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Risk Profiling: An Integral Part in the Investment Process

by AOG Wealth Management

Q: What is risk profiling?
In the financial world, no investment is without risk. That is why most wealth management firms in DC use risk profiling, a process in which the clients are asked a series of questions to better understand their risk tolerance. The answers are assigned a score for each of the factors below:

  1. Risk Required. The return required to achieve the client’s goals from the financial resources available.
  2. Risk Capacity. The level of financial risk the client can afford to take.
  3. Risk Tolerance. The level of risk the client is comfortable with.

These scores are then computed and assessed so that financial advisors can determine the appropriate investment products for clients to meet their investment goals.

Q: What risks are we talking about?
There are different types of risks investors should be aware of as they could easily hurt your financial situation if not properly managed; and these are:

  1. Interest rate risk. The possibility of your investment’s decline in value as a result of a rise in interest rates.
  2. Liquidity risk. The possibility that your investment is ignored by most buyers when you decide to sell.
  3. Credit risk. The possibility that a particular bond issuer will not be able to make expected interest rate payments and/or principal repayment.
  4. Economic risk. The possibility of our economy declining, which could affect the value of your investment.
  5. Industry risk. The possibility of risks affecting a particular industry you invested in.
  6. Currency risk. The possibility of the US dollar losing ground, which also could affect the value of your investment.
  7. Inflation risk. The possibility of your investment not earning enough to keep up with inflation.

Q: How can risk profiling benefit my investments?
It is impossible to avoid all risks when you invest. Understanding risks through proper risk profiling methods provide you with an understanding of the risks and a better chance of avoiding risks.

Q: Why Choose AOG when it comes to managing my investments?
AOG Wealth Management has provided wealth management services in the Washington DC Metro area for many years. Our mission is to address your financial goals and develop an investment strategy to protect your finances and help you meet your goals. Our advisory team has over 100 years of professional experience in the wealth advisory and management industry.

With wealth management firms in the DC, Reston, Potomac, Northern Virginia and surrounding areas, we are confident we can help you meet your financial goals.

Call AOG Wealth Management today to find out how we can help you with your investment decisions!

Category: Blog, Info Articles