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Try This Investment Risk Tolerance Quiz

December 1st, 2006 at 12:44 pm

Want to improve your personal finances? You risk tolerance is one of the fundamental issues to consider when planning your investment strategy. Start by taking this quiz from Kansas State University. Choose the response that best describes you - there are no "right" or "wrong" answers. Just have fun!

Take the Quiz

ps. I scored 33 - "a high tolerance for risk", which is what I expected. The score ranges are:

Score Risk Tolerance Level
0-18 Low tolerance for risk
19-22 Below-average tolerance for risk
23-28 Average/moderate tolerance for risk
29-32 Above-average tolerance for risk
33-47 High tolerance for risk


personal finance, investing, risk

2 Responses to “Try This Investment Risk Tolerance Quiz”

  1. Broken Arrow Says:
    1164982134

    Very interesting test. I scored an average risk tolerance that bordered above-average.

    It's also worth noting that many of the questions delt with the probabilty of success versus the amount of gain one could generate.

    Now, some of the questions are evenly-balanced and, statistically, made no difference. In which case, I generally chose the "safer" choice because I know the real gain that will be made is with how I choose to invest it afterwards. However, to do so, I need more or less "guaranteed" capital.

    For example, if someone offered me $500 for sure, or 50% chance for $1000, I would take $500, not because of on-the-spot risk tolerance, but because I know that once I have the guaranteed money, I can re-invest that for a much larger sum. In that sense, I saw no advantage to taking the risk of losing it all and then end up with nothing to invest.

    On the other hand, some questions were NOT balanced. Some choices gave a higher gain per risk ratio. In which case, regardless of what the "answer" is, I chose the statistically higher ratio. However, I highly doubt that this test checks for that. I think it only adds up your "risk tolerance" on a linear value scale.... even though, again, the risk/benefit ratio isn't linear.

    For example, if someone offered me $500 for sure and 50% chance of earning $5000, then I would bet on the $5000. Why? Because, statistically, my probability of winning is only half whereas the reward is ten fold! In this canned scenario, the reward is much higher than the risk. So, it makes sense to me to take the risk.

    The best example is one of the questions where they show the gain and loss ranges. Regardless of volatility, if a fund has a gain/loss ratio of 2 to 1, and another has a gain/loss ratio of 4 to 1 (and one of them indeed does!), I would buy the 4 to 1 fund all day long. It doesn't even matter that the dollar amount is lower (hundreds versus tens of thousands). Unfortunately, the best answer also ends up being one that would be a considered as a "low risk" option.

    Yes, it was indeed fun! However, I also feel that the quiz was flawed. Also, perhaps there's another lesson to all this. That, perhaps risk tolerance alone isn't enough. That, in the end, savvy is what matters most.

  2. monkeymama Says:
    1165003395

    Your Score: 29
    You have an above-average tolerance for risk.

    I thought it was very interesting too. I would guess at face value I would score zero - hehe. But at this stage in the game I am so young I am open to more risk. Plus some of those questions about getting $1k and how much risk I would take to invest, eh. If I am given money I didn't expect I would be a lot riskier because I know I have all my ducks in a row. I Would gamble an extra $1k, easy peasy, it wouldn't be a large amount to me. I imagine as I grow older that I will tend to the less risk side. I am surprised I scored so high when I Admitted 25% of my investments are in cash. I just don't like putting it all in the market. But I Will put most if it there for now since I have such a long-term horizon.

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