What type of investor are you?

Are you a first time investor? Are you unsure about how much risk you should take?

Then here are 12 Questions that will help determine what type of an Investor you are on the basis of risk:

Please answer these questions and record your answers (a or b or c or d):

1. I am more comfortable in keeping my money in the bank than investing in stocks:

a. Strongly Agree
b. Agree
c. Disagree
d. Strongly Disagree

2.You win a lottery today that’s worth 4 times your salary per month. What do you do with it?

a.Put it in an FD/ Savings account for a rainy day
b.Invest whole in moderately risky investments
c.Invest half, spend half
d. Upgrade your car or take that much dreamt about vacation?

3.If you had to begin goal planning, which among the four would come first (in order of priority):

a.Retirement fund
b.A house
c.Education expenses (yours or your child’s)
d.The exotic vacation

4.If you had to make a lump sum investment today, your income needs would be:

a. Immediate
b. Consistent post a decade or later
c. Post retirement
d. No income needs, just capital appreciation

5.When shopping, do you:

a.Track Shop specific discounts that happen rarely but have the best stock at the highest discount
b.Shop through the year while looking for the best with at least a minimum discount
c.Just looking for the best irrespective of prices
d.Max out your credit card once in six months, during the mid-season sale when there are high discounts but last season stock

6.You hear about a fund manager who guarantees high returns on your investment made in the portfolio that he/she manages, but your investment goes bust. You:

a. Never invest again.
b. Try to sue the fund manager and never invest in mutual funds again
c. Recover but never invest through word of mouth tip offs again
d. Realize that its a ‘one-in-a-million-mistake’ and invest more carefully next time

7.If you’re a beginner or an amateur investor, how would you go about making your investments?

a.Mostly thorough research and facts only
b.Equal parts instinct and research study
c. Word of mouth or tip offs
d.Mostly Instinct and gut feeling

8.Which portfolio composition seems right for you: (Equity- high risk, Debt- low risk, cash and cash equivalents- lowest risk)

a. 30% Equity, 60% Debt, 10% cash & cash equivalents
b. 60% Equity, 30% Debt, 10% cash & cash equivalents
c. 60% Equity, 40% Debt
d. 75% Equity, 5% Debt, 20% cash & cash equivalents

9. “Despite the risks, growth of capital is most important to me”

a.Strongly disagree
b.Disagree
c.Agree
d.Strongly agree

10.What do you most require money for?

a.Day-to-day expenses
b.Family planning
c.Luxury items (car, vacation)
d.Retirement

11. When you see a product/clothing/ lifestyle option that’s trending, you:

a. You don’t like change, so you remain unaffected
b. Contemplate to see if it suits you and then decide
c. Don’t bother cause trends are temporary
d. Join in as soon as possible.

12. “In terms of investing, safety is most important”

a. Strongly Agree
b. Agree
c. Disagree
d. Strongly Disagree

………

So what’s your risk profile?

If you answered mostly a’s you are Risk Averse (RA)– If an investor chooses the guaranteed outcome, however small it might be with the least amount of risk.

If you answered mostly b’s you are Moderately Risk Averse (MRA) – the investor looks for optimal returns with a reasonably higher risk.

If you answered mostly c’s you are Risk Neutral (RN) – If an investor is indifferent about the gamble or the guaranteed outcome, then the investor may be risk neutral.

If you answered mostly d’s you are Risk Seeking (RS) – If an investor chooses the gamble, then the investor is said to be risk loving or risk seeking