What is one basic definition of a good investment decision?

The definition of a good investment decision centers around the relationship between benefits and costs. When considering this concept, a good investment involves evaluating the net benefits derived from an investment compared to the costs incurred, specifically within the framework of present value calculations. This approach emphasizes the importance of not only looking at the potential returns but also understanding how those returns relate to the investment's costs over time.

By assessing the present value of both costs and benefits, investors can make informed decisions that ensure they gain more in benefits than they sacrifice in costs, leading to a favorable investment outcome. This principle is foundational in financial theory, as it assists investors in determining the true profitability and viability of an investment, making it a central tenet of effective investment strategies.

In contrast, the other approaches mentioned fail to incorporate this critical assessment of benefits relative to costs. Relying solely on past market performance ignores the fact that past performance does not guarantee future results. The notion that a good investment decision guarantees a high return overlooks the inherent risks involved in any investment. Lastly, focusing only on short-term gains can lead to detrimental decision-making, as it might neglect the long-term value and sustainability of the investment.

Therefore, the first option stands out as the most comprehensive and sound definition