• About us
    • Who we are
    • Mission
  • Contacts
  • English
    • Português (Portuguese (Portugal))
    • Español (Spanish)
    • Français (French)
  • Login
  • Register
Investorpolis
Advertisement
  • Home
  • Investing Series Guide
    • All
    • I. Goal Based Investing
    • II. Compounding & Inflation
    • III. Assets Risks & Returns
    • IV. Efficient Diversification
    • IX. Sustainable Investing and ESG
    • V. The Investor
    • VI. Assets and Investments
    • VII. Index Funds
    • VIII. Successful Investing
    • XI. Other Topics
    Simple Portfolio Series (DIY) Part 2: The Traditional Portfolio 60/40, what it is, for whom, and its performance

    Simple Portfolio Series (DIY) Part 2: The Traditional Portfolio 60/40, what it is, for whom, and its performance

    Simple or Lazy Portfolio Series (DIY): Part 1 – Overview

    Simple or Lazy Portfolio Series (DIY): Part 1 – Overview

    Choosing Mutual Funds Series: Part 5 – Funds availability and currency of investment

    Choosing Mutual Funds Series: Part 5 – Funds availability and currency of investment

    Maximize time invested in the stock market instead of market timing: Part 2. Impossibilities and losses (cont.)

    Maximize time invested in the stock market instead of market timing: Part 2. Impossibilities and losses (cont.)

    Maximizing time invested in the stock market instead of market timing: Part 1 – Biases and losses

    Maximizing time invested in the stock market instead of market timing: Part 1 – Biases and losses

    ESG Investing Series: Part 9 – Developments and models of corporate governance regulation in the world

    ESG Investing Series: Part 9 – Developments and models of corporate governance regulation in the world

    Trending Tags

      • I. Goal Based Investing
      • II. Compounding & Inflation
      • III. Assets Risks & Returns
      • IV. Efficient Diversification
      • V. The Investor
      • VI. Assets and Investments
      • VIII. Successful Investing
      • IX. Sustainable Investing and ESG
      • X. Kits and Tips
      • XI. Other Topics
    • Wealth and Investing
      • All
      • Investing
      • Wealth
      How Women invest: Part 2 – The results are equivalent to those of men, but with significant differences in investment management

      How Women invest: Part 2 – The results are equivalent to those of men, but with significant differences in investment management

      Outlook 2023: Part 5 – 2023 will be a transitional year with two halves

      Outlook 2023: Part 5 – 2023 will be a transitional year with two halves

      Outlook 2023: Part 4 – In changing economic cycle, policies, and market sentiment, valuation matters become more than ever

      Outlook 2023: Part 4 – In changing economic cycle, policies, and market sentiment, valuation matters become more than ever

      Outlook 2023: Part 3 – 2022 was bad for investments, but was not the same for everything

      Outlook 2023: Part 3 – 2022 was bad for investments, but was not the same for everything

      Outlook 2023: Part 2 – Investment losses in 2022 cost so much that sometimes we forget about previous gains

      Outlook 2023: Part 2 – Investment losses in 2022 cost so much that sometimes we forget about previous gains

      Outlook 2023: Part 1 – 2022 was a bad year for investments, but we can’t lose the medium and long-term perspective

      Outlook 2023: Part 1 – 2022 was a bad year for investments, but we can’t lose the medium and long-term perspective

      Trending Tags

        • Investing
        • Wealth
      • Retirement & Savings
        • All
        • Retirement
        • Savings
        Retirement Series: How much money do we need to live through retirement?

        Retirement Series: How much money do we need to live through retirement?

        Retirement Series: Part 1 – Overview – A backwards view

        Retirement Series: Part 1 – Overview – A backwards view

        How many years do our public or social pensions last?

        What is the replacement rate of retirement pensions?

        How many years will we live in retirement?

