Final answer:
Over the last 30 years, stocks have had the highest returns compared to other investment types, balancing higher risks with higher potential rewards.
Step-by-step explanation:
Over the last 30 years, stocks have produced the highest percentage returns compared to gold, savings accounts, and bonds. This is because stocks offer a potentially high reward for the risk taken by investors. A savings account has very low risk along with very low returns, while bonds provide higher returns but also come with higher risk compared to a savings account. However, stocks are the riskiest investment type among these options but historically have provided the highest returns, which compensates investors for the associated risks. Instances such as the S&P 500 increasing by 26% in 2009 after a 37% decline in 2008 show how volatile but potentially rewarding stock investment can be.
Many investors believe that high-risk should inherently mean low return; however, this is a misconception. High-risk investments are required to offer high potential returns to attract investors, balancing out the risk. Therefore, while a high-risk investment can result in a low return, it can also lead to a high return, with the former necessitating higher average expected returns to justify the risk involved.