Dynamic risk profiling

(Posted Wednesday, 4pm)

If you're not praticing dynamic risk profiling, do not blame yourself if you see your wealth wither and disappear, especially where the global sentiment is so focus on Europe!

Risk profiling is a series of questions which attempts to help the client understand what his risk appetite would be. Mostly, the questions will include an understanding of his time horizon, objective and his reaction to volatile markets, etc.

A score will be tag to each question and the total tallied. This total should represent where or which category the client falls into ranging from conservative to aggressive. Risk profiling helps the planner to determine what sort of volatility the client can stomach. Imo, it does help the 'conservative' client to limit his losses (bear market) and not potentially enhance his investment (bull market)! Anyone like to provide additional comments?

As one audience commented (refer to comments in my posts) the risk profiling will not reduce (it actually aggreviate more) losses if your profiling is aggressive in bear market territories nor reap (but actually limit) potential gains if your profiling is conservative (bull markets). Hence, one should realize that the (static) recommendation would not only limit losses, it would also limit potential gains!

Imo, if there are a set of similar questions that is tag onto your risk profiling for a short, medium and long term goal(s), the relative performance could generate better results.

In addition, the client could even limit losses and reap potentially higher gains if there is a risk profiling in times of potential bear or bull markets.

In light of all the above, I hope you have the right professional wealth planner to enhance your wealth. Otherwise, if you are still wondering why your investment, results relatively weaker, it is probably that your adviser is either sleeping or is not attending sufficient CPD courses! I suggest you remunerate your wealth planner accordingly because good planners are hard to come by!

Does this sound reasonable? Guess who may understand your risk profiling and markets trends better?