ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Investors should be agreeing to invest in riskier investments merely if expected return is adequate for risk level. High risk investments include equity investments, while moderate and low risk instruments include fixed income investment options like fixed deposits.

Detailed explanation-2: -Investors should be willing to invest in riskier investments only: if the term is short. if there are no safe alternatives except for holding cash. if the expected return is adequate for the risk level.

Detailed explanation-3: -High-risk investments offer the prospect of returns that are potentially more attractive than those available from mainstream investments. But there’s no guarantee that high-risk investments will actually deliver high returns. In practice, the actual returns could be below those of mainstream investments.

Detailed explanation-4: -The level of risk associated with a particular investment or asset class typically correlates with the level of return the investment might achieve. The rationale behind this relationship is that investors willing to take on risky investments and potentially lose money should be rewarded for their risk.

Detailed explanation-5: -Investors are usually classified into three main categories based on how much risk they can tolerate. They include aggressive, moderate, and conservative. Knowing the risk tolerance level helps investors plan their entire portfolio and will drive how they invest.