Every investor has different goals – maybe that’s building up your savings for retirement or growing a trust fund for your children. Your desired timeline is another key factor in deciding which investment risks are right for you. Together, your goals and timeframe help shape the investment approach that may be most suitable for you.
Naturally, opting for a lower risk investment, like government bonds, will come with different considerations than choosing to invest in something higher risk like venture capital. If you have a clear vision of where you’re headed but are unsure of the level of risk that’s right for you, an investment suitability quiz could be the next step.
What is an investor suitability quiz?
An investor suitability quiz is an onboarding questionnaire that helps an investment service provider identify the level of investment risk that fits your goals and your circumstances. Usually, the quiz asks about your objectives, planned timeframe, income, savings, regular commitments, debts, investment experience and attitude to losses.
Are there right and wrong answers?
There are no trick questions, and it’s not a test of how much you know about investing. Ultimately, an Investor Suitability Quiz gives your provider a practical picture of you as an investor so they can offer the best guidance around what next steps make sense for you.
Does knowing your suitability support responsible investing?
Generally, yes as investing always involves uncertainty. An investment’s value can fall as well as rise, and you may get back less than you put in. Suitability assessments create a useful pause before your money reaches the market. During this time, you can carefully consider what you can afford to invest, weigh up the pros and cons of a high-risk investment, and decide whether the proposed approach supports your goal.
Is creating an investment plan hard?
Creating an investment plan is usually straightforward. Start by visiting your chosen provider’s website and following its setup instructions. If you’re new to investing and want a user-friendly option, Wealthify’s online investment platform is easy to navigate. It also offers an app so you can oversee your investments from your phone.
Will taking an assessment guarantee returns on my investment?
Taking an assessment doesn’t remove investment risk or guarantee a return. It simply helps reduce the chance of choosing a portfolio that isn’t right for you, because the possible returns are appealing.
Why do honest answers matter?
When you’re completing an investment suitability quiz, it can be tempting to select answers that seem likely to unlock a higher-risk portfolio. However, this distorts the result and could point you towards investments that don’t fit your circumstances. If a loss would affect essential spending, your quiz responses should capture that reality.
Answer based on your current position, not the returns you hope to earn. Consider how you’d respond if your portfolio fell sharply, how soon you may need the money and whether your income or commitments could change. Honest answers support a more useful outcome.
Do all investment platforms use suitability assessments?
A reputable investment service will complete a suitability assessment with you to understand your financial situation, investment objectives and attitude to risk.
Will your suitability for an investment style shift over time?
Life can be unpredictable and it’s likely that over the years your circumstances will change. Things like a new job or receiving an inheritance could improve your capacity for investment risk. Meanwhile, big spends like a house purchase, or an increase in outgoings due to a growing family can alter what you need from your investments.
It’s best practice to review your suitability information after a major life event or whenever your objectives, timeframe or comfort with risk changes. It’s also sensible to revisit it periodically, even when nothing dramatic has happened. A portfolio that suited you several years ago may no longer reflect your priorities.
Remember: honesty matters
Responsible investing starts with an honest view of what you need and what you can realistically afford to lose. Keep your answers accurate, review them as life changes and treat the outcome as one part of your wider research.
Please note that this blog is for general information only and does not constitute financial advice. Your circumstances may differ to those discussed, so consider seeking guidance from a qualified financial adviser before making financial or borrowing decisions.
