How Much Risk Should I Take?

Your attitude towards risk will influence how you invest your money. Obviously, if you take more risk, you expect higher returns. Risk ranges from being very conservative, risk-averse and suffer a lot of pain if money is lost, to being a very aggressive, risk-taker who loves to speculate, in order to receive large returns.

This exercise is designed to determine what your level of risk is. There is no “correct” answer. Answer each question honestly as it relates to your personality.

1. You win €500 in a lottery. You:
Spend it on groceries
Purchase lottery tickets
Deposit in a savings account
Buy some stock

2. Two weeks after buying 100 shares of a €20 stock, the price jumps to €32. You decide:
Buy more of the stock
Sell it
Sell half of the stock
Keep it, hoping it will advance further

3. On a day when the stock market jumps way up, you:
Wish you had invested more
Call your investment advisor and ask for advice
Feel glad you’re not in the market because it fluctuates too much
Pay little attention

4. You’re planning a vacation and can either lock in a fixed room rate which includes meals at €160 per day or book standby and pay anywhere from €100 to €300 per day. You:
Take the fixed room rate offer
Talk to people who have experienced these type of situations about the availability of last-minute accommodations
Book standby and also arrange vacation insurance because you’re leery of the tour agency
Take your chances with standby.

5. The owner of your apartment building is converting the units to condominiums. You can buy your unit for €85,000 or an option on it for €20,000 (Units have recently sold for close to €120,000, and prices have been increasing.) For financing you’ll have to borrow the down payment and pay mortgage and condo service fees higher than your present rent. You:
Buy your unit
Buy your unit and look for another to buy
Sell the option and arrange to rent the unit yourself
Sell the option and move out

6. You have been working three years for a rapidly growing company. As an executive, you are offered the option of buying up to 2% of company stock – 1,000 shares at €6 a share. Although the company is privately owned, its majority owner has made some handsome profits selling other businesses and intends to sell this one eventually. You:
Purchase all the shares you can and tell the owner you would invest more if allowed
Purchase all the shares
Purchase half the shares
Purchase a small amount of shares

7. You go to the casino for the first time. You choose to:
Play €0.50 slot machines
€5 minimum-bet roulette
€1 slot machine
€20 minimum-bet blackjack

8. You want to take an important customer out for a special dinner in a city that you’ve never been to before. How do you choose the restaurant?
Read restaurant reviews on the internet
Ask co-workers if they know of an appropriate restaurant
Call someone you know in this city, who eats out a lot, but only recently moved there
Visit the city sometime before the dinner to check out the restaurants yourself.

9. The expression that best describes your lifestyle is:
No guts, no glory
Just do it!
Look before you leap
All good things come to those who wait

10. Your attitude toward money is best described as:
A dollar saved is a dollar earned
You’ve got to spend money to make money
Cash and carry only
Whenever possible, use other people’s money.




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