Identifying your Investor Profile

Name Date

Determining risk tolerance

One of the first steps in developing an investment strategy is to identify your tolerance for risk as an investor, referred to as your Investor
Profile. It can depend on the goals you are investing toward, as well as your personality, in making investment decisions.
We have identified investor profiles that generally coincide with the ways in which investors characterize themselves, their
objectives, and their feelings about risk. Each investor profile
— Conservative, Moderately Conservative, Moderate, Moderately Aggressive
and Aggressive— has an associated asset allocation based on your overall risk tolerance.
This evaluation will measure your reaction to market volatility and help you identify your investment objectives.

Investor Profile self-evaluation

Please read and answer the following questions. Then, use the scoring process to identify the Investor Profile that corresponds to your
feelings about investing. A description of each profile is provided on page 4. Your Investor Profile will be based on all of your responses
collectively, with no single question being the determining factor.

1 When you invest money,

what is your primary goal? 2 The degree to which the value of an investment
increases and decreases is called volatility (one
a. Preserve the value of my investments. I want to measure of risk). More volatile investments
minimize the risk of my investments losing value. generally offer greater long-term growth
potential than less volatile investments, but
b. Emphasize current income. My investments should be
they may produce greater losses. How much
relatively safe.
volatility are you comfortable with?
c. Generate current income. However, I would also like to
a. As little as possible. I want to focus on current income
build the value of my investments gradually over time.
and stability of value even if it means that my total
I am willing to expose my investments to a moderate
returns are relatively small.
level of risk.
b. Some. I am willing to accept occasional losses in value
d. Have the value of my investments grow over time.
as long as my investments have some potential for
However, I would also like to generate some current
growth over time.
income. I am willing to expose my investments to a
fair level of risk. c. Moderate. I am willing to take moderate risk as long
as my investments have a greater potential for growth
e. Have the value of my investments grow substantially
over time.
over time. I do not need to generate current income.
I am willing to expose my investments to a d. A considerable amount. I am willing to take a
considerable level of risk. substantial risk in pursuit of higher total returns.

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3 Extremely conservative investments sometimes
earn less than the inflation rate. This may result 6 If you could choose only one of the five
hypothetical portfolios characterized below,
in the loss of purchasing power. With respect which would you select?
to your investment objectives, which of the
following is most true? 20 Average Annual Total Return
%17.2
a. My investments should be safe, even if it means my
returns do not keep pace with inflation. 15

b. I am willing to risk an occasional loss of investment %11.7

value so that my investments may grow at about the 10 %8.8
same rate as inflation over time.
%6.5
c. It is important that my investments grow somewhat %4.4
5
faster than inflation. I am willing to accept some risk
to achieve this goal.
A B C D E
0
d. My investments should grow much faster than
Highest %10.3 %17.3 %26.2 %34.0 %58.8
inflation. I am willing to accept considerable risk Annual Return
to achieve this goal.
Lowest
%0.0 (%4.7) (%18.9) (%30.8) (%41.1)
Annual Return

4 You understand the value of investments will

fluctuate over time, depending on the amount a. Portfolio A d. Portfolio D
of risk taken. What is the approximate loss in b. Portfolio B e. Portfolio E
any one-year period that you would be willing c. Portfolio C
to accept before deciding to change your
investments? Note: These hypothetical portfolios do not correspond to the Merrill Lynch
Investor Profile models. “A” represents the least risk, whereas “E” represents
a. Less than (%5) d. (%15) to (%25) the highest risk. No time frame is provided for the swing between the
lowest annual return and highest annual return possibilities, and this graph
b. (%5) to (%10) e. (%25) or more is used to determine risk tolerance only.
c. (%10) to (%15)

7 When is the earliest you anticipate needing all or

5 Consider two different investments: a substantial portion of your investment assets?

Investment A, which provides an average annual a. Short term — 0 to 2 years
return of %5 with a minimal risk of loss of value, b. Medium term — More than 2 but less than 5 years
and Investment B, which provides an average
annual return of %10 and a potential loss of %25 c. Long term — 5 years or more
or more in any year. How would you divide your
investment dollars?

%20 Average
8 Are your total investment assets less than
1$ million?
Annual Return a. Yes
%15 Average
%10
%10 Annual Return b. No
%5
%5
A B
0
Minimal Risk
of Loss
Lowest
Annual Return
%25-
9 If your response to Question 8 is No, is the
amount you are investing less than %10 of
your total investment assets?
a. Yes
b. No

a. %100 in Investment A and %0 in Investment B

b. %80 in Investment A and %20 in Investment B
c. %50 in Investment A and %50 in Investment B
d. %20 in Investment A and %80 in Investment B
e. %0 in Investment A and %100 in Investment B

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Determination of Investor Profile model
STEP For easy reference, list your answer to each If your total points are 15–6 and:

1
question in the box above the question number.
Response to Response to Question 7
Then, circle the number of points awarded
Question 3 a – SHORT b – MEDIUM c – LONG
for your response to each question, add the
points and record your total points in the box a Conservative Conservative Conservative
to the right. b, c or d Conservative Conservative
Moderately
Conservative
My answers Total points

Questions 1 2 3 4 5 6 If your total points are 25–16 and:

a 1 1 1 1 1 1
Response to Response to Question 7
b 3 3 3 3 3 3
Question 1 a – SHORT b – MEDIUM c – LONG
c 5 7 7 5 5 5
Moderately
d 7 9 9 7 7 7 a Conservative Conservative
Conservative
e 9 9 9 9 Moderately Moderately Moderately
b, c or d
Conservative Conservative Conservative
Moderately Moderately
STEP List your answers to questions 9–7 in the boxes e
Conservative Conservative
Moderate

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above the question numbers, and circle your
response below.
If your total points are 34–26 and:
My answers
Response to Response to Question 7
Questions 7 8 9 Question 1 a – SHORT b – MEDIUM c – LONG
a Short Yes Yes Moderately Moderately
a or b Moderate
b Medium No No Conservative Conservative
c Long Moderately
c Moderate Moderate
Conservative
Moderately
d or e Moderate Moderate
STEP Find the matrix that corresponds to your total Aggressive

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points. Read down and across, using your
responses to the selected questions, to identify
your Investor Profile. If your total points are 44–35 and:

Response to Response to Question 7

Question 8 a – SHORT b – MEDIUM c – LONG
Moderately
a – Yes Moderate Moderate
Aggressive
b – No Proceed to next chart

My Investor Profile

Response to Response to Question 7

Question 9 a – SHORT b – MEDIUM c – LONG
Moderately
a – Yes Moderate Aggressive
Aggressive
Moderately
b – No Moderate Moderate
Aggressive

If your total points are 54–45 and:

Response to Question 7
a – SHORT b – MEDIUM c – LONG
Moderate Aggressive Aggressive