To encourage investors to take higher risks, the rewards must be higher for those higher-risk investments.
You can spread investment risk over many different investments. This is called diversification. (There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.) You can use this relationship in making savings and investment decisions—low risk for short-term goals and higher risk for longer-term goals.