Investment Questionnaire

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1) This graph shows the potential range of gains or declines for a $100,000 investment in each of seven hypothetical portfolios at the end of a one-year period. The black number to the right of each bar shows the best potential gain for that portfolio, while the red number to the left shows the largest potential decline. Given that this is the only information you have—and given also that decline does not equal loss—in which would you choose to invest your long-term retirement savings?*

Portfolio A $5,000 <- ---> $10,000
Portfolio B $8,250 <-- ----> $16,500
Portfolio C $11,500 <--- -----> $23,000
Portfolio D $14,750 <---- ------> $29,500
Portfolio E $18,000 <----- -------> $36,000
Portfolio F $21,250 <------ --------> $42,500
Portfolio G $24,000 <------- ---------> $49,000

2) Inflation—rising prices for goods and services—has a diminishing effect on your dollars by decreasing their purchasing power over time. Equity investments (stocks) have historically outpaced inflation over the long run, but they also fluctuate more widely in value than assets like bonds or cash. How do you feel about your investments and their potential to offset the long-range effects of inflation?*

You are satisfied with your investments simply keeping pace with inflation; limiting volatility is your main investment goal. Preservation of principal is more important to you than achieving returns above the rate of inflation.
Over time, you want your investments to grow at a rate that modestly outpaces inflation. You are willing to tolerate moderate volatility in order to pursue that goal.
Over time, you want your investments to grow at a rate that significantly outpaces inflation. You are willing to tolerate higher volatility in order to pursue that goal.

3) Suppose a substantial portion of your investment portfolio is allocated to equities (stocks.) If the stock market experienced a prolonged downturn—declining 50 percent in value over a three-year period—what would you do (assuming your investments reflected a similar decline)?*

Sell all the securities in your portfolio. You’re afraid that the stock market will continue moving down and you cannot tolerate a further decrease in value.
Sell half of the securities in your portfolio. You think the market may rebound, but you’re not willing to leave the full amount of your investment exposed to further decline.
Hold the securities in your portfolio. You understand that your investments are subject to temporary price swings, and you can discipline yourself to “weather the storm.”
Buy more securities for your portfolio to take advantage of lower prices. You understand that decline does not equal loss, and believe that your investments will eventually regain their previous value and rise even further in value over time.

4) Once again, assume a substantial portion of your investment portfolio is allocated to equities. The stock market declines at a rate of two percent per month, eventually declining 24% within a single year (a sharper decline over a shorter time than in Question #3 above.) In this scenario, which of the following would you do?*

Sell all of the securities in your portfolio and accept a 24% loss. Your top priority is avoiding the possibility of any further decline in value.
Sell half of the securities in your portfolio. You’re not willing to leave the full amount of your investment at risk of further decline.
Hold. You are comfortable waiting for the investments to regain their previous value or even to increase in value.
Invest more now because stocks are priced 24% lower than they were one year ago. You believe the portfolio will eventually regain its value, and appreciate even higher over the long-term.

5) Equity investments have historically provided higher returns than bonds or cash. However, they also exhibit greater price fluctuations (volatility) and potential for loss if sold while down in value. How do you feel about volatility—ups and downs—in the value of your portfolio?*

You want to minimize the possibility of decline in the value of your portfolio. You are willing to accept lower overall returns in exchange for less volatility.
You can tolerate moderate volatility in order to pursue favorable returns.
You can tolerate substantial fluctuations in portfolio value in pursuit of greater long-term gains.

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