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Attitude to Risk: Question Text Please answer the following questions which ask about your thoughts, attitudes and experiences when making financial investments and decisions. There are no right or wrong answers. They are to help us assess your attitude to risk in making investments. Read each question and choose the answer that best describes you. Don’t spend too much time considering – your first response is probably best. Answer every question even if you feel it doesn’t really apply to you. If you want to change your answer simply amend the questionnaire to show your preferred answer. 1. I would enjoy exploring investment opportunities for my money. a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 2. I would go for the best possible return even if there were risk involved. a. Always b. Usually c. Sometimes d. Rarely e. Never 3. Compared to other people, how would you describe your typical attitude when making important financial decisions? a. Very adventurous b. Fairly adventurous c. Average d. Fairly cautious e. Very cautious 4. If I had money invested in shares I would be nervous about the stock market falling in the short term. a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 5. Compared to others, what amount of risk have you taken with your past financial decisions? a. Very Large b. Large c. Medium d. Small e. Very small 6. To reach my financial goal I prefer an investment which is safe and grows slowly but steadily, even if it means lower growth overall. a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 7. When I consider investments that have an element of risk I feel quite anxious. a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 8. Imagine that six months after making an investment the financial markets start to perform badly. In line with this, your own investment goes down by a significant amount. What would your reaction be? a. Withdraw your money and put it in a savings account to prevent any further losses b. Transfer your money to a more secure investment product to reduce the risk of further losses c. Monitor the investment and wait to see if it improves d. Invest more funds to take advantage of the lower price, expecting future growth 2 9. I am looking for high investment growth. I am willing to accept the possibility of greater losses to achieve this. a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 10. I usually feel confident where money is concerned. a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 11. If you had money to invest, how much would you be willing to place in an investment with possible high returns but an equal element of risk? a. All of it b. More than half c. Half d. Less than half e. None 12. How would a close friend describe your attitude to taking financial risks? a. Daring b. Sometimes daring c. A thoughtful risk taker d. Careful e. Very cautious and risk averse 13. If you had spare funds to invest, would you choose a risky investment for the excitement of seeing how it would perform? a. Definitely b. Very likely c. Possibly d. Unlikely e. Very unlikely 3 14. If you had picked an investment with potential for large gains but also the risk of large losses how would you feel: a. Panicked and very uncomfortable b. Quite uneasy c. A little concerned d. Accepting of the possible highs and lows e. Excited by the potential for gain 15. Imagine that you have some money to invest and a choice of two investment products, which option would you choose? a. A low average annual return but almost no risk of loss of the initial investment b. A higher average annual return but some risk of losing part of the initial investment c. A mixture of the above 16. I would prefer small certain gains to large uncertain ones a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 17. When considering a major financial decision which statement BEST describes the way you think about the possible losses or the possible gains? a. I’m excited about the possible gains b. I’m optimistic about possible gains c. I think about both the possible gains and losses d. I am conscious of the possible losses e. I worry about the possible losses 18. I want my investment money to be safe even if it means lower returns a. I strongly agree with this statement b. I tend to agree with this statement c. In between d. I tend to disagree with this statement e. I strongly disagree with this statement 4 Scoring algorithm The following grid shows the score to be allocated for each question response. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Total Score A 5 5 5 1 5 1 1 1 5 5 5 5 5 1 1 1 5 1 B 4 4 4 2 4 2 2 2 4 4 4 4 4 2 3 2 4 2 C 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 3 3 3 D 2 2 2 4 2 4 4 4 2 2 2 2 2 4 n/a 4 2 4 E 1 1 1 5 1 5 5 n/a 1 1 1 1 1 5 n/a 5 1 5 Question Score Total score is sum of 18 question responses. Minimum possible score = 18 Maximum possible score = 87 Allocation of total scores to risk categories is shown in next table. Risk Category Risk Category Label Score Range 1 Very Cautious 18-28 2 Cautious 29-33 3 Low end of Cautious to Moderate 34-37 4 Cautious to Moderate 38-42 5 Low end of Moderate 43-47 6 Moderate 48-54 7 Low end of Moderate to Adventurous 55-60 8 Moderate to Adventurous 61-67 9 Adventurous 68-74 10 Very Adventurous 75-87 5 Risk Definitions You are prepared to take only a small amount of investment risk and it is important to you that your capital is protected. Very Cautious This means that your portfolio will concentrate on investments which provide low returns in the long term but present no risk to your capital. Only a small amount of riskier assets will be included in your portfolio in order to increase the chance of obtaining better long term returns. A typical Cautious investor will be invested mostly in fixed interest and cash with a small element (up to about one third) in equities and property which can boost longer term returns but are associated with more risk. Because you are a Very Cautious investor there will be slightly more invested in fixed interest and cash. The range of assets provides diversification benefits which also help to reduce the overall risk. You are prepared to take only a small amount of investment risk and it is important to you that your capital is protected. Cautious This means that your