Quiz: What is your risk appetite?
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Here’s a quick interactive quiz.
This quiz is featured in Burton Malkiel’s – A random walk down wall street and is designed by personal finance expert William E. Donoghue and the editors of Donoghue’s Money Letter to help investors determine the amount of risk you are likely to feel comfortable taking. Needless to say, no simple questionnaire will give you a completely reliable index on your tolerance for risk, but it will make you think.
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Read through the post “How much risk is right for you?” to interpret your results
Would you feel better if:
Which would you rather have done:
Which situation would make you feel happiest?
The apartment building where you live is being redeveloped. You can either buy your future apartment for ₹80L or sell the option for ₹20L. The market value of the flat, once built, is ₹1.2Cr. You know that if you buy the apartment, it might take 6 months to sell, the monthly carrying cost is ₹1.2L and you would have to borrow the down payment for a loan. You don’t want to live in the building. What do you do?
You inherit your uncle’s ₹1 Cr house, free of any loan. Although the house is in a fashionable neighbourhood and can be expected to appreciate at a rate faster than inflation, it is currently in poor condition. It would net ₹100,000 (1 Lakh) monthly if rented as is; it would net ₹150,000 if renovated. The renovations could be financed by a loan on the property.
You work for a small, but thriving, privately held IT Products company. The company is raising money by selling stock to its employees. Management plans to take the company public, but not for four or more years. If you buy the stock, you will not be allowed to sell until shares are traded publicly. In the meantime, the stock will pay no dividends. But when the company goes public, the shares could trade for 10 or 20 times what you paid for them.
How much of an investment would you make?
Your long-time friend and neighbour, an experienced tech entrepreneur, is assembling a group of investors (of which he is one) to fund an ecommerce start-up that could pay back 50 to 100 times its investment if successful. If the company fails, the entire investment is worthless. Your friend estimates the chances of success at 20%.
What would you invest?
You learn that several commercial real estate developers are seriously looking at undeveloped land in a certain location. You are offered an option to buy a choice parcel of that land. The cost is about two months’ salary and you calculate the gain could be ten months’ salary. Do you:
You are on a TV game show and can choose one of the following. Which would you take?
It’s 2016 and inflation is returning. Hard assets such as precious metals and real estate are expected to keep pace with inflation. Your assets are now all in long-term bonds. What would you do?
You’ve lost ₹5,000 at the blackjack table in Atlantic City. How much more are you prepared to lose to win the ₹5,000 back?
Your investment loses 15% of its value in a market correction a month after you buy it. Assuming that none of the fundamentals have changed, do you:
A month after you purchase it, the value of your investment suddenly skyrockets by 40%. Assuming you can’t find any further information, what do you do?