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Individual Personality Profile

These questions will help you discover an investment strategy that will best match your retirement needs.
1. Identify your time horizon 2. Identify your risk tolerance
3. Identify your investment profile 4. Find a sample asset allocation
Once you've completed these steps, you'll be on your way to determining the funds that may match your needs.
The use of asset allocation does not guarantee returns or insulate you from potential losses.
Step 1: Identify your time horizon
Your time horizon is the amount of time your money can stay invested before you need to withdraw it. It is a very important factor in creating your investment strategy. For each question below, select the answer that best matches your personal situation.

A) Given your objectives, when will you begin withdrawing your money?

B) Once you begin making money withdrawals, how long will the money need to last?
I expect to begin making withdrawals in:

Question A points:
Question B points:
Your time horizon score =

*** Your time horizon score equals 0, therefore this questionnaire should not be used for portfolio selection.

Source: Ibbotson Associates Inc., 2000.

Step 2: Identify your risk tolerance
Your risk tolerance is a measure of your personal comfort with risk. Remember, your risk tolerance can change over time, which is why it's important to review your asset allocation strategy each year. For each question below, select the answer that best matches your feelings about risk.

A) Inflation causes prices to rise over time. Which is more important to you --to avoid a decline in value in the short term, or to withstand short-term declines to beat inflation in the long run?

B) At the beginning of the year, you have $100,000 invested. The graph below shows the performance of your different hypothetical portfolios --their potential best- and worst-case ending values. Each bar gives the range of potential returns at the end of the year. Select the portfolio name that you feel most comfortable with.

C) Which of the following statements best describes your attitude about investing for this account?

D) If you had money invested in a diversified portfolio and the stock market took a downturn, when would you sell your riskier investments and put the money in safer assets?

E) Which of the following types of investments do you feel most comfortable with?
An investment that might return:

F) Based on how often you track the performance of your investment, how long would you wait to change your investment if your investment suffered a substantial decline in value?

Question A points:
Question B points:
Question C points:
Question D points:
Question E points:
Question F points:
Your risk tolerance score =
   Your time horizon score (from step 1) is 0
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Step 3. Identify your investor profile
The place where your time hoizon score (from Step 1) intersects with your risk tolerance score (from Step 2) identifies your investor profile.
Your time horizon score
  10 + 8-9 5-7 3-4 0-2
81-100 A MA M MC C
61-80 MA MA M MC C
39-60 M M M MC C
17-38 MC MC MC MC C
0-16 C C C C C
A Aggresive
MA Moderately Aggresive
M Moderate
MC Moderately Conservative
C Conservative
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Step 4. A sample asset allocation
Ibbotson Associates provides the following sample asset allocations according to your investor profile. Each asset allocation uses a broad approach to diversify holdings across six general asset classes, which include combinations of different types of stock investments, bonds and cash equivalents.

International stocks represent primarily the universe of non-U.S. equity securities. Generally, any mutual funds that invest no more than 49% in U.S. markets are classified as international stocks. International investing involves additional risks, including currency fluctuations, political instability and foreign regulations, all of which are magnified in emerging markets.   Large-cap stocks invest in the largest 5% of companies in the market. These are larger, more established, profitable and well-known companies.
Bonds are issued by a corporation, the U.S. government or a governmental agency. Debt security represents a loan. The loan is guaranteed to be repaid by a specified date with regular, fixed interest payments. Because there are

Small-cap stocks invest primarily in the stocks of smaller, lesser-known corporations that represent 80% of the smallest of the approximately 5,000 domestic equity companies. Small-cap stocks have a higher growth potential, but are also more volatile and have a greater probability to fail. Small-cap stocks involve increased risk and volatility.
  many different types of bonds, bond funds can vary dramatically in their risks which can include credit and interest rate risk.
Short-term bonds are issued by a corporation, the U.S. government or a governmental agency. Debt security represents a loan. The loan is

Mid-cap stocks invest primarily in the stocks of mid-size corporations that represent about 15% of the 5,000 domestic equity companies. Mid-caps are generally considered more risky than large-cap stocks, but have a higher return expectation. Overall "market risk" poses the greatest potential danger for investors in mid- and large-cap stock funds. Stock prices can fluctuate dramatically for a broad range of reasons and this type of risk will be determined by the type of funds that you are in.
  guaranteed to be repaid by a specified date with regular, fixed interest payments, Short-term bonds have an average duration of more than 1 year but less than 3.5 years, or an average effective maturity of more than 1 year but less than 4 years.
Cash equivalents represent investments that generally do not fluctuate in market value and yield a regular interest payment. Investments might include bank deposits, money markets, CDs and treasury bills. Though cash equivalents may be subject to less volatility than other investments, they may not keep pace with inflation.
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