Educational exercise only. This quiz is a self-reflection tool for learning. It is not a suitability assessment, a Know-Your-Customer (KYC) or “investment profile” review by a broker or adviser, or financial, investment, tax or legal advice, and it does not recommend any product. Your answers are scored only on this page and are never saved or sent anywhere. Before making investment decisions, speak with a licensed (registered) professional who can review your full situation. You can look up brokers on FINRA BrokerCheck and investment advisers on the SEC’s Investment Adviser Public Disclosure site.
How this quiz works
Investor guidance from the SEC (Investor.gov) describes risk tolerance as both your ability and your willingness to lose money. This quiz scores those as two separate things:
- Part A – Risk willingness (risk tolerance): how comfortable you feel with ups and downs and possible losses.
- Part B – Risk capacity: how much loss your finances can actually absorb without harming your plans (time horizon, savings cushion, income, debt, reliance on the money).
Each part is scored separately. Your overall profile is the lower of the two, which is the approach used in CFA Institute research on risk profiling (and in this course, lesson 2.11). Answer with one goal in mind, such as retirement savings, and pick the option that is most true for you today, not what you think is the “right” answer.
How the scoring works
Sources and research behind this quiz
The questions are original and were written for this course. They are inspired by (not copied from) the research and guidance below.
- Grable, J. E., & Lytton, R. H. (1999). Financial risk tolerance revisited: The development of a risk assessment instrument. Financial Services Review, 8(3), 163–181. A 13-item scale covering investment risk, risk comfort and experience, and speculative risk. Journal page · DOI
- Kuzniak, S., Rabbani, A., Heo, W., Ruiz-Menjivar, J., & Grable, J. E. (2015). The Grable and Lytton risk-tolerance scale: A 15-year retrospective. Financial Services Review. Reliability stayed robust (α ≈ 0.77, n = 160,279). Journal page
- FINRA Rule 2111 (Suitability). A customer’s investment profile includes, among other things, financial situation and needs, investment experience, time horizon, liquidity needs and risk tolerance. finra.org
- U.S. SEC, Investor.gov, Asset Allocation and Diversification (defines risk tolerance as your ability and willingness to lose some or all of your investment, and time horizon). investor.gov
- UK FSA/FCA, FG11/05 Assessing suitability: Establishing the risk a customer is willing and able to take (2011), including “capacity for loss”. PDF
- ESMA (2022/2023), Guidelines on certain aspects of the MiFID II suitability requirements (ESMA35-43-3172), including ability to bear losses. PDF
- Pompian, M. M. (2016). Risk Profiling through a Behavioral Finance Lens. CFA Institute Research Foundation. cfainstitute.org
- Vanguard, Investor Questionnaire and its stated limitations (time horizon plus risk tolerance; results are broad guidelines only). vanguard.com
- Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. Econometric Society
- Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5, 297–323 (median loss-aversion coefficient λ ≈ 2.25). PDF
- Brown, A. L., Imai, T., Vieider, F. M., & Camerer, C. F. Meta-analysis of empirical estimates of loss aversion (mean λ around 1.96). PDF
- Vanguard, risk potential scale: funds are rated from 1 (conservative) to 5 (aggressive). vanguard.com · Investment objectives, risks and expenses are described in each fund’s prospectus or summary prospectus; see also the SEC’s Investor.gov.
- Associated Press via PBS NewsHour (Aug. 18, 2020), S&P 500 closes at a record, erasing last of pandemic losses. Nearly 34% plunge from Feb. 19 to Mar. 23, 2020 (record close 3,386.15; low close 2,237.40). pbs.org
- Federal Reserve Bank of Atlanta, Notes from the Vault: Stock Prices in the Financial Crisis (Sept. 2009). S&P 500 fell 56.8% from Oct. 9, 2007 to Mar. 9, 2009. PDF (FRASER)
- iShares Core U.S. Aggregate Bond ETF (AGG) fact sheet/fund page: benchmark Bloomberg U.S. Aggregate Bond Index returned −13.01% in 2022. ishares.com
- Morningstar (Lauricella, T., Jan. 3, 2023), Just How Bad Was 2022’s Stock and Bond Market Performance? (Morningstar US Moderate Target Allocation Index, a 60/40 benchmark, −15.3% in 2022 and −22.59% in 2008; U.S. Core Bond Index −12.9% in 2022; U.S. Market Index −38.4% in 2008). morningstar.com
Historical figures describe past index or benchmark behavior and are not predictions. Past performance does not guarantee future results.