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Step 10: Risk Capacity

in the final score. The survey must be carefully designed, and investors must be accurate when answering the questions.

Solutions Risk Capacity Survey An easy and efficient way to determine an investor’s risk capacity is to complete a questionnaire or a survey that evaluates and quantifies each of the five dimensions of risk capacity. Several such survey can be found at, which quantify risk capacity using numerical values from 1 to 100. These values correspond to various index portfolios created with the indexes referenced in Step 9.

Risk Capacity Results Once an individual has completed a survey, an overall score is provided, which reflects that investor’s capacity to take risk. An asset allocation of stocks and bonds with a risk exposure that properly matches the individual’s risk capacity is also recommended. Higher scores signify a higher capacity for risk, a longer time horizon and an ability to withstand market volatility. Investors with higher scores are generally recommended to hold portfolios with a larger allocation of global stocks. In contrast, lower scores signify a lower risk capacity and a higher need for liquidity. Investors with lower scores are steered toward more conservative portfolios that hold a higher proportion of shortterm investments such as fixed income.

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