Basics Beginner: Risk Tolerance

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1.
Managing risk can help you take advantage of risk without conflicting with your risk tolerance.
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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.
2.
Investing in a mixed portfolio of stocks, bonds, and cash-equivalent instruments is an example of _______.
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Asset allocation. This is the practice of apportioning investment capital among different asset classes, such as stocks, bonds, and cash-equivalent instruments.
3.
A 32-year-old investing for retirement is likely to have _______.
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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.
4.
The risk-return tradeoff concept states that _______.
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The riskier an investment is, the greater its potential return should be. The risk-return tradeoff also states that safe investments usually yield low returns, and vice versa.
5.
All of the following are elements of risk tolerance except _______.
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None of the above. All of these are elements of an investor's risk tolerance.