Bob wants to accumulate wealth, but he has told you that he is risk-averse. Whic

Question

Bob wants to accumulate wealth, but he has told you that he is risk-averse. Which of the following is the most crucial action he should take first to achieve his goal of accumulating wealth? He should invest in products which bring the highest expected return. The first step is to develop an investment policy statement to more accurately determine his goals before advising where to invest. Put Tom's assets in 100% cash equivalents because he told you he is risk-averse. First determine Tom's risk tolerance to assess his ability and willingness to accept risk.

Explanation / Answer

A risk averse investor is preferring low returns with knoiwn risks rather than higher returns with unknown risks.

According to above statement, last option is correct.

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