Final answer:
The statement that riskier assets guarantee higher returns is false. Risk and return are inherently linked, with higher risk potentially leading to higher returns, but there are no guarantees due to market fluctuations and other factors. Investors must weigh these aspects based on their financial situation and investment horizon.
Step-by-step explanation:
Investing in riskier assets such as start-up companies does not guarantee a higher return for investors; therefore, the statement is False. While it is true that assets with higher risk may offer the potential for higher returns, there is no guarantee that this will be the case. This uncertainty is due to market volatility, economic conditions, and numerous other factors that can impact investment outcomes. It's important for investors to understand the tradeoffs between risk and expected return, especially in the context of their own financial situation and life stage.
Mutual funds, which pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities, can be a way to mitigate some risk due to their diversification benefits and reduced transaction costs. The tradeoffs between risk and return are crucial: high returns on investments such as stocks are possible over a long period, but risks are also significant, particularly in the short term. Relative to bonds or bank accounts, stocks may offer higher returns over a prolonged period, but they are more volatile in nature.