Wheel of Risk Profile

A “risk profile” is an appraisal of a person’s (or company’s) capacity and willingness to take risks. An honestly and duly made profile helps in deciding the best possible asset allocation for the investor.

When making a risk profile consider three main factors

1. Age

2. Income

3. Expense

In case of income, the higher you earn, the more you can invest. But what if you are earning well and close to retirement? Your risk profile changes drastically. Age determines how long you can stay invested, which in turn affects your risk-taking capacity.

Here is how AGE plays a role in determining your risk profile.

The Daring Dreamer [Age Group – 18 to 23 years]: Very High

• Under parents’ care

• Negligible financial responsibility

• Long life ahead to learn, earn and make up any losses made

• Can try their hand at investing (under parents’ guidance, if necessary)

• Can invest in small-cap and mid-cap equity category

The Courageous Corporate [Age Group – 24 to 32 years]: High

• Starting out independently, will soon contribute to household finances

• Abundant opportunities to progress professionally, financially

• No major responsibility or liability

• Can do high-risk, high-reward investing without much fear

The Hopeful Homemaker [Age Group – 33 to 42 years]: Moderately High

• With marriage comes added responsibility

• If, however, spouse is working, savings increase and expenses are shared

• New needs such as new house, new car, etc. increase

• Can indulge in high-risk, high-reward investments with caution

The Prudent Provider [Age Group – 43 to 52 years]: Moderate

• Ensures safety, health and wellbeing of kids

• Has sizeable savings and financial planning to pay for kids’ education

• Plays an active role in social circles

• Can explore alternate sources of income, passive investments can be opted for financial well being

The Scrupulous Senior [Age Group – 53 to 65 years]: Low to moderate:

• Nearing retirement with declining possibility of re-employment

• Family responsibilities (children’s marriage, medical issues, etc.) to be managed

• Saves more, spends less

• Finds it safer to invest in conventional saving products

• Can invest in debt category

The Grateful Golden-ager [Age Group – 65+ years]: Low

• Retired, with family responsibilities fulfilled

• Invests in traditional saving products that spell safety

• Avoids investing for wealth creation purposes

• Prefers to reap and enjoy the benefits of earlier investments

• Can invest in low risk debt category

Aditya Birla Sun Life AMC Limited /Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.