Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors

A client who has an investment horizon of 15 years for a child's higher education but is very uncomfortable with volatility is assessed. Which approach is most consistent with good risk profiling practice?

The adviser should reconcile the long horizon with the client's low tolerance through education and a gradual, moderate allocation, documenting the rationale. Neither fully aggressive nor fully safe investing suits, because both horizon and comfort with volatility must be considered.

  1. APlace the entire amount in equity because the horizon is long
  2. BPlace the entire amount in savings account because the client dislikes volatility
  3. CReconcile the long horizon with the low tolerance through client education and a gradual, moderate allocation, documenting the rationaleCorrect
  4. DSkip profiling since the goal is fixed

Explanation

A long horizon raises capacity and required risk, while low tolerance limits comfort. The adviser should educate the client and propose a suitable moderate allocation, documenting the reasoning. Ignoring either factor risks unsuitability or the client abandoning the plan.

Did you get it right without looking?

One question tells you little. A timed set on Risk Profiling for Investors shows your real accuracy, how long you take and where you lose marks.

Practise Risk Profiling for InvestorsFree diagnostic mock

More Risk Profiling for Investors questions