Question

Nellie is 25 years old and just starting her retirement savings. Which breakdown of investments would a financial advisor most likely suggest for Nellie at this point in time?

0% high-risk; 20% medium-risk; 80% low-risk

10% high-risk; 20% medium-risk; 70% low-risk

25% high-risk; 30% medium-risk; 45% low-risk

50% high-risk; 35% medium-risk; 15% low-risk

Answer 1

@phi

Answer 2

@mathmate

Answer 3

Financial advisors would (probably) not give a options of risk to customers in the first place. They tell them what the returns are, and (by obligation) tell them the risk.

Usually higher returns are associated with higher risk. So how to make the choice?

The financial market usually have perturbations over relatively short periods of time, sometimes 3 months, a year, etc. and then recover over the next 3-6 years.

So it is taken as a rule that if the investor needs the return of investment in a short time, he should invest in low risk (but low return) options. On the other hand, if the investor does not need the money before a long time, such as for a 30-year old executive, he can afford to take a higher risk in return for a better yield in his investments.

So now put on the financial advisor's hat and answer the question! :)

Answer 4

The one with the highest risk?

Answer 5

Taken from the lesson:


"Besides having a diversified portfolio, financial advisors usually suggest putting a larger portion of your money in more risky investments when you're younger, and reducing the proportion of risky investments as you approach retirement. The simple reason for this is that a significant financial loss just before retirement could leave you in a troubled state, with little to no other income for support and no time to wait for the market to rebound. When you're young, you are more likely to bounce back from such a loss because you have the resources and time to rebuild your savings."

Answer 6

Thanks :)

Answer 7

Haha, you could have got it by yourself!
No problem! :)