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Portfolios 103: How Much Risk Can You Tolerate?

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1.
What type of risk do investors focus on most often?
Choose wisely. There is only one correct answer.
Market risk. Investors generally notice short-term volatility that's driven by factors such as market risk.
2.
How can you limit company-specific risks?
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Invest in a variety of stocks. To limit the operational and price risk that one company poses, invest in a variety of companies.
3.
Learning to tolerate day-to-day gyrations in your portfolio is not helpful for dealing with risks in the longer term.
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False. Most likely, it will help you to put risk into perspective and help you tolerate longer-term risks.
4.
To help you develop your investment philosophy about volatility and risk, there are several questions you should answer. Of the following, which one would be least helpful?
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What are your stock prices today? This question is not helpful for developing your investment philosophy.
5.
To limit volatility?
Choose wisely. There is only one correct answer.
Diversify. Owning a variety of investments is the best defense against volatility.