What is risk profiling and how does it work?

Your risk profile is a crucial factor when deciding where your money will be invested

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Risk profiling is an important part of the financial planning process. When you meet with a financial planner to discuss your investment plans, he or she will assess your tolerance for risk and then use that information to help you make important investment decisions.

So what does risk profiling involve and what impact does it have on where you invest your money? Read on to find out.

What is risk profiling?

Risk profiling is the process of calculating your attitude to risk. When you meet with a financial planner to receive investment advice, you’ll need to answer a range of questions about your current financial situation, your investment goals and investment time frames – in other words, what are you hoping to achieve with your investments and over what time period? This assessment process commonly takes the form of a risk-profile questionnaire or quiz.

Your financial planner will use the information you provide in this questionnaire to determine your risk profile. Your risk profile takes into account a number of factors, including:

Your current financial situation

What are your debts and other ongoing expenses? How much income do you earn? How much money do you have to invest and how much financial risk can you afford to take?

Your investment goals

What are you hoping to achieve with your investments? Are you saving towards a particular goal, for example funding your retirement, or simply aiming to build wealth?

Your investment time frame

How long do you have to achieve your goals? Do you need to maximise returns in a short time frame or are you happy to play a longer game? What risk is required for you to reach your investment goals in the desired time frame?

Your general attitude to risk

Are you willing to adopt a riskier investment strategy in return for potentially higher rewards, or would you feel more comfortable if your portfolio was geared more towards guaranteed consistent returns?

The aim of risk profiling in financial planning is to not only determine the financial risk you have the capacity to take, but also the level of risk you are willing to take.

What are the different risk profiles?

Your risk profile outlines the level of investment risk you are willing to accept. Generally speaking, the greater the risk with an investment, the greater the potential returns. However, opting for riskier investments also means you need to accept the potential of losing money.

When you fill out a risk profile quiz – you can see some sample risk-profile quiz questions below – your answers will be graded with a score. Your total score at the end of the quiz will be tallied so that you can be classified into a particular investment style.

The names given to risk profiles vary, but profiles tend to fall into one of the following categories:


You want stable, reliable growth and/or a high level of income. You are only willing to accept minimal losses and may have a short-term investment time frame.

Moderately conservative

You want reasonably stable growth and/or a moderate income and are willing to accept a moderate level of risk. Your investment term is a few years or more.


You’re looking for a diversified portfolio that contains a balance of security and the potential for growth. You’re willing to accept a certain level of volatility and will typically be prepared to invest for five years or longer.

Moderately aggressive

You want to invest in a broad range of asset classes but with a greater focus on growth rather than income. You’re willing to accept volatility in the value of your investments in return for potentially higher growth, and you could be looking to invest for up to 10 years.


Long-term capital growth is your main focus. You’re willing to accept substantial fluctuations in value in the knowledge that you will be able to access the highest possible returns in 10 years or more.

How does my risk profile affect my investment decisions?

How you perceive risks has a big impact on which investments are best suited to you. Generally speaking, investments can be split into two categories:

Growth assets

These are investments that have the potential to provide higher returns but that also come with a higher level of short-term risk. Shares and property are two examples of growth assets.

Compare and search share trading accounts

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
ASX shares, US shares
Australia’s lowest-cost broker for ASX shares and ETFs.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
ASX shares
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
Finder AwardExclusive
Bell Direct Share Trading
ASX shares, mFunds, ETFs
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
SelfWealth (Basic account)
ASX shares, US shares
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
Saxo Capital Markets (Classic account)
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CMC Markets Invest
ASX shares, Global shares, mFunds, ETFs
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
HSBC Online Share Trading
ASX shares, mFunds, ETFs, Bonds
Limited time offer: Get up to $100 in brokerage rebates on your first 5 trades when you sign up to a HSBC Online Share Trading account (T&Cs apply). Make trades online with brokerage fees starting from just $19.95 with an HSBC Online Share Trading account. Plus gain access to complimentary expert research, trading ideas and tools.

Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Defensive assets

Defensive assets usually have little risk of suffering a loss but also provide lower returns than growth assets. Cash and fixed-interest investments fall into this category.

The money you invest will be allocated to a mix of defensive and growth assets, with the exact asset allocation chosen based on your risk profile. So what types of investments match my risk profile? If your risk profile is conservative, your portfolio will be skewed towards investments that provide safe, guaranteed returns, such as cash and term deposits. In fact, defensive assets could make up 75% or even more of your investment portfolio.

