Final answer:
Long-term investments like stocks generally yield higher returns compared to short-term investments, with a high-risk-return tradeoff influenced by market volatility and personal financial goals.
Step-by-step explanation:
Compared to a short-term investment, the general return of a long-term investment is typically higher, especially when investing in stocks. Over an extended period, stocks have been shown to pay a higher average return than bonds or savings accounts, which are considered more secure but yield lower returns.
The higher returns associated with stocks and other high-risk investments come because of their potential to grow significantly over time, despite possible short-term volatility. For instance, the S&P 500 had a significant increase of 26% in 2009 following a substantial decline of 37% in 2008.
The valuation of a bond, which fluctuates less than stocks, still varies more than a savings account because it is highly influenced by interest rate changes. Ultimately, the risk-return tradeoff must be considered alongside the investor's life stage and financial goals.