When investing for a long horizon,investors care about the volatility of ________ returns and not the volatility of ________ returns.

Question

Quizplus · Accepted Answer

When investing for a long horizon, investors are concerned about the cumulative returns they will receive at the end of the investment period, rather than the average returns they will receive over that time. The volatility of cumulative returns is what matters, not the volatility of average returns. This is because cumulative returns represent the total gain or loss experienced by the investor over the entire investment period, while average returns represent the return experienced by the investor in any given year. Therefore, choice B is the best answer.

When Investing for a Long Horizon,investors Care About the Volatility