Adaquant Investor Questionnaire is a free questionnaire to define risk profile of the investor. Ability to tolerate risk is one of the most important factors when creating suitable asset allocation plan for an investor. A person who cannot or does not want to take risk needs to keep investments in low risk asset classes such as cash and short-term bonds. A person with very high risk tolerance can reach higher long-term returns by investing into higher risk asset classes such as long-term bonds, equities and real estate.
In Adaquant the chosen risk measure for investment portfolios is “maximum drawdown”. Maximum drawdown tells how much the investment portfolio has dropped from its past highest value. So if investment portfolio first increases from $100,000 to $150,000 and then drops to $75,000, the maximum drawdown is $75,000 / $150,000 – 1 = -0.5 = -50%.
The higher the risk tolerance of the investor, the worse maximum drawdown they are able to stomach. If a person with low risk tolerance has too risky investment portfolio, they are likely to abandon their investment plan when maximum drawdown appears. This results into e.g. panic selling investments or quitting to invest money altogether. On the other hand, having too conservative investment portfolio means the investor may have lower long-term returns.
To make the investor questionnaire, enter below the size of your investment portfolio and click “Start questionnaire”. Answer the questions with one specific financial goal in mind. This goal could be for example retirement, in which case the investment horizon is usually long-term and the investor may be able to accept higher risk for his investments. Short-term goals usually require more conservative investment approach in order to have higher likelihood not to lose investment capital.