Final answer:
The correct answer is option d. The least variation in the expected real rate of return from the ownership of stocks is achieved through the ownership of a diverse set of stocks, as diversification minimizes risk and provides more consistent returns over time.
Step-by-step explanation:
When considering investment options that will result in the least variation in the expected real rate of return from the ownership of stocks, various strategies can be compared. The options include ownership of a single stock for a short period of time, ownership of a single stock over a lengthy period of time, ownership of stocks from a specific sector over a lengthy period of time, and ownership of a diverse set of stocks. Historically, individual stocks present significant volatility, which can result in a high degree of variability, particularly in the short term. Specialized sector investments can also exhibit considerable fluctuations, influenced by the particular dynamics of that sector. Therefore, the correct answer is (d) ownership of a diverse set of stocks (the standard). Diversification is a key strategy for reducing risk and smoothing out returns over time.
As for stocks versus other investment types, stocks have provided a higher average return over extended periods compared to bonds or savings accounts, but with greater risk. The stock market can experience sharp declines, as seen in 2008, as well as substantial growth, requiring a long-term perspective to level out these fluctuations. Mutual funds, which pool investments into a diverse array of securities, offer a way to take advantage of this long-term growth while mitigating individual stock risk. Therefore, a strategy that employs diversification across various stocks, as done in mutual funds, aligns with the objective of minimizing the variability in returns.