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

Question

Quizplus · Accepted Answer

When investing for the long term, investors care more about the overall cumulative returns, rather than the average returns. This means that they are willing to tolerate some volatility in short-term returns as long as it results in a higher overall return in the long run. Therefore, the volatility of cumulative returns is more important than the volatility of average returns.

When Investing for a Long Term, Investors Care About the Volatility