Basics Beginner: Risk Tolerance

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1.
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.
2.
Which of the following questions is the best indicator of your risk tolerance?
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Can you afford to lose your money? The financial consequences of poorly performing investments are the biggest determinants of your risk tolerance.
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.
"Getting the most return for a given risk, and taking on the least risk for a given return" is a simple statement of _______.
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Modern Portfolio Theory. This is the theory that portfolios should and can be managed to provide the most return for a given level of risk, and should take on the least possible risk to achieve a given return.