Activity: What is Your Investing Risk Profile?

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Dec 19, 2014
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Activity, Behavioral Finance, Investing

This is a fun/engaging and short online activity to help students understand their risk profile which is so critical to their investing success.  How often do we see investors with stock heavy portfolios during a bull market, only to see them sell at the first signs of a correction and not get back into the market?  The answer:  too often.  Why?  Investor misjudge their tolerance for risk.  Unfortunately, risk profile surveys often can’t capture your disposition during a stressful market event.

That’s why I like this Balloon Test so much, as it forces students to make decisions and live with the consequences.  In this case, the number of times the students pump the balloon is a measure of their tolerance for risk, as each pump could lead to the balloon exploding.

Activity:

  1. Students go to Balloon Test website.
  2. Follow instructions and play game.
  3. Write down their score and compare with others on the Risk vs. Reward chart.
  4. Play game again and write down their score.  Did their score improve?
  5. Ask them to answer whether they feel this game is accurate representation of their tolerance for risk.

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Check out NGPF’s Investing Basics lesson

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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