A Risk Profile Assessment helps in classifying the type of investor you are, based on your risk appetite. It guides you in determining investments that are best suited to your investment objectives, risk tolerance, preference and experience.
Here's a simple questionnaire to determine your investor risk profile.
1. Investment Objective: What is your key investment objective?
A. To protect principal amount of investments and earn steady stream of interest income.
B. To preserve capital or real value of investments.
C. To achieve growth through a balance between interest income and capital gain over a medium term period.
D. To achieve significant growth or capital appreciation over the medium to long term period
2. Investment Horizon: What portion of your investment can be placed in medium or long term investments, i.e., more than 3 years?
A. 10% to 30%
B. 40% to 60%
C. 70% to 80%
D. 90% to 100%
3. Liquidity: Do you have regular liquidity requirements?
A. I need to draw regular income from my investments and may use a portion of the principal in the short term.
B. I do not need to draw regular income from my investments nor do I see the immediate need to use any portion of the principal in the short term.
C. I have other sources of liquidity and do not see a real need to use funds for the next 5 to 10 years.
D. I have other sources of liquidity and do not see a real need to use funds for the next 10 years.
4. Investment Knowledge and Experience: What is your knowledge and experience on investments?
A. Minimal. I know bank deposits, BSP SDA, T-bills and money market placements.
B. Low. Outside deposits and short term government securities, I have experience investing in money market funds such as corporate bonds and fixed income bonds.
C. Medium. I have experience investing in mutual funds, UITFs, foreign currencies and direct investment in listed stocks and bonds.
D. High. I have an extensive experience in investing and have a broad understanding of the domestic and global capital markets in general.
5. Investment Experience: How many years of experience have you had investing in securities, either directly or through a fund manager?
A. 1 year or less
B. More than 1 year up to 5 years
C. More than 5 years up to 10 years
D. More than 10 years
6. Risk Tolerance: What is your tolerance for risk?
A. I accept steady and minimal returns without any fluctuation in the principal amount of my investments.
B. I accept minimal fluctuations in the principal amounts of my investments for commensurate returns.
C. I accept a fair amount of fluctuation in the principal amount of my investments in order to achieve above average returns and capital growth over the medium term.
D. I am prepared for a high degree of volatility and possibly losses for certain periods in the principal amount of my investment in order to achieve high returns or capital growth over a period of 5 years or more.
7. Risk Tolerance: If the value of your portfolio decreased by 20% in one year, how would you react?
A. I will be very concerned and will immediately put my investment back to cash (i.e. in the form of deposits and/or short term government securities).
B. I will be very concerned and will find safer investment outlets, which are not necessarily cash.
C. I will be concerned and will review the aggressiveness of my portfolio.
D. I will NOT be concerned about the short-term fluctuation of certain investments in my portfolio.
8. Risk Tolerance: What is your average net worth for the last 2 years?
A. P 5 M (USD100,000) and below
B. Over P 5 M (USD100,000) up to P 30 M (USD600,000)
C. P 30M up to P 60 M (USD1.2M)
D. Over P 60 M
Source: Bank of the Philippine Islands
How to Score:
Each "A" answer corresponds to 5 points, "B" corresponds to 10 points, "C" corresponds to 15 points, "D" corresponds to 20 points.
Investor Type Classification:
Conservative (1 - 70 points)
If you're the conservative type, it is suggested that you invest only in Money Market Fund UITF or Mutual Fund (MF). This type of UITF/MF has the lowest risk. The probability of losing money in this fund is small, however, the return is also not that high (can have an ROI of less than 2%, based on 2014 year-end data).
Moderately Conservative (71 - 100 points)
If you're the moderately conservative type, it is suggested that you invest in Bond Fund UITF/MF . It still has relatively low risk, but with slightly higher return (can have an ROI of around 4%, based on 2014 year-end data).
Moderately Aggressive (101 - 130 points)
If you're the moderately aggressive type, you may already consider a Balanced Fund UITF/MF. With this type of UITF/MF, a major part of your investment is already exposed to stocks, giving you the possibility of a higher return but also with a higher risk (can have an ROI of around 28%, based on 2014 year-end data).
Aggressive (131 - 160 points)
If you're the aggressive type of investor, an Equity Fund UITF/MF will suit you. With this type of UITF/MF, your investment is fully invested in stocks. But since stock prices fluctuate based on market sentiment, the possibility of losing money is highest with this type of fund. However, it also gives you the possibility of highest return, especially if the fund manager's stock picks are good (can have an ROI of around 48%, based on 2014 year-end data).
Additional Notes from MYPG
The Investor Type you fall under doesn't restrict you from subscribing to a UITF or Mutual Fund that entails higher risk. For example, if you really want to subscribe to a Balanced Fund or Equity Fund UITF eventhough you're a moderately conservative investor, the bank will allow you to do so, but you have to sign a waiver. Just always remember, the higher the risk, the higher the reward.
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