Which of the following is generally considered the best way to achieve long-term financial goals?

• A. Speculating in high-risk stocks for quick gains
• B. Investing in a diversified portfolio of securities
• C. Relying solely on lottery winnings
• D. Keeping all funds in a checking account

Answer: (B)

Verified step by step guidance

1. Understand the concept of long-term financial goals: These are objectives that require planning and consistent effort over an extended period, such as saving for retirement, buying a home, or funding education.
2. Evaluate the options provided in the question: Speculating in high-risk stocks, relying on lottery winnings, keeping funds in a checking account, and investing in a diversified portfolio of securities.
3. Analyze the risks and benefits of each option: High-risk stocks may lead to quick gains but are volatile and unpredictable. Lottery winnings are unreliable and not a sustainable strategy. Keeping funds in a checking account provides safety but does not generate significant returns due to low interest rates.
4. Understand the concept of diversification: Investing in a diversified portfolio of securities spreads risk across various assets, reducing the impact of poor performance in any single investment and increasing the likelihood of steady returns over time.
5. Conclude that investing in a diversified portfolio of securities is generally considered the best way to achieve long-term financial goals, as it balances risk and return effectively while promoting financial growth over time.