So, you are wondering, how does a risk assessment questionnaire or a financial professional decide what risk profile is best suited for you? Read on to understand how stock markets generally move, what risk really means, and how we assess your risk profile.
How Stock markets generally move: It is important to understand that historically stock markets have almost always trended upwards given a long enough period of time. However, they don't go up in a straight line - sometimes they go up, sometimes they go down. Some years they go up a lot, some years they go down a lot, and some years are fairly flat. In other words, stock markets fluctuate constantly but trend upwards. StockAxis will ensure that your portfolio is participating in the major market movements and our goal is to capture the long-term growth trend.
What risk really means: Since nobody can control market movements (or returns for that matter), StockAxis focuses on controlling the level of risk you should expose yourself to. Risk or Volatility as we call it in the financial industry is simply a measure of how much your investments will fluctuate depending on how markets move. If you take on more risk and markets rise, you're likely to have higher gains. But if you take on more risk and markets fall, you're likely to have larger losses. In other words, taking more risk will make your portfolio more volatile. If you take on lower levels of risk, your investments will gain less or lose less if markets rise or fall respectively. So, taking lower risks leads to less volatility or more stability.
How does StockAxis access your risk profile: Using a combination of your objectives, your investment time horizon, your level of income, your net worth, your investment knowledge, your past investment experience, and your personal tolerance to risk StockAxis is able to assess how much risk or potential fluctuations your investments should be subject to. Accordingly, you are recommended a suitable proportion of large-cap, mid-cap & small-cap stocks.