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Understanding Financial Tolerance in the New Era
[By Dr. David E. Marcinko MBA and Staff Reporters]
Some physicians and financial planners prefer to use a specific approach in determining these difficult-to-determine areas, in lieu of one of several psychological tests that are currently available.
Examples of this specific approach follow.
Investment Temperament
Which statement best describes your investment temperament? Please indicate by ranking the items below from 1 to 4, with 1 being the most descriptive and 4 being the least descriptive. Also, please indicate the extent of your risk aversion by indicating what percentage of your assets you would feel comfortable investing in each category (for example, 50% in the first category, 25% in the second, etc.).
***
| Numerical | Percentage | |||
| ranking | allocation | |||
| * I prefer only the safest of investments. | ||||
| * I am interested only in “blue-chip” investments. | ||||
| * An occasional risk is worth the effort for above-average potential reward. | ||||
| * I’m willing to put everything on the line if the potential reward is large enough. | ||||
Listed below are various forms of investments. Please indicate your familiarity with each.
| Familiarity | |||||||||
| Description | High | Low | |||||||
| Certificates of deposit | 5 | 4 | 3 | 2 | 1 | ||||
| Treasury bills | 5 | 4 | 3 | 2 | 1 | ||||
| Other short-term fixed income | 5 | 4 | 3 | 2 | 1 | ||||
| Stocks | 5 | 4 | 3 | 2 | 1 | ||||
| U.S. government bonds | 5 | 4 | 3 | 2 | 1 | ||||
| Corporate bonds | 5 | 4 | 3 | 2 | 1 | ||||
| Municipal bonds | 5 | 4 | 3 | 2 | 1 | ||||
| Mutual funds | 5 | 4 | 3 | 2 | 1 | ||||
| Real estate—direct ownership | 5 | 4 | 3 | 2 | 1 | ||||
| Real estate—limited partnerships | 5 | 4 | 3 | 2 | 1 | ||||
| Oil and gas | 5 | 4 | 3 | 2 | 1 | ||||
| Collectibles | 5 | 4 | 3 | 2 | 1 | ||||
| Precious metals | 5 | 4 | 3 | 2 | 1 | ||||
| Insurance products | 5 | 4 | 3 | 2 | 1 | ||||
Assessment
Any other thoughts on behavioral finance topics, like this?
Conclusion
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Filed under: Financial Planning, Investing, Portfolio Management | Tagged: behavioral finance, risk tolerance |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
The next decade will be full of risk adverse doctors, laymen and FAs. And, some sanity will return to the capital markets … but beware inflationary trends.
Clifford
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Nice blog, and nice post too. I appreciate all the information on this blog, and am a subscriber … cheers!
Sam
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This is a good blog, and a timely subject
The past two years have served as a “stress test” to evaluate investors’ true tolerance for risk. Those investors who bailed out on their investment plan and sold equities around March of 2009 should invest in a more conservative portfolio.
Brian J. Knabe MD CMP™
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SEC Approves Crowdfunding Plan As White Advances Jobs Act
Start-ups and small businesses could sell ownership stakes in their companies by soliciting investors over the Internet under a proposal advanced by the Securities and Exchange Commission.
http://www.fa-mag.com/news/sec-approves-crowdfunding-plan-as-white-advances-jobs-act-15838.html?section=43
But, is this really an alternative investment [AI]?
George
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