Risk Questionnaire and Profile

This questionnaire is designed to understand your willingness to take on risk.  Let’s get started!

Risk Questionnaire and Profile

Step 1 of 5

Name
Age Category
Current amount of cash reserves capable of supporting typical monthly spending.
How would you rate your willingness to take on financial risk compared to others?

The amount of risk an investor’s portfolio is able to tolerate depends on two investor factors; ability and willingness. An investor’s ability (or capacity) to take on risk is determined by situational factors such as total investment portfolio relative to needs, age, income, etc.  An investor’s willingness to take on risk is a function of behavioral and emotional factors such as, loss aversion, regret avoidance, overconfidence, etc. Risk ability and risk willingness can be very different and do not necessarily correlate with each other. For instance, a client in his 30’s making $400,000 a year with a large portfolio and significant future inheritance may be a very conservative investor that prefers less risk. On the other hand, an investor in his late 50’s with a small portfolio and an erratic income that averages $60,000 per year may be willing to take on a lot of risk. The first client obviously has a higher ability to take on risk than the second client, but he has a much lower willingness. When constructing a portfolio, the lower of the two risk preferences, if there is a discrepancy, will determine the portfolio’s risk profile. In the two examples above both clients would have low risk portfolios; the first client because of his low willingness to take on risk and the second client because of his low ability to take on risk.

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