Take this quiz to find out what kind of investor you are

Fsp Invest, 09 Jan. 2014

Tags: investor, investing, type of investor, timid, cautious, shrewd, adventurous, risk, how much risk, risk profile,

Your ideal investment strategy will depend, to a large extent, on your attitude towards the possibility of losing money – in other words, risk. For instance, how would you cope with the excitement and adrenaline produced by a volatile junior mining share? Could you sleep at night? Or does your blood pressure dictate a steady-as-she-does-it, safer investment selection? Read on to uncover how much risk you can stomach…

Before you start investing, you need to know your risk profile, Gareth Stokes in Fear, Greed and the Stock Market explains…

By determining your risk profile, you can concentrate on the right investment products for you.

The risk profile quiz

1. When it comes to investment, which of the following best describes you?
a) Old, tried and trusted is best.
b) I don’t make financial decisions because I don’t want to make a mistake.
c) I’m a risk taker and as such hope to make an awful lot of money.
d) It’s my money so I decide where and when I’m going to invest it.

2. You have a sudden windfall of R100,000. This is money you won’t need for the foreseeable future. Which of the following would you prefer?
a) Put the money in a nice, safe savings account.
b) Keep the money under your mattress.
c) Invest the money purely in shares.
d) Invest the money in a mixture of shares and other more secure forms of investment.

3. You own a number of low-risk shares that have gone up in line with the market. You feel:
a) To have kept in line with the market is quite satisfactory.
b) Your portfolio worked this year, but might not the next. Best get out while the going’s good and put the money in a savings account.
c) Furious. You haven’t beaten the market average. You’ve played it too safe.
d) That’s an okay performance, but nothing spectacular. Next time, you’ll invest in some high-risk growth shares as well.

4. If the market’s gone up, and two of your shares have each shown a 30% profit since you bought them a year ago, do you:
a) Sell one of them to capture the profit, but retain the other.
b) Sell them both with some relief – to cash-in on the profits.
c) Double up your holdings in the shares.
d) Keep the shares, but watch them closely and be ready to sell at the first sign of a downturn.

5. Let’s suppose you hold shares in a risky biotechnology company. If the company suddenly withdraws its key product as it’s faulty, with the result that the share price falls 80% in a day, do you:
a) Keep your safe-as-houses shares, but sell this biotech stock and never buy a speculative investment again.
b) Panic and take your money out of the stock market altogether.
c) Shrug. You win some and lose some. But you hope your next high-risk investment will work out and you’re actively looking for it.
d) Choose your next speculative stock more carefully and sell it at the first sign of trouble.

How you scored in the risk profile quiz

The timid investor

If you answered b) to most of the questions, listen up! You have to steel yourself to take slightly more risk – otherwise opportunities are going to pass you by! What’s worse, inflation could well erode the value of your wealth, leaving you with even less than you started.

The cautious investor
If you answered a) to most of the questions, this is you. You don’t like risk much – but you already know that! This is no reason for your wealth to stagnate. Low to medium risk investments can grow your net worth very effectively – it’s just a matter of choosing those that will allow you to sleep at night.

The shrewd investor
Answers of d) to most of the questions put you in this category. You’re willing to take a risk, but are careful too. This is indeed a shrewd combination and should earn you decent, though not spectacular, gains. On the other hand, you shouldn’t lose too much!

The adventurous investor
If you answered c) to most of the questions, you’re clearly a risk taker. This can be good if you assess your risk in advance. But when you throw caution to the wind, it can be dangerous.

So there you have it, a quiz to show you what type of investor you are.

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