Lack of Understanding

One of the primary deterrents to investors earning market rates of returns is their lack of understanding of the relationship between risk and return. The natural tendency of investors is to want returns without the risk. Because risk is the source of returns, investors would be better served to be more concerned with the risk level of their investments.

The overall concept of the risk/return relationship is that when risk increases, the expected return on the asset should also increase as a result of an expected risk premium.

Step 8