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INSTRUCTIONS:
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INTERPRETING YOUR RISK TOLERANCE SCORE
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If your score is between... | Your risk tolerance score provides a very general guideline for investment allocations in the stock market. The score is not intended to be an absolute determinate for exact stock exposure, but rather as a tool to help investor manage expectations and risk which are inherit with stock market investment. The table below provides additional insight based upon score ranges. | ||
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0 and 30 |
This score indicates a very low tolerance for risk. You are a very
conservative investor, likely to have difficulty with market downturns, even
ones that are relatively short in duration. You would be in line
with your low tolerance by keeping the majority of your investments in
secure places, like CDs and money market funds. A small portion going into stocks
could be positioned
with a conservative approach, such as with a mutual fund with a proven track record in
down market management.
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30 and 60 | This
score shows a low to moderate risk tolerance. A score of 50 could suggest that you invest
around 50% of your portfolio in
stocks or stock mutual funds. In this range, using a balanced fund may be appropriate.
This type of mutual fund typically has 50-60% in stocks, with the remainder
in bonds and money markets.
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60 and 90 |
A score in this zone indicates a moderate to moderately-high tolerance to
risk. Here, one could build upon a balance-type mutual fund or
portfolio by adding more aggressive stocks or stock funds across a wider
range of categories. In this zone, an investor's time horizon is at
least one-to-two full market cycles, with each cycle averaging a 3-to-5
years, which allows for accepting a higher level of risk.
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over 90 | This
zone goes from high risk to maximum risk tolerance. This range also
suggests that you have a long-term time frame over several market-cycles
which allows for higher levels of loss during market declines, while seeking
average to above-average gains in cyclical bull markets. In this range, an
investor could consider an extensive range of asset categories and stock
market related investments.
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Investment Strategies, Inc. (ISI) offers its Risk Tolerance Questionnaire (RTQ) as a free community service for investors in relation to the overall stock market. RTQ is a mathematical model aimed at helping an individual investor better understand their own risk tolerance relating to stock market investing. It is not a projection or guarantee of future results with any stock market investment or other asset category, such as bonds, real estate, etc.. The RTQ should not be considered individual investment advice and investors should seek such advice from their own advisors. Copyright Notice: All content relating to ISI's Risk Tolerance Questionnaire or RTQ are protected by U.S. copyright and international treaties. The RTQ is for the benefit of individual website visitor non-commercial use only and is not to be summarized, reproduced, or rebroadcast in any fashion, including discussing contents in message board, newsgroup, and chat formats, without the written permission of Investment Strategies, Inc. Copyright © 1981-2012, Investment Strategies, Inc. All rights reserved.
RECOMMENDED INTERNET RESOURCES For more information regarding the risk tolerance, investors are urged to seek a wide range of sources for assistance in determining their own risk tolerance and investing approach to the stock market. Here are a couple suggestions: SEC Roadmap: Risk at www.sec.gov/investor/pubs/roadmap/risk.htm offers general insights from The Securities & Exchange Commission An excellent narrative, Understanding Risk, with subject related links is available from the website About.com at http://stocks.about.com/od/riskreward/a/Understandrisk.htm The American Association of Individual Investors, which specializes in investment education, has a free commentary, Long-Term Investors, the Focus Should Be on Risk, available at www.aaii.org/commentary/articles/200506_portstrategies.cfm
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