Investor Profile Assessment

When taking any investor profile assessment, it is always good to have some knowledge about financial markets & instruments. That being said, if you have little or no investment experience, that is not the end of the world, and you should take the assessment anyway.

The whole underlying idea is to evaluate to which extent an investor understands financial instruments, and what investment risk he or she is able and willing to take. There are no correct or wrong answers; this is only about how you view investing matters. Take your time!

In this specific test, you will not find difficult questions about financial knowledge or experience. The latter is very important info for banks & brokers before letting someone pass orders in financial instruments without  sufficient knowledge.

The 6-question assessment will be able to verify how you think and feel, how much of your net worth goes into your portfolios etc. And from that you’ll have an answer as to whether you are considered as a conservative, balanced or dynamic investor.

Q 1   What is your Time Horizon?

Less than one year | From 1 to 4 years | From 5 to 10 years | More than 10 years.

That is the time you expect you can let your money invested, i.e. how long do you think you can invest without the need to withdraw major chunks before the end of your “Time Horizon”. 

If you are investing for your grandchildren, your time horizon may be big. If you’re putting money aside for a college or university education which starts over 2 years, your time horizon becomes rather small.

Q2   How much % of your net worth does your investment portfolio represent?

More than 75% | 50% to 75% | 10% to 20% | Less than 10%

Net worth means all your assets minus all debts. Take the value of all your investment portfolios taken together and divide that by your net worth. You now have your percentage.

Q 3  What % of your investments do you plan to spend within your time horizon?

More than 30% | From 10% to 30% | Less than 10%

If there is less financial stability and/or withdrawals may be needed, then that influences your investor profile towards more prudent investment approaches.

Q 4  Is your retirement covered without your investment portfolio?

Insufficiently | Sufficiently | More than sufficiently

That gives an indication if you will need your investment portfolio(s) or not to live normally when you retire.

Many of us adopt an attitude of “I will cross that bridge when I get there”. Don’t. Plan ahead! That, together with your time horizon, gives an indication as to what kind of investment risk you can bear.

Q 5  What is your level of risk acceptance?

Weak – No or little losses | Medium – Occasional small losses | Significant – Capital can fluctuate | Very high – Substantial losses are possible

This question actually probes how you feel in case of financial losses. You may very well be financially able to suffer losses, but that does not mean you are willing to take risks that invariably come with aggressive investing.

Q 6  What are your investment objectives?

Capital Preservation | Moderate Growth | Balanced Growth | Dynamic Growth

Each possible answer has a more detailed description about risk/reward that comes with such an Investment Objective, please take a look here before making your choice:

Capital Preservation

You wish to preserve and protect your capital with as little risk as possible, and you clearly accept that this comes with a very limited growth potential of your investment portfolio.

Moderate Growth

You wish to obtain a certain performance of your capital, but you have a relatively low tolerance to the possibility of suffering losses and fluctuations in capital, and you accept a limited growth potential that comes with this choice.

Balanced Growth

You wish to obtain a performance of your capital and to generate regular income from interests and dividends, accepting potential loss of capital.

Dynamic Growth

You wish to grow your capital and fully accept the risk of important financial losses and fluctuations of your capital.

And to conclude..

When you start doubting about what you may answer to a given question, and you balance between two options, than very often is your first spontaneous response that reflects how you really feel and think about something.

No stress, there are no right or wrong answers to this assessment. The result will only will reflect what type of investor profile you have, and that is very useful information for you to work with.

I do recommend finding other investor profile tests (internet, your bank or broker) and doing one or two of those. The outcomes should be very similar as the one from the our 6-question assessment.

That’s all there is to it really, and when you have answered every question you will immediately find out which investor profile you have. With this, you now know which asset allocation grids to check.

Stay curious !