- Mohammed's risk tolerance score is 66, placing him in Risk Group 6, which is very tolerant of risk. However, he estimated his score would be higher.
- Those in Risk Group 6 are prepared to take medium to large risks with investments and prefer portfolios with a higher risk/return profile. Mohammed differs in that he would choose the lowest risk portfolio option.
- A 33% drop in the total value of his investments would make him feel uncomfortable, in line with others in Risk Group 6.
In this tandem letter first Ben Inker shows how risk is something quite separate from volatility and then Jeremy Grantham concludes that this time is – very – different.
On 1/26/2017, we hosted a webinar featuring Richard Lindsey, Managing Partner and Head of Liquid Alternative Strategies at Windham Capital Management. Rich discussed how to model portfolio returns, risk premia, and how to decompose portfolio risk.
Investing Public Funds: PFI Strategies is in the business of “finding money” in an institution’s operational and reserve funds. We also help public fund investors avoid the heartache of poor investment decisions, which everyone makes from time to time
This document provides an introduction to investing and discusses several key concepts:
1) It is impossible to consistently predict when markets will rise and fall, so the best strategy is to invest regularly over time through ups and downs to benefit from pound cost averaging.
2) While it is difficult to determine if markets are cheap or expensive, standard valuation metrics like the price-to-earnings ratio can provide some guidance.
3) All investments carry risk, and higher potential returns generally require taking on more risk. It is important to understand the risks and reduce risk exposure when markets are highly valued.
This document provides an introduction to becoming a successful investor. It discusses several key points:
1) Markets are difficult to predict in the short-term, but following a strategy of regular savings and rebalancing can help reduce risks over the long run.
2) Risk and potential returns are correlated - higher risks allow for higher potential returns but do not guarantee them. Understanding risks is important.
3) Diversification through asset allocation and collective funds can help manage risks. Selecting funds based on manager performance is also discussed.
This document provides an introduction to becoming a successful investor. It discusses several key points:
1) Markets are difficult to predict in the short-term, but following a strategy of regular savings and rebalancing can help reduce risks over the long run.
2) Risk and potential returns are correlated - higher risks allow for higher potential returns but do not guarantee them. Understanding risks is important.
3) Diversification through asset allocation and collective funds can help manage risks. Selecting funds based on manager performance is also discussed.
How important are the rules used to create smart beta portfoliosRalph Goldsticker
Most Smart Beta presentations are about: “What and Why?”
This presentation addresses: “Do the rules used to construct a Smart Beta portfolio matter?”
Our approach was to use alternative portfolio construction rules to simulate multiple 25-year return histories for Low Volatility, Fundamental Indexing and Momentum strategies, and then compare their average returns, risks, drawdowns and factor exposures.
In this tandem letter first Ben Inker shows how risk is something quite separate from volatility and then Jeremy Grantham concludes that this time is – very – different.
On 1/26/2017, we hosted a webinar featuring Richard Lindsey, Managing Partner and Head of Liquid Alternative Strategies at Windham Capital Management. Rich discussed how to model portfolio returns, risk premia, and how to decompose portfolio risk.
Investing Public Funds: PFI Strategies is in the business of “finding money” in an institution’s operational and reserve funds. We also help public fund investors avoid the heartache of poor investment decisions, which everyone makes from time to time
This document provides an introduction to investing and discusses several key concepts:
1) It is impossible to consistently predict when markets will rise and fall, so the best strategy is to invest regularly over time through ups and downs to benefit from pound cost averaging.
2) While it is difficult to determine if markets are cheap or expensive, standard valuation metrics like the price-to-earnings ratio can provide some guidance.
3) All investments carry risk, and higher potential returns generally require taking on more risk. It is important to understand the risks and reduce risk exposure when markets are highly valued.
This document provides an introduction to becoming a successful investor. It discusses several key points:
1) Markets are difficult to predict in the short-term, but following a strategy of regular savings and rebalancing can help reduce risks over the long run.
2) Risk and potential returns are correlated - higher risks allow for higher potential returns but do not guarantee them. Understanding risks is important.
3) Diversification through asset allocation and collective funds can help manage risks. Selecting funds based on manager performance is also discussed.
This document provides an introduction to becoming a successful investor. It discusses several key points:
1) Markets are difficult to predict in the short-term, but following a strategy of regular savings and rebalancing can help reduce risks over the long run.
2) Risk and potential returns are correlated - higher risks allow for higher potential returns but do not guarantee them. Understanding risks is important.
3) Diversification through asset allocation and collective funds can help manage risks. Selecting funds based on manager performance is also discussed.
How important are the rules used to create smart beta portfoliosRalph Goldsticker
Most Smart Beta presentations are about: “What and Why?”
This presentation addresses: “Do the rules used to construct a Smart Beta portfolio matter?”
Our approach was to use alternative portfolio construction rules to simulate multiple 25-year return histories for Low Volatility, Fundamental Indexing and Momentum strategies, and then compare their average returns, risks, drawdowns and factor exposures.
The document provides an explanation for why long-term investing in assets is recommended over cash or inflation. It discusses diversifying investments across asset classes to reduce risk and increase returns. Passive funds are preferred over active funds due to higher costs and lack of evidence that active funds consistently outperform indexes. Risk is reduced by combining low-correlated assets from different categories in portfolios tailored to individual risk tolerances.
Sound Investing In Global Financial Crisis - 6th Dec 2008Peter Lim
The document provides lessons on sound investing based on the author Peter Lim's experience. It discusses that (1) investors should prepare by living below their means and setting aside emergency funds before investing; (2) common stocks have historically provided the highest returns over the long term though with more risk; and (3) diversification and investing for the long run through index funds reduces risk while maintaining returns for most investors.
The document discusses principles of behavioral finance and long-term investing. It notes that investors tend to be overconfident and influenced by short-term gains. Successful long-term investing requires discipline, focusing on asset allocation and diversification, and ignoring short-term noise and market hype. The key is developing a personalized investment policy and sticking to a plan through different market conditions.
Smart Beta Investing - Trends and OpportunitiesAmit Sinha
Additional content available at www.focus262.com/blog
Presentation by Amit Sinha at the Copal Amba Breakfast Series that walks through the what, why and where of Smart Beta investing.
