NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors
In risk profiling of an investor, the 'risk required' is best described as the level of risk that the investor:
Risk required is the level of risk an investor must take to achieve the financial goals given the available resources and time horizon. It is goal-driven, unlike risk tolerance, which reflects emotional comfort with losses.
- AMust take to reach the financial goals with the funds availableCorrect
- BIs emotionally comfortable bearing during market falls
- CIs legally permitted to take under SEBI rules
- DHas taken in past investments
Explanation
Risk required is driven by goals: the return needed to reach the target from current resources and time horizon determines how much risk must be taken. Comfort with volatility is risk tolerance, a psychological attribute, not risk required. Regulatory permission and past behaviour do not define risk required.
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