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Financial Risk 

There are three factors to determining a viable strategy for your IRA funds. The first two — your long-term objectives, and your current financial situation, are relatively easy to quantify. The third, and possibly the most important, is your capacity to tolerate risk. After all, if you make a decision that keeps you awake at night, it's probably not the best choice for you. That's why before you decide, it's important to plan a strategy with results based on a risk level you are comfortable with.

Risk Tolerance Survey

With which types of savings or investments are you most comfortable?

 a. Money market accounts

 b. Government savings bonds

 c. Corporate bonds or bond funds

 d. Stocks or stock funds

After you make a savings or investment decision, you feel:

 a. Worried

 b. Satisfied

 c. Hopeful

 d. Invigorated

Say you invest $20,000. Each of the following answers shows the range of returns that your investment may experience after just one year, based on the underlying holdings. Which investment would you be most comfortable holding?

 a. $21,000 - $19,000

 b. $23,000 - $17,000

 c. $27,000 - $13,000

 d. $30,000 - $10,000

For the last five years, your investment has returned an average 10% per year — in line with other similar investments. However, it loses 20% over the next year. What do you do?

 a. Sell all of the investment.

 b. Sell a portion of the investment.

 c. Nothing.

 d. Buy more of the same investment.

Which phrase best describes your take on life?

 a. Proceed with caution — take no unnecessary risks.

 b. Take small, measurable risks and patiently pursue your dreams.

 c. Prepare well, but follow your goals without fear.

 d. No hesitation — go for it!

 

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