When it comes to financial matters, we all know what risk is — the possibility of losing your hard-earned cash. And most of us understand that a return is what you make on an investment. What many people don’t understand, though, is the relationship between the two.Trade-offsThe relationship between risk and return is often represented by a trade-off. In general, the more risk you take on, the greater your possible return. Think of lottery tickets, for example. They involve a very high risk (of losing your money) and the possibility of an extremely high reward (the giant check with lots of zeroes). Or penny stocks: They’re also very risky and yet seem full of amazing potential.
Ms. Tran is an undergraduate student at Drexel University’s LeBow College of Business, where she is pursuing her B.S. in Economics and Finance. As part of the STAR Scholars program at Drexel, she is working with Dr. Gray in undertaking Alpha Architect’s mission in empowering investors through education. With her work in the blog series on the introductory courses of finance, she aims to compile and provide the fundamentals of finance for readers. Besides from her involvement with STAR Scholars, Ms. Tran is an active member of the Delta Zeta Sorority, Drexel’s Student Activity Fee Allocation Committee, and Drexel’s Peer Leader program—among other organizations.
Performance figures contained herein are hypothetical, unaudited and prepared by Alpha Architect, LLC; hypothetical results are intended for illustrative purposes only. Past performance is not indicative of future results, which may vary. There is a risk of substantial loss associated with trading stocks, commodities, futures, options and other financial instruments. Full disclosures here.