EDUCATION PLANNING

INVESTOR'S RISK PROFILE

Your risk profile reflects your perception of the acceptable trade-off between risk and the reward required for bearing any investment risk. If you are willing to accept a high degree of risk, then the high-risk, high-return investment will be viable alternative for any wealth accumulation purposes. In contrast, if you are risk averse you may find that a small decline in the investment may exert high anxiety. If the possibility of such loss would make you loose your sleep at night, a conservative low-risk, low-return, safer investment might be suitable for you.  

The other factor that affects your risk profile is the investment planning time horizon.   As a long-term investor, you can better afford to assume greater risks for better potential returns. Shortfalls from anticipated returns can be made up with additional contributions that are still lesser than the required contributions when investing in lower-return, safer investments. However, as planning horizon shortens, the risk of irrevocable loss from shortfalls increases, and you may be less willing to bear risk and the overall risk profile of the investment mix declines.

To know more how your psychological makeup and investment time horizon play a significant role in allocating your investment assets, Public Mutual had devised an Investor's Risk Profile Test to help you determine your risk profile.

Answer each of the following 12 questions. Take as long as you like, there is no time limit. For the multiple choice questions, try and choose the answer that is closest to your circumstances.
1. When you hear unexpected adverse or bad financial news, you
a. never overreact
b. rarely overreact
c. always overreact
2. Between a new position offering greater job security with small pay rise, and another, with a high pay rise but less job security, which would you select?
a. Probably higher pay rise
b. Not sure
c. Probably greater job security
3. Would you borrow money or go on margin trading to make an investment that might double your money
a. Yes
b. Maybe
c. No
4. If you have invested in a stock that rose 30% within 6 months after you bought it, you would
a. do nothing or buy more shares
b. sell some shares
c. sell all your shares
5. Do you believe luck is important in making your investment decisions?
a. Yes
b. Sometimes
c. No
6. If you could increase your chances of improving your returns by taking more risk, you would be
a. willing to take a lot more risk with all your money
b. willing to take some risk with some of you money
c. unwilling to take much more risk
7. What percentage of your household income (after tax) is spent each month paying off credit card bills, car payments and either on rent or mortgage payments?
a. More than 50%
b. Between 25% and 50%
c. Less than 25%
8. In case of an emergency, you would have available savings to pay for
a. less than 3 months' living expenses
b. 3-12 months' living expenses
c. more than 12 months' living expenses
9. Would you invest in a stock based on a friend's tip?
a. Yes
b. Maybe
c. No
10. Which of the following statement best describes your feelings about investment risk?
a. I prefer to select an aggressive mix of investment - some that have a low degree of risk, but with emphasis on others that have a higher degree of risk that may yield greater returns
b. I prefer to select a balanced mix - some that have a low degree of risk, others that have a higher degree of risk that may yield greater returns
c. I prefer to select a mix of investment with emphasis on those with a low degree of risk and a small portion in others that have a higher degree of risk that may yield greater returns
11. Do you expect your future earnings over the next five years to:
a. increase
b. stay the same
c. decrease
12. Would you invest in individual stocks or equity (stock-based) unit trust?
a. Yes
b. Maybe
c. No