potential gains with the amount of risk they’re willing to take. In general, investments with higher risk offer the possibility of higher returns to compensate for those risks, while safer options tend to provide lower returns. This idea underpins how portfolios are built and why diversification matters—it spreads risk while aiming for a higher overall return. Other terms like yield describe income from an investment, saving is simply setting money aside, and buy-and-hold is a long-term strategy, not the relationship between risk and return.