Just 2 months after you put money into an investment, its price falls 25%. Assuming that none of the investment fundamentals have changed, which of the following actions would evidence the greatest risk tolerance?

Question

Quizplus · Accepted Answer

Buying more when the price has dropped 25% shows a high risk tolerance because it involves investing more money in a declining asset. This strategy assumes that the investment fundamentals are sound and that the price will eventually rebound, which is not guaranteed. Option A shows a lower risk tolerance because it involves selling out of fear, while option B shows a moderate risk tolerance because it involves holding onto the investment but not taking any active steps to increase exposure. Option D is not a viable choice since the advisor has not necessarily done anything wrong, and lawsuits are generally costly and time-consuming.

Just 2 Months After You Put Money into an Investment