Risk Tolerance Analysis – Private Wealth Management and Financial Consulting

Name

First Name

Last Name

In general, how would your best friend describe you as a risk taker?

A real gambler

Willing to take risks after completing adequate research

Cautious

A real risk avoider

You are on a TV game show and can choose one of the following. Which would you take?

$5,000 in cash

A 50% chance at winning $25,000

A 25% chance at winning $50,000

A 5% chance at winning $500,000

You have just finished saving for a “once-in-a-lifetime” vacation. Three weeks before you plan to leave, you lose your job. You would:

Cancel the vacation

Take a much more modest vacation

Go as scheduled, reasoning that you need the time to prepare for a job search

Extend your vacation, because this might be your last chance to go first-class

How would you respond to the following statement? “It’s hard for me to pass up a truly good bargain (ie. a grocery item is 40% off.)”

Very true

Sometimes true

Not at all true

If you unexpectedly received $100,000 to invest, what would you do?

Deposit it in a bank account, money market account, or an insured CD

Invest it in safe high quality bonds or bond mutual funds

Invest it in stocks or stock mutual funds

Invest it in Bitcoin

In terms of experience, how comfortable are you investing in stocks or stock mutual funds?

Not at all comfortable

Somewhat comfortable

Very comfortable

Which situation would make you the happiest?

You win $150,000 in a publisher’s contest

You inherit $150,000 from a rich relative

You earn $150,000 by risking $3,000 in the options market

Any of the above—after all, you’re happy with the $150,000

When you think of the word “risk” which of the following words comes to mind first?

Loss

Uncertainty

Opportunity

Thrill

You inherit a mortgage-free house worth $400,000. The house is in a nice neighborhood, and you believe that it should increase in value faster than inflation. Unfortunately, the house needs repairs. If rented today, the house would bring in $2000 monthly, but if updates and repairs were made, the house would rent for $3000 per month. To finance the repairs you’ll need to take out a mortgage on the property. You would:

Sell the house

Rent the house as is

Remodel and update the house, and then rent it

In your opinion, is it more important to be protected from rising consumer prices (inflation) or to maintain the safety of your money from loss or theft?

Much more important to secure the safety of my money

Much more important to be protected from rising prices (inflation)

You’ve just taken a job at a small fast growing company. After your first year you are offered the following bonus choices. Which one would you choose?

A five year employment contract

A $75,000 bonus

Stock in the company currently worth $75,000 with the hope of selling out later at a large profit

Some experts are predicting prices of assets such as gold, jewels, collectibles, and real estate (hard assets) to increase in value; bond prices may fall, however, experts tend to agree that government bonds are relatively safe. Most of your investment assets are now in high interest government bonds. What would you do?

Hold the bonds

Sell the bonds, put half the proceeds into money market accounts, and the other half into hard assets

Sell the bonds and put the total proceeds into hard assets

Sell the bonds, put all the money into hard assets, and borrow additional money to buy more

Assume you are going to buy a home in the next few weeks. Your strategy would probably be:

To buy an affordable house where you can make monthly payments comfortably

To stretch a bit financially to buy the house you really want

To buy the most expensive house you can qualify for

To borrow money from friends and relatives so you can qualify for a bigger mortgage

Given the best and worst case returns of the four investment choices below, which would you prefer?

$1000 gain best case; $0 gain/loss worst case

$4000 gain best case; $1000 loss worst case

$13,000 gain best case; $4000 loss worst case

$24,000 gain best case; $12,000 loss worst case

Assume that you are applying for a mortgage. Interest rates have been coming down over the past few months. There’s the possibility that this trend will continue. But some economists are predicting rates to increase. You have the option of locking in your mortgage interest rate or letting it float. If you lock in, you will get the current rate, even if interest rates go up. If the rates go down, you’ll have to settle for the higher locked in rate. You plan to live in the house for at least three years. What would you do?

Definitely lock in the interest rate

Probably lock in the interest rate

Probably let the interest rate float

Definitely let the interest rate float

In addition to whatever you own, you have been given $10,000 to invest. You are now asked to choose between:

A sure gain of $5000

A 50% chance to gain $10,000 and a 50% chance to gain nothing

In addition to whatever you own, you have been given $20,000 to invest. You are now asked to choose between:

A sure loss of $5000

A 50% chance to lose $10,000 and a 50% chance to lose nothing

Suppose a relative left you an inheritance of $400,000, stipulating in the will that you invest ALL the money in ONE of the following choices. Which one would you select?

A savings account or money market mutual fund

A mutual fund that owns stocks and bonds

A portfolio of 15 common stocks

Commodities like gold, silver, oil and crypto

If you had to invest $100,000, which of the following investment choices would you find most appealing?

60% in low-risk investments 30% in medium-risk investments 10% in high-risk investments

30% in low-risk investments 40% in medium-risk investments 30% in high-risk investments

10% in low-risk investments 40% in medium-risk investments 50% in high-risk investments

Your trusted friend and neighbor, an experienced geologist, is putting together a group of investors to fund an exploratory gold mining venture. The venture could pay back 50 to 100 times the investment if successful. If the mine is a bust, the entire investment is worthless. Your friend estimates the chance of success is only 20%. If you had the money, how much would you invest?

Nothing

One month’s salary

Three month’s salary

Six month’s salary

In approximately how many years do you expect withdrawals to begin from your portfolio

50