What is a trade off investopedia?
In economics, the term trade-off is often expressed as an opportunity cost, which is the most preferred possible alternative. A trade-off involves a sacrifice that must be made to get a certain product or experience.
What is meant by the phrase risk/return trade off as it applies to investing?
What is meant by the phrase “Risk-Return Trade-Off” as it applies to investing? Generally, what does “Risk” mean in investing? If an investor wants to earn a higher return, the investor must be willing to take higher risk; If an investor wants to take lower risk, the investor must be willing to receive a lower return.
Why is the risk/return trade off important from an investment perspective?
According to the risk-return tradeoff, invested money can render higher profits only if the investor will accept a higher possibility of losses. Investors consider the risk-return tradeoff as one of the essential components of decision-making. They also use it to assess their portfolios as a whole.
What does risk off mean in trading?
When stocks are selling off and investors run for shelter to bonds or gold, the environment is said to be risk-off. Investors invest in a risk on environment when they put their money into riskier assets.
What is meant by risk/return trade-off quizlet?
Risk-Return Trade-Off. There is a reward for bearing risk. The greater the potential reward, the greater the risk.
How do you explain risk/return trade-off?
The risk-return trade-off states that the level of return to be earned from an investment should increase as the level of risk goes up. Conversely, this means that investors will be less likely to pay a high price for investments that have a low risk level, such as high-grade corporate or government bonds.
What are the risk off currencies?
In a nutshell, currencies are either risk-on, meaning that they tend to perform well when the market sentiment is positive, or risk-off, meaning that they tend to perform well when the market sentiment is negative. Risk-on currencies do poorly in periods of stress and in particular when equity depreciates.
Is USD a safe haven?
The U.S. dollar, which is also often seen as the ultimate safe-haven currency, held firm against many other rivals, including the euro and commodity-linked currencies.
Which is the correct definition of a trade-off?
Definition of trade-off 1 : a balancing of factors all of which are not attainable at the same time the education versus experience trade-off which governs personnel practices— H. S. White. 2 : a giving up of one thing in return for another : exchange. Other Words from trade-off Synonyms Learn More About trade-off.