Risk Tolerance Questionnaire

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Risk Tolerance Questionnaire

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Please answer all the questions by circling one of the options. Choose the option that best indicates how you feel about each question. If none of the options is exactly right for you, choose the option that is closest.
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1. Compared to others, how do you rate your willingness to take financial risks?*
2. How easily do you adapt when things go wrong financially?*
3. When you think of the word "risk" in a financial context, which of the following words comes to mind first?*
4. Have you ever invested a large sum in a risky investment mainly for the "thrill" of seeing whether it went up or down in value?*
5. If you had to choose between more job security with a small pay increase and less job security with a big pay increase, which would you pick?*

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6. When faced with a major financial decision, are you more concerned about the possible losses or the possible gains?*
7. How do you usually feel about your major financial decisions after you make them?*
8. Imagine you were in a job where you could choose to be paid salary, commission or a mix of both. Which would you pick?*
9. What degree of risk have you taken with your financial decisions in the past?*
10. What degree of risk are you currently prepared to take with your financial decisions?*

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11. Have you ever borrowed money to make an investment (other than for your home)?*
12. How much confidence do you have in your ability to make good financial decisions?*
13. Suppose that 5 years ago you bought stock in a highly regarded company. That same year the company experienced a severe decline in sales due to poor management. The price of the stock dropped drastically and you sold at a substantial loss. The company has been restructured under new management and most experts now expect it to produce better than average returns. Given your bad past experience with this company, would you buy stock now?*
14. Investments can go up and down in value and experts often say you should be prepared to weather a downturn. By how much could the total value of all your investments go down before you would begin to feel uncomfortable?*
15. Assume that a long-lost relative dies and leaves you a house which is in poor condition but is located in a suburb that's becoming popular. As is, the house would probably sell for $300,000, but if you were to spend about $100,000 on renovations, the selling price would be around $600,000. However, there is some talk of constructing a major highway next to the house, and this would lower its value considerably. Which of the following options would you take?*

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16. Most investment portfolios have a mix of investments - some of the investments may have high expected returns but with high risk, some may have medium expected returns and medium risk, and some may be low-risk/low-return. (For example, stocks and real estate would be high-risk/ high-return whereas cash and CDs (certificates of deposit) would be low-risk/low-return.) Which mix of investments do you find most appealing? Would you prefer all low-risk/low-return, all high-risk/high-return, or somewhere in between? Please select one of the seven portfolios listed below.*
Mix of Investments in Portfolio

Portfolio High Risk/Return Medium Risk/Return Low Risk/Return

1 0% 0% 100%

2 0% 30% 70%

3 10% 40% 50%

4 30% 40% 30%

5 50% 40% 10%

6 70% 30% 0%

7 100% 0% 0%
17. You are considering placing one-quarter of your investment funds into a single investment. This investment is expected to earn about twice the CD (certificate of deposit) rate. However, unlike a CD, this investment is not protected against loss of the money invested. How low would the chance of a loss have to be for you to make the investment?*
18. With some types of investment, such as cash and CDs (certificates of deposit), the value of the investment is fixed. However inflation will cause the purchasing power of this value to decrease. With other types of investment, such as stocks and real estate, the value is not fixed. It will vary. In the short term it may even fall below the purchase price. However, over the long term, the value of stocks and real estate should certainly increase by more than the rate of inflation. With this in mind, which is more important to you - that the value of your investments does not fall or that it retains its purchasing power?*
19. In recent years, how have your personal investments changed?*
20. When making an investment, return and risk usually go hand-in-hand. Investments which produce above-average returns are usually of above-average risk. With this in mind, how much of the funds you have available to invest would you be willing to place in investments where both returns and risks are expected to be above average?*

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21. Think of the average rate of return you would expect to earn on an investment portfolio over the next ten years. How does this compare with what you think you would earn if you invested the money in one-year CDs (certificates of deposit)?*
22. People often arrange their financial affairs to qualify for a government benefit or to obtain a tax advantage. However a change in legislation can leave them worse off than if they'd done nothing. With this in mind, would you take a risk in arranging your affairs to qualify for a government benefit or obtain a tax advantage?*
23. Imagine that you are borrowing a large sum of money at some time in the future. It's not clear which way interest rates are going to move - they might go up, they might go down, no one seems to know. You could take a variable interest rate that will rise and fall as the market rate changes. Or you could take a fixed interest rate which is 1% more than the current variable rate but which won’t change as the market rate changes. Or you could take a mix of both. How would you prefer your loan to be made up?*
24. Insurance can cover a wide variety of life’s major risks – theft, fire, accident, illness, death, etc. How much coverage do you have?*
25. This questionnaire is scored on a scale of 0 to 100. When the scores are graphed they follow the familiar bell-curve of the Normal distribution shown below. The average score is 50. Two-thirds of all scores are within 10 points of the average. Only 1 in 1000 is less than 20 or more than 80.
What do you think your score will be?
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Risk Tolerance Questionnaire

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Mix of Investments in Portfolio

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Portfolio	High Risk/Return	Medium Risk/Return	Low Risk/Return
1	0%	0%	100%
2	0%	30%	70%
3	10%	40%	50%
4	30%	40%	30%
5	50%	40%	10%
6	70%	30%	0%
7	100%	0%	0%