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Setting Financial Goals Risk Tolerance Your risk tolerance is like the first domino in a string — it affects every aspect of your plan as you begin to assess what you'll need to set aside to reach a particular goal. Your risk tolerance should govern your investment style — what types of investments in which you're comfortable investing. Your investment style also governs your investment earnings potential — how much you can expect your investment to grow. Your earnings potential also governs the amount you'll need to plan to save in order to meet the goal — how many more deposits will you need to make? Knowing your risk tolerance is the first step in managing your risk. If you don't know what type of investment volatility you can live with — and still sleep at night — then you cannot purchase an investment with confidence. Risk tolerance quiz The following questions are intended to help you measure your attitude toward investment risk as it applies to your financial goals. Fill out the form below: Strongly Agree Agree Disagree Strongly Disagree I am prepared to sacrifice some safety in exchange for higher returns. I am willing to accept some risk in effort to stay ahead of inflation. From time to time, I can tolerate negative returns. I am willing to take above average risks to achieve above average returns. Your Total Score is: Risk tolerance quiz results Score Investor Type Description 4-6 "A" Conservative Primary concern is preservation of capital 7-9 "B" Moderately Conservative Comfortable with a balanced portfolio weighted toward bonds and guaranteed instruments 10-13 "C" Moderately Aggressive Comfortable with a balanced portfolio weighted toward stocks 14-16 "D" Aggressive Can tolerate a high degree of volatility Explanation of scores: Total score between 4-6: You are a conservative investor with a very low tolerance to risk or market fluctuations. You feel comfortable with a portfolio weighted mostly in short-term bonds and fixed instruments, with only a small portion in stocks. Total score between 7-9: You are a moderately conservative investor. You feel comfortable with a portfolio still weighted towards bonds and fixed instruments, but with a moderate portion in conservatively diversified equities. Total score between 10-13: You are a moderately aggressive investor. Your assets may be weighted towards a diversified stock portfolio, but still with a good mix of bonds and fixed, guaranteed instruments. Total score between 14-16: You are an aggressive investor with a high tolerance to market volatility. You feel comfortable with most of your assets in stocks, but should still maintain a small portion in bonds and guaranteed accounts. During the asset allocation section of this course, you will learn more about the process of matching your risk tolerance with your investments. < PREVIOUS NEXT > #38599