Final answer:
Individuals with significant cash seeking high returns should consider the risk-return tradeoff of various investment options. Stocks offer the highest potential returns but also come with higher risks, while bank accounts are low-risk with low returns but are FDIC insured up to $250,000.
Step-by-step explanation:
For individuals with significant cash who desire the highest return possible, understanding the tradeoff between expected return and risk is essential. Bank accounts typically offer very low risk with equally low returns, which is beneficial for those prioritizing safety and liquidity. However, for those seeking the highest private rates of return, investing in stocks may be more appropriate as they are the riskiest but have the potential for the highest returns.
It is important to note that the FDIC insures deposits up to $250,000, offering a level of security for bank account holders. Therefore, if the goal is to maximize returns, one should look beyond simple bank savings accounts and consider other financial instruments like bonds or stocks that offer higher expected returns to compensate for the increased level of risk.