        Planning for a good financial life in retirement

        Trending Tags

          • Retirement
          • Savings
        • Tools
          • All
          • Calculators
          • Publications
          • Sites and apps
          Morningstar Rating for Funds

          Morningstar Rating for Funds

          Morningstar’s European Active/Passive Barometer

          Morningstar’s European Active/Passive Barometer

          Morningstar’s U.S. Active vs. Passive Barometer

          Morningstar’s U.S. Active vs. Passive Barometer

          The Power of Dividends: Past, Present, and Future, Hartford Funds, 2021

          The Power of Dividends: Past, Present, and Future, Hartford Funds, 2021

          OECD Corporate Governance Factbook 2021

          OECD Corporate Governance Factbook 2021

          G20/OECD Principles of Corporate Governance, 2015

          G20/OECD Principles of Corporate Governance, 2015

          Trending Tags

          • calculators
          • Calculators
          • Publications
          • Sites and apps
        • More
          • All
          • Best of
          Best Of Mutual Funds Series: Dividend Stocks for Investors Outside the U.S.

          Best Of Mutual Funds Series: Dividend Stocks for Investors Outside the U.S.

          Best Of Mutual Funds Series: Dividend Stocks for U.S. Investors

          Best Of Mutual Funds Series: Dividend Stocks for U.S. Investors

          Best Of Mutual Funds Series: Investment Grade Bonds, Indexed, for Eurozone Investors

          Best Of Mutual Funds Series: Investment Grade Bonds, Indexed, for Eurozone Investors

          Best Of Mutual Funds Series: US Bonds, Indexed, for US Investors

          Best Of Mutual Funds Series: US Bonds, Indexed, for US Investors

          Best Of Mutual Funds Series: Passive, US Large Stocks, for Non-US Investors

          Best Of Mutual Funds Series: Passive, US Large Stocks, for Non-US Investors

          Best Of Mutual Funds Series: Passive Large US Stocks for US Investors

          Best Of Mutual Funds Series: Passive Large US Stocks for US Investors

          Trending Tags

            • Best of
            • Reviews
            • Snapshots
            • Others
          No Result
          View All Result
          • Home
          • Investing Series Guide
            • All
            • I. Goal Based Investing
            • II. Compounding & Inflation
            • III. Assets Risks & Returns
            • IV. Efficient Diversification
            • IX. Sustainable Investing and ESG
            • V. The Investor
            • VI. Assets and Investments
            • VII. Index Funds
            • VIII. Successful Investing
            • XI. Other Topics
            Simple Portfolio Series (DIY) Part 2: The Traditional Portfolio 60/40, what it is, for whom, and its performance

            Simple Portfolio Series (DIY) Part 2: The Traditional Portfolio 60/40, what it is, for whom, and its performance

            Simple or Lazy Portfolio Series (DIY): Part 1 – Overview

            Simple or Lazy Portfolio Series (DIY): Part 1 – Overview

            Choosing Mutual Funds Series: Part 5 – Funds availability and currency of investment

            Choosing Mutual Funds Series: Part 5 – Funds availability and currency of investment

            Maximize time invested in the stock market instead of market timing: Part 2. Impossibilities and losses (cont.)

            Maximize time invested in the stock market instead of market timing: Part 2. Impossibilities and losses (cont.)

            Maximizing time invested in the stock market instead of market timing: Part 1 – Biases and losses

            Maximizing time invested in the stock market instead of market timing: Part 1 – Biases and losses

            ESG Investing Series: Part 9 – Developments and models of corporate governance regulation in the world

            ESG Investing Series: Part 9 – Developments and models of corporate governance regulation in the world

            Trending Tags

              • I. Goal Based Investing
              • II. Compounding & Inflation
              • III. Assets Risks & Returns
              • IV. Efficient Diversification
              • V. The Investor
              • VI. Assets and Investments
              • VIII. Successful Investing
              • IX. Sustainable Investing and ESG
              • X. Kits and Tips
              • XI. Other Topics
            • Wealth and Investing
              • All
              • Investing
              • Wealth
              How Women invest: Part 2 – The results are equivalent to those of men, but with significant differences in investment management

              How Women invest: Part 2 – The results are equivalent to those of men, but with significant differences in investment management

