Risk Questionnaire

Option 1

Instructions:

Read each question carefully and select the answer that best describes your situation or feelings. After completing the questionnaire, tally your scores to determine your risk tolerance category and corresponding portfolio allocation.

Section 1: Personal Profile

A) Under 30 (5 points)
B) 30-45 (4 points)
C) 46-60 (3 points)
D) Over 60 (2 points)

A) More than 20 years (5 points)
B) 10-20 years (4 points)
C) 5-10 years (3 points)
D) Less than 5 years (2 points)

A) Capital Growth (5 points)
B) Income Generation (4 points)
C) Capital Preservation (3 points)
D) Short-term Savings (2 points)

Section 2: Financial Situation

A) High (e.g., >$150,000) (5 points)
B) Above average ($75,000-$150,000) (4 points)
C) Average ($40,000-$75,000) (3 points)
D) Below average (<$40,000) (2 points)

A) Extensive (10+ years) (5 points)
B) Moderate (5-10 years) (4 points)
C) Limited (1-5 years) (3 points)
D) None (2 points)

A) 80-100% (5 points)
B) 60-80% (4 points)
C) 40-60% (3 points)
D) Less than 40% (2 points)

Section 3: Risk Attitude

A) I would stay invested and not make any changes. (5 points)
B) I would consider buying more to take advantage of lower prices. (4 points)
C) I would be worried but would likely stay invested. (3 points)
D) I would sell some or all of my investments to prevent further losses. (2 points)

A) I am comfortable with high levels of risk for potentially higher returns. (5 points)
B) I prefer a balance between risk and return. (4 points)
C) I prefer lower risk, even if it means lower returns. (3 points)
D) I want to avoid risk as much as possible, even if it means lower returns. (2 points)

A) Not important; I prioritize growth over value. (5 points)
B) Somewhat important; I seek growth but can tolerate some fluctuations. (4 points)
C) Important; I prefer stability with modest growth. (3 points)
D) Very important; I need my investments to maintain their value. (2 points)

Section 4: Behavioral Considerations

A) No, I stayed invested regardless of market conditions. (5 points)
B) Yes, but only a small portion of my investments. (4 points)
C) Yes, I sold a significant portion but stayed invested. (3 points)
D) Yes, I sold most or all of my investments. (2 points)

A) Regularly (e.g., quarterly) (5 points)
B) Occasionally (e.g., annually) (4 points)
C) Rarely (e.g., every few years) (3 points)
D) Never (2 points)

Scoring System

Add up the points from each answer to get your total score. The total score will determine your risk tolerance category and suggest an appropriate MPT portfolio allocation.

Risk Tolerance Categories and MPT Allocations

Total Score Risk Tolerance Asset Allocation

- 10-20% Bonds
- 0-5% Cash
- Consider alternative investments (e.g., REITs, commodities) for higher growth potential.

- 30-40% Bonds
- 0-5% Cash
- Diversified across different sectors and geographies.

- 50-60% Bonds
- 5-10% Cash
- Focus on dividend-paying and blue-chip stocks.

- 60-70% Bonds
- 10-20% Cash
- Emphasize capital preservation and low volatility investments.

Aggressive (42-55 points): Suitable for investors seeking high growth and comfortable with significant market fluctuations. Ideal for long-term horizons and those who can withstand potential losses for higher returns.
Balanced (32-41 points): A mix of growth and income, balancing risk and return. Suitable for investors with a moderate risk tolerance and a medium to long-term investment horizon.
Conservative (22-31 points): Focused on preserving capital with lower exposure to volatile assets. Suitable for investors who prioritize stability and have a shorter investment horizon.
Very Conservative (11-21 points): Prioritizes capital preservation and liquidity, with minimal exposure to stocks. Ideal for investors nearing retirement or those with very low risk tolerance.