Beginning with what is smart beta, then moving to why investors can benefit from smart beta and concluding with where the industry is headed - highlighting the potential market opportunity, challenges, and business models followed by asset managers such as Dimensional, AQR, GSAM, etc.
Every month we publish just the stats from the newsletter, just the stats. That is why the release is called "Stats on Stats ETF" In this August 2016 release we cover the 6 Alpha returns and as well the Trend Alpha returns. Also we included the Robo Advisor returns and a list of Exchange Traded Funds from each sector that are currently trending with above average returns with in their respective asset class. The list also provides the only publicly available ratings system geared towards ETF's. The “Alpha Ranking System” which is generated by ETFInvests Algorithms.
The document provides 5 investing principles based on a presentation about lessons learned. Principle 1 discusses that every investment has risks, even cash, as investors flocked to cash during volatile periods but it provided little return over the long run after accounting for inflation. Principle 2 notes that while most asset classes declined in 2008, a diversified portfolio still worked over the full market cycle from 2000-2009. Principle 3 explains that not all bonds or bond funds perform the same way. Principle 4 asserts that stocks have generally outperformed over the long run. Principle 5 advocates for including international stocks rather than avoiding foreign markets.
The document discusses the strong performance of markets in the first quarter of 2012 and what may lie ahead for the rest of the year. It analyzes recent market trends and sector performance using technical indicators. While fundamentals have improved, concerns remain around unresolved issues in Europe and China. Sentiment indicators show investors remain cautiously negative. In summary, the markets have seen a strong uptrend but short-term technicals warrant caution amid ongoing global economic uncertainties.
This document provides information from Atlantic Sun Financial Group's August 2016 newsletter. It includes three articles:
1) "Investors Are Human, Too" which discusses behavioral biases that can influence investor decisions and recommends having a long-term perspective and sticking to an investing strategy.
2) "Be Prepared to Retire in a Volatile Market" which explains sequencing risk in retirement and recommends allocating assets into short, mid, and long-term buckets and strategies for determining annual withdrawals.
3) "Understanding the Net Investment Income Tax" which provides an overview of the 3.8% Medicare surtax on net investment income that applies to certain investment income if modified adjusted gross income exceeds thresholds.
Callan research that found investors over the last 20 years have had to take on three times as much risk to earn the same return electrified the institutional investing community. The Published Research Group interviewed Jay Kloepfer and Julia Moriarty about how the research was done and its implications.
"Three Dimensional Time: Working with Alternative Data" by Kathryn Glowinski,...Quantopian
From QuantCon 2017: Lookahead bias and stale data when used in an algorithm are generally categorized as "incorrect data". In fact, the issue does not lie with the data itself, but instead is an issue of perspective. This talk will examine how data is typically viewed through the lens of time, and why, on the whole, that approach is wrong.
At Quantopian, we've tried several ways of handling data with regards to time, and we'll talk about lessons learned along the way. We'll also discuss what multidimensionality means for financial data specifically, and how we can apply this to get better results in backtesting.
Additionally, we'll touch on how to apply multidimensionality to more general data, and why it's important for anyone working with applied data to take this approach.
I'm looking for 2 people that want to change their current situation.
See how $18, one time, can change your situation in one year. There is strength in numbers. Teamwork makes the dream work. Take a look here >>> http://tinyurl.com/kb7luuf
http://Kaea80.4c4all.com
http://flow77.4c4all.com
http://unitedlove1.4c4all.com
The document evaluates the normal probability distribution's ability to quantify investment risk by analyzing daily FTSE100 data over 20 years. It finds that the normal distribution does not accurately reflect financial market risk, as there are more extreme variations than predicted. Alternative approaches are needed to account for non-normal events, behavioral risks, asset correlations, and specific risks. Investors should use multiple measures like VaR, skewness, fat tails, and betas to better understand risk rather than relying solely on the normal distribution.
Deep Value and the Aquirer's Multiple by Tobias Carlisle for QuantCon 2016Quantopian
Activist investors and contrarians battle for control of losing corporations by identifying undervalued companies trading well below their intrinsic value. The document discusses five main ideas: 1) Deep value strategies like contrarian investing outperform growth and quality factors. 2) Contrarians can identify mispriced stocks by going against the crowd. 3) Simple valuation models often outperform experts who overthink things. 4) The acquirer's multiple, which values companies based on earnings, is a straightforward valuation method. 5) Hedging strategies using indicators like moving averages can help reduce downside when the market declines.
The 8 Rules of Dividend Investing outlines strategies for selecting dividend stocks. Rule 1 is to invest in companies with over 25 years of consecutive dividend increases to find stable, profitable businesses. Rule 2 is to rank stocks by dividend yield to increase cash flow. Rule 3 is to rank stocks by payout ratio to ensure businesses can sustain dividends through downturns. The strategies emphasize investing in high-quality dividend stocks trading at fair prices for long-term growth and reliable income.
Taking on Wall Street: A Comparative Study of Strategies Sourced from "The Pr...Quantopian
A unique set of data comprised of strategy returns sourced through traditional means from managers (“the pros”) and from strategies developed on Quantopian’s platform (“the crowd”) is analyzed. We detect distinct groups of strategy styles within the data: In particular, some "crowd" strategies fall into their own clusters distinct from those within the "pro" data set. A few do overlap as well. We go on to analyze the various strategy groups with respect to environmental conditions and risk factors (among other relevant features), teasing out differences in trading styles.
Ultimately we judge how well “the crowd” is doing so far, in terms of being able to compete with the established managers not only in terms of performance but also with respect to risk management and overall novelty and diversification in the trading styles that have emerged. Finally we address general notions (and pitfalls) of building meta strategies from manager return streams.
This presentation was part of QuantCon 2015 hosted by Quantopian. Visit us at: www.quantopian.com.
This document discusses the importance of setting savings goals and outlines True Potential's philosophy on investing. The key points are:
- Setting clear, quantified goals that account for inflation is crucial for effective savings and investment. Goals should be fun and motivate continued saving.
