Like to play it safe? Or would you rather take risks? Do you even know? Everyone has a different attitude toward saving, spending, and investing. Take this quiz to discover how your personality will match up with the types of investments you may make now or in the future.
Your favorite uncle, Sonny, gives you a nice chunk of change for your graduation and tells you to save it for a rainy day -- or even retirement. Realistically, when would you dip into the account?
A. When I retire. What kind of account should I use? A Roth or traditional IRA?
B. In about five years. I know he earmarked it for emergencies. But I'll want to move from the dorms to an apartment. He'd understand.
C. Uh, tomorrow. How else can I afford an iPod and a senior trip to Cancun?
Your grandparents bought you some Disney stock when you went through your "Little Mermaid" stage. Once in a while you glance at the paper to see how it's doing. When the price is down, what do you think?
A. Panic. And I never really liked "The Little Mermaid" anyway.
B. I really don't worry about it -- don't we all have our ups and downs?
C. I can buy more shares at a cheaper price.
How important is it to you to have a good portion of your money in an account that earns exactly what it says it will -- you know, like a certificate of deposit or money market account?
A. It's very important. But I also hate blind dates.
B. Somewhat important, but not if it means missing a great investment opportunity.
C. Not important at all: Part of life's adventure is not knowing what's next!
It's payday at your part-time job. Have you created a budget, and do you stick to it?
A. I have a budget and save part of every check by having it automatically transferred from my checking account to savings.
B. I keep my tip money in a jar, and I sorta have a budget, but I don't stick to it.
C. Why budget?
You've decided to invest your money in the stock market. Are you more afraid of investing in company stock that falls in value, or scared of missing out on a great investment because you were too worried to take the risk?
A. Losing money -- I hate it.
B. I mountain-bike, so I know how to balance risk and caution.
C. Taking risks makes life worth living. That's why I love to surf.
When do you think you?ll have enough money to retire?
A. 62. I've already started long-term saving.
B. When I'm 50. I haven't started saving, but I've heard that I should be thinking about it maybe after college.
C. I'm still trying to scrounge up enough money to go out Saturday night. I'm hoping for scholarships and a good retirement plan.
In 1980, a new Toyota Corolla was $5,458. In 2004, the base price was $13,570. (Hello, inflation.) Would you rather invest your money in riskier investments to keep up with inflation or put your savings in an account where you know exactly what it will earn?
A. I get really nervous if I don't know what my money is going to do. I don't think I could handle seeing my investments drop in value.
B. Are you kidding? They're both important, but I prefer a balance (to keep up with inflation).
C. A nice ride is important to me, so I'll just finance a new car by dragging out the payments as long as I can; the monthly payment will be smaller.
When it comes to investment attitude, which famous personality do you most resemble?
A. OK, so she's not famous, but my Great-aunt Agatha. She saved every penny, invested in treasury bonds and certificates of deposit, and now she takes a Caribbean cruise every year.
B. Warren Buffet -- you know, that famous investor who only buys stocks in companies that he understands and stays the course. That sounds like me.
C. Donald Trump. I know he takes risks with his investments, but just look at his lifestyle -- that Palm Beach spread is incredible.
So how did you score? From your answers, USAA financial planner June Walbert describes what kind of investing matches your personality.
Mostly A's: Safe-and-steady Sam. You know exactly how many pennies and nickels are in your piggy bank at home, and you?d rather date a nice boy or girl who your aunt's neighbor sets you up with than meet somebody at the water park this summer. When you're ready to invest, you may feel safest keeping a big chunk of your money in guaranteed-return investments -- or an investment where you know exactly what your money will be earning. Good choices may be U.S. Treasury securities, certificates of deposit, or money market accounts. But being too conservative may increase the risk of your savings not keeping pace with inflation.
Mostly B's: Middle-of-the-road Ruth. You'll try the latest rage in yoga because you like some excitement, but you like balance. You have some savings and want some future growth, so your safe side may want to deposit a portion of your money in a money market account or certificate of deposit to get you up to three to six months of expenses. A balanced mutual fund, where you're pooling your money with a number of investors, may be appropriate because it combines the growth of a stock fund plus the income of a bond fund. This combination of stocks and bonds in the same fund usually helps to maintain a more moderate level of risk.
Mostly C's: Aggressive Andy. You live for today, which is probably why you don't have an emergency account or a budget. Start with getting both of these in place. When you are ready to begin investing for the long term, you could use growth-oriented mutual funds, which are generally comprised of stocks of firms that the fund manager believes have growth potential. A good growth mutual fund can satisfy your stock market thirst but also keep you diversified and in the hands of professionals. Or you can find mutual funds that track the overall stock market, also known as index funds, to participate in the growth and diversification of the broader stock market.
June Walbert is a salaried CERTIFIED FINANCIAL PLANNER/practitioner with USAA Financial Planning Services, one of the USAA family of companies.
The preceding discussion is not tax, legal or estate planning advice. Consult your tax, legal or estate planning professional regarding your specific situation.
About USAA
USAA, a diversified financial services company, is the leading provider of competitively priced financial planning, insurance, investments, and banking products to members of the U.S. military and their families. Named by BusinessWeek as 2007?s Customer Service Champion and ranked highest among financial services companies for customer advocacy in a Forrester Research survey, USAA provides convenient and accessible financial products to its more than 6 million members. For more information about USAA, or to learn more about membership, visit usaa.com.
USAA is a diversified insurance and financial services organization that has served the military community since 1922. USAA Financial Planning ServicesSM refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency, and its wholly owned subsidiary.
USAA means United Services Automobile Association and its affiliates.
