Question

make: investment portfolio risks
ople take risks in their investments based on their individual circumstances. lets practice
paring what level of risk different people should take. review the information below and
plete the questions that follow.
erent levels of risk
conservative - cautious or first - time investor or will need the money in 5 years or less
moderate - willing and able to accept a moderate level of risk and return
aggressive - someone who can tolerate higher degrees of fluctuation in the value of
their investments or someone who wont need the money from their investments for
15 years or more
investor #1

investor profile	investor risk level

| is 24 years old. he is in tech and wants to
ly. he makes $100,000 a year and has a lot
a income every month. should he be a
ative, moderate, or aggressive investor? | ☐ conservative
☐ moderate
☐ aggressive |
er this: how much do you think zhang should invest in stocks? in bonds?
explain your answer.
investor #2

investor profile	risk level

| rs old. she recently inherited some
its to invest it. she plans on retiring in
n years or so. should she be a
moderate, or aggressive investor? | ☐ conservative
☐ moderate
☐ aggressive |
ow much do you think kim should invest in stocks? in bonds? explain

Explanation:

For Investor #1: He is 24, in tech with a high income, and likely has a long investment horizon (since he's young and doesn't need the money soon). Aggressive investors can tolerate high risk and have long horizons, so he fits Aggressive. For investment, stocks are higher - risk/higher - return, bonds lower. An aggressive investor would invest more in stocks (e.g., 70 - 90% in stocks, 10 - 30% in bonds) as they seek growth and can handle volatility.

For Investor #2: The text is cut off, but if she plans to retire soon (implied by "in [X] years or so" with X likely small, like 5 or less), a Conservative or Moderate approach. If retiring in 5 or less, Conservative (needs money soon, low risk) or Moderate (willing to accept some risk). If the horizon was longer, Aggressive, but short horizon means lower risk. For investment, a Conservative investor would invest more in bonds (e.g., 70 - 90% in bonds, 10 - 30% in stocks) for stability; Moderate would be balanced (50 - 50 or 60 - 40 stocks - bonds).

Answer:

Investor #1:

• Risk Level: Aggressive
• Stock Investment: Around 70 - 90% of the portfolio. Explanation: Aggressive investors seek high growth, and stocks offer higher returns over the long term. His young age and high income allow him to tolerate the volatility of stocks.
• Bond Investment: Around 10 - 30% of the portfolio. Explanation: Bonds provide stability and income, but a smaller portion as he seeks growth.

(For Investor #2, assuming she plans to retire in 5 years or less (short horizon)):

• Risk Level: Conservative (if she needs the money soon) or Moderate (if she can accept some risk)
• If Conservative:
• Stock Investment: Around 10 - 30% of the portfolio. Explanation: Stocks are risky, and with a short horizon, she can't afford large losses.
• Bond Investment: Around 70 - 90% of the portfolio. Explanation: Bonds are more stable and preserve capital, suitable for short - term needs.
• If Moderate:
• Stock Investment: Around 50 - 60% of the portfolio. Explanation: She can accept some risk for moderate growth.
• Bond Investment: Around 40 - 50% of the portfolio. Explanation: Balances growth (stocks) and stability (bonds).