- Understanding your risk tolerance is important for choosing appropriate investments that can help you achieve your goals while avoiding excessive risk.
- True Potential believes investing can be simple, easy to understand, and focus on long-term growth to beat inflation and outperform cash savings. They emphasize transparency and monitoring progress regularly.
This document discusses investing a $10,000 inheritance to reach a goal of $15,000 in 3 years to pay for a vacation. Several investment alternatives are considered: savings accounts, CDs, bonds, stocks, and mutual funds. A scoring model evaluates the alternatives based on meeting the $15,000 goal, 10% average annual returns, risk level, and returns after 5 years. The analysis finds that investing 100% in mutual funds best balances the goals of risk tolerance and desired returns while meeting objectives.
This document provides an introduction to becoming a successful investor. It discusses several key points:
1) Markets are difficult to predict in the short-term, but regular savings plans can take advantage of buying low during downturns. Understanding risks is important, as higher potential returns come with higher risks.
2) Diversification through asset allocation and rebalancing is important to manage risk. Measuring risk focuses on volatility, but this does not guarantee future performance.
3) Factors like valuations based on price-to-earnings ratios and understanding inflation risk are also part of becoming a successful long-term investor. The document provides an overview of basic investing concepts.
The document provides an explanation for why long-term investing in assets is recommended over cash or inflation. It discusses diversifying investments across asset classes to reduce risk and increase returns. Passive funds are preferred over active funds due to higher costs and lack of evidence that active funds consistently outperform indexes. Risk is reduced by combining low-correlated assets from different categories in portfolios tailored to individual risk tolerances.
Sound Investing In Global Financial Crisis - 6th Dec 2008Peter Lim
The document provides lessons on sound investing based on the author Peter Lim's experience. It discusses that (1) investors should prepare by living below their means and setting aside emergency funds before investing; (2) common stocks have historically provided the highest returns over the long term though with more risk; and (3) diversification and investing for the long run through index funds reduces risk while maintaining returns for most investors.
The document discusses principles of behavioral finance and long-term investing. It notes that investors tend to be overconfident and influenced by short-term gains. Successful long-term investing requires discipline, focusing on asset allocation and diversification, and ignoring short-term noise and market hype. The key is developing a personalized investment policy and sticking to a plan through different market conditions.
Smart Beta Investing - Trends and OpportunitiesAmit Sinha
Additional content available at www.focus262.com/blog
Presentation by Amit Sinha at the Copal Amba Breakfast Series that walks through the what, why and where of Smart Beta investing.
Beginning with what is smart beta, then moving to why investors can benefit from smart beta and concluding with where the industry is headed - highlighting the potential market opportunity, challenges, and business models followed by asset managers such as Dimensional, AQR, GSAM, etc.
Every month we publish just the stats from the newsletter, just the stats. That is why the release is called "Stats on Stats ETF" In this August 2016 release we cover the 6 Alpha returns and as well the Trend Alpha returns. Also we included the Robo Advisor returns and a list of Exchange Traded Funds from each sector that are currently trending with above average returns with in their respective asset class. The list also provides the only publicly available ratings system geared towards ETF's. The “Alpha Ranking System” which is generated by ETFInvests Algorithms.
The document provides 5 investing principles based on a presentation about lessons learned. Principle 1 discusses that every investment has risks, even cash, as investors flocked to cash during volatile periods but it provided little return over the long run after accounting for inflation. Principle 2 notes that while most asset classes declined in 2008, a diversified portfolio still worked over the full market cycle from 2000-2009. Principle 3 explains that not all bonds or bond funds perform the same way. Principle 4 asserts that stocks have generally outperformed over the long run. Principle 5 advocates for including international stocks rather than avoiding foreign markets.
The document discusses the strong performance of markets in the first quarter of 2012 and what may lie ahead for the rest of the year. It analyzes recent market trends and sector performance using technical indicators. While fundamentals have improved, concerns remain around unresolved issues in Europe and China. Sentiment indicators show investors remain cautiously negative. In summary, the markets have seen a strong uptrend but short-term technicals warrant caution amid ongoing global economic uncertainties.
This document provides information from Atlantic Sun Financial Group's August 2016 newsletter. It includes three articles:
1) "Investors Are Human, Too" which discusses behavioral biases that can influence investor decisions and recommends having a long-term perspective and sticking to an investing strategy.
2) "Be Prepared to Retire in a Volatile Market" which explains sequencing risk in retirement and recommends allocating assets into short, mid, and long-term buckets and strategies for determining annual withdrawals.
3) "Understanding the Net Investment Income Tax" which provides an overview of the 3.8% Medicare surtax on net investment income that applies to certain investment income if modified adjusted gross income exceeds thresholds.
Callan research that found investors over the last 20 years have had to take on three times as much risk to earn the same return electrified the institutional investing community. The Published Research Group interviewed Jay Kloepfer and Julia Moriarty about how the research was done and its implications.
"Three Dimensional Time: Working with Alternative Data" by Kathryn Glowinski,...Quantopian
From QuantCon 2017: Lookahead bias and stale data when used in an algorithm are generally categorized as "incorrect data". In fact, the issue does not lie with the data itself, but instead is an issue of perspective. This talk will examine how data is typically viewed through the lens of time, and why, on the whole, that approach is wrong.
At Quantopian, we've tried several ways of handling data with regards to time, and we'll talk about lessons learned along the way. We'll also discuss what multidimensionality means for financial data specifically, and how we can apply this to get better results in backtesting.
Additionally, we'll touch on how to apply multidimensionality to more general data, and why it's important for anyone working with applied data to take this approach.
I'm looking for 2 people that want to change their current situation.
See how $18, one time, can change your situation in one year. There is strength in numbers. Teamwork makes the dream work. Take a look here >>> http://tinyurl.com/kb7luuf
http://Kaea80.4c4all.com
http://flow77.4c4all.com
http://unitedlove1.4c4all.com
The document evaluates the normal probability distribution's ability to quantify investment risk by analyzing daily FTSE100 data over 20 years. It finds that the normal distribution does not accurately reflect financial market risk, as there are more extreme variations than predicted. Alternative approaches are needed to account for non-normal events, behavioral risks, asset correlations, and specific risks. Investors should use multiple measures like VaR, skewness, fat tails, and betas to better understand risk rather than relying solely on the normal distribution.
