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Definitions of Risk Categories

Definitions of Risk Categories

Five categories describe how much market fluctuation an investor can accept, and why. Each one reflects a combination of tolerance, capacity and goals — not risk appetite alone.

Capital stability Growth potential
1

Conservative Investor

An investor with a low tolerance for market volatility and a strong preference for capital stability. Such an investor is generally uncomfortable with significant short-term declines and places greater importance on preservation of capital and predictability than on maximising long-term returns. Higher-risk and highly volatile investments should generally be avoided unless specifically appropriate for a defined long-term objective and supported by the investor's capacity and understanding.

2

Moderately Conservative Investor

An investor who has a relatively low tolerance for volatility but can accept a limited degree of market fluctuation in pursuit of better long-term returns. Capital preservation remains important, while a measured allocation to growth-oriented assets may be appropriate where the investment horizon and financial capacity support it.

3

Moderate Investor

An investor who can accept a balanced level of market volatility and temporary declines in portfolio value in pursuit of long-term growth. Such an investor generally seeks a balance between capital preservation and growth and can typically accommodate a meaningful allocation to growth assets when consistent with goals, horizon and capacity.

4

Moderately Aggressive Investor

An investor who has a relatively high tolerance for market fluctuations and accepts the possibility of significant short-term declines in exchange for higher long-term growth potential. Such an investor generally has a sufficiently long investment horizon and financial capacity to withstand periods of volatility.

5

Aggressive Investor

An investor with a high tolerance for market volatility and substantial short-term fluctuations, including material temporary losses, in pursuit of higher long-term growth potential. This category is appropriate only where the investor's capacity, investment horizon, objectives and understanding of risk are consistent with such exposure.

Important

A risk category is not determined solely by willingness to take risk. The final assessment considers the combined Tolerance, Capacity and Goals of the investor. A high willingness to take risk does not by itself justify a high-risk product where financial capacity, liquidity requirements or investment objectives do not support it.

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Financial Radiance

Helping clients achieve Financial Freedom.

Rajesh Minocha, CFP
AMFI Registered Mutual Fund Distributor (ARN-117902)

First registration date: 27-Dec-2016

Current Validity: Till 18-Nov-2028

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