Understand Your Investment Risk Profile

Risk preference alone is often emotions-based and reflective of an individual’s tolerance for risk at a specific moment in time. Risk capacity is the amount of risk investors can actually take on, given their current life situation.

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1)  Risk Capacity

How much risk the investor can or can not take given their current life situation – ability to take risk.

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2)  Risk Preference

How much risk the investor is willing to take.

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3)  Portfolio Risk

The portfolio risk score should fall between the risk preference and risk capacity scores.