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Risk Tolerance Questionnaire

Ever wonder what is your risk tolerance? Below is a link to a risk tolerance questionnaire that will give you a quick overview of your risk tolerance.

Investment risk is the exposure your money has to the potential of a return that is less than expected or even a loss. Investing theory calls for higher returns when you assume higher risk. Investors take on the risk of losing money and the risk of not achieving their financial goals.

Losing Money

Investing risk is commonly linked to the possibility of losing your hard-earned money. There are many investments with low levels of risk. Such low risk investments include US Treasury bonds and bills. They are risk free because they are guaranteed by the US government.

The price you pay for low risk is the profit you gain. Under such investments your returns are extremely low. In real growth terms you may be further disappointed since the effects of inflation and taxes eat up your profits.

Financial Goals

The achievement of financial goals is determined mainly by the amount you have allocated for investing and the time you have. Additionally, the rate of return and growth play a major role in the achievement of your financial goals.

If you are a more conservative type of an investor, you should increase the amount of money for investing. You should also start early so that you have more time to accumulate money. Don't underestimate the role of inflation though. When estimating the time needed for your goals achievement, include the taxes you are liable to as well as investment fees.

Risk Tolerance Questionnaire

Most people think they can tolerate more risk than they really can once they encounter a loss. This is where the risk tolerance survey comes in. Based on the research of two professors, it gives you an independent way to assess your risk tolerance. The risk tolerance quiz will help you gain an understanding of you ability to handle risk. There are no right or wrong answers, and you may find the results do not match your perceptions of your risk tolerance.

The Risk Tolerance Survey survey was developed by two university personal finance professors, Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at Kansas State University. Dr. Ruth Lytton and Dr. John Grable, have completed extensive research in trying to quantify investor risk tolerance. In addition to the general risk assessment provided by this survey, they have found that people with higher levels of income, education, and knowledge of personal finance have more risk tolerance. Your investment time horizon is also a factor, and people who can invest for a longer time period can generally assume more risk than those investing for shorter periods. It has also been found that gender is a minor factor in explaining risk tolerance with women having a slightly higher tolerance for risk than men do.

Investment Risk Tolerance Quiz

Risk includes the possibility of losing money. However, extra considerations should be made in addition to the safety of the principal and the potential for growth. These considerations include the likelihood of achieving the financial goals you have established. Additionally, you should consider whether you are willing and able to accept a higher level of risk in order to achieve further rewards.

 


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