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Risk Profiling

Risk Profiling of Customers

Evaluate risk capacity and tolerance with a weighted, 10-question assessment.

1) Risk Capacity (Ability)

  • Age — younger investors typically have longer investment horizons.
  • Income Stability — consistent, predictable income increases capacity.
  • Wealth & Liabilities — net worth, debts, liquidity needs.
  • Investment Horizon — longer horizons allow greater risk-taking.

2) Risk Tolerance (Willingness)

  • Emotional reaction to losses.
  • Past investment experience.
  • Preference: stability vs. growth.
  • Return expectations.

3) Methodology

A structured questionnaire approach. Each answer is scored 1 / 3 / 5 and combined via weights to produce a weighted score mapped to a profile.

1 = Conservative 3 = Balanced 5 = Aggressive
Question Weights
Q#QuestionWeightReasoning
1Investment horizon10%Time horizon impacts capacity.
2Income stability8%Stable income supports risk.
3Primary goal10%Direct intent indicator.
4Reaction to 15% drop15%Reveals true risk attitude.
5Investment knowledge8%Knowledge aids risk handling.
6Preservation vs returns10%Core risk-return trade-off.
7Expected returns10%Higher expectations → higher risk.
8Windfall preference7%Behavioral tendency.
9% in high-risk assets12%Direct allocation comfort.
10Comfort with volatility10%Emotional tolerance.

3.1 Sample Questionnaire

Select the option that best reflects the customer's situation or preference.

1) Investment horizon (10%)
2) Income stability (8%)
3) Primary financial goal (10%)
4) Reaction to 15% drop (15%)
5) Investment knowledge (8%)
6) Capital preservation vs returns (10%)
7) Expected return range (10%)
8) Windfall investment preference (7%)
9) % in higher-risk assets (12%)
10) Comfort with volatility (10%)
Weighted Score
—
Risk Profile
—
Mapping: ≤2.0 Conservative, 2.01–3.5 Balanced, ≥3.51 Aggressive.
Next: See suggested allocations

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