How Much Risk Can You Handle? Take This Short Quiz

When you start investing, after you get past the “I just want to grow my money” phase, one of the more confusing questions is: “How much risk should I take?” Sure, you hear friends talking about stocks, crypto, or index funds, but none of this matters unless you understand how you personally handle risk.

The right investment strategy isn’t about picking the “best” investment; it’s about choosing the one you can stick with through both good days and bad.

Try This Risk Tolerance Exercise

Here's a simple risk assessment to help you measure your comfort level with investing. There are no right or wrong answers, so be honest with yourself. Afterwards, ask a friend to complete this assessment and compare the results. You might find that people see risk very differently, even if they're the same age or share similar goals.

Scoring Instructions

For the first six questions:

• 1 point = strongly agree

• 3 points = somewhat agree

• 5 points = disagree

Questions:

1. I need this money/account for an emergency.
   Score: ___

2. I need to access this money/account quickly. Score: ___

3. I need income from my investments/account now.
   Score: ___

4. I worry about fluctuations in the value of my investments/account.
   Score: ___

5. I prefer government securities to high-quality corporate bonds.
   Score: ___

6. I will consider investing in stocks, but only those of quality companies.
   Score: ___

For the financial two questions

• 1 point = 5 years or less

• 3 points = 15 years

• 5 points = 25+ years

Questions:

1. I plan to retire in…
   Score: ___

2. I need to begin using my investment principal within the next…
   Score: ___

Add up the total score for all eight questions.
Total Score = ____

How to Interpret Your Results

• 8–17 points: Lower Risk Tolerance: You might prioritize stability and prefer predictable results, even if it results in slower growth. Safety is more important to you than pursuing large gains.

• 18–31 points: Average Risk Tolerance: You might be okay with some ups and downs if they help you reach your long-term goals. A well-balanced mix of investments could feel right.

• 32–40 points: High Risk Tolerance: You can potentially tolerate volatility and are comfortable with short-term dips if they lead to greater long-term growth.

Reality of the Situation

Say you and a friend both score your results. You land in an “average risk” range, and your friend scores “high risk.” What does this mean?

Well, in theory, it might tell you that you may feel more comfortable with a portfolio that mixes stocks and bonds to balance growth and stability. Your friend, on the other hand, might prefer mostly stocks because they’re comfortable with more ups and downs.

Same age, same stage of life, different comfort levels. That’s exactly why understanding risk tolerance matters.

In the End

Knowing your risk tolerance doesn’t tell you what to invest in, but it gives a helpful starting point. Once you know what level of risk feels right, you can work with a financial professional to develop an investment plan that matches your goals and brings you peace of mind. Investing is a long-term game, and the best strategy is the one you can confidently stick with.

Disclaimer: Creek & Lyells Financial Literacy Foundation does not provide financial services, nor does it recommend or advise visitors to open accounts or buy or sell securities. All content on this blog is for educational purposes only. While we strive to provide accurate, relevant, and well-vetted information, visitors should consult a licensed financial professional and carefully evaluate the risks of any financial decision before taking action.