Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

Risk aversion significantly shapes an investor's portfolio preference by leading them to favor portfolios that exhibit stable, predictable returns. This behavior stems from the desire to minimize potential losses and maintain capital, which is a priority for risk-averse individuals. They prioritize certainty and the reduction of volatility in their investments over the possibility of higher returns that come with increased risk.

While some investors might be drawn to the allure of high returns, those characterized by risk aversion are more concerned with protecting their existing wealth and ensuring outcomes that do not lead to substantial financial setbacks. By favoring stable returns, they seek investments that reduce uncertainty, thereby aligning with their overall investment objectives and comfort levels regarding risk.

The other choices highlight aspects of risk-taking and indifference to risk, which do not resonate with the principles of risk aversion. A focus on high variance, indifference to risk, or favoring high-return portfolios without consideration for risk does not align with the risk-averse mindset.