Question

What rule is important to remember when evaluating risk and return?

The higher the risk, the higher the potential return.
The higher the risk, the lower the potential return.
The lower the risk, the higher the potential return.
There is no connection between risk and return.

Answer 1

"The higher the risk, the higher the potential return."

This is the basic risk–return tradeoff: investors generally must accept more risk to earn higher expected returns (and those higher returns are not guaranteed — they come with greater chance of loss).