RISK TOLERANCE
Risk tolerance score
This test does not ask about returns. It measures, in 8 questions, how much swing you can live with and shows it as one number from 0 to 100.
1 / 8
First reaction
You have a lump sum you do not need right away. What is your first thought?
What the result looks like
Values are examplesExample values58 / 100
Balanced
14 / 24 → on a 100-point scale
- 0~20SafetyPrefers to avoid any situation where the principal shrinks
- 21~40CautiousA little swing is fine, but a big break is not
- 41~60BalancedWeighs the chance of gains and the chance of losses equally
- 61~80ActiveAccepts considerable swings for the return they expect
- 81~100AggressiveDislikes missing an opportunity more than big swings
Risk tolerance is not about returns
Talk about investing usually starts with how much you can make. What actually wrecks an account, though, is not the expected return but the decisions made in front of a fall larger than you thought you could bear. Most cases of exiting when you should hold on, or adding more when you should pause, come from there.
Risk tolerance is the word for the size of that swing. It is not how much you know or how long you have invested, but the range in which you can keep your usual judgment with a loss in front of you. The range differs from person to person, and high is not good, nor is low bad. The only problem is not knowing your own range.
How the score is calculated
Each of the 8 questions scores from 0 to 3. An answer closer to protecting the principal scores 0, and one closer to accepting swings scores 3. No question carries extra weight. The total is out of 24, and that total converted to a 100-point scale is your score.
The reason for no weights is simple: you should be able to trace which answers raised your score. If you are not happy with the result, you can check for yourself which questions made the difference.
Each question measures something different. In effect the same question is asked from different angles: first reaction, reaction to a loss, choosing a range of outcomes, when you need the money, facing the unfamiliar, the weight it leaves on daily life, how you split your assets, which is harder to bear. The design keeps the total from swinging much when one answer stands out.
When not to trust this number
This score records your answers at this moment. Long-standing research on risk tolerance has pointed out again and again that the same person answers differently in rising and falling markets. Ideally the score would be the same whichever way the market moves, but often it is not.
Tolerance and capacity also differ. Saying you can bear a 20% fall is a very different thing from being fine if money you need in a year shrinks by 20%. Even with a high score, when you need the money comes first.
This questionnaire does not tell you what to hold or how much. Risk tolerance is the starting point of a decision, not its conclusion.
This assessment is reference content that describes an investing style. It is not a suggestion to trade any stock or product and not investment advice. Investment decisions and their responsibility rest with you.