Risky Business: You May Not be as Daring as You Think
I thought I was through with exams when I finished college. Then my financial adviser (a.k.a. stockbroker) had me take a test to measure my tolerance for risk. He said, there were no right or wrong answers, but I knew better.
Once I had taken a personality test when I was in career transition (a.k.a. unemployed). My counselor had said the same thing, "There is no right or?," but when he told me my score he noted it was on the edge of the bell curve - the wrong edge. My need for acceptance by others was high; so high that I could not confront a taxi driver who gave me zero change from a $10 bill, on a $4.50 fare.
I was very leery of taking this "risk-tolerance profile." As I expected the questions showed that I was a total "wuss." (In Pittsburgh, if you're 15 and a guy it means you always cover your ears in winter).
A typical question; if your portfolio dropped 21.8 percent in one year, would you:
a. Sell all your equities?
b. Sell 1/3 of your equities and buy intermediate-term, tax-free municipals?
c. No change, staying the course?
I selected 'c' not because I believed in my strategy but out of total fear.
And yet deep down, when it came to the important things in life I felt that I was a risk-taker. I could be as much a risk-taker as an F-16 fighter pilot or a New York City undercover cop. However, no test ever asked the real important questions of life, the kind of questions that affected my daily reality. Questions like:
You have to drive to the airport. You get in your car, turn on the engine, and the gas gauge is on "E." Do you: a) immediately fill up, b) drive to the airport but don't put on the air conditioning, or c) drive back and forth without ever looking at the gas gauge again. OK, now lets add some real risk to the above question. What is your answer assuming your spouse is in the car with you?
Now let's deal with food instead of hedge funds. For example, for breakfast you like your bagels dark but definitely not burned. You've just put a bagel in the toaster, and it is just not dark enough. You put it in the toaster again, just nudging the dial to the optimum position, taking into consideration the heat already generated and the level of darkness around the edges of the bagel. As you wait for your bagel, do you: a) stand there staring at the bagel, b) let the dog out, c) get your newspaper from the driveway and check the Knicks score.
How would your answer change if it were your last bagel?
Now lets deal with the most risky part of life - relationships: Its 11:30 p.m., Thanksgiving Eve; your wife is exhausted, having cooked the 24-pound turkey and the rest of the food. She asks you to place the turkey in the fridge in the basement. She reminds you of last year's fiasco when you forgot to refrigerate the bird. Do you: a) do it immediately; run upstairs to report to her that you completed the task. You then return to the basement to ensure that you have closed the fridge door, b) leave a note for your teenage son to do it when he comes in after midnight.
Now for extra credit. You get a call from your high-school sweetheart. She asks to meet you for coffee in an hour. Do you: a) decline and tell you wife about the call, b) decline and not tell you wife about the call, c) ask your son if you can borrow his mousse. You get the idea. On this kind of test, I would score very high.
I figure once I fine-tune my questions, I could use this kind of questionnaire to screen professionals trying to give me advice. For example, my internist wants me to come in to review the results of my prostate exam and to discuss the different options and the risks involved with each course of action. I may surprise him and ask him to complete my questionnaire first. I want to see what kind of risk-taker he is.
P.S. My stockbroker just took my exam. He failed. I am looking for a new broker. Any recommendations?
Hesh Reinfeld writes a syndicated business humor column. You can read additional examples of his columns on his website: http://www.heshreinfeld.com Or contact him at hesh1@comcast.net
Latest News
The week's top Personal Finance stories MarketWatch - By MarketWatch In case you missed them, here are the top 10 Personal Finance stories from MarketWatch for the week of Nov. 17-21: By 2011? No recovery? ... |
InsWeb.com Named to Kiplinger's Personal Finance "The Best List ... MarketWatch - Published in the December 2008 issue of Kiplinger's Personal Finance magazine, "The Best List" includes Kiplinger's top picks in categories such as mutual ... |
Mutual Funds & Personal Finance Investor's Business Daily (subscription) - BY DONALD JAY KORN So you should do some calculations to see if that or itemizing will save you more money. You take itemized deductions on Schedule A of ... |
Alvin Hall takes your questions on personal finance and debt The Takeaway, New York - Financial educator and author Alvin Hall took your questions on personal finance and debt on Friday, November 21, 2008. The Takeaway: Our Q&A with personal ... |
Yodlee(R) Announces Availability of Over 11000 Financial Data Sources MarketWatch - The Yodlee Data Engine powers Yodlee's most recent innovations, including Yodlee PersonalFinance(TM), (the industry leading personal finance management ... |
NU Predicts Rise in Equity Release ; PERSONAL FINANCE istockAnalyst.com (press release), OR - (Source: Birmingham Post; Birmingham (UK))Although the enthusiasm of older homeowners to unlock capital from their homes by equity release schemes has been ... |
Personal Finance Calculators Tools and Tips PRLog.Org (press release), Romania - PRLog (Press Release) – Nov 22, 2008 – CalculatorPlus today unveiled CalculatorPlus.com, a free and innovative personal finance calculator tool and advice ... |
Murray State only public Kentucky university ranked in Kiplinger's ... Murray State News, KY - According to kiplinger.com, Kiplinger is a publisher of personal finance ideas and advice, as well as company forecasts. The two most popular publications ... |
PERSONAL FINANCE The Spokesman Review, WA - Online bill paying has certainly made a nagging monthly chore easier. But there are still usually multiple Web sites to juggle – and passwords to remember. ... |
Financial advisers rolling into town The State, SC - The nationwide bus tour is sponsored by the National Association of Personal Financial Advisors, TD Ameritrade Institutional and Kiplinger’s Personal ... |
Resources
-
Sorry there are no resources available at this time