To begin thinking about your risk tolerance, answer the following questions. When you are finished, add up the score for your responses for each answer.
Scoring
a
1 point
b
2 points
c
3 points
- When you think of the word "risk", what first comes to mind?
- a. Loss
- b. Uncertainty
- c. Opportunity
- What matters most to you as an investor?
- a. I don’t care if my return keeps pace with inflation; I want to avoid losses and uncertainty.
- b. My return should keep pace with inflation; I want to see consistent growth over time. To achieve this
growth, I can accept that some of my investments may not grow the way I hope they will.
- c. My return should be significantly above the rate of inflation; I want my investments to grow quickly,
even if this could mean increased uncertainty and more ups and downs in the value of my portfolio.
- When it comes to your investment portfolio, how do you feel about change?
- a. I’m an observer. I am hesitant to make changes if there’s no guarantee of a positive
outcome.
- b. I’m an investigator. I am open to changes, but prefer to research the pros and cons beforehand.
- c. I’m an adventurer. I welcome change and do not hesitate to try new things.
- Suppose you have $10,000 to invest. Which of the following investment choices would you find most
appealing?
- a. 60% low-risk investments – 30% medium-risk investments – 10% high-risk investments
- b. 30% low-risk investments - 40% in medium-risk investments – 30% in high-risk investments
- c. 10% low-risk investments – 30% medium-risk investments – 60% in high-risk investments
- If the value of your investment portfolio dropped from $100,000 to $80,000 in one year, what would you
do?
- a. Move my money to more conservative investments right away to avoid the potential of future losses.
- b. Speak with my financial advisor to ensure that my asset allocation is appropriate, and make changes if
needed.
- c. Take advantage of low prices and invest more.
Results
1-5 points – Your tolerance for risk is low. You look for security in your investments and
want to avoid drastic changes in the value of your investments when markets shift. Conservative portfolios made up
primarily of lower-risk investments, such as bonds or cash, can help to provide predictable income and preserve your
capital.
5-10 points – You have a moderate tolerance for risk. You are comfortable with some ups and
downs in your investments, as long as they continue to grow steadily over time. A balanced and diversified portfolio
with a mix of different asset classes (cash, fixed income and equities) can help to reduce risk and smooth out the
returns in your portfolio over the long term.
10-15 points – You have a higher tolerance for risk. Market ups and downs do not unnerve you
as you pursue the highest returns possible on your investments over the long term. Growth-oriented portfolios are
made up of investments that aimed to outperform the market and maximize returns.
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Talk with your advisor to make an investment plan that suits your risk capacity.