Basics Beginner: Risk Tolerance

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1.
A 75-year-old couple investing their life savings are likely to have _______.
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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.
2.
A risk-averse investor _______.
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Takes on only as much risk as necessary. The risk-averse does this to achieve the level of return he or she seeks. Risk-averse investors also wish to maximize the returns they get for the level of risk they take on.
3.
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.
4.
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.
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.