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How do you choose the investment mix that’s right for you?

Here are some important considerations when choosing your portfolio.

Determining how to allocate your money among major asset classes such as stocks, bonds, and

short-term cash reserves may be the most important factor in determining the long-term return and

volatility of your portfolio. When it comes to investing, there is a direct relationship between

expected returns and risk. The higher the returns or expected payback from your investment, the

higher the risk. Before you can decide on a personal asset allocation strategy, you need to consider

how much or how little risk you are prepared to take with your money.

Your Time Horizon and Risk Tolerance are important factors to consider when selecting investments

for your portfolio.

1. Determine your time horizon for each goal.

Think about your most important financial life goals and estimate when you plan to begin

withdrawing your money from your account. How much will you need? If your planned withdrawal

date is many years away you may be comfortable with a portfolio that carries a greater potential for

appreciation and higher level of risk. There is more time to weather the inevitable ups and downs of

the market for long-term goals compared to short-term time frames.

The chart below spells out the relationship between risk and return for the three major asset classes.

Cash

Bonds

Stocks

Less than 5 years

5-10 years

ver 10 years

Preservation of Principal

Income

Growth

Time

Horizon

Objective

Lower Potential Return

Higher Potential Return

Lower Potential Risk

Higher Potential Risk

This document contains confidential and proprietary information of Financial Finesse, Inc. and is intended solely for use of the intended recipient.

Unauthorized reproduction or distribution is strictly prohibited. The information contained in this document is not to be construed as advice. If you have

questions about your financial situation, you should contact a financial professional.

Investor Risk Profile & Asset

Allocation Worksheet

2. Determine your risk tolerance.

How do you feel about risk and uncertainty? Some investments fluctuate more

dramatically in value than others but also have the potential for higher returns. It’s

important that you select investments that fit within your level of tolerance for this risk.

Complete an investment risk questionnaire to help determine your Investor risk profile.

Time Horizon Score

Question 1:

I plan to begin making withdrawals from my investments in:

A. 5 years or less

B. 6-10 years

C. 11-20 years

D. 21 years or more

Question 2:

Once I begin making withdrawals from my investments I will need the funds to last:

A. Less than 5 years

B. 5-10 years

C. 11-15 years

D. 16 years or more

Risk Tolerance Score

Question 3:

Perception of Risk: When you think of the word “risk,” which of the following comes to

mind first?

A. Loss

B. Uncertainty

C. Opportunity

D. Thrill

Question 4:

Investment Knowledge: When it comes to investing in stock or bond mutual funds, I

would describe my knowledge of these investments as follows:

A. None

B. Limited

C. Good

D. Extensive

Question 5:

Investment Fluctuation: I am willing to accept some degree of fluctuation in my

investments over time.

A. Strongly Disagree

B. Disagree

C. Agree

D. Strongly Agree

This document contains confidential and proprietary information of Financial Finesse, Inc. and is intended solely for use of the intended recipient.

Unauthorized reproduction or distribution is strictly prohibited. The information contained in this document is not to be construed as advice. If you have

questions about your financial situation, you should contact a financial professional.

Question 6:

Risk and Inflation: I am willing to take on additional risk in order for my investments to

keep pace with inflation

A. Strongly Disagree

B. Disagree

C. Agree

D. Strongly Agree

Question 7:

Future Risk Perception: Assume that your financial plan shows that you are likely

to run out of money during retirement. Which of the following actions would you

perceive as the best way to prevent that from happening?

A. Lowering your future expectations

B. Saving more

C. Selling assets

D. Taking on more risk with your investments

Question 8:

Short-Term Gains and Losses: Assume you had an investment portfolio with a

balance of $100,000. Given the best and worst case returns of the four investment

choices below, which would you prefer over the course of a one- year period?

A. $10,000 gain best case; $0 loss worst case; $4,500 average gain

B. $18,000 gain best case; $12,000 loss worst case; $6,000 average gain

C. $26,000 gain best case; $18,000 loss worst case; $8,000 average gain

D. $35,000 gain best case; $30,000 loss worst case; $12,000 average gain

Question 9:

Risk Need: Given your current financial situation, which of the following describes

your need to take risk with your finances in order to accomplish your primary goal?

A. I need to take extremely little to no financial risk to accomplish my goal.

B. I need to take a little financial risk to accomplish my goal.

C. I need to take a moderate amount of financial risk to accomplish my goal.

D. I need to take a considerable amount of financial risk to accomplish my goal.

Question 10:

Matching Risk with Goals: When thinking about using your investments to reach

important life goals, where would you place yourself on the following scale? (Pick one)

1 2 3 4 5 6 7 8

9 10

I need to minimize my

losses and fluctuation

as much as possible

I need to maintain a balanced

mix of investments with some

fluctuation, growth, and income.

I need my money to grow as

much as possible regardless

of risk or fluctuation

This document contains confidential and proprietary information of Financial Finesse, Inc. and is intended solely for use of the intended recipient.

Unauthorized reproduction or distribution is strictly prohibited. The information contained in this document is not to be construed as advice. If you have

questions about your financial situation, you should contact a financial professional.

Your Risk Profile: Total Points:______

(11 to 21 Points) Conservative:

Conservative investors tend to prefer current income and stability. They are most concerned

with capital preservation and hold larger positions in fixed income investments and cash

equivalents.

(22 to 29 Points) Moderately Conservative:

Moderately conservative investors prefer current income and relative stability. They want

access to some investments with an opportunity to increase in value.

(30 to 39 Points) Moderate:

Moderate investors tend to seek solid growth with relative stability. They are willing to take

some risk and feel more comfortable in a balanced portfolio with a mix of stocks and bonds.

(40 to 47 Points) Moderately Aggressive:

Moderately aggressive investors tend to hold larger positions in established large-cap and

international equity companies with slightly less exposure to market volatility and other risks

compared to aggressive investors.

(48 to 54 Points) Aggressive:

Aggressive investors tend to hold the largest percentage of positions in stocks (i.e., large-

cap, small-cap, and international) that seek to potentially generate higher returns.

Aggressive portfolio strategies in general can expose investors to a higher degree of market

volatility (including loss of principal) along with other types of increased risks.

3. Review sample asset allocation models.

Now that you know your time horizon and risk profile, you can make some asset allocation

choices. The chart below provides sample allocations based on these factors. Remember, these

guidelines are for illustrative purposes only and should serve merely as a starting point for your

decisions. Don’t forget that some goals have multiple time horizons. If you are planning to retire

in the next 5 years, it can actually be a long-term goal if you plan to be in retirement for 20

years.

Risk Category Sample Asset Allocation Models

Conservative 20-30% Stocks, 55-65% Fixed Income, 15-25% Cash

Moderately Conservative 30-40% Stocks, 50-60% Fixed Income, 10-15% Cash

Moderate 50-60% Stocks, 35-45% Fixed Income, 5-10% Cash

Moderately Aggressive 60-70% Stocks, 15-25% Fixed Income, 5-10% Cash

Aggressive 80-90% Stocks, 5-15% Fixed Income, 5% Cash

4. Balance risks, time frames and investments.

Only you can decide the appropriate investment mix that is right for you. By understanding

these three components you will be better prepared to make investment decisions. The final

decision is always yours!

This document contains confidential and proprietary information of Financial Finesse, Inc. and is intended solely for use of the intended recipient.

Unauthorized reproduction or distribution is strictly prohibited. The information contained in this document is not to be construed as advice. If you have

questions about your financial situation, you should contact a financial professional.

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Fillable Investor Risk Profile & Asset Allocation Worksheet

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