Standard Risk Tolerance Questionnaire

Different investors have different risk tolerances. Much of the difference stems from time horizon. That is, someone with a short investment time horizon is less able to withstand losses. The remainder of the difference is attributable to the individual's appetite for risk.

Volatility can be nerve-wracking for many people, and they are more comfortable when they can avoid it. However, there is a definite relationship between risk and return. Investors need to recognize this risk/return trade-off.

The following risk tolerance questionnaire is designed to measure an individual's ability (time horizon) and willingness (risk aversion) to accept uncertainties in their investment's performance.

Please answer the following questions to help your advisor establish your current risk profile. Once it's completed, your advisor can use the outcome to recommend which of the available asset allocation models is most appropriate for you.

Answer Eight Key Questions

*1. When do you expect to begin withdrawing money from your investment account?	Less than 1 year 1 to 2 years 3 to 4 years 5 to 7 years 8 to 10 years 11 years or more
*2. Once you begin withdrawing money from your investment account, how long do you expect the withdrawls to last?	I plan to take a lump-sum distribution 1 to 4 years 5 to 7 years 8 to 10 years 11 years or more

Risk Aversion

*3. Which of these choices best reflects your attitude towards inflation and risk?

My main goal is to avoid loss, even though I may only keep pace with inflation
My main goal is to earn slightly more than inflation, while taking on a low level of risk.
My main goal is to increase my portfolio’s value. Therefore, I am willing to accept short-term losses, but I am not comfortable with extreme performance shifts that may be experienced in the most aggressive investment options.
My main goal is to maximize my portfolio value, and I am willing to take on more extreme levels of risk and performance shifts in my portfolio to do so.

*4. The table below presents a potential best case result, probable result and potential worst case result of five sample portfolios over a one year period with an initial $100,000 investment. Understanding the potential upsides and downsides of each portfolio, which portfolio would you prefer to hold?

	Potential Best Case Result ($)	Probable Result ($)	Potential Worst Case Result ($)
Portfolio-1	113,159	104,073	92,453
Portfolio-2	117,430	104,712	89,037
Portfolio-3	122,899	105,252	84,529
Portfolio-4	127,422	105,614	80,983
Portfolio-5	132,051	105,889	77,483

*5. Investing involves a trade-off between risk and return. Which statement best describes your investment goals?

Protect the value of my account. In order to minimize the chance for loss, I am willing to accept the lower long–term returns provided by conservative investments.
Keep risk to a minimum while trying to achieve slightly higher returns than the returns provided by investments that are more conservative.
Focus more on the long term investment returns Long-term growth is equally as important as managing portfolio risk.
Maximize long-term investment returns I am willing to accept large, and sometimes dramatic, short-term fluctuations in the value of my investments.

*6. Historically, markets have experienced downturns, both short-term and prolonged, followed by market recoveries. Suppose you owned a well-diversified portfolio that fell by 20% over a short period, consistent with the overall market.

Example:

$10,000 initial investment would now be worth $8,000.
$100,000 initial investment would now be worth $80,000.

Assuming you still have 10 years until you begin withdrawals, how would you react?

I would change to options that are more aggressive
I would not change my portfolio
I would wait at least 1 year before changing to options that are more conservative
I would immediately change to options that are more conservative

*7. The graph below shows the hypothetical best and worst results of five sample portfolios over a one-year holding period. Note that the portfolio with the highest upside also has the largest downside. Which of these portfolios would you prefer to hold?

Portfolio A
Portfolio B
Portfolio C
Portfolio D
Portfolio E

*8. I am comfortable with investments that may frequently experience large declines in value if there is a potential for higher returns. Does this describe you?

Strongly disagree
Disagree
Agree