Which of the following correctly describes a characteristic of a risk-averse investor?

A risk-averse investor is someone who prefers to minimize risk rather than pursue the highest potential returns. This characteristic fundamentally shapes their investment strategy, as they are focused on protecting their capital and avoiding losses, even if it means accepting lower returns.

By seeking to minimize potential losses, risk-averse investors tend to favor safer investments, such as bonds or blue-chip stocks, which offer more stability. They often analyze the risk associated with different investment opportunities and prioritize those that align with their preference for lower volatility. This approach helps them achieve a more stable and predictable investment outcome, which is crucial for long-term financial planning.

The other choices depict behaviors that are contrary to the principles of risk aversion. For instance, embracing high risk for high returns and investing only in high-risk assets indicate a higher risk tolerance, which is not aligned with the behavior of a risk-averse investor. Ignoring expected returns suggests a lack of strategic thinking in investment decisions, which again diverges from the calculated approach typical of someone who is risk averse.