Which of the following is true?
A) People who invest in the stock market are virtually certain to make money.
B) Investors in the stock market can reduce their risk if they hold shares of specific stocks for only short periods of time.
C) The risk of stock market investments can be reduced through the holding of a diverse portfolio of unrelated stocks over long periods of time.
D) In the long run, corporate bonds can be expected to yield a higher real rate of return than ownership of stocks.

Question

Quizplus · Accepted Answer

Diversification through holding stocks over long periods of time in a diverse portfolio has been shown to reduce the risk of stock market investments. A and B are both false, as there is no guarantee of making money in the stock market, and holding shares for short periods of time can increase risk. D is also false, as historically stocks have provided a higher real rate of return than bonds over the long run.

Which of the Following Is True