Question

Your great grandparents placed $1 in an investment in 1925. Which of the following securities would have given them the highest average annual return over the past eight decades?

a) U.S. Treasury Bonds
b) Blue-Chip Stocks
c) Gold
d) Real Estate

Answer 1

In general, stocks have a higher average return than bonds, and bonds have a higher average return than a savings account.

Step-by-step explanation:

Over a sustained period of time, stocks have an average return higher than bonds, and bonds have an average return higher than a savings account. This is because in any given year the value of a savings account changes very little. In contrast, stock values can grow or decline by a very large amount. The value of a bond, which depends largely on interest rate fluctuations, varies far less than a stock, but more than a savings account.