Deep Value and the Aquirer's Multiple by Tobias Carlisle for QuantCon 2016Quantopian
Activist investors and contrarians battle for control of losing corporations by identifying undervalued companies trading well below their intrinsic value. The document discusses five main ideas: 1) Deep value strategies like contrarian investing outperform growth and quality factors. 2) Contrarians can identify mispriced stocks by going against the crowd. 3) Simple valuation models often outperform experts who overthink things. 4) The acquirer's multiple, which values companies based on earnings, is a straightforward valuation method. 5) Hedging strategies using indicators like moving averages can help reduce downside when the market declines.
The 8 Rules of Dividend Investing outlines strategies for selecting dividend stocks. Rule 1 is to invest in companies with over 25 years of consecutive dividend increases to find stable, profitable businesses. Rule 2 is to rank stocks by dividend yield to increase cash flow. Rule 3 is to rank stocks by payout ratio to ensure businesses can sustain dividends through downturns. The strategies emphasize investing in high-quality dividend stocks trading at fair prices for long-term growth and reliable income.
Taking on Wall Street: A Comparative Study of Strategies Sourced from "The Pr...Quantopian
A unique set of data comprised of strategy returns sourced through traditional means from managers (“the pros”) and from strategies developed on Quantopian’s platform (“the crowd”) is analyzed. We detect distinct groups of strategy styles within the data: In particular, some "crowd" strategies fall into their own clusters distinct from those within the "pro" data set. A few do overlap as well. We go on to analyze the various strategy groups with respect to environmental conditions and risk factors (among other relevant features), teasing out differences in trading styles.
Ultimately we judge how well “the crowd” is doing so far, in terms of being able to compete with the established managers not only in terms of performance but also with respect to risk management and overall novelty and diversification in the trading styles that have emerged. Finally we address general notions (and pitfalls) of building meta strategies from manager return streams.
This presentation was part of QuantCon 2015 hosted by Quantopian. Visit us at: www.quantopian.com.
This document discusses the importance of setting savings goals and outlines True Potential's philosophy on investing. The key points are:
- Setting clear, quantified goals that account for inflation is crucial for effective savings and investment. Goals should be fun and motivate continued saving.
- Understanding your risk tolerance is important for choosing appropriate investments that can help you achieve your goals while avoiding excessive risk.
- True Potential believes investing can be simple, easy to understand, and focus on long-term growth to beat inflation and outperform cash savings. They emphasize transparency and monitoring progress regularly.
This document discusses investing a $10,000 inheritance to reach a goal of $15,000 in 3 years to pay for a vacation. Several investment alternatives are considered: savings accounts, CDs, bonds, stocks, and mutual funds. A scoring model evaluates the alternatives based on meeting the $15,000 goal, 10% average annual returns, risk level, and returns after 5 years. The analysis finds that investing 100% in mutual funds best balances the goals of risk tolerance and desired returns while meeting objectives.
This document provides an introduction to becoming a successful investor. It discusses several key points:
1) Markets are difficult to predict in the short-term, but regular savings plans can take advantage of buying low during downturns. Understanding risks is important, as higher potential returns come with higher risks.
2) Diversification through asset allocation and rebalancing is important to manage risk. Measuring risk focuses on volatility, but this does not guarantee future performance.
3) Factors like valuations based on price-to-earnings ratios and understanding inflation risk are also part of becoming a successful long-term investor. The document provides an overview of basic investing concepts.
The document appears to be a questionnaire assessing an individual's attitude towards risk and investing. It contains 18 multiple choice questions regarding comfort with investment risk and potential losses, goals for investments, reactions to market downturns, familiarity with different investment types, and preferences regarding risk level, returns, and capital preservation. The questions aim to understand the respondent's risk tolerance and preferences between potential gains and protecting their original capital.
This document provides an introduction to investing and key concepts like risk and return. It explains that balancing risk and return is important for achieving financial goals. While higher risk investments offer potential for greater returns, they also carry more uncertainty. The document advocates diversifying investments across different asset classes like stocks, bonds, property and cash to reduce risk. It provides data showing how various asset classes have performed over time, with higher risk assets generally providing higher average returns but also more variability in returns. The key is choosing an appropriate mix of assets based on an individual's risk tolerance and time horizon.
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This document discusses how to design investment portfolios tailored to private investors' needs, goals, and aspirations based on their risk tolerance. It proposes using a liability-driven investment approach where liabilities (needs) are matched with lower-risk assets like bonds. Investor risk tolerance is assessed using a questionnaire measuring ability and willingness to take risk. Based on the assessment, investors are classified as conservative, moderate, or aggressive, and model portfolios with different asset allocations and expected risk/return profiles are provided for each classification.
Michael Schwartz outlines 11 common retirement planning mistakes and provides advice on how to avoid them. The key mistakes include failing to have a proper retirement plan, having improper asset allocation, failing to calculate taxes, and failing to plan for healthcare costs. Schwartz urges readers to evaluate whether they have planned for these issues and offers to discuss how to turn potential mistakes into future strengths. He provides more detail on the first two mistakes of failing to plan and having improper asset allocation, emphasizing the importance of developing a comprehensive retirement plan and properly diversifying investments across different asset classes.
If you are beginning your investment journey (or if you want to rethink with a structured approach), there’s no better place to start! This document outlines a structured approach to investing that we wish we had when we started to invest.
A research study on investors behaviour regarding choice of asset allocation ...SubmissionResearchpa
This document discusses asset allocation and factors that influence investors' choices. It begins by defining asset allocation as balancing risk and reward by distributing investments across asset classes like equities, fixed income, and cash. Key factors in selecting an asset allocation include time horizon, risk tolerance, and goals. Diversification across asset classes reduces risk through offsetting performance. The document then examines various investor profiles defined by characteristics like age, wealth source, personality. Loss aversion and framing effects can influence decisions by making investors reluctant to realize losses or consider choices separately.
