Risk-adjusted return

A method that attempts to adjust an investment’s return in accordance with the risk undertaken. For example, if a person buys an S&P 500 ETF on 2:1 margin(effectively doubling his purchasing power) and it goes up 10%, the investor’s return on capital would be 20% but his risk adjusted return would be 10%. Generally speaking, it is difficult to produce risk-adjusted returns over the S&P 500 in the long run.

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