Safe investments usually stay stable on the stock market, and don't go up very fast. Risky investments can shoot up or shoot down. If you invest money into a safe investment, you're less likely to gain lots of money, or lose lots of money. If you invest in riskier ones, you're a lot more likely to gain lots of money, but you also are more likely to lose money.
Students should understand that every saving and investment product has different risks and returns. Differences include how readily investors can get their money when they need it, how fast their money will grow, and how safe their money will be.
Safe investments generally require less investment money and therefore tend to have a lower rate of return. In contrast, risky investments usually involve a lot of money and can cause a great loss for the investor, for this reason, they need to have a higher rate of return so that the investor feels influenced to invest, even with the high risk.
Explanation:
No investment is risk-free, but the higher the risk, the higher the rate of return and the greater the investor's profit.
In general, safe investments have a lower risk, require little money from the investor and do not have a very high rate of return, because the movement with the money is small and often limited. An example of this type of investment is saving, where the money invested is not moved, there is no risk of losing it.
On the other hand, high-risk investments are characterized by the rapid and constant movement of money invested. This type of investment usually involves large amounts of money and great chances that this money will be lost. For this reason, this type of investment may not be attractive to many people, which allows their rate of return to be high, to encourage the investor to take a risk.
The safe investments tend to have low return because it gives constant and stale returns.
Further Explanation:
Risk-Return Tradeoff:
Risk-Return Tradeoff refers to the position where the increase in the risk increases the return. This theory states that the investment can give higher profit only when the investor accepts a higher possibility of losses.
Explain how safe investments usually have a lower rate of return:
The safe investments refer to the investment in the securities that are considered to have a stable future income. The investments with stable and constant returns tend to have a lower rate of return. The investment in blue-chip companies is an example of a safe investment. Blue-chip companies tend to give lower returns, but they have strong consistency. The blue-chip companies are the established companies that have already captured the market and earned the maximum possible profit. Now, they have stable returns as they have already exhausted the business opportunity and earned the profit from them.
A start-up is an example of a riskier investment. The start-up may get sky-high returns if it gets an appropriate business opportunity. However, the chances of failure are very high because the start-up has limited capital, resources, market share. It would not be able to tackle the adverse situations efficiently. Therefore, riskier investment options tend to have a higher rate of return and higher risk.
Thus, safe investments tend to have low return because it gives constant and stale returns.
Learn More:
Learn more about the buying power of an individual Learn more about the diversification of the investment Learn more about the monopoly
Safe investments usually stay stable on the stock market, and don't go up very fast. Risky investments can shoot up or shoot down. If you invest money into a safe investment, you're less likely to gain lots of money, or lose lots of money. If you invest in riskier ones, you're a lot more likely to gain lots of money, but you also are more likely to lose money.
Students should understand that every saving and investment product has different risks and returns. Differences include how readily investors can get their money when they need it, how fast their money will grow, and how safe their money will be.
Safe investments generally require less investment money and therefore tend to have a lower rate of return. In contrast, risky investments usually involve a lot of money and can cause a great loss for the investor, for this reason, they need to have a higher rate of return so that the investor feels influenced to invest, even with the high risk.
Explanation:
No investment is risk-free, but the higher the risk, the higher the rate of return and the greater the investor's profit.
In general, safe investments have a lower risk, require little money from the investor and do not have a very high rate of return, because the movement with the money is small and often limited. An example of this type of investment is saving, where the money invested is not moved, there is no risk of losing it.
On the other hand, high-risk investments are characterized by the rapid and constant movement of money invested. This type of investment usually involves large amounts of money and great chances that this money will be lost. For this reason, this type of investment may not be attractive to many people, which allows their rate of return to be high, to encourage the investor to take a risk.
The safe investments tend to have low return because it gives constant and stale returns.
Further Explanation:
Risk-Return Tradeoff:
Risk-Return Tradeoff refers to the position where the increase in the risk increases the return. This theory states that the investment can give higher profit only when the investor accepts a higher possibility of losses.
Explain how safe investments usually have a lower rate of return:
The safe investments refer to the investment in the securities that are considered to have a stable future income. The investments with stable and constant returns tend to have a lower rate of return. The investment in blue-chip companies is an example of a safe investment. Blue-chip companies tend to give lower returns, but they have strong consistency. The blue-chip companies are the established companies that have already captured the market and earned the maximum possible profit. Now, they have stable returns as they have already exhausted the business opportunity and earned the profit from them.
A start-up is an example of a riskier investment. The start-up may get sky-high returns if it gets an appropriate business opportunity. However, the chances of failure are very high because the start-up has limited capital, resources, market share. It would not be able to tackle the adverse situations efficiently. Therefore, riskier investment options tend to have a higher rate of return and higher risk.
Thus, safe investments tend to have low return because it gives constant and stale returns.
Learn More:
Learn more about the buying power of an individual Learn more about the diversification of the investment Learn more about the monopoly
Answer Details:
Grade: Middle school
Chapter: Investments
Subject: Accounting
Keywords: safe, investments, usually, have, lower, rate, return, than, riskier, ones, Should written, paragraph.