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1.
A 32-year-old investing for retirement is likely to have _______.
Aggressive risk tolerance. A 32-year-old investing for retirement has a long time to hold investments; that time will allow long-term growth trends to overcome short-term price fluctuations, giving our investor an aggressive risk tolerance.
2.
A 75-year-old couple investing their life savings are likely to have _______.
Conservative risk tolerance. A 75-year-old couple investing their life savings will need to protect their capital, and are likely to have conservative risk tolerance.
3.
Which of the following questions is the best indicator of your risk tolerance?
Can you afford to lose your money? The financial consequences of poorly performing investments are the biggest determinants of your risk tolerance.
4.
Investing in a mixed portfolio of stocks, bonds, and cash-equivalent instruments is an example of _______.
Asset allocation. This is the practice of apportioning investment capital among different asset classes, such as stocks, bonds, and cash-equivalent instruments.
5.
Managing risk can help you take advantage of risk without conflicting with your risk tolerance.
True. Diversification and maximizing your investment time horizon can minimize the negative impact of risk on your investments, allowing you to take on more risk in segments of your investment portfolio.