Find your risk tolerance

Find your risk tolerance

In order to identify how much volatility you can handle in your portfolio, answer the following six hypothetical questions, and find your risk tolerance level.

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1. From September 2008 through November 2008, stocks lost more than 31% of their value. If I owned a stock investment that lost about 31% of its value in three months, I would . . . (If you owned stocks during this period, please select the answer that matches your actions at that time.)
 

2. From an original investment of $25,000, your portfolio has grown 100% to $50,000, but it suddenly drops $10,000, down 20% (your portfolio is $40,000 now). How would you react?

3. Your portfolio, from the previous question, is now worth $40,000, and it suddenly declines another

$6,000 or 15%, (your portfolio is $34,000 now). How would you react?
4. The chart to the right shows the highest one-year loss and the highest one-year gain on four different hypothetical investments of $10,000.* Given the potential gain or loss in any one year, I would invest my money in

5. If you could choose only one of the four portfolios characterized below, which would you select?
  Average Annual Return Highest Annual Return Lowest Annual Return
Portfolio A 5% 10% 0%
Portfolio B 8% 18% -10%
Portfolio C 10% 30% -22%
Portfolio D 15% 60% -40%
6.The bar charts below show annual rates of return earned by four hypothetical investments over a ten year period. Each chart also shows the cumulative value of an initial lump sum deposit of $50,000 made at the beginning of year one, then held for ten years. Given the fluctuation of the returns for these four investments and their ending values, which would you choose?




   

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