The document provides an overview of Elmwood Wealth Management's quarterly insights for April 2013. It discusses several challenges facing investors including slowing economic growth rates compared to the previous year. It also notes that corporate profit margins remain high but may be pressured if companies increase spending. The document summarizes Elmwood's investment strategies in various themes like the U.S. energy resurgence and total return equity investing. It concludes by reaffirming Elmwood's commitment to serving clients' needs.
Is Your Advisor Giving You The Information Needed To Succeed? - Investment Op...shirtz14
The document discusses three major types of investments - variable, fixed, and indexed. It states that some investment advisors fail to present all three options to clients. The types define how interest is earned, with variable investments linked to market performance, fixed investments providing guaranteed returns, and indexed investments providing some market upside with downside protection. The document emphasizes getting informed about all the options available.
The document provides advice on mutual fund investing from The Financial Literates website. It discusses choosing the right mutual funds by properly diversifying across market caps, fund houses, and types of funds. It emphasizes the importance of matching funds' stated objectives and risks to the investor's goals and risk tolerance. Past performance is not indicative of future returns, and funds should be evaluated based on long-term performance across market cycles.
The document provides information about Ameriprise Financial and its services. It discusses Ameriprise Financial's history of helping clients through challenging economic times with a focus on goals and dreams. It also outlines four cornerstones of financial planning: liquidity, investment, protection, and tax planning.
Stock market investing for beginners _ essentials to start investing successf...mikhaelmanalu1
This document provides an overview of the fundamentals of the stock market, including a brief history and descriptions of some of the major stock exchanges. It notes that the first stock exchange opened in Amsterdam in 1611, and that the New York Stock Exchange traces its origins to 1792 when stockbrokers gathered under a buttonwood tree to create trading rules. Today, the largest stock exchanges in the US are the New York Stock Exchange, NASDAQ, and American Stock Exchange. It provides short descriptions of these exchanges as well as the Chicago Board Options Exchange and Chicago Mercantile Exchange.
If you are preparing to retire within the
next five years, you have some important
decisions to make — and one of the most
important involves your retirement income
strategy
Investing Public Funds: PFI Strategies is in the business of “finding money” in an institution’s operational and reserve funds. We also help public fund investors avoid the heartache of poor investment decisions, which everyone makes from time to time
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1. MOHAMMED ALSHAIBAN (66) AGREEDSCORE: - 07 JUNE 2016
PERSONAL FINANCIAL RISK TOLERANCE REPORT
Prepared for Mohammed Alshaiban from the questionnaire completed on 07 June 2016.
YOUR RISK TOLERANCE SCORE
Your Risk Tolerance Score enables you to compare yourself to a representative sample of the adult population. Your score
is 66. This is a very high score, higher than 94% of all scores.
When scores are graphed they form a bell-curve as shown below. To make the scores more meaningful, the 0 to 100
scale has been divided into seven Risk Groups. Your score places you in Risk Group 6.
In answer to the last question, you estimated your score would be 84. Most people under-estimate their score by a few
points. However, yours was a major over-estimate. When compared to others you are much less risk tolerant than you
thought you were.
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2. YOUR RISK GROUP
Overview
The description of Risk Group 6 which follows provides a summary of the typical attitudes, values, preferences and
experiences of those in your group. It summarizes how those in your Risk Group usually answer the risk tolerance
questionnaire. Two of your answers differed from this description. They are shown in italics below the relevant part and
in the Summary section that follows. These differences fine-tune the description to you personally.
Making Financial Decisions
They think of "risk" as "opportunity" and are prepared to take a medium to large degree of risk with their financial decisions,
more likely large (Q3 & 10). Most have a great deal of confidence in their ability to make good financial decisions but some
have only a reasonable amount (Q12). They usually feel somewhat or very optimistic about their major decisions after they
make them (Q7).
When faced with a major financial decision they are usually more concerned about the possible gains (Q6). Most would
probably choose less job security with a big pay increase rather than more job security with a small pay increase and
others would definitely make that choice (Q5).
You think of "risk" as "uncertainty".
Financial Disappointments
When things go wrong financially they adapt somewhat easily (Q2).
Financial Past
They have taken a medium to large degree of risk with their past financial decisions, more likely large, and half have
borrowed money to make an investment (Q9 & 11). Most have invested a large sum of money in a risky investment mainly for
the "thrill" of seeing whether it went up or down in value, but not very frequently (Q4).
Investment
It is somewhat to much more important that the value of their investments retains its purchasing power than that it does not
fall, more likely much more important (Q18). For most a fall of 33% in the total value of their investments would make them
feel uncomfortable but for some it would take a 50% fall (Q14). In recent years, their personal investment changes have
mostly been towards higher risk (Q19). Over ten years they expect an investment portfolio to earn, on average, at least
three times the rate from term deposits, more likely more than three times (Q21).
Given the portfolio choices below, they would prefer Portfolios 5 or 6, more likely Portfolio 6 (Q16).
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3. With these portfolio choices, you would choose Portfolio 1.
0 % 100 %
30 % 70 %
40 % 50 %
40 % 30 %
40 % 10 %
30 % 0 %
0 % 0 %
1
2
3
4
5
6
7
0 %
0 %
10 %
30 %
50 %
70 %
100 %
HIGH MEDIUM LOW
EXPECTED RISK AND RETURN
Borrowing
If they were borrowing a large sum of money at a time when it was not clear which way interest rates were going to
move and when the fixed interest rate was 1% more than the variable rate, most would choose to have 50% of the loan at
variable interest but some would choose 75% or 100% (Q23).
Government Benefits and Tax Advantages
Most would take a risk in arranging their affairs to qualify for a government benefit or obtain a tax advantage if there was
a better than 50% chance they could finish up better off than if they had done nothing. However some would only take a
risk if there was only a small chance of finishing up worse off (Q22).
