Wednesday, May 2, 2012

Money – Risk Tolerance

The other day I was out walking and thinking about risk tolerances of people. I feel based on my experiences that people have low risk tolerances when it comes to losing money. I wanted to have a group discussion on how you feel about risk, and preferences to different investments.

So, let’s get started.

Risk Test…let’s say you have the option to pick one of these investment vehicles.   Choose which investment you would have felt comfortable with during the course of 5 years, and then choose which investment you want to choose for the next five years.

Remember past performance does not guarantee future results.  Each investment vehicle might consist of stock, bonds, or both.  Since most people don't read a mutual fund's prospectus...it is fair to not tell you what investment is what until after you select.

Each investment is for 5 past years.  You do not know what the future of these investments are going to be.  Choose wisely.

   Year 1    Year 2    Year 3    Year 4   Year 5
1.    2%         3%         4%           5%        5%

2.    5%         4%         6%           5%        3%

3.  10%         8%       5%         12%         8%

4.  10%      -15%       25%         20%        -2%

5.  12%         5%      -20%        30%         5%

6. -20%      35%      -40%         -5%        55%

7.  20%       -4%       15%       -10%         25%

8. -10%      32%       13%          2%         -3%

9.    4%        4%         4%          4%          4%

I have my thoughts on which investment people would likely choose, but I want to know your opinion.  Please do not be swayed by other comments...since this is your risk tolerances.

Be sure to comment so we can have an interactive conversation on this important topic.  When you comment please choose one option, and explain your reasoning.

3 comments:

  1. I went with #3 because that option gave me the highest return after 5 years...

    ReplyDelete
  2. My emotional stability would do much better with #3, however #7 has a higher percentage.

    ReplyDelete
    Replies
    1. Unfortunately, option 7 doesn't have a higher return. If you add up all the percentages...it is higher, however this doesn't always mean the return will be higher.

      Delete

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