by Stan Heller, Consultant, VectorVest Canada
December 9, 2014

Risk vs Reward graphicDo you want to have a better, more calculated idea about your tolerance for financial risk? Would there be more harmony if you and your spouse or partner truly understood each other’s risk tolerance?

If you answered yes to either question, then you might want to check out this month’s issue of MoneySense magazine. Go directly to page 52. There, you’ll find information about how you can access a free scientific assessment of your personal financial risk tolerance.

The risk tolerance test is provided by Australian risk profiling firm FinaMetrica, a company that has developed one of the world’s most popular and respected risk tolerance measurement systems. Their test is used in 23 countries in seven languages, with over 700,000 tests done since its launch in 1998.

Until January 5, FinaMetrica is allowing readers of MoneySense magazine to take their test for free. Once you’ve taken the 25-question test, you’ll receive a risk tolerance score that enables you to compare yourself to a representative sample of the adult population.

One of the really cool aspects of this test is that your score places you in one of seven risk groups. From there, you can read a comprehensive four-page report which summarizes how those in your risk group usually answer the risk tolerance questionnaire and it identifies any of your answers that are inconsistent with those typical for your risk group.

As a preamble to the free risk tolerance test, MoneySense carries a terrific article titled, Are Your Investments At Risk? All in all, the December issue is a worthwhile read and FinaMetrica’s test is a nice bonus. Of course if you want to go more in-depth, you can check out FinaMetrica’s retail website at, http://myrisktolerance.com. They also have a site for financial advisors at www.riskprofiling.com.

The test is not only useful, but it’s a fun test. Check out these sample questions:

When you think of the word “risk” in a financial context, which of the following words comes to mind first?

  1. Danger 2. Uncertainty 3. Opportunity 4. Thrill

How do you usually feel about your major financial decisions after you make them?

  1. Very pessimistic 2. Somewhat pessimistic 3. Somewhat optimistic 4. Very optimistic

VectorVest’s Strategic Investment Matrix. Once you’ve identified your risk tolerance score, go back and review VectorVest’s Strategic Investment Matrix. Developed by our Founder, Dr. Bart DiLiddo, the Matrix report will help you ensure your stocks are consistent with your investment style and strategy. Matrix details are in Chapter 11 of the little green book of Stocks, Strategies and Common Sense. It’s also in the Special Report Section of the Views in the report titled, Strategic Investment Matrix.

The VectorVest system of stock analysis identifies four basic investment styles: Conservative, Prudent, Aggressive and Speculative. Which of these investment styles suits you?

What’s Your Test Score? It would be great if you those of you who take the test would include your test score and group number in the comments section. If you prefer more anonymity, email me directly at stan.heller@vectorvestca.azurewebsites.net. I’ll compile the results and do a summary follow-up to show “scientifically” where the majority of our investors fit in the Investment Matrix. If I get enough response, I’ll reveal some UniSearch studies from each of the four investment styles that may surprise you.