On the other hand, if you’re classified as an aggressive investor, your portfolio will contain a much larger allocation of high risk/reward investments, for example Australian and international shares.

If your risk profile is balanced, your investment portfolio will include a combination of growth and defensive assets, perhaps skewed slightly towards either asset class depending on your personal circumstances.

Risk profiling and robo advisers

It’s not just traditional financial planners and advisers that use risk profiling; you will often also need to fill out a risk profiling questionnaire when you sign up for a robo-advice service.

When you open an account with a robo adviser, you will need to answer a few simple questions about your investment amount, your investment goals and your tolerance for risk. These answers will determine your risk profile, and you’ll then be assigned an investment portfolio with an asset allocation designed to suit your appetite for risk.

For example, if you sign up for an account with Raiz Invest (previously Acorns Australia), you’ll be asked to provide details about your financial situation, investment goals and time frame. Based on your answers, you are then matched with one of five portfolios of exchange-traded funds (ETFs) designed to match different levels of risk and return: Conservative, Moderately Conservative, Moderate, Moderately Aggressive and Aggressive.

What questions are included in a risk-profile quiz?

Are you looking for a risk-profile template or an example of a risk-profiling quiz? Below is a list of questions you may expect to find in a risk-profile questionnaire.

What stage of life are you at?

For example, you could be young, single and have few financial burdens, and be looking to generate long-term wealth. Alternatively, you could be a young family coping with a mortgage and raising two kids, or a mature person preparing to leave the workforce and wanting to ensure a comfortable retirement.

How much do you know about investing and investment matters?

Are you a complete novice, somewhat familiar with the share market and other investments, or an experienced investor?

How long before you would need to access the money you invest?

You may need to access the funds you invest within two years, have a mid-range goal of five to seven years, or be looking for a long-term strategy of ten or more years.

What are your investment goals?

Do you want guaranteed and reliable returns, are you happy to accept some variability in returns, or are you willing to accept unstable but potentially higher returns?

How would you respond in a specific investment scenario?

For example, if you had an investment portfolio of $50,000 and market conditions caused it to drop to $40,000 during a short period, how would you respond? Would you sell all or some of your investments, hold your position or invest further?

How much potential loss are you prepared to accept in return for potential gains?

For example, Portfolio A has a maximum potential gain of $15,000 and a maximum potential loss of $2,000, while Portfolio B has a maximum potential gain of $25,000 and a maximum potential loss of $10,000 – which would you be more likely to choose?

Your financial planner will use the answers you provide to determine your risk profile, and then match you with an investment portfolio that matches that profile.

However, remember that your financial-risk capacity and your attitude to risk will change over time, so don’t assume that once you’ve chosen an investment portfolio based on your risk profile you can simply “set and forget”. Review your risk tolerance and your investment portfolio with your financial planner regularly to make sure your investments are still suitable for your needs.

Picture: ShutterstockBack to top

You may also be interested in

Today’s ASX top stocks: Class (CL1 ↑60.8%), Superloop (SLC ↑20.6%)

Today’s ASX top stocks: Class (CL1 ↑60.8%), Superloop (SLC ↑20.6%)

The 10 biggest movers on the ASX for Monday 18 October 2021.

Read more…
Why is the Zip Co share price stumbling today?

Why is the Zip Co share price stumbling today?

Shares in BNPL provider Zip Co are down by nearly a quarter over the last 6 months.

Read more…
A guide to stockbrokers in Perth

A guide to stockbrokers in Perth

If you're looking to buy shares from Perth, there are a few options available to you.

Read more…
Today’s trending Reddit stocks

Today’s trending Reddit stocks

We've pulled a list together of the meme stocks being mentioned most on Reddit in the past 24 hours.

Read more…
Why is the RIO share price lagging other miners today?

Why is the RIO share price lagging other miners today?

Shares in mining giant Rio Tinto are up just 7% in the last 12 months.

Read more…
Today’s ASX top stocks: Sandfire Resources (SFR ↑6.4%), Helloworld Travel (HLO ↑6.3%)

Today’s ASX top stocks: Sandfire Resources (SFR ↑6.4%), Helloworld Travel (HLO ↑6.3%)

The 10 biggest movers on the ASX for Friday 15 October 2021.

Read more…

More guides on Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site