What do you mean by risk/return trade off why it is important from investment perspective?

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. 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.Click to see full answer. Similarly, you may ask, what does the risk/return trade off mean?Definition of ‘Risk Return Trade Off’ Definition: Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return. This trade off which an investor faces between risk and return while considering investment decisions is called the risk return trade off. how do they involve risk/return trade off? The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns. Similarly, how might you explain the concept of risk vs return trade off during the shareholders meeting? The concept of risk versus return trade off is whereby investments which has low risk levels tend to have low potential returns. On the other hand, investments that have high risk levels tend to have high potential returns. On the other hand if a company wants high returns it must be willing to undertake high risks.Why is an investment perspective important?The success or failure of an organization largely depends on how human resource is used to utilize other resources available to the organization. Adopting an investment perspective allows the management to consider the risk of investment in human resource and to device strategies to avoid those risks as well.