How Much Risk Can You Handle?: The Development of a New Risk Tolerance Questionnaire

As we have all witnessed over the past few years with the economic downturn that has faced the world, individuals and corporations have been extremely risky with their investments in an effort to capitalize on high-risk and high-return investments. However, the global economy has been threatened by all of these risky investment decisions and there is now an effort underway by many financial institutions to overhaul the advice they give to both individual and corporate clients about the level of risk suggested for their portfolios (Mannes 2009). This research shows that an investor’s risk tolerance is not as stable as it has been portrayed previously in the literature. In addition, this research provides some suggestions on how to frame investment decisions for individual investors and could be used by investment advisors to predict what sorts of investment tools their advisees could be looking for in the future given today’s market conditions.