Conference nyoss1::market_investing

187.0. "Evaluating your risk tolerance" by LEDS::VESESKIS () Thu May 07 1992 14:21

			Checking Your Risk Tolerance


	I read this article from Fidelity Focus on how to evaluate your risk
threshold.  I found it pretty interesting and maybe some other people would 
like to try it.  It is printed here, not verbatim, without the permission of 
the publisher.  At the end of the test it will explain how to score it.  
I don't agree or disagree with the type of investments they prescribed at the
end as a function of your risk tolerance.  
________________________________________________________________________________

1. I believe investing in today's volatile market is similar to spinning a 
roulette wheel in Las Vegas because of the odds against me.

	a. agree strongly
	b. agree
	c. neither agree or disagree
	d. disagree
	e. strongly disagree

2. My salary and overall earnings from my job are likely to increase signifi-
cantly in the coming years.

        a. disagree strongly
        b. disagree
        c. neither agree or disagree
        d. agree
        e. strongly agree

3. If I were deciding how to invest my retirement plan, I would choose 
investments that offered guaranteed returns and stability.

        a. agree strongly
        b. agree
        c. neither agree or disagree
        d. disagree
        e. strongly disagree


4. If I were picking a stock to invest in, I would look for companies that
were developed breakthrough products of the future, such as the next penicillin


        a. disagree strongly
        b. disagree
        c. neither agree or disagree
        d. agree
        e. strongly agree
    

5. If I were selecting an investment for my newborn child's college education
fund, I would choose:

	a. Fed. insured C.D.'s
	b. Government backed securities
	c. High quality corporate bonds
	d. Stock mutual funds
	e. Corporate junk bonds

6. The following number of dependents rely on me for financial support.

	a. 4 or more
	b. 3
	c. 2
	d. 1
	e. myself

7. The number of years remaining until I expect to retire is roughly:

	a. currently retired
	b. less than 5 
	c. 5-14
	d. 15-24
	e. 25 or more

8. My total net worth (the value of your assets minus debts) is:

	a. under $15K
	b. $15K - $50K
	c. $50K - $150K
	d. $150K - $350K
	e. >$350K

9. The amount I have saved to handle emergencies, such as a job loss or 
unexpected medical emergency, equals:

	a. 1 mo. salary or less
	b. 2 - 6 mo. salary
	c. 7 - 12 mo salary
	d. 1 - 2 years salary
	e. > 2 yrs. salary

10. I would rather invest in a stock mutual fund than choose individual stocks
on my own because a mutual fund provides professional management and
diversification.

        a. agree strongly
        b. agree
        c. neither agree or disagree
        d. disagree
        e. strongly disagree
   

11.  I want and need to reduce the overall level of debt in my personal 
finances.

        a. agree strongly
        b. agree
        c. neither agree or disagree
        d. disagree
        e. strongly disagree

12. When making investments, I prefer to have a guaranteed yield at a specified
date, rather than the possibility of a higher or lower return sometime in the
future.


        a. agree strongly
        b. agree
        c. neither agree or disagree
        d. disagree
        e. strongly disagree

______________________________________________________________________________

				SCORING

	IF YOUR ANSWER IS:		THEN SCORE THIS MANY POINTS
	------------------		---------------------------	
	
		a				1
		b				2
		c				3
		d				4
		e				5

	Add up your total.


	IF YOUR TOTAL IS:		THEN YOUR RISK FACTOR IS:
	-----------------		------------------------
	 46 or higher			High - Invest in aggressive growth funds
					and stock funds, IPO's, sector mutual
					funds, OTC stock funds, foreign stock,
					junk bonds funds.

	 41 - 45			Above average risk - Invest in a 
					combination of growth and stock funds,
					international funds, high yield bonds,
					blue chip stocks, intermediate-term
					corporate bonds.

	 36 - 40			Average risk. Blue chip stocks, high
					grade  corporate bonds and bond funds,
					growth and income funds, index funds
					or balanced funds.

	 31 - 35			Below average risk. Invest in your home,
					high quality bonds and bond funds, 
					money market funds, government backed
					securities, and fed. insured savings
					account.

	 30 or less			No risk tolerance. C.D.'s, Treasury
					bills,notes and bonds. Your mattress. 

    
    	FWIW, I took the test and scored a 39.  This placed me in the high
    end of the average risk taker.  The type investments I have more or
    less fell in line with what they suggested they should be.   I don't 
    think this is any magic but mostly common sense they are applying.  It
    was interesting to go through it though.
    
    Ken

I scored a 48...and I guess I pretty much match the suggested
profile.  But the High "Risk Factor" category suggests _only_
high risk investments.  I'm not sure I agree with that.  I 
believe in a balanced portfolio.  While I have the _majority_
of my money in higher risk investments, I also like to keep 
some in moderate or low risk stuff as a hedge.

Tom

I STRONGLY disagree with Question 10 (rate a 5 - 46 total) and got
quite a laugh in the suggestions for the "higher" risk investor.