Question

How do safe investments usually have a lower rate of return than riskier ones?

Answer 1

Answer:

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.

Answer 2

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.