Understanding Risk Appetite

Risk Appetite Questionnaire

The Risk Appetite questionnaires is an important part of Andes Multi-dimensional Risk Assessment.

Adapted from the risk questionnaire developed by Dr. Ruth Lytton at Virginia Tech, and Dr. John Grable at Kansas State University, it uses a set of seven questions to determine if you are risk taker, and to what extent.

For each question, you will get a score from 1-4 based on your response. The total score will put you in one of the following buckets:

  • Low
  • Medium Low
  • Medium
  • Medium High
  • High
  • Very High

Cross-examine Risk Tolerance Test

There is some subtle differences between risk appetite and risk tolerance, but the main point is that we provide two ways to look at the investor’s risk level for cross-examination: this Risk Appetite Questionnaire and our visual Risk Tolerance Test.

If the results are consistent, it gives confidence that it is accurate. Otherwise it warrants a deeper conversation. For example, investors may be tempted by the upside in the Risk Tolerance Test without fully understanding the downside.

The investor’s risk level drives the asset allocation, and the corresponding return expectation is an important input for financial planning. Our multi-dimension risk assessment ensures an accurate reading of the investor’s risk level.

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