ZERO EQUILIBRIUM® APPLIED FINANCE SERIES: Understanding Investment Risk, Return and the Risk-Return Relationship Having covered the basics of Finance, and explained foundational concepts we can now move on to understanding the investment risks and risk-return relationship. In investment decision-making, two fundamental considerations that are central to the process are the returns an investor expects to earn and the risks associated with achieving those returns. Every investment involves some degree of risk, whether through fluctuations in market prices (inflation risk), changes in interest rates (interest rate risk), inflation, exchange rates, liquidity conditions, creditworthiness (solvency) or other factors that can affect the value of an investment. Understanding the relationship between investment risk and return is therefore essential to evaluating investment opportunities, constructing portfolios and making informed financial decisions. (Topics we would still cover in the series) The previous discussion on matching financial instruments with investment objectives establishes that investors should begin with their objectives rather than simply chase returns. This thread builds on that foundation by explaining what investors are exposed to when they select particular instruments 1/15 #InvestmentRisk #InvestmentReturns #RiskReturnRelationship #AppliedFinance