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4. DIFFERENCES
RISK GROUP
1 2 3 4 5 6 7Making Financial Decisions
MEANING OF "RISK" Q3
CURRENT RISK-TAKING Q10
CONFIDENCE IN DECISIONS Q12
FEEL AFTER DECISIONS Q7
LOSSES V GAINS Q6
JOB SECURITY V PAY INCREASE Q5
✔
✔
✔
✔
✔
✔
Financial Disappointments
ADAPTABILITY Q2
✔
Financial Past
RISK TAKING? Q9
BORROW TO INVEST Q11
THRILL INVESTING Q4
✔
✔
✔
Investment
FACE VS REAL VALUE Q18
DOWNSIDE COMFORT Q14
RISK CHANGES? Q19
10-YEAR RETURNS Q21
PREFERREDPORTFOLIO Q16
✔
✔
✔
✔
✔
Borrowing
FIXED V VARIABLE INTEREST Q23
✔
Government Benefits and Tax Advantages
TAKE A RISK? Q22
✔
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5. ALL RESPONSES
1.
Compared to others, how do you rate your willingness to take financial risks?
Extremely low risk taker.1
Very low risk taker.2
Low risk taker.3
Average risk taker.4
✔ High risk taker.5
Very high risk taker.6
Extremely high risk taker.7
2.
How easily do you adapt when things go wrong financially?
Very uneasily.1
Somewhat uneasily.2
✔ Somewhat easily.3
Very easily.4
3.
When you think of the word "risk" in a financial context, which of the following words comes to
mind first?
Danger.1
✔ Uncertainty.2
Opportunity.3
Thrill.4
4.
Have you ever invested a large sum in a risky investment mainly for the "thrill" of seeing
whether it went up or down in value?
No.1
Yes, very rarely.2
✔ Yes, somewhat rarely.3
Yes, somewhat frequently.4
Yes, very frequently.5
5.
If you had to choose between more job security with a small pay increase and less job
security with a big pay increase, which would you pick?
Definitely more job security with a small pay increase.1
Probably more job security with a small pay increase.2
Not sure.3
✔ Probably less job security with a big pay increase.4
Definitely less job security with a big pay increase.5
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6. 6.
When faced with a major financial decision, are you more concerned about the possible
losses or the possible gains?
Always the possible losses.1
Usually the possible losses.2
✔ Usually the possible gains.3
Always the possible gains.4
7.
How do you usually feel about your major financial decisions after you make them?
Very pessimistic.1
Somewhat pessimistic.2
✔ Somewhat optimistic.3
Very optimistic.4
8.
Imagine you were in a job where you could choose whether to be paid salary, commission or
a mix of both. Which would you pick?
All salary.1
Mainly salary.2
✔ Equal mix of salary and commission.3
Mainly commission.4
All commission.5
9.
What degree of risk have you taken with your financial decisions in the past?
Very small.1
Small.2
✔ Medium.3
Large.4
Very Large.5
10.
What degree of risk are you currently prepared to take with your financial decisions?
Very small.1
Small.2
Medium.3
✔ Large.4
Very large.5
11.
Have you ever borrowed money to make an investment (other than for your home)?
No.1
✔ Yes.2
12.
How much confidence do you have in your ability to make good financial decisions?
None.1
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7. A little.2
✔ A reasonable amount.3
A great deal.4
Complete.5
13.
Suppose that 5 years ago you bought shares in a highly regarded company. That same year
the company experienced a severe decline in sales due to poor management. The price of
the shares dropped drastically and you sold at a substantial loss.
The company has been restructured under new management and most experts now expect it
to produce better than average returns. Given your bad past experience with this company,
would you buy shares now?
Definitely not.1
Probably not.2
Not sure.3
✔ Probably.4
Definitely.5
14.
Investments can go up or down in value and experts often say you should be prepared to
weather a downturn. By how much could the total value of all your investments go down
before you would begin to feel uncomfortable?
Any fall in value would make me feel uncomfortable.1
10%.2
20%.3
✔ 33%.4
50%.5
More than 50%.6
15.
Assume that a long-lost relative dies and leaves you a house which is in poor condition but is
located in a suburb that's becoming popular.
As is, the house would probably sell for $300,000, but if you were to spend about $100,000 on
renovations, the selling price would be around $600,000. However, there is some talk of
constructing a major highway next to the house, and this would lower its value considerably.
Which of the following options would you take?
Sell it as is.1
Keep it as is, but rent it out.2
✔ Take out a $100,000 mortgage and do the renovations.3
16.
Most investment portfolios have a mix of investments - some of the investments may have
high expected returns but with high risk, some may have medium expected returns and
medium risk, and some may be low-risk/low-return. (For example, shares and property would
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8. be high-risk/high-return whereas cash and term deposits would be low-risk/low-return.)
Which mix of investments do you find most appealing? Would you prefer all low-risk/low-
return, all high-risk/high-return, or somewhere in between?
MOHAMMED
MIX OF INVESTMENTS IN PORTFOLIO
HIGH RISK/RETURN
MEDIUM
RISK/RETURN
LOW RISK/RETURN
0 % 0 % 10 % 30 % 50 % 70 % 100 %
0 % 30 % 40 % 40 % 40 % 30 % 0 %
100 % 70 % 50 % 30 % 10 % 0 % 0 %
1 2 3 4 5 6 7
P O R T F O L I O
17.
You are considering placing one-quarter of your investment funds into a single investment.
This investment is expected to earn about twice the term deposit rate. However, unlike a term
deposit, this investment is not protected against loss of the money invested.
How low would the chance of a loss have to be for you to make the investment?
Zero, i.e. no chance of any loss.1
Very low chance of loss.2
Moderately low chance of loss.3
✔ 50% chance of loss.4
18.
With some types of investment, such as cash and term deposits, the value of the investment
is fixed. However inflation will cause the purchasing power of this value to decrease.
With other types of investment, such as shares and property, the value is not fixed. It will vary.
In the short term it may even fall below the purchase price. However, over the long term, the
value of the shares and property should certainly increase by more than the rate of inflation.
With this in mind, which is more important to you - that the value of your investments does not
fall or that it retains its purchasing power?
Much more important that the value does not fall.1
Somewhat more important that the value does not fall.2
Somewhat more important that the value retains its purchasing power.3
✔ Much more important that the value retains its purchasing power.4
19.
In recent years, how have your personal investments changed?
Always toward lower risk.1
Mostly toward lower risk.2
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9. No changes or changes with no clear direction.3
✔ Mostly toward higher risk.4
Always toward higher risk.5
20.
