The basic trade-off in the investment process is
A) between the anticipated rate of return for a given investment instrument and its degree of risk.
B) between understanding the nature of a particular investment and having the opportunity to purchase it.
C) between high returns available on single instruments and the diversification of instruments into a portfolio.
D) between the desired level of investment and possessing the resources necessary to carry it out.
E) None of the above.

Question

Quizplus · Accepted Answer

The basic trade-off in the investment process is between the anticipated rate of return for a given investment instrument and its degree of risk. Investors need to weigh their desire for high returns against the potential risks of losing their investment. Investing in higher-risk instruments often offers the potential for higher returns, but also carries a higher risk of losing money. Lower-risk instruments, on the other hand, may offer lower returns but are less likely to result in a complete loss of investment. Finding the right balance between risk and return is essential for successful investing.

The Basic Trade-Off in the Investment Process Is