Sample Portfolio Allocations Based on MPT

80% Stocks
50% U.S. Large-Cap
20% International
10% Emerging Markets
15% Bonds
10% High-Yield Bonds
5% International Bonds
5% Cash/Cash Equivalents

60% Stocks
40% U.S. Large-Cap
20% International
35% Bonds
25% Intermediate-Term Bonds
10% High-Quality Corporate Bonds
5% Cash/Cash Equivalents

40% Stocks
25% U.S. Large-Cap
15% International
55% Bonds
35% Intermediate-Term Bonds
20% Government Bonds
5% Cash/Cash Equivalents

20% Stocks
15% U.S. Large-Cap
5% International
70% Bonds
40% Government Bonds
30% High-Quality Corporate Bonds
10% Cash/Cash Equivalents

Calculate Your Score: Answer all questions honestly and add up your total points.
Determine Your Risk Category: Refer to the scoring table to identify your risk tolerance level.
Review the Suggested Allocation: Use the recommended asset allocation as a guideline for building or adjusting your investment portfolio.
Consult a Financial Advisor: While this questionnaire provides a foundational assessment, consulting with a professional can help tailor your investment strategy to your unique circumstances.
Disclaimer: This questionnaire is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.

Option 2

Instructions:

Please answer each question honestly. After finishing, calculate your total score to determine your suggested investment strategy.

A. Under 30 - 5 points
B. 31–40 - 4 points
C. 41–50 - 3 points
D. 51–60 - 2 points
E. Over 60 - 1 point

A. Less than 3 years - 1 point
B. 3–5 years - 2 points
C. 6–10 years - 3 points
D. 11–15 years - 4 points
E. More than 15 years - 5 points

A. Preserve my capital - 1 point
B. Generate steady income - 2 points
C. Grow my capital moderately - 3 points
D. Achieve substantial growth - 4 points
E. Maximize growth aggressively - 5 points

A. I would immediately sell all investments to prevent further loss - 1 point
B. I would be very concerned and consider selling - 2 points
C. I would be uncomfortable, but hold my investments - 3 points
D. I would see it as a buying opportunity - 4 points
E. I would invest more, seeing the drop as an opportunity - 5 points

A. None - 1 point
B. Very little (bank deposits, savings accounts) - 2 points
C. Moderate (bonds, mutual funds) - 3 points
D. Considerable (individual stocks, ETFs) - 4 points
E. Extensive (derivatives, high-risk investments) - 5 points

A. Sell immediately - 1 point
B. Reduce my investment exposure - 2 points
C. Do nothing and wait for recovery - 3 points
D. Invest more to average down - 4 points
E. View it as a strong buying opportunity - 5 points

A. 2–3% annually (low risk) - 1 point
B. 4–5% annually (moderate risk) - 2 points
C. 6–7% annually (balanced risk) - 3 points
D. 8–10% annually (high risk) - 4 points
E. Above 10% annually (very high risk) - 5 points

Scoring and Suggested Portfolio Allocations

Add up the points from each answer to find your total score. Use the chart below to determine your investment profile and recommended Modern Portfolio Theory allocation.

7-14 Conservative 80% Bonds, 20% Equities
15-21 Moderately Conservative 60% Bonds, 40% Equities
22-28 Balanced 40% Bonds, 60% Equities
29-35 Moderately Aggressive 20% Bonds, 80% Equities
36-40 Aggressive 0-10% Bonds, 90-100% Equities

Conservative (7–14 points) Prioritizes capital preservation and stability, with minimal exposure to equities. A portfolio that emphasizes bonds over stocks, ideal for short investment horizons or risk-averse individuals.
Moderately Conservative (15–21 points) Seeks stability but is open to modest growth opportunities. Includes a balance of bonds and stocks, suitable for those with low risk tolerance but a slightly longer time horizon.
Balanced (22–28 points) A 60/40 split favoring equities, aimed at achieving moderate growth with some volatility tolerance. Appropriate for mid-term investors with an average risk tolerance.
Moderately Aggressive (29–35 points) Focused on capital growth with a majority in equities, suitable for those willing to experience short-term losses for long-term gains. Ideal for younger or experienced investors.
Aggressive (36–40 points) Prioritizes growth, with little to no bonds, targeting high returns despite significant volatility. Designed for long-term investors with high risk tolerance who can withstand market swings.

This questionnaire provides a structured approach to understanding risk tolerance while linking it to a data-driven MPT asset allocation strategy.