Sample Economics Paper on Risk Tolerance for Life Situation

Several factors are considered when it comes to making investments including risk tolerance, time horizon, assets, and age. For a 24-year-old single woman, college graduate, engineer, with $20,0000 savings, the factors that would come into play when investing are age and risk tolerance. The best move or decision for the woman would be to allocate her funds to risky avenues or investments. In this case, her age and savings would make it easier for her to choose between long-term and short-term investments. Being 24 years old and single, she seems to have minimal responsibilities meaning she can easily engage in long-term investments. She can decide to take a risk and invest in stocks or fixed income securities. Often, risk tolerance is higher when earnings are higher. The fact that she is young, energetic, and single means that she can take higher risks to get higher returns.

She can decide to invest about 60 percent of her $20,000 savings into stocks, which though risky, has higher returns. The remaining 40 percent of the savings could be invested in other avenues such as fixed incomes securities, bonds, stocks, and real estate. At her age, she is capable of engaging in aggressive investment that would result in higher returns. Other than stocks, real estate also provides an opportunity for significantly high returns. Only committed and aggressive people who invest in real estate become successful, and the fact that the woman is aggressive cannot be doubted. Since she is not considering entry into partnerships, she should opt for an individual account for her investments. Moreover, being single, there are other potential risks such as health complications meaning that she should also consider investing some of her savings in insurance such as life insurance.