As the people are becoming aware of the risk in the financial market, it is making them more defensive and alert with the various risk factors that can affect their investments negatively. To overcome the losses and to gain new profits with zero risks, investors are going for premium equity tips in the market which gives us an idea about the minds of young an new investors that they have made their minds and ready to take a risk and new challenges.
For traders who have been trading for a long time and who are new, risk profiling is a must done the task. Without the risk estimation, they would lose a huge chunk of their invested money. Let us know how risk profiling is carried out. The investment advice and asset allocation for an investor have to be customized to the ability and willingness of the investor to assume the risk. This is determined by a risk the profiling exercise, which seeks to assess the attitude towards risk and possible loss of the portfolio and the willingness to pursue equity tips, after understanding the underlying risks.
It is the responsibility of the investment adviser to ensure that he obtains from the client, such information as is necessary for the purpose of giving investment advice. This information includes age, investment objective, investment horizon, income details, existing assets and liabilities and risk appetite. Information provided by the clients and their risk assessment must be updated periodically.
• Risk assessment:
There must be a process in place for assessing the risk that a client is willing and able to take. The risk profile of the client must be communicated to the client after risk assessment completed. Risk assessment includes the following aspects:
1. Assessing a client’s capacity for absorbing loss;
2. Identifying whether the client is unwilling or unable to accept the risk of loss of capital;
3. Appropriately interpreting client responses to questions and not attributing inappropriate weight to certain answers.
• Risk profiling tools:
The investment adviser may use various tools such as surveys, questionnaires, proprietary tools to generate risk appetite scores of clients. When such tools are used for risk profiling, the investment adviser must ensure that the tools are fit for the purpose and any limitations have been identified and mitigated. Such tools should not be too complex or misleading for the client to understand and express a fair opinion.
Risk profiling is an important aspect when you trade in the market where risk is there. People who have a small idea about how to invest in share market consider the capital market investment as a gamble and think it is worthless of time and, money. But with the proper knowledge, guidance, risk profiling and market calls, they can change their minds and can earn huge profits w3hich could make their lives much easier.