What is a risk profiler?

Posted by: Labdhi Mehta on Jul 17, 2017, 06.30 AM IST

1. The aim of the risk profiler is to gauge the optimal level of investment risk for an investor based on his required risk, risk capacity and the risk attitude.

2. Key inputs including family details, employment details and income expenditure statement help evaluate the Risk Capacity of an investor.

3. Technical inputs like Networth Statement and Goals help compute the risk required to achieve the goals with the available financial resources.

4. Answers to psychometric questions will help reveal whether the customer likes to take risks or play it safe in order to estimate his Risk Tolerance.

5. The output of the risk profiler forms the basis of a tailored financial plan that better reflects the investor's perception of the acceptable trade-off between risk and return.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Jul 17, 2017, 06.30 AM IST