In order to make money over time, one needs to assume at least some risk. The more risk a person takes, the more potential there is for greater return. But also along with that comes the risk of loss in the shorter term. One should only take as much risk as they can withstand without getting to the point of feeling investments must be sold when they have declined. This could cause significant harm.
To help in this assessment, click Your Risk Profile and answer the five questions. PLEASE, PLEASE, PLEASE, before answering each question, read the information below…
Question 1… These are typical ranges and not the best and the worst each risk profile could be. There are outliers on the upside and downside. Also realize, that if the timeframe was longer, the upside would be lower and the downside would be less or non existent… the longer the timeframe the likelihood of loss gets lower and then goes away. It is also important to realize that taking more risk leads to a greater rate of return difference over greater periods of time than seems apparent in the 12 month periods of this question.
Question 2… This is the outlier question. If there a market decline like the one seen from November 2007 through early March 2009 (was the worst since the Great Depression) that causes stocks to go down more than typical, how much loss could you experience before you felt you had to take your money out of stocks, even if you were counselled that it was not wise to do so?
Question 3… This is less about your expertise and more about your feelings toward the stock market, so don’t worry if you don’t know for sure what the market will do.
Question 5… Please note that there has to be a definitive plan to take out at least 1/3 of your portfolio for something OTHER THAN retirement spending for you to put any other answer than NEVER.
Additional Note… Your selection in question 1 is not necessary your risk profile. Questions 2-5 will either move you to the left or right of what you selected in Question 1. When you have completed all the questions, look at the bottom right of page two to see which risk profile (RP) you are and compare it to what you selected in Question 1. If you are uncomfortable with the risk profile scoring, I suggest you look at the question explanations as well as all your answers again more carefully and consider whether adjusting them to end up with the typical range of returns that you prefer in Question 1 would make sense for you.
When you have completed the form, please print, sign/date, and either scan/email or mail the form to me. Don’t download the pdf first, or you will lose your answers and your risk profile scoring.
