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Jan 29 2020

Identifying Your Risk Tolerance

Starlight Portfolios first identifies your risk profile before providing any portfolio recommendations. The profile is built based on your answers to the risk tolerance questionnaire. Risk tolerance is commonly defined as the degree of investment return variability that an investor is willing to bear. Risk tolerance identifies how an investor reacts to potential market changes within the context of their investments. This risk tolerance profile is not absolute, as you may have a different risk tolerance associated with different investments. For instance, a comparison of an investor’s risk tolerance for an investment geared towards saving for a vacation could be drastically different than that for retirement. As the time horizon, amount to be saved, and many other factors are taken into account and influence the overall tolerance measurement.

We assign risk profiles based on the answers provided in our risk tolerance questionnaire process (identified below). The process of calculation begins with the value assigned to each answer, which is then applied to our algorithm to calculate your risk tolerance profile. For more about risk tolerance profiles, please visit our Risk Tolerance Profiles page.

Here’s an overview of our process of risk tolerance identification, via the online questionnaire:

invest.starlightportfolios.com
Identification of time horizon and how long with the funds be tied to the investment.
Provides measurement of the amount the investor has in savings. This question also gives a look into whether or not a big hit to this account greatly affect their overall financial stability? How likely will the investor need these funds in case of a financial emergency?
Provides the ranking of this portfolio in relation to all investments held by the investor?
Identifies how the investor would react to a drastic loss to their investment.
Investor’s self-identification of risk categorization.
Identification of the investor’s risk tolerance and relative growth expectation.
Based on question weighting and our algorithm, the investor can view their recommended portfolio and related asset allocation.

Written by Jacque Kemp · Categorized: Blog

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