Drifting Away

Tuesday, March 11, 2008

Answer the following questions truthfully.

1. Even though the chips and salsa are delicious, you are down $500 in a poker game. How much more would you bet to get the $500 back?

a. More than $500
b. $500
c. $250
d. Nothing, stick with the nachos and eat your losses now

2. A friend who is good with number convinces you to invest $500 in a new hot stock. 1 year later, the value has risen 40%. Would you:

a. Hold it, hoping for more gains
b. Sell it, take your gains now
c. Buy more shares, as it could go higher

3. A month after you put most of your long term savings in stocks, the market, and your investments drops 30% in value. Would you:

a. Buy more shares after the price drop
b. Hold on and wait for the price to come back then sell
c. Sell immediately to avoid losing even more

4. For the past year, you have been busting your rump at a small company. As a thank you gesture, your boss offers you a bonus of $1000 cash or stock options worth $2000. The cash can be received immediately but the stock options cannot be redeemed for at least 4 months and during that time the price may sail or plummet. Which would you take:

a. $1000 cash bonus
b. Stock options currently worth $2000

5. You just received a $10 000 inheritance to invest. Would you:

a. Invest it all at once
b. Invest it gradually over time

Answers:

Question 1: A = 9 points, B = 5 points, C = 3 points, D = 1 point
Question 2: A = 3 points, B = 1 point, C = 4 points
Question 3: A = 4 points, B = 3 points, C = 1 point
Question 4: A = 1 point, B = 5 points
Question 5: A = 5 points, B = 1 point

Scoring:

If your score totaled 6 to 16 points, you may have the leanings of a more conserative investor. Your investment strategies should probably be more stable and predictable. This does not mean you will be able to avoid risk altogether but you should be careful in choosing those investments that will limit you worrying all night about possible losses in your portfolio.

If you scored between 17 to 27 points, you are probably willing to take more chances with your money to earn higher returns down the road. While not thrilled with the idea, you may be more comfortable with the idea of short term losses, that often follow the riskier investments you may be more likely to approach. To you, the extra reward is worth the extra risk.

kAkA.hUnTeR

I will survive.

spoke at : 3/11/2008 05:07:00 PM

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