              Outlook 2023: Part 5 – 2023 will be a transitional year with two halves

              Outlook 2023: Part 5 – 2023 will be a transitional year with two halves

              Outlook 2023: Part 4 – In changing economic cycle, policies, and market sentiment, valuation matters become more than ever

              Outlook 2023: Part 4 – In changing economic cycle, policies, and market sentiment, valuation matters become more than ever

              Outlook 2023: Part 3 – 2022 was bad for investments, but was not the same for everything

              Outlook 2023: Part 3 – 2022 was bad for investments, but was not the same for everything

              Outlook 2023: Part 2 – Investment losses in 2022 cost so much that sometimes we forget about previous gains

              Outlook 2023: Part 2 – Investment losses in 2022 cost so much that sometimes we forget about previous gains

              Outlook 2023: Part 1 – 2022 was a bad year for investments, but we can’t lose the medium and long-term perspective

              Outlook 2023: Part 1 – 2022 was a bad year for investments, but we can’t lose the medium and long-term perspective

              Trending Tags

                • Investing
                • Wealth
              • Retirement & Savings
                • All
                • Retirement
                • Savings
                Retirement Series: How much money do we need to live through retirement?

                Retirement Series: How much money do we need to live through retirement?

                Retirement Series: Part 1 – Overview – A backwards view

                Retirement Series: Part 1 – Overview – A backwards view

                How many years do our public or social pensions last?

                What is the replacement rate of retirement pensions?

                How many years will we live in retirement?

                Planning for a good financial life in retirement

                Trending Tags

                  • Retirement
                  • Savings
                • Tools
                  • All
                  • Calculators
                  • Publications
                  • Sites and apps
                  Morningstar Rating for Funds

                  Morningstar Rating for Funds

                  Morningstar’s European Active/Passive Barometer

                  Morningstar’s European Active/Passive Barometer

                  Morningstar’s U.S. Active vs. Passive Barometer

                  Morningstar’s U.S. Active vs. Passive Barometer

                  The Power of Dividends: Past, Present, and Future, Hartford Funds, 2021

                  The Power of Dividends: Past, Present, and Future, Hartford Funds, 2021

                  OECD Corporate Governance Factbook 2021

                  OECD Corporate Governance Factbook 2021

                  G20/OECD Principles of Corporate Governance, 2015

                  G20/OECD Principles of Corporate Governance, 2015

                  Trending Tags

                  • calculators
                  • Calculators
                  • Publications
                  • Sites and apps
                • More
                  • All
                  • Best of
                  Best Of Mutual Funds Series: Dividend Stocks for Investors Outside the U.S.

                  Best Of Mutual Funds Series: Dividend Stocks for Investors Outside the U.S.

                  Best Of Mutual Funds Series: Dividend Stocks for U.S. Investors

                  Best Of Mutual Funds Series: Dividend Stocks for U.S. Investors

                  Best Of Mutual Funds Series: Investment Grade Bonds, Indexed, for Eurozone Investors

                  Best Of Mutual Funds Series: Investment Grade Bonds, Indexed, for Eurozone Investors

                  Best Of Mutual Funds Series: US Bonds, Indexed, for US Investors

                  Best Of Mutual Funds Series: US Bonds, Indexed, for US Investors

                  Best Of Mutual Funds Series: Passive, US Large Stocks, for Non-US Investors

                  Best Of Mutual Funds Series: Passive, US Large Stocks, for Non-US Investors

                  Best Of Mutual Funds Series: Passive Large US Stocks for US Investors

                  Best Of Mutual Funds Series: Passive Large US Stocks for US Investors

                  Trending Tags

                    • Best of
                    • Reviews
                    • Snapshots
                    • Others
                  No Result
                  View All Result
                  Investorpolis
                  No Result
                  View All Result
                  Home Investing Series Guide

                  How to know our investor profile through profiling questionnaires

                  3 de May, 2020
                  in Investing Series Guide, V. The Investor
                  Reading Time: 7 mins read
                  0 0
                  0
                  Share on FacebookShare on Twitter

                  The allocation of investments should be guided by the time horizon of the financial objective and by the investor profile, and this profile is determined by his financial capacity and risk tolerance

                  The format of the investor profile questionnaire

                  The investor profiles types or categories

                  How to understand and conduct an investor profile questionnaire: the Vanguard questionnaire example

                  Other useful risk profile questionnaires

                  What is the best way to view the questionnaire?

