Series 65: 7.3.7. Risk-Adjusted Returns

7.3.7. Risk-Adjusted Returns

Risk is another critical factor when assessing the performance of a security. In the context of investing, risk is defined as the volatility in the returns of a security. When volatility is high, the returns vary from high to low, so investors open themselves up to the possibility of bigger losses and bigger gains.

Imagine two bonds that have equivalent returns at the end