Risk appetite is the level of risk that you or your organization is prepared to accept in pursuit of its objectives before action is deemed necessary to reduce the risk. This concept helps guide the organization’s approach to risk and investment activities.
Each person has a different tendency for risk. When investing, this risk tendency can be used to determine how much of a risk you are willing to take as well as what percentage of your portfolio you are willing to expose to high risk.
Investing has become a fast-growing trend recently, but before you go ahead to start and even if you are already investing, you should consider how much or how little risk you are willing to take with your money. Take this risk appetite quiz to determine your risk appetite.
In general, how would your friends and colleagues describe you as a risk-taker?
You are on a TV game show and can choose one of the following, which would you take?
You have just finished saving for a “once-in-a-lifetime” vacation. Three weeks before you plan to leave, you lose your job. You would:
If you unexpectedly received N20,000,000 to invest, what would you do?
In terms of experience, how comfortable are you investing in stocks or stock mutual funds?
When you think of the word “risk” which of the following words comes to mind first?
Some experts are predicting prices of assets such as gold, jewels, collectables, and real estate (hard assets) to increase in value; bond prices may fall, however, experts tend to agree that government bonds are relatively safe. Most of your investment assets are now in high-interest government bonds. What would you do?
Given the best and worst case returns of the four investment choices below, which would you prefer?
In addition to whatever you own, you have been given N10,000,000. You are now asked to choose between:
In addition to whatever you own, you have been given N20,000,000. You are now asked to choose between:
Suppose a relative left you an inheritance of N100,000, stipulating in the will that you invest ALL the money in ONE of the following choices. Which one would you select?
If you had to invest N2,000,000, which of the following investment choices would you find most appealing?
Your trusted friend and neighbour, an experienced geologist, is putting together a group of investors to fund an exploratory gold mining venture. The venture could pay back 50 to 100 times the investment if successful. If the mine is a bust, the entire investment is worthless. Your friend estimates the chance of success is only 20%. If you had the money, how much would you invest?
Share your Results:
Developed by two university personal finance professors, Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at Kansas State University.
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