A risk-averse investor primarily considers which factor regarding an investment?

A risk-averse investor places significant emphasis on expected return because they seek to maximize their potential rewards while minimizing exposure to potential losses. In their decision-making process, the expected return represents the compensation for taking on risk. Therefore, while they recognize the risks associated with investments, the anticipated return is a crucial factor that influences their choices.

Risk aversion means that investors are particularly cautious about investments that yield higher volatility or uncertainty, as they are less willing to accept outcomes that can lead to substantial financial losses. As a result, they will often compare the expected returns of various investment opportunities in the context of the risks involved.

Factors such as market trends and investment duration can be important but are often secondary to the fundamental evaluation of return versus risk. Understanding that the return expectation aligns with their risk tolerance guides risk-averse investors toward decisions that balance profitability with safety. Thus, the expected return is the primary consideration for a risk-averse investor, as it equips them with a clearer picture of the risk-reward trade-off.