The investor questionnaire
What kind of investor are you?
Not the boring version.
Ten questions, about four minutes, none of them lifted from a compliance textbook. You will find out which of five investors you are. We will find out the things a single score cannot tell us, which is what actually decides how your money gets invested.
What is the difference between risk tolerance and risk capacity?
Risk tolerance is how much uncertainty a person is willing to accept, a fairly stable trait. Risk capacity is how much loss their finances can absorb, a matter of timeline, income and reserves. Baldwin Financial, a fee-only fiduciary adviser in Oklahoma City, measures the two separately and lets the lower one govern, because a confident investor with a three-year horizon still cannot afford a deep drawdown. The CFP Board’s practice standards list the two as separate items.
Source: CFP Board, Code of Ethics and Standards of Conduct · SEC, Investor.gov on risk
Why it is built this way
A score tells you one thing.
We need more than one.
Most risk questionnaires blend how much risk you can stomach, how much you can afford, how much your plan needs and how dangerous the market feels this month into one number. The number then predicts very little about what anyone does in a bad quarter. This one keeps the four apart, so that when we talk, we are talking about the right one.
We ask what you would do. Then what you did.
People are poor at forecasting their own reaction to a loss; the evidence on that is robust. So alongside the hypotheticals, we ask what you actually did in March 2020, the fastest fall in market history. The history is the better evidence, and it is why there is no wrong answer to that question.
The same loss, twice.
A 25% fall and the same fall written in dollars are the same question, and most people answer them differently. In one study about a third more chose to sell when the loss carried a dollar sign. Neither answer is wrong. The gap between them is worth more than either.
Nerve and room are different things.
How much risk you are willing to take is a trait, and it is fairly stable. How much you can afford to take is arithmetic, and it starts with when you need the money. The two are read separately, never averaged, and the lower one governs. The rest of that arithmetic is what the first conversation is for.
This questionnaire is a starting point for a conversation and does not constitute personalized investment, tax or legal advice. Risk tolerance is one of several factors Baldwin Financial, LLC considers, alongside time horizon, income stability, liquidity needs, tax situation, existing assets and overall goals, and no allocation is made from these answers alone. All investing involves risk, including the possible loss of principal. Completing it does not create an advisory relationship. Your answers are sent to the firm by email and retained as part of your file.
An invitation
Four minutes here.
A real conversation, whenever you like.
A complimentary conversation, by video, phone, or in person in downtown Oklahoma City, whenever suits you. Nothing to prepare and nothing to bring. Come as you are; leave knowing more than you arrived with.
What the conversation looks like
- 01
You talk. What you own, what you owe, who depends on you, and whatever is coming up that you have not solved yet.
- 02
We tell you what we see. The two or three things we would look at first, and why those and not the rest.
- 03
You decide, on your own time. If we are not the right fit, we will say so and point you toward someone who is.
Or reach us directly
- Phone
- (405) 266-7856
- Serving
- Oklahoma City, Edmond, Nichols Hills, and clients who have moved away