Which of the following statements is true?
A) Except for tax-exempt investors and tax-deferred accounts, annual tax payments increase investment returns.
B) The only way to maintain purchasing power over time is to invest in bonds.
C) After adjusting for taxes, long-term bonds consistently outperform stocks.
D) An asset allocation decision for a taxable portfolio that does not include a substantial commitment to common stocks may make it difficult for the portfolio to maintain real value over time.
E) None of the above

Question

Quizplus · Accepted Answer

D is the only statement that is accurate. It is essential to have a substantial commitment to common stocks in a taxable portfolio to maintain real value over time. A and C are incorrect as taxes reduce investment returns, and long-term stocks outperform bonds. B is incorrect as stocks also maintain purchasing power over time.

Which of the Following Statements Is True