A risk profile is made up of an investor’s risk capacity, risk tolerance and the level of risk required to meet their investment objectives. As part of a comprehensive evaluation, risk profiling is conducted by financial experts like wealth managers. Read on to find out more.
Risk capacity
Investor loss capacity is usually expressed in terms of exactly how much capital they are willing to lose over 12 months and how much capital they are prepared to lose over the period of time they are invested. A simple rule is that the lengthier an investor’s time frame is for a specific investment, the greater risk they can potentially take.
Risk tolerance
Various tools and methods have been devised to determine an individual investor’s risk tolerance, including personality tests and questionnaires. Ultimately, however, the level of risk a person is prepared to accept comes down to just how much money they are comfortable with losing before becoming concerned.
Risk level required
Finally, the amount of risk that is required to reach an investor’s aims within a set time period is also important. If an investor is unable to take sufficient risk, they may not be able to achieve their investment goals.
Experts in portfolio management in Shropshire and Chester
At Hartey Wealth Management, we offer a comprehensive portfolio management service for our clients. Following conducting a risk profile, our expert team will construct an investment portfolio that meets your expectations. Get in touch today to discuss your financial ambitions.
