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Put Yourself to the Test
By James H. Lowell III Bankrate.com
Are you as much of a dare-devil as you think you
are?
OK. This isn't exactly a scientific test here. But
then, the markets aren't exactly rational -- consider the frenzy,
chaos and pandemonium that sometimes culminate in an adrenaline
rush that follows making money in what's often a binge-and-purge
process of buying and selling, and. These days -- especially in
this September sell-off -- we're all reminded that the "long term"
crumbles like a stale cookie when faced with the monster of daily
volatility.
Enter our quiz, designed to help you gauge your investment
risk tolerance as well as your ability to take the right kinds of
risks. Chances are you are already somewhat familiar with your risk-talking
skills. But taking risks means you have to walk the talk, and that's
a much harder task to accomplish -- even more so if you don't really
know your risk-taking self.
So put your index finger on your nose, tilt your head
back and walk the following lines.
Your score is: 0
20 or higher: You're a well-rehearsed risk
taker who knows how to set reasonable limits in accordance with
realizable goals. Your friends are green with envy. Not unwilling
to try to take on a new challenge, you are also against leaps of
faith for faith's sake. Chances are you could be a successful entrepreneur,
which, by the way, is the same profile it would take to be a successful
investor. You're willing to take charge of a new situation in an
informed, objective way while, at the same time, able to recognize
the potential pitfalls and calculate the consequences. you're also
able to spot trouble before you're in it. To be a successful investor,
you need to be able to tolerate and accomplish all the above without
being overwhelmed by second doubts. You're on your way, baby.
20 to 10 points: Depending on where your score
falls, you are either more or less likely to take risks with a greater
or lesser degree of probability that there will be a reward waiting
for you on the other side. You have tended to either take too much
risk with too little advance thinking about the possible consequences,
or too little risk without understanding the potential downside
in terms of gain. As an investor, you will need to learn more about
the potential risks and rewards in order to ensure that you flourish,
rather than founder, when it comes to new investments which are
better suited to your objectives -- rather than tailored to your
whims. You will need to learn more in order to take on more risks
which, in turn, will help you increase your long-term chances of
successfully achieving your investment objectives. Pay particular
attention to each fund's particular risks and potential rewards.
10 points or fewer: You are, in varying degrees,
either too willing to take risks without knowing and understanding
the consequences, or too unwilling to take on necessary risks in
order to achieve reasonable objectives. As an investor, you'll need
to come to terms with the fact that some risks aren't worth taking
-- while others decidedly are. Familiarizing yourself with appropriate
risks and rewards for each type of fund within each fund category
will help you overcome your timidity or tame your overconfidence
so you won't get gored by a bull market or mauled by a bear market.
| Scorecard |
| Remember when your teacher
told you that you could grade your own exam. Well, that's not
in the cards. Instead, you'll need to score yourself based on
the following: |
| 1 |
0 |
½ |
- |
- |
0 |
½ |
1 |
- |
- |
0 |
½ |
1 |
- |
- |
| 0 |
1 |
½ |
- |
- |
1 |
½ |
0 |
- |
- |
1 |
1 |
½ |
0 |
0 |
| 1 |
0 |
- |
- |
- |
1 |
½ |
0 |
- |
- |
0 |
1 |
½ |
- |
- |
| 1 |
½ |
0 |
- |
- |
1 |
0 |
½ |
- |
- |
1 |
0 |
0 |
1 |
- |
| 4 |
2 |
1 |
0 |
- |
½ |
1 |
0 |
- |
- |
0 |
0 |
½ |
1 |
- |
| 1 |
½ |
0 |
- |
- |
0 |
0 |
0 |
½ |
- |
1 |
1 |
½ |
0 |
- |
| 1 |
½ |
0 |
- |
- |
0 |
0 |
0 |
- |
- |
1 |
½ |
0 |
- |
- |
| 5 |
1 |
½ |
0 |
* |
½ |
1 |
½ |
- |
- |
0 |
1 |
½ |
0 |
* |
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