                  The correct allocation of investments should be guided by the time horizon of the financial objective and by the investor profile, and this profile is determined by his financial capacity and risk tolerance

                  We have seen that:

                  1. Living on deposits and savings accounts aren’t enough due to their low returns so we need to make financial investments.
                  2. To higher returns corresponds more risk, and investments in stock markets provide greater capital appreciation and those in bond markets more stability.
                  3. The risk of any of the investments decreases over time.
                  4. We must diversify investments to improve the level of expected returns to the same level of risk or reduce the risk to a given level of returns.
                  5. The allocation of assets, that is, the distribution of capital between stocks and bonda investments determines performance by more than 90%.
                  6. Our personal allocation of investments depends on the objectives and the investment time horizon, as well as on our investor profile.
                  7. If we do not live well with financial market risk, we will have poor results in our investments.
                  8. The investor profile involves two dimensions: our financial capacity and risk tolerance.

                  These issues raise the question of what the allocation of investments will be most appropriate to our case, which is equivalent to how to determine our targeted returns or establish our maximum level of risk.

                  In other words, how to measure and evaluate our investor profile in general or in the face of a given financial investment? That is what the investor or investment profile questionnaires are for.

                  The format of the investor profile questionnaire

                  The exercise of knowing or assessing the investor financial identity is called risk profiling or investor profile.

                  It is usually carried out by financial advisors based on a questionnaire designed for this purpose, and this assessment is mandatory for the provision of advice on investment products and services.

                  The questionnaire contains a set of multiple-choice questions, typically between 6 and up to 40 questions, which seek to measure those dimensions.

                  Depending on our answers, we are classified in groups or classes of investor profile types, usually in 5 categories, staggered as follows by increasing order of risk: conservative or prudent, moderate, balanced, dynamic or aggressive.

                  The odd number has implicit that the average investor is placed in the middle group or core class of balanced profile (as the name implies).

                  This questionnaire lies at the heart of behavioural economics applied to the practice of investments that had a very recent development with Kahneman, Tversky and Thaler.

                  The conclusions of the studies on this subject point to the view that these questionnaires have had a great evolution in recent times, although there are still no models that can be considered excellent or of indisputable superior quality.      

                  Thus, we consider that a good principle will be for the investor himself to do this exercise, that is, a self-diagnosis or self-assessment. 

                  How can the investor do it?

                  We advise that to make the best of it, that is, to be more robust, follow the various stages of the investment process:

                  1. Having prior knowledge of the historical returns and risks of the various financial assets, through their historical performance (because history is repeated) in several periods.
                  2. Having prior knowledge of the results and implications of diversification of investments and the correct way to do so, in terms of alignment with objectives and in particular of the respective investment term (or need for invested capital).
                  3. Being aware that the results of investments and the appreciation of assets are essentially determined by the allocation by financial assets and the behavioural biases to which we are subject.
                  4. Having a reflexive response to the risk profile questionnaire(s), pondering reason and emotion (and possible reviews or simulations in case of identification with more than one response).

                  The investor profiles types or categories

                  The following table illustrates the meaning of 5 different investor risk tolerance profiles:

                  The investor profile in general or in the face of a given investment can be classified into 5 major categories:

                  1. Level 1, minimum risk, more conservative: only provided to a minimum level of risk and return, with the objective priority of preserving the capital.
                  2. Level 2, low risk, prudent: willing to incur a low level of risk to achieve slightly better returns over the medium and long term.
                  3. Level 3, moderate, balanced risk: willing to accept a moderate level of risk to achieve higher medium and long-term returns.  
                  4. Level 4, high risk, dynamic: willing to take more risk to achieve much higher potential returns over the medium and long term.
                  5. Level 5, significant, aggressive risk: seeks to maximize potential returns, being prepared to lose a significant part of capital.

