Risk Tolerance Survey

The first step toward implementing a strategy is taking the Beacon Capital Management Risk Tolerance Survey developed by professors Dr. Ruth Lytton at Virginia Tech University and Dr. John Grable at Kansas State University.

Why is knowing your risk tolerance important? Successful Investing isn’t just about strategy. You need a sense of how much volatility you can handle comfortably. In other words, how far can the market fall before you panic and sell? Most investors determine their risk tolerance by their time horizon. But age and withdrawal needs are only half the story. Some investors prefer the thrill of the high wire while others would rather walk through life comfortably on solid ground. Grable has concluded that these traits impact how you should invest.

Please answer the following multiple-choice questions.

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

2. You are on TV game show and can choose one of the following, which would you take?

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

4. If you unexpectedly received $20,000 to invest, what would you do?

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

6. When you think of the word "risk" which of the following words comes to mind first?

7. Some experts are predicting the prices of hard assets such as gold, jewels, collectibles and real estate 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?

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

9. You have been given $1,000 to invest. You are now asked to choose between:

10. You have been given $2,000 to invest. You are now asked to choose between:

11. Suppose a relative left you an inheritance of $100,000, stipulating in the will that you invest ALL of the money in ONE of the following choices. Which one would you select?

12. If you had to invest $20,000, which of the following investment choices would you find most appealing?

13. 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?

14. How many years before you expect to make withdrawals from this account?