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The investment contrast: Full speed ahead or hit the brake?

You’re a sensible person, but sometimes you throw caution to the wind.

You’re a sensible person, but sometimes you throw caution to the wind.

You are not alone. Most people are both risk-takers and cautious, depending on the activity.

Risk tolerance is one of the basic factors in determining your best investment strategy. Your tolerance can affect both the types of investments you make and how you diversify your portfolio.

So, how do you know how much risk to take with investments? To start, here is a short – and unscientific – quiz to learn more about yourself.

Do you put on the brake when the traffic light turns yellow or do you step on the gas? If you brake, give yourself one point. If you step on the gas, collect three points.

Do you fill the gas tank when the needle reaches halfway or do you run a few miles on empty? If you fill the tank halfway, give yourself one point. If you run on empty, score three points.

Do you take the long way because it’s the way you know or will you take a shortcut never taken before? If you take the long way, score one point. If you take the shortcut, give yourself three points.

Do you take the train long distances or do you fly? If you take the train, give yourself one point. If you fly, collect three points.

Add your points. The maximum is 12; the minimum is 4.

Those with a higher score can accept a relatively great amount of risk and are referred to as risk tolerant. Those who scored low can accept very little risk and are referred to as risk averse.

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