NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investment Landscape
Which of the following asset classes is generally considered to offer the highest potential for long-term inflation-beating returns, along with the highest short-term volatility?
Equity shares offer the highest potential long-term inflation-beating returns, but they also show the greatest short-term volatility. Savings deposits, government securities held to maturity and treasury bills are much more stable and carry lower expected returns, which is why they suit short horizons.
- ASavings bank deposits
- BEquity sharesCorrect
- CGovernment securities held to maturity
- DTreasury bills
Explanation
Equities have historically delivered the highest long-term returns above inflation but fluctuate sharply in the short run. Bank deposits, G-secs held to maturity and T-bills are lower-risk and lower-return instruments.
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