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Investor profile

Ten questions that separate two things people often mix up: risk capacity, how much loss your situation can absorb, and risk tolerance, how much loss you can live with. The result is a description to think with, not a verdict.

  1. 1.When might you need most of this money?

    Risk capacity

  2. 2.How stable is your income?

    Risk capacity

  3. 3.How many months of expenses could you cover from cash savings, without selling investments?

    Risk capacity

  4. 4.How much of your monthly income goes on loan repayments?

    Mortgage, personal loans, cards, leasing.

    Risk capacity

  5. 5.What part of everything you own would this money be?

    Risk capacity

  6. 6.Which of these have you held through at least one large fall in price?

    Risk tolerance

  7. 7.Your investments fall 30% in a few months. What would you most likely do?

    Risk tolerance

  8. 8.How long could you wait for a 30% fall to be made back before giving up?

    Past recoveries have taken anywhere from months to decades.

    Risk tolerance

  9. 9.Which statement is closest to how you feel?

    Risk tolerance

  10. 10.During a bad week in the markets, how often would you check your account?

    Risk tolerance

What large falls have looked like

A few well-documented falls of broad markets, as published by the sources linked. They are history, not a forecast: the next fall can be smaller, larger, shorter or longer.

Questions to think about

  • What is this money for, and on what date would you actually need it?
  • If the value halved the year before you needed it, what would you do instead?
  • Where would cash for an emergency come from, without selling investments?
  • Do you know what you own, what it costs each year and how easily you can sell it?
  • How did you react the last time your savings or investments lost value?
  • Would you be comfortable explaining your plan to someone you trust, and sticking to it for ten years?

The scores are a simple count of the answers, shown to make the description easier to read; they are not a measure used by any regulator or firm. For information and education only, not investment advice.