When making an investment, return and risk usually go hand-in-hand. Investments which
produce above-average returns are usually of above-average risk.
With this in mind, how much of the funds you have available to invest would you be willing to
place in investments where both returns and risks are expected to be above average?
None.1
10%.2
20%.3
30%.4
40%.5
50%.6
✔ 60%.7
70%.8
80%.9
90%.10
100%.11
21.
Think of the average rate of return you would expect to earn on an investment portfolio over the
next ten years. How does this compare with what you think you would earn if you invested the
money in term deposits?
About the same rate as from term deposits.1
About one and a half times the rate from term deposits.2
About twice the rate from term deposits.3
About two and a half times the rate from term deposits.4
✔ About three times the rate from term deposits.5
More than three times the rate from term deposits.6
22.
People often arrange their financial affairs to qualify for a government benefit or obtain a tax
advantage. However a change in legislation can leave them worse off than if they'd done
nothing.
With this in mind, would you take a risk in arranging your affairs to qualify for a government
benefit or obtain a tax advantage?
I would not take a risk if there was any chance I could finish up worse off.1
✔ I would take a risk if there was only a small chance I could finish up worse off.2
I would take a risk as long as there was more than a 50% chance that I would finish up better
off.
3
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10. 23.
Imagine that you are borrowing a large sum of money at some time in the future. It's not clear
which way interest rates are going to move - they might go up, they might go down, no one
seems to know.
You could take a variable interest rate that will rise and fall as the market rate changes. Or you
could take a fixed interest rate which is 1% more than the current variable rate but which won't
change as the market rate changes. Or you could take a mix of both.
How would you prefer your loan to be made up?
100% variable.1
✔ 75% variable, 25% fixed.2
50% variable, 50% fixed.3
25% variable, 75% fixed.4
100% fixed.5
24.
Insurance can cover a wide variety of life's major risks - theft, fire, accident, illness, death etc.
How much cover do you have?
Very little.1
Some.2
✔ Considerable.3
Complete.4
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11. 25.
This questionnaire is scored on a scale of 0 to 100. When the scores are graphed they follow
the familiar bell-curve of the Normal distribution shown below. The average score is 50.
Two-thirds of all scores are within 10 points of the average. Only 1 in 1000 is less than 20 or
more than 80.
What do you think your score will be?
RISK AVOIDING RISKSEEKING
MOHAMMED
0 10 20 30 40 50 60 70 80 90 100
S C O R E
84
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12. HOW TO USE THIS REPORT
Your Personal Financial Risk Tolerance Report has been prepared from information provided by you and is, of course, only
relevant to you.
If, for example, you are one of a couple who make joint decisions, your partner should also do a risk tolerance test. Both
sets of test results then need to be considered when joint decisions are being made. Similarly, where you are acting on
behalf of someone else, e.g. under a power of attorney or as trustee, your own risk tolerance remains relevant but must
be considered in the context of your responsibilities.
Risk tolerance, as with other aspects of personality, is determined by genetics and life experiences. Essentially, it is settled
by early adulthood. Typically it does decrease slowly with age and, as with other aspects of personality, may be changed
by major life events, good or bad.
Accordingly, your risk tolerance should be retested every two or three years and also after any major life event.
Your Personal Financial Risk Tolerance Report compares your answers to those given by a very large sample of the adult
population. If you use a financial advisor, the report, particularly any of your answers identified as differing from those
normally given by others in your Risk Group, should be discussed with your financial advisor. Notes of this discussion
should be made. These notes may include modifications of, or expansions on, particular aspects of your report.
Because it is critical that you and your advisor have the same understanding of your risk tolerance, you both should
sign-off on your report, including any changes made as a result of discussion.
It is important to have confidence in any person with whom you discuss your risk tolerance. They must have the
experience, skill and capacity to incorporate it into a decision-making process with you.
You can rely on your Personal Financial Risk Tolerance Report to assist you in your financial decision-making. However,
we cannot endorse or support any specific decision you may make because, while we fully support the report itself, we
are not privy to all the other information that effective financial decision making requires.
Our risk tolerance testing system is the financial services equivalent of the first blood pressure machine. While an
accurate blood pressure reading does not, by itself, determine a diagnosis or treatment, it does provide critically important
information. As the use of scientific testing becomes widespread, better 'diagnoses' will be made, more appropriate
'treatments' will be prescribed, the incidence of unpleasant 'side-effects' will be reduced and 'health' outcomes will
improve.
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13. FOOTNOTES
1.Risk, Risk Tolerance and Psychological Testing
Risk means different things to different people - danger, uncertainty, opportunity, thrill. In reality, though, there is risk in any
situation where there is more than one possible outcome and the outcomes have differing values for you.
We are all aware that when it comes to taking risks, we each have our own comfort zone. We also know our friends,
family members and colleagues often have different comfort zones from our own.
Studies have identified five different categories of risk: financial, physical, social, health and ethical. Most people behave
consistently within a category but not necessarily between categories, e.g. a sky-diver Is more likely to be a mountain
climber but may or may not be a comfortable public speaker or financial risk-taker.
People react differently to risk. Some are habitually inclined to reject it, others to accept it. Risk tolerance is the level of risk
a person prefers to take. It should be thought of as a continuum, with people ranging from risk-avoiders to risk-seekers.
Your risk tolerance is not a particular point on that continuum but rather a range of risk levels with which you would be
comfortable.
The whole issue of financial risk is a difficult one. On the one hand, low risk tolerance prevents many people from doing as
well as they could financially. On the other, some of life's most unpleasant financial surprises arise because people were
exposed to a level of risk beyond their comfort zone, i.e. beyond their risk tolerance. So, while we tend to focus on the
dangers of taking too much risk, it is possible to have too little risk, which results in missed opportunities.
Unlike, say, height or weight, there is no unit of measurement for risk tolerance. A person's risk tolerance can only be
measured relative to others on a constructed scale (in much the same way as IQ is measured.) Someone may know what
risks they are, or are not, prepared to take. But they are unlikely to know how this compares to others.
