Scenario 1-Time Frame
Time frame plays the single most critical factor in determining your risk tolerance (i.e. time frame trumps risk tolerance). Even, if you have the ability to withstand a certain risk level, you must also have sufficient investment time to capture the expected return. In other words, the more risk you take, the more time you need to smooth out the bumps.

1. The Short Term Investor: Will need the investment money within a year.
   This time frame confines the investor to a risk-adverse portfolio.
2. The Short/Mid Term Investor: Will need the investment money in 1 to 5 years.
   This time frame allows the investor to select between a conservative and a risk-adverse portfolio.
3. The Mid Term Investor: Will need the investment money in 5 to 7 years.
   This time frame allows the investor to use a portfolio with a risk level between risk-adverse and middle.
4. The Mid/Long Term Investor: Will need the investment money in 7 to 10 years.
   This time frame allows the investor to use a portfolio with a risk level between risk-adverse and moderate.
5. The Long Term Investor: Will need the investment money after 10+ years.
   This time frame is compatible with any risk level.

Scenario 2-The Sharp Downturn
A friend tells you to sell a stock, which you do not. Subsequently the stock drops 50% in price over the course of a year, while the overall market drops 15%. You believe that it has fallen because of a recession and that its products are still viable. How would you react?

1. Slightly distressed- go out for some ice-cream to forget about it.
2. Angry that you didn't pull out when your friend told you to.
3. Make a promise to yourself to learn from your mistake and not buy a stock from that Industry again.

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