                  How to understand and conduct an investor profile questionnaire: the Vanguard questionnaire example

                  Let us see one of the most widely used models in the world, the Vanguard questionnaire, the world’s largest asset manager.

                  The simulation is done on the following link:

                  https://personal.vanguard.com/us/FundsInvQuestionnaire

                  The questionnaire consists of a total of 10 questions that are distributed across 3 large groups:

                  1. Questions 1 through 3 seek to determine the investment term. The first measures the investment period until we begin to need the money, the second focuses on what time period of usage of funds (between the initial and final moment of the capital withdrawal), and the latter seeking to infer the perception of the meaning of what is the long term for investors in terms of the number of years of investment.
                  2. Questions 4 through 9 try to assess the investor risk tolerance. The fourth is heading to measure the reaction of investing to a sharp drop in stock markets, from its response to a situation in which stocks lost 31% in 3 months. The fifth is positioned in terms of the risk profile declared by itself, or how it manages the trade-offs or conflict of interests between more returns and more risk, in response to a scale of agreements between preferences at low risk and low returns high risk vis-à-vis and high profitability. The sixth questions whether the investor in the face of a decline in risk assets would sell them for safer assets or not. The seventh meets the degree of motivation, security and investor confidence to invest autonomously in mutual funds and without the use of an expert or financial advisor. The eighth corresponds to the fourth for bond investments, asking which investor’s reaction to a decrease in bond value of 4% in two months, as occurred between September and October 2008. The ninth focuses on investing in choices of scenarios or substitution between returns and risk in a year using 3 examples-type investments.
                  3. Questions 10 to 12 focus on the financial capacity, knowledge and experience of investor in investments. Question 10 seeks to know how the income stability is. Question 11 refers to the level of knowledge of investing in investment in stocks or equity funds. The 12 and last asks the investor to say its current allocation of investments among the 3 main asset classes: savings or deposits, bonds and stocks.

                  Other useful risk profile questionnaires

                  There are some other frequently used risk profile questionnaires:

                  https://www.schwab.com/public/file/P-778947/InvestorProfileQuestionnaire.pdf

                  https://hr.unl.edu/Fidelity%20-%20Investment%20Mix.pdf

                  https://njaes.rutgers.edu/money/assessment-tools/investment-risk-tolerance-quiz.pdf

                  https://www.ubs.com/ch/en/swissbank/wealth-management/investing/financial-personality.html

                  What is the best way to view the questionnaire?

                  The answers should be reflective. One should seek to live the moment of gain and especially the loss of markets and try to understand what they would feel and what they would do. Try to imagine the adverse situation, see yourself in the mirror and understand the sensations and reactions. Only one answer is right: that it leaves people satisfied and involved in the decision. There is no healthy process with people eager for less risk or for more gains.

                  It is always useful to carry out the investor profile questionnaire in banks where we have our investments and savings because the information, recommendations and advice received will be guided by these results.

                  Previous Post

                  International Monetary Fund (IMF), World Economic Outlook (and GFSR and FMR, biannual)

                  Next Post

                  Investing in index funds: The S&P 500, the main index of stock markets

                  Investadmin

                  Investadmin

                  Related Posts

                  Simple Portfolio Series (DIY) Part 2: The Traditional Portfolio 60/40, what it is, for whom, and its performance
                  Investing Series Guide

                  Simple Portfolio Series (DIY) Part 2: The Traditional Portfolio 60/40, what it is, for whom, and its performance

                  28 de January, 2023
                  Simple or Lazy Portfolio Series (DIY): Part 1 – Overview
                  Investing Series Guide

                  Simple or Lazy Portfolio Series (DIY): Part 1 – Overview

                  28 de January, 2023
                  Choosing Mutual Funds Series: Part 5 – Funds availability and currency of investment
                  Investing Series Guide

                  Choosing Mutual Funds Series: Part 5 – Funds availability and currency of investment

                  24 de January, 2023
                  Maximize time invested in the stock market instead of market timing: Part 2. Impossibilities and losses (cont.)
                  Investing Series Guide

                  Maximize time invested in the stock market instead of market timing: Part 2. Impossibilities and losses (cont.)

