To begin with, please note this is general advice and you will have to take into account your own personal circumstances that may affect the given advice. Everyone is different, so everyone may have a little more flexibility than others.
Before you venture into that wonderful world called the stock-market, it’s important to assess and know your stance on risk. Some people may feel that they are super keen to invest anything and everything they have, but then may read a situation and answer differently. The stock-market is a risky place, but with high risk comes high reward – just remember though you may have the subsequent year that suffers – a little known thing called volatility. If you aren’t good with momentary let down, then it may be best to steer clear of the stock-market. It’s a fun roller-coaster ride of up-down, when it’s up, it’s an adrenaline rush and when you’re teetering on the edge it’s that unsure gut feeling ready for the foreseen plunge!
So you can start thinking about how you want to invest, AJ is here to help you assess your risk tolerance with the questions below to give you a better understanding on where you stand. Each answer will result in a number of points, at the end add all your points and see your outcome. Be honest! It’s for your own good and betterment, and perhaps you may learn a little something about yourself
1.How would your partner, best-friend, mum, dad, anyone close to you describe you as a personal risk taker?
A. First to gamble (4 points)
B. Likes to take calculated risks (3 points)
C. Not confident in gambling (2 points)
D. Shun those that gamble (1 point)
2.You’ve just won the lotto and can choose from one of the following payouts. Which do you like the best? (Choose the payout that you’d happily walk away with)
A. $1,000 in cash (1 point)
B. 50% chance at winning $5,000 (2 points)
C. 25% chance at winning $10,000 (3 points)
D. 5% chance at winning $100,000 (4 points)
3.You have just been given $10,000 as a good-will gift to invest, what do you do?
A. Straight to the bank (1 point)
B. Invest in secure bonds (2 points)
C. Invest in stocks (3 points)
4.What would you say your experience is in regards to stocks or the stock-market?
A. No experience at all (1 point)
B. Some experience (2 points)
C. Already in the stockmarket (3 points)
5.Quick, what do you think of when you hear the word ‘risk’?
A. Losses (1 point)
B. Uncertainty (2 points)
C. Opportunity (3 points)
D. Adrenaline (4 points)
6.These are some pretty bad investment returns, but which would you prefer out of the results?
A. $100 return best case; worst case $0 return (1 point)
B. $600 return best case; worst case $100 loss (2 points)
C. $2,600 return best case; worst case $600 loss (3 points)
D. $4,600 gain best case; worst case $2,400 loss (4 points)
7.You’ve just been gifted $1,000. You must choose between the two choices:
A. Automatic gain of $250 (1 point)
B. 50% chance gain of $250 and 50% chance no gain (3 points)
8.You’ve just been gifted $2,000. You must choose between the two choices:
A. Automatic loss of $250 (1 point)
B. 50% chance loss of $250 and 50% chance no loss (3 points)
9.If you were given $30,000 to invest, which option would you like the best?
A. 60% conservative investments, 30% growth investments, 10%, high-growth investments (1 point)
B. 30% conservative investments, 40% growth investments, 30% high-growth investments (2 points)
C. 10% conservative investments, 40% growth investments, 50% high-growth investments (3 points)
10.You’re left $250,000 in a will from your relative but you must invest all of the money into one of the following choices, which would you prefer?
A. Cash account (bank account, money market fund) (1 point)
B. Mutual fund that holds both equal amount stocks and bonds (2 points)
C. Portfolio of 15 top common stocks for the year (3 points)
D. Commodities with the choice of either gold, silver, or oil (4 points)
How many points do you have and where do you fall?
0 to 16: Conservative investor who has low risk tolerance
17 to 20: Below-average risk tolerance
21 to 26: Average/moderate risk tolerance
27 to 30: Above-average risk tolerance
31 and above: high risk tolerance (high growth investor)
So, how did you do? And just what are you meant to do now? Keen to see an asset allocation for each type of investor? Keep your eyes peeled readers in the coming weeks, we’ve got you 🙂