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Risk scores

Every investor has a different capacity for risk. Understanding investment risk can help you define and achieve your financial goals.

Assessing risk scores

Interactive advisors employs a risk questionnaire to assign all clients a personal risk score on a scale of one to five. This risk questionnaire aims to assess the following three key areas:

Investment objectives

What are your investment goals and how much risk will you need to achieve them?

Risk tolerance

How comfortable are you with regular changes in the value of your investment?

Financial capacity

How does your financial situation impact your ability to take on investment risk?

Understanding risk scores

The risk score can help formulate an investment strategy that is tailored to your individual goals.

Cautious

Cautious capital growth with a lower risk than broad equity markets. Investing mostly in ETFs, funds and large-cap equities and prepared to accept some level of fluctuation in portfolio value.

Growth

Capital growth with a similar risk profile to broad equity markets. Investing in equities and prepared to accept fluctuation in portfolio value.

Growth plus

Capital growth plus with a more complex portfolio or higher risk profile than broad equity markets. Investing in equities and concentrated portfolios and prepared to accept fluctuation in portfolio value.

Aggressive

Aggressive capital growth with significantly higher risk than broad equity market. Investing in equities and concentrated portfolios and prepared to take substantial risk to achieve investment goals.

Speculative

Speculative capital growth with significantly higher risk than broad equity markets. Investing in equities and concentrated portfolios and prepared to take exceptional risk including taking speculative and concentrated positions in high risk securities.

Portfolio risk scores

Initially before the launch of a portfolio on the platform and then at the beginning of every quarter thereafter, Interactive Advisors assigns each portfolio a risk score by combining:

Strategy review

The Investment Management team reviews for classification and adherence to previously stated objectives the portfolio managers’ description of the strategy and their answers to a questionnaire.

Risk metrics

The Investment Management team analyzes quantitative measures, based on the accounts historical holding and performance. Holding characteristics, such as concentration in individual securities and sectors, leverage and margin requirements and return and risk characteristics, such as volatility, VaR, drawdowns are used.

Portfolio rules

Interactive Advisors has established and enforces a set of trading rules that determine which trades are allowed to be replicated in client accounts’ based on their appropriateness for the risk level of the portfolio. For instance, certain types of trades (like short positions or leverage) are only appropriate for certain risk scores.

Personal risk score >= portfolio risk score

Your personal risk score helps determine which portfolios are suitable for you.
You may only invest in portfolios that have a risk score less than or equal to your own client risk score.

Goal tracker

Performance metrics