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Put Yourself to the Test

Are you as much of a dare-devil as you think you are?

OK. This isn't exactly a scientific test here. But then, the markets aren't exactly rational -- consider the frenzy, chaos and pandemonium that sometimes culminate in an adrenaline rush that follows making money in what's often a binge-and-purge process of buying and selling, and. These days -- especially in this September sell-off -- we're all reminded that the "long term" crumbles like a stale cookie when faced with the monster of daily volatility.

Enter our quiz, designed to help you gauge your investment risk tolerance as well as your ability to take the right kinds of risks. Chances are you are already somewhat familiar with your risk-talking skills. But taking risks means you have to walk the talk, and that's a much harder task to accomplish -- even more so if you don't really know your risk-taking self.

So put your index finger on your nose, tilt your head back and walk the following lines.

  1. Have you ever considered trying bungee jumping or parachuting?
    a. Yes.
    b. No.
    c. Maybe.

  2. Have you ever decided to do something without knowing the potential consequences (i.e., jump into untested waters)?
    a. Yes.
    b. No.
    c. Almost.

  3. Have you traveled abroad?
    a. Yes.
    b. No.

  4. Do you go to your ATM machine at night?
    a. Regularly.
    b. Sometimes.
    c. Never.

  5. Without looking at the top 10 companies that just one of your funds invests in, can you
    a. Name all 10?
    b. Name more than five?
    c. Name more than two?
    d. Less than zero?

  6. How often do you check the air pressure in your tires?
    a. Regularly.
    b. Sometimes.
    c. Never.

  7. If the pilot light in a gas stove isn't working, you would
    a. Light it.
    b. Stand by while someone lights it for you.
    c. Move.

  8. Which best describes how your current portfolio is allocated?
    a. 100 percent in high-risk investments.
    b. Some risky investments, some conservative investments.
    c. Moderately conservative with a dash of risk.
    d. As little risk as possible.

  9. Does the probability of losing 10 percent or more of your entire portfolio make you
    a. Not want to invest?
    b. Invest a modest amount?
    c. Ignore short-term dips?

  10. If you inherited a lump sum of money, say $10,000, would you
    a. Invest it all at once?
    b. Gradually invest it?
    c. Put it all in a CD?

  11. Do you feel more comfortable when
    a. You're in total control?
    b. Sharing decisions?
    c. Being told what to do?

  12. Would you risk everything for a potentially huge return?
    a. Yes.
    b. No.
    c. Maybe.

  13. Which strategy suits you best
    a. Taking your time to get to trust someone?
    b. Trusting someone before you know them?
    c. Trusting no one?

  14. Who would you trust first?
    a. Car mechanic.
    b. Hair stylist.
    c. Real estate agent.
    d. Broker.

  15. The last time you pretended to know something that you didn't was
    a. Just now.
    b. A few days ago.
    c. Never.

  16. You would rather
    a. Impress your friends.
    b. Impress yourself.
    c. Impress your mother.

  17. When you were applying for your latest job, did you
    a. Tell everyone you thought you would get it?
    b. Tell only a handful of people you were applying?
    c. Keep it to yourself, until you actually got it?

  18. Rate the riskiest thing you have ever done on a scale from 1 (being the least risky) to 10 (being the most risky):
    a. 10
    b. 7
    c. 5
    d. 3
    e. 1

  19. Say your money is in an account at the bank that's 100 percent protected against loss. If you found out that the assets in the account weren't fully protected, would you be less inclined to keep your money at that bank?
    a. Yes.
    b. No.
    c. Maybe.

  20. In general you think that compared to the stock market, banks are
    a. Safer places to keep your money?
    b. Better places to keep your money?
    c. Safer and better?
    d. Safer, but not necessarily better?

  21. When you contemplate investing in the U.S. stock market, do you think that it's
    a. Too risky to invest in?
    b. Too risky and expensive?
    c. Not too risky, but too expensive?
    d. Worth the risks?

  22. When standing in line at the airport, you check to ensure you have your ticket
    a. Once?
    b. Twice?
    c. At least twice?
    d. More than three times?

  23. When it comes to long-term commitments you would say that you are
    a. Unshakable?
    b. Mostly committed?
    c. Fickle as a fertile feline?

  24. Are you easily influenced by others when it comes to making decisions about your well being?
    a. Yes.
    b. No.
    c. Sometimes.
    d. You tell me.

Your score is: 0

20 or higher: You're a well-rehearsed risk taker who knows how to set reasonable limits in accordance with realizable goals. Your friends are green with envy. Not unwilling to try to take on a new challenge, you are also against leaps of faith for faith's sake. Chances are you could be a successful entrepreneur, which, by the way, is the same profile it would take to be a successful investor. You're willing to take charge of a new situation in an informed, objective way while, at the same time, able to recognize the potential pitfalls and calculate the consequences. you're also able to spot trouble before you're in it. To be a successful investor, you need to be able to tolerate and accomplish all the above without being overwhelmed by second doubts. You're on your way, baby.

20 to 10 points: Depending on where your score falls, you are either more or less likely to take risks with a greater or lesser degree of probability that there will be a reward waiting for you on the other side. You have tended to either take too much risk with too little advance thinking about the possible consequences, or too little risk without understanding the potential downside in terms of gain. As an investor, you will need to learn more about the potential risks and rewards in order to ensure that you flourish, rather than founder, when it comes to new investments which are better suited to your objectives -- rather than tailored to your whims. You will need to learn more in order to take on more risks which, in turn, will help you increase your long-term chances of successfully achieving your investment objectives. Pay particular attention to each fund's particular risks and potential rewards.

10 points or fewer: You are, in varying degrees, either too willing to take risks without knowing and understanding the consequences, or too unwilling to take on necessary risks in order to achieve reasonable objectives. As an investor, you'll need to come to terms with the fact that some risks aren't worth taking -- while others decidedly are. Familiarizing yourself with appropriate risks and rewards for each type of fund within each fund category will help you overcome your timidity or tame your overconfidence so you won't get gored by a bull market or mauled by a bear market.

Remember when your teacher told you that you could grade your own exam. Well, that's not in the cards. Instead, you'll need to score yourself based on the following:
  a b c d e   a b c d e   a b c d e
1. 1 0 ½ - - 9. 0 ½ 1 - - 17. 0 ½ 1 - -
2. 0 1 ½ - - 10. 1 ½ 0 - - 18. 1 1 ½ 0 0
3. 1 0 - - - 11. 1 ½ 0 - - 19. 0 1 ½ - -
4. 1 ½ 0 - - 12. 1 0 ½ - - 20. 1 0 0 1 -
5. 4 2 1 0 - 13. ½ 1 0 - - 21. 0 0 ½ 1 -
6. 1 ½ 0 - - 14. 0 0 0 ½ - 22. 1 1 ½ 0 -
7. 1 ½ 0 - - 15. 0 0 0 - - 23. 1 ½ 0 - -
8. 5 1 ½ 0 * 16. ½ 1 ½ - - 24. 0 1 ½ 0 *


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