Investor Education
Risk Profiling
Risk profiling is more than asking whether you are conservative or aggressive. It combines financial capacity, emotional tolerance, liquidity needs and time horizon.
Risk tolerance
- How much volatility can you experience without abandoning the plan?
- How have you reacted to losses in the past?
- Would a temporary decline change your behavior?
Risk capacity
How much loss could your finances absorb without threatening essential spending, debt obligations or near-term goals?
Time horizon
Longer horizons can change the types of risk an investor can consider, but time alone does not make a risky investment appropriate.
Liquidity needs
Money needed soon generally requires different risk management than capital intended for distant goals.
Concentration
A portfolio can be diversified by number of holdings and still be concentrated in the same sector, factor, geography or economic risk.
Risk disclosure: All investing involves risk, including loss of principal. Diversification and asset allocation do not guarantee a profit or prevent loss. Past performance does not guarantee future results.