Planning ensures that your goals are met.
Risk Management protects your assets.
Portfolios are built with Modern Portfolio Theory.
I. SUITABILITY a. Investor Risk profiling
II. Risk Tests
Test # 1 III. SELF Questionnaire IV. Online Tests
Suitability is matching an individual investor with an investment portfolio. Downside risk is what we are defining, measuring, and quantifying.
Individual investors make risk decisions based on their own life experiences. Everyone has a different tolerance for different types of "losses". Life experiences contain elements of both emotional and intellectual factors. How much risk, in a particular situation, are you willing to take for a particular reward?
b. Portfolio risk
Investment portfolios can be described by their downside risk. Assessing a portfolio's negative risk is done objectively; the tools of choice are statistical.
c. Matching Investors with Portfolios:
1. Individual Risk Test analysis.
2. Investor constraints - Liquidity, time horizon, tax liabilities and other unique circumstances.
3. Investment Policy statement - objectives, return vs. risk and possible Monte Carlo simulation.
5. Suitability - and the appropriateness of potential investments.
6. Strategic Asset Allocation.
7. Tactical Portfolio Optimization.
Below are links to four Risk Profile Tests which will help you decide if you are an Aggressive, Balanced or Conservative investor. Also below are links to three professional web site and their description for online assessment.
1. Do you have 3 to 6 months of savings for emergencies?
Yes - 5 pts
No - 0 pt
2. Which investments have you owned (add up total)?
Bonds / Bond funds - 1 pt
Real Estate investments - 1 pt
U.S. stocks / Stock Mutual funds - 1 pt
International stocks / International Mutual funds - 1 pt
Options and/or Futures - 2 pts
Managed futures and/or Commodity funds - 2 pts
Hedge funds - 2 pts
Managed accounts - 1 pts
3. What average annual rate of return of do you expect?
4% or less - 0 pts
4% to 7% annually - 2 pts
7% to 15% annually - 5 pts
15% or more annually - 7 pts
4. What percentage of your total net worth is invested?
Less than 15% - 5 pts
15% to 30% - 4 pts
30% to 50% - 3 pts
50% to 75% - 2 pts
More than 75% - 1 pt
5. What type of Investor are you?
Buy and hold investor. - 5 pts
Market timer investing in Bull markets. - 3 pts
Market timer avoiding Bear markets. - 1 pt
6. Which age group do you fall into?
under 30 - 6 pts
30 to 44 - 5 pts
45 to 60 - 4 pts
60 to 74 - 2 pts
75 and up - 1 pt
7. What is your primary source of income?
Salary and other earnings from work - 5 pts
Earnings from my investment portfolio - 3 pts
Retirement pension and/or Social Security - 1 pt
8. Part of your Investment portfolio may be liquidated for retirement income, educational and/or medical expenses, the purchase of a house and/or another large purchase.
in less than 2 years - 1 pt
2 to 5 years - 2 pts
5 to 10 years - 3 pts
10 years or more - 5 pts
9. I will need income from these investments now or very soon.
Yes - 1 pt
No - 4 pts
10. Compared to the S&P 500 my investment should:
Outperform the S&P 500 - 5 pts
Approximate the S&P 500 - 3 pts
Underperform the S&P 500 with less risk - 1 pt
11. My attitude of trading activity is:
Portfolio changes are costly and unproductive. - 1 pt
Reallocation is Okay. - 3 pts
Moderate trading is Okay. - 5 pts
12. If the stock market declines 20% your reaction would be:
I should not have invested in Financial market. - 0 pts
I should have sold by now to limit my exposure. - 2 pts
I'm still invested but I am prepared to sell. - 3 pts
I will ride out the Bear market awaiting the next Bull market. - 5 pts
13. The most I am willing to lose in one year is:
Less than 5%. Avoiding loses is very important to me. - 2 pt
5% to 10%. Modest periodic declines are acceptable. - 3 pts
10% to 20%. Short term losses are acceptable if higher risk investments will offer higher returns over the long term. - 5 pts
Over 20%. High returns don't come without taking risk, I can afford a large short term loss. - 7 pts
0 - 20 points you have a Conservative risk profile
21 - 44 points you have a Balanced risk profile
over 45 points you have an Aggressive risk profile.
Try taking Test # 2 (click)
Try taking Test # 3 (click)
Try taking Test # 4 (click)
What do you like Most, Least and would want Changed about your portfolio?
What do you Want, Need and should be Different from an Advisor?
Composition of your current Portfolio:
% of CASH
% of BONDS Gov't & Corp.
% of LARGE Cap growth & value
% of MID Cap growth & value
% of SMALL Cap growth & value
% of FOREIGN Investments
% of NATURAL RESOURCES
% of SECTOR Financial
% of SECTOR Health Care
% of SECTOR Technology
% of Other Investments
Provides a scientifically validated technique for assessing financial risk tolerance and an easily understood methodology for incorporating the assessment into the financial planning process.
Your Money Personality Moneymax® Personality Questionnaire Based upon your answers to the Moneymax® Questionnaire, this eight-page report provides a detailed explanation of your financial personality, style and type including your strengths and ways to shore up your weaknesses with a personalized money action plan that will help you better manage your money.
http://www.humanmetrics.com Human Metrics - Risk Attitudes Profiler
There are some people whose aim is to reach stability, order and safety in their life. The others, on the contrary, have an unconscious drive to a dynamic life, keen excitements, risk-taking. These needs and inclinations may be stirred from one's consciousness. The reason for many life troubles and lost fortunes is the incompatibility between the risky qualities of a person and his/her lifestyle, what occupation he/she chooses, what are the objectives and how they are realized. It is of great importance to know your own risk-type and a risk balance because in the case of incorrect orientation you feel emotional discomfort, may experience failures in a career or in a business as well as troubles in private life and loss of your confidence in your abilities. As a result of the test you will obtain your risk balance indices, description of your risk type, its strong and weak points, ways of personal growth and strategy to success.
a. Investor Risk profiling
II. Risk Tests
Test # 1 III. SELF Questionnaire IV. Online Tests
Test # 1
III. SELF Questionnaire
IV. Online Tests