What characterizes highly risk-averse investors regarding bonds?

Highly risk-averse investors prioritize safety over potential higher returns, making them more inclined to choose investments that offer stability and lower risk, such as bonds. These investors typically seek to preserve their capital and avoid significant fluctuations in their investment value. As a result, they often prefer fixed-income securities like government bonds, which are perceived to have lower credit risk compared to stocks.

This behavior reflects their aversion to the volatility that comes with higher-return investments, such as equities, which can experience significant price swings and potential loss of principal. By choosing bonds, highly risk-averse investors are essentially trading off some potential for higher returns for improved security and predictability in their investment outcomes. This focus on safety is a crucial characteristic of their investment strategy.