Risk Tolerance Profile Risk Tolerance Profile Investment Questionnaire General Information First, Last Name First, Last Spouse’s Name Street Address Address City City State mm/dd/yyyy Zip State Zip Dependents Birthday No. of dependents Business/Cell Phone Home Phone Business Phone Home Phone Investment Time Horizon Time Horizon 1. In how many years will you begin taking consistent withdrawals from your portfolio? 0 pts 1 pt 3 pts 5 pts 10 pts 15 pts 15 pts ☐ ☐ ☐ ☐ ☐ ☐ ☐ A. Less than 1 year B. 1 – 2 years C. 3 – 5 years D. 6 – 9 years E. 10 – 15 years F. 16 – 25 years G. More than 25 years 2. Once you begin making withdrawals, how many years will you be withdrawing your money from the account? 0 pts 0 pts 1 pt 3 pts 5 pts 8 pts 8 pts ☐ ☐ ☐ ☐ ☐ ☐ ☐ A. Lump sum or fully withdraw over a period of less than 1 year B. Over a period of 1 – 2 years C. Over a period of 3 – 5 years D. Over a period of 6 – 9 years E. Over a period of 10 – 15 years F. Over a period of 16 – 25 years G. More than 25 years Total TIME HORIZON TOTAL SUM OF QUESTIONS 1 - 2 Risk Tolerance Risk / Return Tradeoff 3. Investment decisions are generally determined by a risk / return tradeoff. Risk is any possibility of loss to the value of your portfolio. Return is the amount earned or profit on an investment. How would you respond to the following statement? Protecting my portfolio from loss is more important to me than achieving high returns? 0 pts 2 pts 5 pts 8 pts 10 pts ☐ ☐ ☐ ☐ ☐ A. Strongly Agree B. Agree C. Risk and Return are Equally Important D. Disagree E. Strongly Disagree 4. Riskier investments have the potential to experience higher long-term gains. Likewise, less risky investments have less potential for high long-term gains. With this in mind, which of the following statements is most consistent with your investment attitude? 8 pts 4 pts 0 pts ☐ ☐ ☐ A. I am willing to endure losses to maximize the chance of experiencing high long-term gains. B. I am equally concerned with avoiding losses and experiencing long-term gains. C. Avoiding losses is more important to me than experiencing long-term gains 5. Historically, investors who have received higher long- term returns have also experienced major changes in the value of their investments. Higher returns come with a greater chance of loss Conservative Investments Lower Risk/Lower Return Higher Risk/Higher Returns Risky Investment Which of the following statements best describes your investment philosophy? 0 pts ☐ A. I feel most comfortable with stable investments that generate consistent, but lower returns year-to-year. I prefer to assume as little risk as possible. 3 pts ☐ B. I am willing to withstand some fluctuations in the value of my portfolio, but I prefer to be invested in less risky investments that reduce the likelihood of large losses 7 pts ☐ C. I seek substantial investment returns and am willing to accept occasional short-term declines associated with this strategy. 10 pts ☐ D. I seek potentially high investment returns and am willing to accept the higher risk of potential losses associated with this strategy Range of Returns 6. The following table shows the ending values a $50,000 investment in four hypothetical portfolios over a three-year period. The returns for these portfolios may fall anywhere within these ranges. Which of the four hypothetical portfolios would you feel most comfortable accepting? 0 pts 3 pts 6 pts 9 pts ☐ ☐ ☐ ☐ VALUE OF $50,000 AFTER THREE YEARS Portfolio Worst Case Value Likely Value Best Case Value Portfolio A $42,000 $57,000 $70,000 Portfolio B $39,000 $60,000 $78,000 Portfolio A Portfolio C $36,000 $62,000 $87,000 Portfolio B Portfolio D $31,000 $64,000 $97,000 Portfolio C Portfolio D Volatility 7. The degree to which the value of a portfolio rises and falls is called volatility. Generally, assets that exhibit higher volatility also have higher returns. Investments are risky, however, because there is no guarantee that the upturns in your portfolio will be greater than the downturns Which of the following best describes how you feel about the amount of volatility you are willing to accept? 10 pts ☐ A. Considerable – My main goal is to achieve higher returns over time and I can endure substantial losses through intermittent periods in order to do so. 4 pts ☐ B. Some – I would like to achieve higher returns over time and can withstand an occasional, large downturn in the value of my portfolio. 0 pts ☐ C. Little – I would rather have small returns than risk losing any money. HIGHER RETURNS COME WITH INCREASED VOLATILITY 8. The table to the right shows three hypothetical portfolios with their yearly returns over a twenty year period In which portfolio would you feel most comfortable investing? 