A risk profile is an assessment of your willingness and ability to take risks with your investments. It helps you understand how much risk you are comfortable with based on your financial goals, investment horizon, and personal circumstances.
Your risk profile is calculated through a risk profile questionnaire, which typically includes questions about:
Age: Younger investors may be more willing to take risks, while older investors often prefer safer investments as they approach retirement.
Investment Knowledge: Your understanding of financial markets and investment products can influence your comfort level with risk.
Risk Appetite: This measures how much risk you are willing to take on for the potential of higher returns.
Investment Experience: Your past experiences with investing can shape your perception of risk and comfort level.
Investment Objectives: What are you aiming to achieve with your investments (e.g., growth, income, preservation of capital)?
Based on your answers, the questionnaire generates a risk score that categorizes you into different risk profiles, such as conservative, moderate, or aggressive. This information helps guide investment decisions that align with your comfort level and financial objectives.