One of the most important relationships in modern finance is the risk-return relationship as defined by the Modern Portfolio Theory propounded by Harry Markowitz in 1952 in Journal of Finance. According to this theory, as the expected return from an asset class or instrument increases, the risk also rises, i.e., a high return instrument will carry high risk and vice versa. An investor can reduce the overall portfolio risk by diversifying across instruments or asset classes. The fundamental underlying principle of this theory is that markets are always efficient and it is almost impossible to find anything investible that has low risk and high return. But if one looks at the real world, does this relationship hold up? If it were true, then the most successful investor would be the one taking the highest risk. But we know it is the reverse. Almost all successful investors, and successful businessmen too, are highly risk averse. They give topmost priority to protecting capital, but that does not mean that they generate low returns. On the other hand, those taking high risks repeatedly end up going bankrupt.