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Risk Tolerance Essay

532 words - 3 pages

WHAT’S YOUR RISK TOLERANCE?
Circle the letter that corresponds to your answer
1. Just 60 days after you put money into an investment, its price falls 20%. Assuming none of the fundamentals have changed, what would you do?
a. Sell to avoid further worry and try something else
b. Do nothing and wait for the investment to come back
c. Buy more. it was a good investment before ;now it’s cheap investment , too
2. Now look at the previous question another way. Your investment fell 20% , but it’s part of a portfolios being used to meet investment goals with three different time horizons
2A. What would you do if the goal were five years away?
a. Sell
b. Do nothing
c. Buy more
2B. What would you do if the ...view middle of the document...

Which would you rather do?
a. Invest in a money-market fund or guaranteed investment contract, giving up the possibility of major gains, but virtually assuring the safety of your principle
b. Invest in a 50-50mix of bond funds and stock funds, in hopes of getting some growth, but also giving yourself some protection in the form of steady income
c. Invest in aggressive growth mutual funds whose value will probably fluctuate significantly during the year, but have the potential for impressive gains over five or 10 years
5. You just won the big prize! But which one? It’s up to you.
a. a. $2,000 in cash
b. a 50% chance to win $5,000
c. a 20% chance to win $15,000
6. A good investment opportunity just came along. But you have to borrow money to get in. would you take out a loan?
a. Definitely not
b. Perhaps
c. Yes
7. Your company is selling stock to its employees. In three years, management plans to take the company public. Until then, you won’t be able to sell your shares and you will get no dividends. But your investment could multiply as much as 10 times when the company goes public how much money would you invest?
a. None
b. Two months’ salary
c. Four months’ salary
SCORING YOUR RISK TOLERANCE
To score the quiz, add up the number of answers you gave in each category a-c, then multiply as shown to find your score
(a) Answers ________* 1 = ________points
(b) Answers ________* 2 = ________points
(c) Answers _________*3 = ________points
YOUR SCORE _________POINTS
If you scored … you may be a
9-14 points Conservative investor
15-21 points Moderate investor
22-27 points Aggressive investor

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