Studies confirm that people generally do not accurately estimate their own risk tolerance (and, not surprisingly, given the
difficulties in any communication about an intangible, that their advisors' estimates are less accurate than their own.) While
the pattern of estimates is scattered, there is a slight overall tendency to under-estimate. A possible explanation for this is
that the majority of the population is, in absolute terms, more risk-avoiding than it is risk-seeking. Faced with a choice
between a certain profit and an uncertain but probably larger profit, a sizeable majority chooses the certain (but probably
smaller) profit. Someone who in absolute terms is slightly risk-averse may not realise that this is typical of the population as
a whole.
An additional difficulty is that, even the meaning of "risk" can depend on the situation. When individuals talk about "risk" as
they experience it in their personal financial affairs they are not talking about the same thing as investment researchers
discussing the "risk" of an investment.
So, consumers (and their financial advisors) face a double challenge,
firstly, in making an accurate and meaningful assessment of their tolerance of risk as they perceive it, and•
secondly, in expressing this assessment in such a way that the risk involved with their current arrangements, and
in the decision alternatives now on offer to them, can be evaluated against their risk tolerance.
•
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14. All fields of human endeavour use measurement in some form, and each field has its own measuring tools measuring units
and measuring disciplines.
Risk tolerance is a psychological trait, as are other aspects of personality. A trait can be defined as any distinguishable,
relatively enduring way in which one person varies from another.
Since the early 1900s, psychologists and statisticians have been developing techniques to measure and assess
psychological traits. While this development has not been free of controversy, there is now a widely accepted discipline,
psychometrics, for psychological testing and assessment. The technical quality of any test can now be measured against
internationally agreed psychometric standards. A 'good' test is one that is valid and reliable, i.e. it measures what it
purports to measure and it does so consistently.
FinaMetrica's Risk Profiling system has been developed using the disciplines that apply to psychological testing and the test
itself exceeds international psychometric standards.
2.FinaMetrica's Risk Tolerance Scoring Scale
As with many other human attributes, risk tolerance is Normally distributed. When risk tolerance scores are analysed
statistically, they are found to fit the pattern of a Normal distribution. When graphed they follow its familiar bell-curve.
Because the mathematics of a Normal distribution are well defined, the interpretation of individual scores is greatly
simplified. For example, it is possible to state with confidence the proportion of scores that will fall above or below a
particular score, and also the proportion that will fall within a particular range of scores.
In order to aid understanding and interpretation, the 'raw' scores from the questionnaire have been 'standardised' to the
FinaMetrica risk tolerance scale which has a Mean of 50 and a Standard Deviation of 10.
To further aid understanding and interpretation, the 0 - 100 scale has been divided into seven segments. The middle
segment is the mean ± half a standard deviation, i.e. from 45 to 54. Segments either side are then a standard deviation
higher or lower, with the end segments covering the balance of the high and low 'tails' of the distribution.
Seven segments are needed to provide sufficient differentiation of those with extremely low or extremely high risk
tolerance - one person in 100 in both cases. In IQ terms, this is the equivalent of those with IQs below 75 or above 125.
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15. 3.FinaMetrica's Risk Group Descriptions & Differences
A person's Risk Group description, fine-tuned by any reported differences, provides the basis for comparing the risk
involved with their current arrangements, and in any financial decisions being considered, against their risk tolerance.
The group descriptions allow you (and your financial advisors) to build a picture of what is typical for your group. The Risk
Groups can be thought of as the equivalent of the standard clothing sizes where Group 4 is Medium, Group 5 is Large,
Group 3 is Small, and so on.
The Risk Group descriptions have been developed by analysing how members of that group typically answer the
questionnaire. For example, in answering Question 3 more than 80% of Risk Group 4 choose "uncertainty" and so the
group description says, "They usually think of risk as uncertainty."
Of course, few people in a group will fit the group description precisely. Where a person gives a different answer, that
answer is reported. Usually, someone will give about five different answers and so have five reported differences. The
reported differences can be thought of as the equivalent of the tailoring adjustments needed to have one of the standard
clothing sizes fit you precisely.
4.The Development of the FinaMetrica System
The FinaMetrica system had its beginnings with The Survey of Financial Risk Tolerance (SOFRT) authored by Dr. Michael J.
Roszkowski, Associate Professor of Psychology at The American College, Bryn Mawr, PA. Dr. Roszkowski is an
acknowledged expert in the relationships between psychological and financial variables, and continues to consult to
FinaMetrica. The SOFRT was PC-based and used a 57-question questionnaire which took 30 minutes to complete.
FinaMetrica's first development phase was a pre-licensing evaluation of the SOFRT system, completed late 1997, which
involved,
The evaluation was successful in confirming Australian validity and reliability. But advisors and clients reported that the
SOFRT system was too cumbersome and time-consuming to warrant the effort involved.
However, FinaMetrica could see how to overcome the shortcomings of the SOFRT. The second development phase,
completed October 1998, became the creation of a new test and testing system which involved,
Psychological testing expertise was provided by Chandler & Macleod Consultants during the first phase and by Drs. Austin
Australianising the language of the SOFRT,•
inventing the seven-segment Risk Tolerance Scale and the Risk Group/Differences reporting system,•
conducting useability and 'norming' trials, and•
establishing the Australian database.•
developing questions with more perceived relevance and/or more usefulness in reporting and reduce the number
of questions while maintaining psychometric integrity,
•
the invention of a new, more precise scoring algorithm which allowed reliability/accuracy to be improved and the
number of questions to be reduced from 57 to 25,
•
the conducting of three further trials, and•
the establishment of the system on our website.•
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16. Adams and Jim Bright of the Applied Psychology Unit at the University of New South Wales during the second phase.
FinaMetrica has ongoing research relationships with academic institutions in Australia and elsewhere. The qualities of our
test are monitored continuously. In 2011/12 our database of ~500,000 completed tests was analysed in detail and the test
was fine-tuned through small adjustments to the scales and scoring algorithms. The test continues to exceed
psychometric standards for tests of this type. During this most recent analysis, psychological testing expertise was
provided by Dr Joanne Earl, School of Psychology, University of New South Wales.
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