Investments that carry higher potential returns typically come with:

Investments that offer the opportunity for higher potential returns come with higher risk due to the inherent nature of financial markets. The principle of risk and return indicates that in order to achieve greater rewards, investors must be willing to accept more uncertainty and potential loss. For example, stocks in volatile industries or startups may offer substantial returns; however, they also carry the risk of losing some or all of the investment.

Investing in safer assets, like government bonds or savings accounts, often provides lower returns because they are more stable and have a lower chance of loss. Therefore, while seeking high returns, investors must recognize that their capital may be at significant risk, making higher risk a characteristic of these types of investments. This understanding is crucial for investors when they are evaluating their investment options and aligning them with their risk tolerance and financial goals.