Question

Which of the following statements about length of investment is correct?
a.
Bonds tend to be better long-term investments than stocks because bonds are unlikely to lose their value.
b.
Stocks tend to be better long-term investments than bonds because bonds do not have the same growth potential that stocks do.
c.
Bonds tend to be better long-term investments than stocks because bonds, unlike stocks, are guaranteed to keep up with inflation.
d.
Stocks tend to be better long-term investments than bonds because stocks can be bought and sold more readily than bonds.

Answer 1

b.

Stocks usually make better long-term investments because they offer greater growth potential than bonds. Bonds generally provide lower, more predictable returns and can lose purchasing power to inflation, whereas stocks historically have higher returns over long horizons despite greater short-term volatility.