Question: EXERCISE #3: Historically the S&P 500 Index has returned about 8% a year but returns are very uneven as recent experience has reminded us -

EXERCISE #3: Historically the S&P 500 Index has returned about 8%

EXERCISE #3: Historically the S&P 500 Index has returned about 8% a year but returns are very uneven as recent experience has reminded us - the INDEX declined by more than 50% from its peak in 2007 and took 7 years to attain that peak level again. Last year the S&P 500 Index gained over 30% but this year it declined by over 30% in March alone. In contrast a typical Money Market Fund has returned about 2% a year with minimal capital fluctuation. Given these facts, evaluate the following: d) How risky would it be if you planned to use the Money Market fund as the major component of your retirement funds, 40 years from now? Briefly discuss your perception of risk in this decision, given your objective! Very low risk [ 2 3 5 6 Very high risk 7 Briefly explain your decision

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