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Risk Return

The risk/return ratio, also known as the risk-return ratio, describes the relationship between the risk taken and the expected return on an investment. Basically, risk and return are in conflict with each other, as a lower risk tends to mean a lower return and vice versa.

In the context of crowdlending, the risk-return ratio proves to be favorable. This is because the diversification effect can effectively reduce risk. Even in the event of possible defaults, the comparatively high nominal interest rates allow for an attractive return. This diversification allows investors to spread their risk and thus minimize potential losses. More information on investing in crowdlending can be found here.