Understanding The Risk Factors

Last year when my son who was in standard XI, tried to negotiate a deal with me. His argument was, since the school bus charges Rs2,500 per month and the EMI of a new two-wheeler for two years was also the same, it is better that I buy him the two-wheeler because in addition to his convenience I will also own an asset at the end of the tenure. Though his logic was sound and convincing, but he did not consider the higher risk that would be incurred on a daily basis vis-à-vis a school bus. Likewise, I have heard my investors asking for the product with best return and least risk. Well, that product is yet to be designed.  What I mean by the above anecdote is that there is always a trade-off between risk and other factors, in the above case comfort and convenience or in case of investments, returns. What I want to highlight here is the all pervasive question – how much...