Which statement best defines a long-term investment?

• A. An asset held for more than one year that may include stocks, bonds, real estate, and cash, and may never be sold.
• B. An asset expected to be sold within a year.
• C. A type of retirement savings plan with no tax benefits.
• D. An immediate-use cash reserve.

Answer: (A)

The idea being tested is the time horizon of an investment. A long-term investment is something you intend to hold for more than a year, with the goal of growth or income over time rather than quick cash. This fits assets like stocks, bonds, real estate, or even cash positions that you don’t plan to use in the short term. The phrase that it “may never be sold” reflects that some long-term investments are kept for a long time, sometimes indefinitely, as part of a strategy to grow wealth over many years.

The other statements describe different concepts. An asset expected to be sold within a year is a short-term investment, not long-term. A retirement savings plan with no tax benefits isn’t defining long-term investing and doesn’t capture the holding period idea. An immediate-use cash reserve is about liquidity, not investment for growth or income.