One incorrect belief that is often cited as a reason for fully-funded pension funds to invest in equities is
A)stocks have higher risk.
B)bonds have lower returns.
C)stocks provide a hedge against inflation.
D)stocks have higher returns.
E)all of the above are incorrect beliefs that are often cited.

Question

Quizplus · Accepted Answer

While stocks do have higher risk, and bonds often have lower returns than stocks, the incorrect belief that is often cited as a reason for pension funds to invest in equities is that stocks provide a hedge against inflation. While this may be true over the long-term, it is not a guaranteed or consistent correlation, and there are other ways to hedge against inflation that do not involve investing in stocks.

One Incorrect Belief That Is Often Cited as a Reason