                  21 de November, 2022
                  Maximizing time invested in the stock market instead of market timing: Part 1 – Biases and losses
                  Investing Series Guide

                  Maximizing time invested in the stock market instead of market timing: Part 1 – Biases and losses

                  21 de November, 2022
                  ESG Investing Series: Part 9 – Developments and models of corporate governance regulation in the world
                  Investing Series Guide

                  ESG Investing Series: Part 9 – Developments and models of corporate governance regulation in the world

                  15 de August, 2022
                  Next Post

                  Investing in index funds: The S&P 500, the main index of stock markets

                  Leave a Reply

                  Your email address will not be published. Required fields are marked *

                  Trending

                  How Women invest: Part 2 – The results are equivalent to those of men, but with significant differences in investment management

                  How Women invest: Part 2 – The results are equivalent to those of men, but with significant differences in investment management

                  2 de March, 2023
                  Outlook 2023: Part 5 – 2023 will be a transitional year with two halves

                  Outlook 2023: Part 5 – 2023 will be a transitional year with two halves

                  17 de February, 2023
                  Outlook 2023: Part 4 – In changing economic cycle, policies, and market sentiment, valuation matters become more than ever

                  Outlook 2023: Part 4 – In changing economic cycle, policies, and market sentiment, valuation matters become more than ever

                  17 de February, 2023
                  Outlook 2023: Part 3 – 2022 was bad for investments, but was not the same for everything

                  Outlook 2023: Part 3 – 2022 was bad for investments, but was not the same for everything

                  16 de February, 2023
                  Investorpolis

                  We developed this blog because we believe that only a small learning effort is needed to make a big change in the decisions and results of our investments and financial assets.

                  Main categories

                  • Investing Series Guide
                  • Wealth and Investing
                  • Retirement & Savings
                  • Tools
                  • More

                  Newsletter

                  Sign to our mailing list to receive updates direct to your inbox!

                  *We don’t spam

                  • Privacy Policy
                  • Cookie Policy
                  • Contacts

                  © 2021 - Investorpolis / Powered by Delta Soluções

                  • pt-pt Português
                  • fr Français
                  • es Español
                  • en English
                  • Home
                  • Investing Series Guide
                    • I. Goal Based Investing
                    • II. Compounding & Inflation
                    • III. Assets Risks & Returns
                    • IV. Efficient Diversification
                    • IX. Sustainable Investing and ESG
                    • V. The Investor
                    • VI. Assets and Investments
                    • VII. Index Funds
                    • VIII. Successful Investing
                    • X. Kits and Tips
                    • XI. Other Topics
                  • Retirement & Savings
                    • Retirement
                    • Savings
                  • Wealth and Investing
                    • Investing
                    • Wealth
                  • Tools
                    • Calculators
                    • Publications
                    • Sites and apps
                  • More
                    • Best of
                    • Reviews
                    • Snapshots
                    • Others
                  • About us
                    • Who we are
                    • Mission
                  • Login
                  • Sign Up
                  • Cart

                  © 2021 - Investorpolis / Powered by Delta Soluções

                  Welcome Back!

                  Login to your account below

                  Forgotten Password? Sign Up

                  Create New Account!

                  Fill the forms bellow to register

                  All fields are required. Log In

                  Retrieve your password

                  Please enter your username or email address to reset your password.

                  Log In
                  We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
                  Cookie configurationCookie PolicyAcceptReject
                  Manage consent

                  Privacy Overview

                  This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
                  Advertisement
                  Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
                  Analytics
                  Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
                  Functional
                  Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
                  Necessary
                  Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
                  Others
                  Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
                  Performance
                  Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
                  SAVE & ACCEPT

                  Add New Playlist

                  Are you sure want to unlock this post?
                  Unlock left : 0
                  Are you sure want to cancel subscription?