0 pts 4 pts 8 pts ☐ ☐ ☐ 35% - 40% 30% - 35% 20% - 25% Portfolio B An average return of 6% with three negative years and where the majority of returns range from -5% to 25% each year. 25% - 30% Portfolio A An average return of 5% with one negative year and where the majority of returns range from 0% to 15% each year. Portfolio C An average return of 7% with a wide range of positive and negative returns. 40% + 15% - 20% 10% - 15% 5% - 10% 0% - 5% (0% - 5%) (5% - 10%) (10% - 15%) (15% - 20% (20% - 25%) (25% - 30%) (30% - 35%) Portfolio A Portfolio B Portfolio C Each dot represents a single year of hypothetical market performance Inflation 9. Over time, inflation can have a significantly negative impact on what your money can buy. By keeping pace with inflation, investors can maintain their buying power over time. Which of the following choices best reflects your attitude toward inflation and risk? 6 pts ☐ ☐ ☐ 8 pts ☐ 0 pts 2 pts A. Although I may only keep pace with inflation, my main goal is to avoid loss. B. While accepting a low level of risk, my main goal is to earn slightly more than inflation. C. My main goal is to increase the value of my portfolio. Therefore, I am willing to accept short-term losses associated with more aggressive investment options. D. I am willing to endure large fluctuations in the value of my portfolio for the chance of obtaining a higher return and beating inflation. Loss Aversion 10. The table to the right shows risk and return characteristics of three hypothetical portfolios. With higher prospective annual returns, possible losses also increase In which portfolio would you want to invest? 10 pts 5 pts 0 pts ☐ ☐ ☐ Portfolio A Portfolio B Portfolio C Portfolio Most Likely Annual Return Possible Annual Return Portfolio A Gain of 9% Loss of 28% Portfolio B Gain of 7% Loss of 19% Portfolio C Gain of 5% Loss of 12% 11. I am comfortable with investments that may frequently experience large declines in value if there is a potential for higher returns. These frequent and large declines may be experienced at an inopportune time, such as at the end of the investment horizon. 0 pts 3 pts 7 pts 10 pts ☐ ☐ ☐ ☐ A. Strongly Disagree B. Disagree C. Agree D. Strongly Agree 12. Sometimes investment losses are prolonged and sometimes they are short-lived. How might you respond when you experience Investment losses? A. I would sell my investments immediately if they suffered substantial declines 4 pts ☐ ☐ 8 pts ☐ C. Even if my investment suffered a significant decline over several years, I would continue to follow my long-term strategy and not adjust my portfolio 0 pts B. Although declines in investment value make me uncomfortable, I would wait several quarters or possibly one year before adjusting my portfolio. Ability To Stay The Course 13. Most investments fluctuate over the short term. Suppose you invested $30,000 this year with the intention of holding the investment for ten years. If this investment lost value during the first year, at what value of your initial $30,000 investment would you sell and move to a more stable investment? 0 pts 2 pts 4 pts 6 pts 9 pts ☐ ☐ ☐ ☐ ☐ A. $28,000 B. $27,000 C. $25,500 D. $24,00 or Less E. I Would Not Sell Total RISK TOLERANCE TOTAL SUM OF QUESTIONS 3 – 13 Risk Tolerance Profile Now that you have completed the Personal Investment Profile questionnaire, record your Time Horizon Total and your Risk Tolerance Total in the tables below. Total TIME HORIZON TOTAL Total RISK TOLERANCE TOTAL The scores above now provide us with the foundation from which to build your financial plan. By matching your Time Horizon Total with your Risk Tolerance Total you can find the appropriate asset allocation for your investment personality. Risk Tolerance Total Time Horizon Total 0–2 3 4–5 6–7 8+ 3 – 10 Capital Preservation Plus Capital Preservation Plus Income Plus Income Plus Income Plus 11 – 36 Capital Preservation Plus Conservative Growth Conservative Growth Conservative Growth Conservative Growth 37 – 64 Income Plus Conservative Growth Moderate Growth Moderate Growth Moderate Growth 65 – 90 Income Plus Conservative Growth Moderate Growth Growth Growth 91 – 100 Income Plus Conservative Growth Moderate Growth Growth Aggressive Growth Do you agree with the results of this risk tolerance questionnaire? ☐Yes ☐No If you do not agree with the portfolio allocation that your results suggest, please detail which portfolio you believe would be more appropriate and WHY (type in the box below): Enter Text Here Signature: _________________________________________ Date: ____________________
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