Jonathan, a 30-year-old client, is saving for retirement and has a high-risk tolerance. He understands that while higher returns often come with higher risk, he aims to maximize growth over his 35-year time horizon. Which investment characteristic is most indicative of higher potential returns but also higher inherent risk?

Question: Jonathan, a 30-year-old client, is saving for retirement and has a high-risk tolerance. He understands that while higher returns often come with higher risk, he aims to maximize growth over his 35-year time horizon. Which investment characteristic is most indicative of higher potential returns but also higher inherent risk?

Answer options: ✅ A mutual fund with a high standard deviation.

• A mutual fund with a low expense ratio.
• A mutual fund invested primarily in money market instruments.
• A mutual fund diversified across many ultra-stable, large-cap Canadian corporations.

Correct answer: A mutual fund with a high standard deviation.

Explanation: Standard deviation measures the historical volatility or dispersion of returns. A higher standard deviation indicates a wider range of possible returns, implying higher risk but also a greater potential for higher (or lower) returns, which aligns with the risk-return tradeoff.