"The relationship between risk and return can be classified as a "positive" or "direct" relationship, by this mean; investors will set a higher return to compensate the higher level of risk in their portfolio. Alternatively, if an investment offers relatively lower level of risk, then, investors should satisfied with a lower returns.
Since the level of risk and return are based on expectation, so the proper analysis needs to be done. Normally, investors will look into both past year return/risk and the expected economic conditions in the future.
Comparison between various instruments in the market is one of the crucial factor to determine the best asset/s to be invested in. Investors also have to consider about setting up a well-diversified portfolio to minimize the unsystematic risk, since the market risk is beyond their control."
TQVM
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