Final answer:
The reward for taking on risk in investments is the potential for higher returns. Different investments have different risk levels and potential returns. Investors must carefully consider their own risk tolerance and financial goals when deciding how much risk to take on.
Step-by-step explanation:
The reward for taking on risk when it comes to investments is the potential for higher returns. In general, investments that carry a higher level of risk have the potential to generate higher profits. For example, stocks are considered riskier than bank accounts or bonds, but they also have the potential for greater returns.
This tradeoff between risk and return exists because riskier investments require investors to take on more uncertainty and volatility, which increases the possibility of losing money. Therefore, to incentivize individuals to take on this risk, these investments offer the potential for higher profits.
It's important to note that different investments have different risk levels and potential returns.
For instance, bank accounts are considered very low risk but also provide low returns. Bonds, on the other hand, have higher risk but offer higher returns compared to bank accounts. Lastly, stocks are the riskiest of all, but they have the potential to generate even higher returns.
In conclusion, the reward for taking on risk in investments is the potential for higher returns. Investors must carefully consider their own risk tolerance and financial goals when deciding how much risk to take on in their investment portfolio.