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.
"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.
3.
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.
4.
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.
5.
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.