portfolio will concentrate on investments which provide low returns in the long term but present no risk to your capital. Only a small amount of riskier assets will be included in your portfolio in order to increase the chance of obtaining better long term returns. A typical Cautious investor will be invested mostly in fixed interest and cash with a small element (up to about one third) in equities and property which can boost longer term returns but are associated with more risk. The range of assets provides diversification benefits which also help to reduce the overall risk. You are prepared to take a limited investment risk in order to increase the chances of achieving a positive return but you only want to risk a small part of your capital to achieve this. A typical Cautious to Moderate portfolio will have up to half invested in fixed Low end of interest products which are low risk but have low returns. The larger part of Cautious to the portfolio will be invested in equities and property which can boost longer Moderate term returns but are associated with more risk. Because you are a Low end of Cautious to Moderate investor there will be slightly more invested in fixed interest and cash. The range of assets provides diversification benefits which also help to reduce the overall risk. 6 You are prepared to take a limited investment risk in order to increase the chances of achieving a positive return but you only want to risk a small part of your capital to achieve this. A typical Cautious to Moderate portfolio will have up to half invested in fixed Cautious to interest products which are low risk but have low returns. The larger part of Moderate the portfolio will be invested in equities and property which can boost longer term returns but are associated with more risk. The range of assets provides diversification benefits which also help to reduce the overall risk. You are prepared to take a moderate amount of investment risk in order to increase the chance of achieving a positive return. Capital protection is less important to you than achieving a better return on the investment. A typical moderate investor will usually invest in a variety of assets to obtain Low end of diversification. There would be a substantially higher proportion of equities Moderate and property compared to fixed interest and cash. Because you are a Low end of Moderate investor there will be slightly more invested in fixed interest and cash. The range of asset types helps reduce the overall risks as well as increasing the chance of better returns. You are prepared to take a moderate amount of investment risk in order to increase the chance of achieving a positive return. Capital protection is less important to you than achieving a better return on the investment. Moderate A typical moderate investor will usually invest in a variety of assets to obtain diversification. There would be a substantially higher proportion of equities and property compared to fixed interest and cash. The range of asset types helps reduce the overall risks as well as increasing the chance of better returns. You are prepared to take a medium degree of risk with your investment in return for the prospect of improving longer term investment performance. Short term capital protection is not important to you and you are willing to Low end of sacrifice some long term protection for the likelihood of greater returns. Moderate to Adventurous A typical Moderate to Adventurous investor will be invested mainly in equities but with other assets included to provide some diversification. There may be a small amount of specialised equity within the portfolio. Because you are a Low end of Moderate to Adventurous investor there will be slightly more invested in fixed interest and cash. 7 You are prepared to take a medium degree of risk with your investment in return for the prospect of improving longer term investment performance. Short term capital protection is not important to you and you are willing to Moderate to sacrifice some long term protection for the likelihood of greater returns. Adventurous A typical Moderate to Adventurous investor will be invested mainly in equities but with other assets included to provide some diversification. There may be a small amount of specialised equity within the portfolio. You are prepared to take a substantial degree of risk with your investment in return for the prospect of the highest possible longer term investment performance. You appreciate that over some periods of time there can be significant falls, Adventurous as well as rises, in the value of your investment and you may get back less than you invest. This strategy holds significant risk in the shorter term. A typical Adventurous investor will be invested entirely in equities, both in the UK and overseas. There may be a significant proportion of the investment in specialised equities. You are prepared to take a substantial degree of risk with your investment in return for the prospect of the highest possible longer term investment performance. You appreciate that over some periods of time there can be significant falls, Very as well as rises, in the value of your investment and you may get back less Adventurous than you invest. This strategy holds significant risk in the shorter term. A typical Adventurous investor will be invested entirely in equities, both in the UK and overseas. There may be a significant proportion of the investment in specialised equities. Because you are a Very Adventurous investor there will be slightly more invested in specialised equities. 8 Additional Questions 1. Is this investment a significant proportion of your total wealth? If Yes, please provide further detail below Yes/No 2. Is this investment providing your daily living expenses? If Yes, please provide further detail below Yes/No 3. Would you need the money being invested to cover your expenses in an emergency? If Yes, please provide further detail below Yes/No 4. Do you have any dependents who rely on you financially? If Yes, please provide further detail below Yes/No 9 5. Do you have any major financial commitments that could mean you need to access this money earlier than you currently think? If Yes, please provide further detail below Yes/No 6. Are you experienced in investing? If Yes, please provide further detail below Yes/No 10