RISK MATTERS
MORE THAN
RETURNS
RISK MATTERS
MORE THAN
RETURNS
Play this game with your client:
You’re going to determine their returns for the next 12 months. Have them put all of their money on the table in front of you. Hand them a nickel and a quarter, then ask them to choose a coin under these assumptions.
The Nickel
If they choose
flip it in the air
If it lands on heads,
they will be up 5%.
If it lands on tails,
they will be down 5%.
If they choose
The Quarter
flip it in the air
If it lands on heads,
they will be up 25%.
If it lands on tails,
they will be down 25%.
WHICH COIN DID THEY CHOOSE?
If your client chose the nickel, they have indicated that they’re more concerned with risk than return.