As Cory and Tisha Dumont have recognized their need for financial planning assistance is far greater than they realized. They have taken your advice and consistently reduced expenses. To their great surprise, they have already accumulated $1,500 for an emergency fund. They feel that they are getting a handle on their basic money management skills and are more confident in their insurance knowledge and .product selection. Now they want to develop an investment plan. Cory and Tisha have $13,000 invested in a stock market index mutual fund for a house down payment. They also have $2,500 in a savings account earning 3 percent interest and an average of $1,800 in their checking account earning 0.75 percent interest. (Their $1,500 in emergency funds is in addition to these savings amounts and has been temporarily deposited in their savings account.) The shares of Great Basin Balanced Mutual Fund, given to Tisha by her father, are worth $2,300. After completing a risk tolerance questionnaire on an investment Website, Tisha and Cory confirmed that their attitudes toward risk are very different. Tisha is much more comfortable with "gambling" higher risks for higher returns, whereas Cory wants a "safe bet." Help the Dumonts answer the following questions regarding the management of their investments.

Background Family: Cory and Tisha met in college when they were in their early 20s. They continued to date after graduation, and 6 years ago, they got married. Cory is 31 years old. Tisha is 30 years old. Their son, Chad, just turned 4 years old, and their daughter, Haley, is 2 years old. They also have a very fat tabby cat named Ms. Cat.

Employment: Cory works as a store manager and makes $45,000 a year. Tisha works as an accountant and earns $53,000 a year.

Housing: The Dumonts currently rent a three-bedroom townhome for $2,000 per month, but they hope to buy a house. Tisha mdicated that she would like to purchase a home within the next 3 to 5 years. The Dumonts are well on their way to achieving their goal. They opted for a small wedding and applied all gifts and family contributions to a market index mutual fund for their "dream" house. When they last checked, the fund account had a balance of $13,000.

Questions 1. 

Fundamentally, what must Cory and Tisha understand about themselves and the risk-return trade-ofl of investments to achieve their long-term investment goals?