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Scorecard

What Is Your Investment Risk Tolerance?

Vanguard's investor-behavior research consistently shows that the largest single drag on long-term returns is not asset choice but selling during drawdowns. Score your risk tolerance across time horizon, loss reaction, income stability, investment experience, and goals to see your risk profile and the allocation framework that typically matches it; specific recommendations require a licensed advisor.

Last updated: May 2026

An investment risk tolerance profile combines your capacity to absorb portfolio volatility (time horizon, income stability, emergency cushion) with your willingness to do so (loss reaction, experience, goals). Profile = Average of 5 Category Scores (Time Horizon + Loss Reaction + Income Stability + Experience + Goals/Liquidity). Conservative allocation framework typically target 30/70 stock/bond reference.

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What is Investment Risk Tolerance Profile?

An investment risk tolerance profile combines your capacity to absorb portfolio volatility (time horizon, income stability, emergency cushion) with your willingness to do so (loss reaction, experience, goals). The output is a profile from conservative to aggressive that maps to a general allocation framework.

The Formula

Profile = Average of 5 Category Scores (Time Horizon + Loss Reaction + Income Stability + Experience + Goals/Liquidity)

Time Horizon and Loss Reaction are the two heaviest signals because they determine whether the household will actually stay invested through drawdowns; the rest fine-tune the allocation.

Worked Example

A 50-year-old planning to retire at 65, dual stable income, 6 months emergency fund, would hold through a 20% drop, experienced with index funds, balanced goals.

Time Horizon: 8 (15 years)
Loss Reaction: 8 (hold)
Income Stability: 9 (dual stable)
Investment Experience: 8 (confident with indexes)
Goals and Liquidity: 7 (balanced)

📌 Profile is Moderate-Growth. A 60/40 to 70/30 stock/bond framework is the standard reference point for this scoring profile; specific allocation requires a licensed advisor who can see the full picture.

Why This Matters

Behavior is the biggest return drag

Vanguard's investor-behavior research consistently shows the largest single drag on long-term returns is selling during drawdowns and missing the recovery. Matching the allocation to the temperament prevents this.

Capacity and willingness are not the same

A household can have the financial capacity to take risk (long horizon, stable income) but lack the willingness (anxious during drops), or vice versa. The right allocation honors both, not just whichever score is higher.

Common Mistakes

❌ Choosing aggressive because long-term returns are higher

An aggressive allocation only outperforms if you actually hold it through drawdowns. The right choice is the most aggressive allocation you will actually stay invested through, which is often less than the math allows.

❌ Skipping the assessment when starting out

New investors often discover their stated and actual tolerances differ once a real drawdown arrives. Doing the assessment up front, plus revisiting after the first real decline, calibrates the plan.

Industry Benchmarks

Category	Good	Average	Poor
Conservative allocation framework	30/70 stock/bond reference	40/60 to 50/50	All cash (inflation drag)
Moderate allocation framework	60/40 reference	50/50 to 70/30	Mismatched to temperament
Aggressive allocation framework	80/20 to 90/10 with long horizon	70/30 to 80/20	All-equity without cushion

Source: FINRA Investor Education Foundation Risk Tolerance Research and Vanguard Investor Behavior Studies

Benchmark data sourced from FINRA Investor Education Foundation Risk Tolerance Research and Vanguard Investor Behavior Studies.

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One of the most common mistakes we see when working with clients: choosing aggressive because long-term returns are higher. An aggressive allocation only outperforms if you actually hold it through drawdowns. The right choice is the most aggressive allocation you will actually stay invested through, which is often less than the math allows.

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Frequently Asked Questions

Why does risk tolerance matter so much for investing?

Risk tolerance determines whether you can stay invested during the drawdowns that come with any growth-oriented portfolio. Vanguard's investor-behavior studies consistently find that the cost of selling during a 20-30% drawdown and missing the recovery is far larger than the choice between similar diversified portfolios. Matching the allocation to the temperament keeps you invested.

How is investment risk tolerance different from a money personality?

Risk tolerance focuses specifically on your capacity and willingness to absorb investment volatility (drawdowns, time horizon, income stability), while money personality is the broader pattern that shapes spending, saving, and avoidance habits. The two interact but they are measured separately by most planning frameworks.

What allocation does a conservative profile usually suggest?

A conservative profile commonly maps to a 30/70 stock/bond mix or a similar capital-preservation framework; moderate maps to 60/40; growth maps to 80/20; aggressive maps to 90/10 or higher. These are general framework reference points, not personalized recommendations. A licensed advisor tailors the mix to your full situation.

Should I retake the risk-tolerance scorecard over time?

Yes, especially after major life events (job change, new dependents, retirement, inheritance) or after a real market drawdown. Behavior during an actual decline is the truest test of risk tolerance; many investors discover their stated and actual tolerances differ once they have lived through one.

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