Market Timing: Big Wins or Big Trouble? - Halliburton

Risk Assessment
Risky Business:
Understanding Your Risk Tolerance
Whether it is investing, driving, flying or
walking down the street, everyone exposes
themselves to risk. Your personality and
lifestyle play a big role in the amount of
risk you personally can handle.
Risk tolerance is the degree of uncertainty an investor can
handle in regard to losses in his or her portfolio…that is
how much money you can comfortably lose. One of the
most important aspects of risk tolerance is this: know
your limits. Your risk tolerance depends on your financial
situation, how close you are to reaching your retirement
goals and your comfort level. As you develop an investing
strategy, think carefully about your risk tolerance.
Different individuals will have different tolerances for risk.
Expect your risk tolerance to change as you grow older
and move closer to retirement. Achieving the right balance
between risk and return will ensure you achieve your
financial goals while allowing you to get a good night’s sleep.
To get an idea of your risk tolerance,
take a few minutes to complete the
following risk tolerance quiz. As you do
the quiz, keep track of your answers:
1. With which types of investments
are you most comfortable?
a. Money market accounts
b. Corporate bonds or bond funds
c. Stocks or stock funds
2. After you make an investment,
you feel:
a. Nauseous
b. Satisfied
c. Invigorated
3. Say you invest $20,000. Each of the
following answers shows the range
of returns that your investment
may experience after
just one year, based
on the underlying
holdings. Which
investment
would you
be most
comfortable
holding?
a. $21,000-$19,000
b. $23,000-$16,000
c. $27,000-$13,000
4. For the last 5 years, your investment
has returned an average 10% per
year — in line with other similar
investments. However, it loses 20%
over the next year. What do you do?
a. Sell all of the investment
b. Maybe sell a portion of the
investment
c. Buy more of the same
investment
5. Which phrase best describes your
take on life?
a. Proceed with caution — take no
unnecessary risks
b. Take small, measurable risks and
patiently pursue your dreams
c. No-holds barred — go for it!
Source: MsMoney.com
Score:
If you selected mostly As: You are risk
adverse and are considered a conservative
investor. You are uncomfortable taking risk
with market volatility. You hope to protect
your investment value and have a shorter
investment horizon.
If you selected mostly Bs: You have an
average risk tolerance and are considered
a moderate investor. You prefer to avoid
volatility, but can accept moderate risk.
Moderate investors tend to invest for the
medium, to long-term.
If you selected mostly Cs: You have a
high risk tolerance and are considered an
aggressive investor. You are comfortable
taking risk with your investments and are
not concerned about short-term volatility.
Aggressive investors tend to be younger
and investing for the longer-term.