Risk Tolerance Questionnaire
What is Risk Tolerance?
Risk tolerance is an important factor in financial decision-making. According to the International Standards Organization (ISO), risk tolerance is the extent to which you are prepared to risk experiencing a less favourable outcome in the pursuit of a more favourable outcome. It is the point at which you are psychologically comfortable with the implications of your choices – the potential loss or gain.
Research suggests that tolerance for risk, as with other psychological traits, is determined by genetics (how you’re built) and also by your life experiences and current circumstances. There are five different categories of risk: physical, social, health, ethical, and financial. Your risk tolerance may be different in terms of your health compared to your finances, for example. Although relatively consistent, studies show that risk tolerance does change and should be retested periodically.
Why Use the Risk Tolerance Questionnaire
When you have registered with your information below, you can complete the questionnaire to learn more about your financial risk tolerance. The FinaMetrica questionnaire, developed by an Australian firm and now owned by Morningstar, is used globally, with norms for each country or region including Canada. Because it is so well researched, we find that it can be used to reliably pinpoint the relationship between risk and your financial decision-making. From a strategic planning perspective, it is important to understand how much risk you can tolerate – how much is too little and how much is too much and to clarify how this relates to your financial strategy.
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