As a general rule, investments with high risk tend to have high returns and vice versa. Another way to look at it is that for a given level of return, it is human nature to prefer less risk to more risk. Therefore, the higher the risk of an investment, the higher its returns have to be to attract investors.

The existence of risk does not mean that you should not invest – only that you should be aware that any investment has some degree of risk which should be considered when deciding whether the expected returns of that investment are worth it.

Therefore, when considering the suitability of any investment, you must understand both the likely returns and the risks involved. The appropriate risk-return combination will depend on your financial objectives. Some people prefer a low-risk, steady income stream while others don’t mind taking on more risk for the chance of making higher returns.