16-24 Describe your risk tolerance. What factors contribute to your tolerance level? Given your risk tolerance,

16-24 Describe your risk tolerance. What factors contribute to your tolerance level? Given your risk tolerance,

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January 14, 2022
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16-24 Describe your risk tolerance. What factors contribute to your tolerance level? Given your risk tolerance, what kinds of investments would be suitable for you right now? What factors may contribute to a change in your risk tolerance?

Answer and ExplanationSolution by a verified expert

Chapter 16, End of Chapter, Self Test, Exercise 16-24
Page 527
Explanation
A young individual might focus on investing aggressively as there is enough time and money can be made in such a time frame by jumping into the high-risk portfolio. These investments tend to generate high volatility as compared to other types of portfolios.
With time there are chances that the level of financials of the individuals also increases and with that the risk tolerance may also rise. The small and mid-cap investment includes funds that are open-ended, like equity funds with 65% of the total assets in equity and equity-related instruments of mid-cap companies. Small-cap funds are also open-ended equity funds with a minimum investment of 65% of the total assets in small-cap stocks.
Also as time rises, the investor may also shift to large-cap investing. These are the situations of an aggressive investor, there are two more types of investors as well that is conservative and moderate. Depending on the portfolio size the risk is also reduced in such cases.
Sample Response
Risk tolerance is the measure that varies in investment returns as an investor withstands the financial planning.

Risk Tolerance is dependable on the factor of the tolerance level such as:

Age
Investment goals
Earning capability
Retirement planning
Getting Married
Based on an investor tolerance level Small and Micro-Cap Stock Investing can be made.

Factors such as knowledge and stability in the market can lead to a change in the tolerance level as well.

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