November 23rd, 2009
11:48 AM GMT
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We’ve all heard the old tale that if you invested $10,000 in Microsoft when the company went public in 1986, today you’d be a multi-millionaire. We think back to when oil was trading at $30 a barrel, and ask ourselves why we didn’t get into the action. Or, look at the price of gold. Why didn’t I invest a bit just a few weeks back? We kick ourselves.

But actually making these investments is of course easier said than done. Because when we’re faced with investment decisions, it’s not that simple. People are comfortable with different levels of risk. And finding out where you stand within that spectrum can be challenging.

On this week’s Biz Clinic, we sampled a series of these tests designed to gauge your stomach for risk.

The following are some from a test put together by professor at Rutgers University:

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

  1. A real gambler
  2. Willing to take risks after completing adequate research
  3. Cautious
  4. A real risk avoider

You are on a TV game show and can choose one of the following. Which would you take?

  1. $1,000 in cash
  2. A 50% chance at winning $5,000
  3. A 25% chance at winning $10,000
  4. A 5% chance at winning $100,000

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

  1. Loss
  2. Uncertainty
  3. Opportunity
  4. Thrill.

Take the full test if you want to get a clear picture of your appetite for risk.

While I was skeptical, the tests can be helpful. One independent consumer survey broke down a possible investment strategy for me. Another suggested a mix of aggressive mutual funds, with bonds. I was told I had a “moderate risk tolerance.”

They helped put my level of risk in perspective. And they got me thinking of another question you might ponder:

A Harvard-dropout has started a relatively new company that could revolutionize the way people use personal computers. You could make millions in the long run. But right now, he needs $10,000. Would you fork over the cash?

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Filed under: Biz ClinicFinancial markets


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