What's Your Risk Profile?

What You’ll Learn

Learn the three risk profiles and the questions that define yours, and which investment vehicle fits.

Content

Risk profile: a pre-commitment about what you’ll do when markets drop. Three types: conservative (low loss tolerance), moderate (mid), aggressive (high volatility tolerance).

Questions a risk-profile test asks (4 examples):

1. If my portfolio drops 30% in a year, what do I do? (Sell, hold, add.)
2. Investment horizon? (1-3, 3-10, 10+ years.)
3. Current emergency fund? (None, 1-3 mo, 6+ mo.)
4. Do I have extra savings each year?

Conservative profile:

• HYSA 30%, US Treasuries 40%, large-cap stocks 30%.
• Expected real return 3-5%.
• Low volatility, sleeps at night.

Moderate profile:

• VTI/VOO (US total market) 50%, VXUS (international) 20%, BND (bonds) 25%, gold 5%.
• Expected real return 5-7%.
• Standard for most US investors.

Aggressive profile:

• US growth stocks 50%, international 20%, small-cap 15%, crypto 5%, alternatives 10%.
• Expected real return 7-10%.
• High volatility; 40%+ swings in a year possible.

Risk profile isn’t fixed:

• Shifts conservative as age increases (target-date funds do this automatically).
• Don’t go aggressive without an emergency fund.
• Anyone who lived through 2008, 2020, or 2022 has tested themselves.

Important: there’s no “correct” profile. The best one matches your tolerance, your goal, and your horizon. Liking NVDA doesn’t make it right for you. Build your portfolio based on your honest answers.

Practice quiz

Four practice questions for this page. The lesson in the app ends with one or two multiple-choice questions.

Question 1: What is risk profile?

• A) Number of investment experiences
• B) Your tolerance for market downturn (Correct)
• C) Credit score
• D) Age

Question 2: Typical conservative allocation?

• A) 100% stocks
• B) 30% HYSA + 40% Treasuries + 30% stocks (Correct)
• C) 50% crypto
• D) Only gold

Question 3: Where does the profile shift as age increases?

• A) More aggressive
• B) Conservative (Correct)
• C) Stays the same
• D) Crypto

Question 4: Pre-condition for aggressive profile?

• A) High salary
• B) Emergency fund + long horizon (Correct)
• C) Lots of experience
• D) Credit score

Action

Take UseFinLit Module 1 / Lesson 10 (about a minute), then answer the four example questions above honestly. Look at the typical allocation for your result. Does your current portfolio match that profile?