How is a risk-free investment different from a low-risk investment?

A riskfree investment is an investment that carries no risk of losing the principal amount, whereas a lowrisk investment is an investment that carries a lower risk of losing the principal amount but still carries some risk. A riskfree investment generally provides a lower return compared to a lowrisk investment. In a riskfree investment, the investor is guaranteed to receive the principal amount and a fixed rate of return, whereas in a lowrisk investment, the investor may receive a higher return, but there is still a possibility of losing the principal amount. Therefore, a riskfree investment is considered the safest investment option, while a lowrisk investment carries some level of risk.