Which of the following is most likely to convince an investor to buy stocks or mutual funds?

• A. The potential for higher returns compared to traditional savings accounts
• B. The ability to avoid all taxes on investment gains
• C. Guaranteed fixed interest rates regardless of market performance
• D. Complete immunity from any financial risk or loss

Answer: (A)

Verified step by step guidance

1. Understand the key factors that influence an investor's decision to buy stocks or mutual funds. These include potential returns, risk tolerance, tax implications, and market performance.
2. Evaluate the first option: 'The potential for higher returns compared to traditional savings accounts.' Stocks and mutual funds often offer higher returns over time, which is a major incentive for investors seeking growth.
3. Analyze the second option: 'The ability to avoid all taxes on investment gains.' While certain investment accounts (e.g., retirement accounts) may offer tax advantages, complete tax avoidance is not realistic for most investments.
4. Consider the third option: 'Guaranteed fixed interest rates regardless of market performance.' Stocks and mutual funds are not fixed-income investments; their returns fluctuate based on market conditions, so this option is not applicable.
5. Review the fourth option: 'Complete immunity from any financial risk or loss.' Investments in stocks and mutual funds inherently carry risk, and no investment is entirely immune to loss. This option is not accurate.