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package/.claude/skills/portfolio-manager/references/risk-profile-questionnaire.md

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+# Risk Profile Questionnaire
+
+This document provides a framework for assessing investor risk tolerance and determining appropriate target asset allocation.
+
+## Overview
+
+Risk profile assessment helps answer:
+1. How much volatility can the investor handle emotionally?
+2. How much loss can they afford financially?
+3. What allocation matches their risk capacity and tolerance?
+4. What expected return do they need to meet goals?
+
+**Three Components of Risk Assessment:**
+
+1. **Risk Capacity** - Financial ability to withstand losses (objective)
+2. **Risk Tolerance** - Emotional willingness to accept volatility (subjective)
+3. **Risk Requirement** - Return needed to achieve goals (objective)
+
+Optimal allocation balances all three components.
+
+## Risk Capacity Assessment (Financial)
+
+Risk capacity is determined by objective financial factors:
+
+### 1. Time Horizon
+
+**Question:** When will you need to withdraw a significant portion of this portfolio?
+
+| Answer | Years | Risk Capacity | Typical Allocation |
+|--------|-------|---------------|-------------------|
+| **A.** Retired, currently withdrawing | 0-3 | Very Low | 20-30% stocks |
+| **B.** Retiring soon | 3-5 | Low | 30-40% stocks |
+| **C.** Mid-career, 10-15 years | 10-15 | Medium | 50-70% stocks |
+| **D.** Early career, 20+ years | 20-30 | High | 70-85% stocks |
+| **E.** Very young, 30+ years | 30+ | Very High | 85-100% stocks |
+
+**Scoring:**
+- A = 1 point
+- B = 2 points
+- C = 3 points
+- D = 4 points
+- E = 5 points
+
+**Rationale:** Longer time horizons allow recovery from market downturns, supporting higher equity allocation.
+
+### 2. Income Stability
+
+**Question:** How stable and predictable is your income?
+
+| Answer | Risk Capacity Impact |
+|--------|---------------------|
+| **A.** Fixed pension or annuity (very stable) | Very High (can handle portfolio volatility) |
+| **B.** Stable salary, secure job | High |
+| **C.** Salary with some variability | Medium |
+| **D.** Commission or bonus-heavy | Low |
+| **E.** Entrepreneur/self-employed | Low (income correlates with markets) |
+
+**Scoring:**
+- A = 5 points
+- B = 4 points
+- C = 3 points
+- D = 2 points
+- E = 2 points (or 1 if business is cyclical)
+
+**Rationale:** Stable income allows taking more risk in portfolio; variable income requires conservative portfolio as ballast.
+
+### 3. Net Worth and Liquidity
+
+**Question:** What percentage of your total net worth is this investment portfolio? (Exclude home equity and retirement accounts you can't access)
+
+| Answer | Risk Capacity Impact |
+|--------|---------------------|
+| **A.** Less than 25% (most wealth elsewhere) | Very High |
+| **B.** 25-50% | High |
+| **C.** 50-75% | Medium |
+| **D.** 75-90% | Low |
+| **E.** Over 90% (nearly all wealth) | Very Low |
+
+**Scoring:**
+- A = 5 points
+- B = 4 points
+- C = 3 points
+- D = 2 points
+- E = 1 point
+
+**Rationale:** If portfolio represents most of your wealth, you can't afford large losses. Diversified wealth allows higher risk in this account.
+
+### 4. Emergency Fund Status
+
+**Question:** Do you have a separate emergency fund (3-6 months expenses) outside this portfolio?
+
+| Answer | Risk Capacity Impact |
+|--------|---------------------|
+| **A.** Yes, fully funded (6+ months) | High (no need to tap portfolio) |
+| **B.** Partially funded (3-4 months) | Medium |
+| **C.** No, this portfolio is my emergency fund | Low (need liquidity) |
+
+**Scoring:**
+- A = 5 points
+- B = 3 points
+- C = 1 point
+
+**Rationale:** Emergency fund prevents forced liquidation at market lows; its absence requires higher cash allocation.
+
+### 5. Debt Level
+
+**Question:** What is your debt situation?
+
+| Answer | Risk Capacity Impact |
+|--------|---------------------|
+| **A.** No debt (or only mortgage) | High |
+| **B.** Moderate debt, manageable payments | Medium |
+| **C.** High debt, significant payments | Low |
+| **D.** High-interest debt (credit cards) | Very Low |
+
+**Scoring:**
+- A = 5 points
+- B = 3 points
+- C = 2 points
+- D = 1 point
+
+**Rationale:** High debt reduces capacity to handle portfolio losses; paying down debt may be better use of funds than risky investments.
+
+**Risk Capacity Score (Financial):**
+```
+Total Points: ___ / 25
+
+20-25 points: Very High Capacity (can handle 80-100% stocks)
+15-19 points: High Capacity (60-80% stocks)
+10-14 points: Medium Capacity (40-60% stocks)
+5-9 points: Low Capacity (20-40% stocks)
+0-4 points: Very Low Capacity (0-20% stocks)
+```
+
+## Risk Tolerance Assessment (Emotional/Behavioral)
+
+Risk tolerance is subjective - how much volatility can you handle emotionally?
+
+### 1. Loss Reaction
+
+**Question:** If your $100,000 portfolio dropped to $80,000 (-20%) in a market crash, how would you react?
+
+| Answer | Risk Tolerance |
+|--------|----------------|
+| **A.** Panic, sell everything, can't sleep at night | Very Low |
+| **B.** Very concerned, consider selling | Low |
+| **C.** Uncomfortable but hold steady | Medium |
+| **D.** Stay calm, stick to plan | High |
+| **E.** Excited, buy more at lower prices | Very High |
+
+**Scoring:**
+- A = 1 point
+- B = 2 points
+- C = 3 points
+- D = 4 points
+- E = 5 points
+
+### 2. Historical Behavior
+
+**Question:** Have you experienced a major market downturn (2008, 2020)? How did you react?
+
+| Answer | Risk Tolerance |
+|--------|----------------|
+| **A.** Sold stocks near the bottom, locked in losses | Very Low |
+| **B.** Reduced equity exposure significantly | Low |
+| **C.** Held steady, didn't trade | Medium |
+| **D.** Held steady and added to stocks | High |
+| **E.** Increased equity exposure significantly | Very High |
+| **F.** Haven't experienced a major downturn yet | Unknown (rate yourself hypothetically) |
+
+**Scoring:**
+- A = 1 point
+- B = 2 points
+- C = 3 points
+- D = 4 points
+- E = 5 points
+- F = Use answer to Question 1
+
+**Insight:** Past behavior is the best predictor of future behavior. If you sold in prior crashes, you likely will again.
+
+### 3. Sleep Test
+
+**Question:** What is the largest portfolio decline you could tolerate without losing sleep?
+
+| Answer | Drawdown Tolerance | Risk Tolerance | Suitable Allocation |
+|--------|-------------------|----------------|---------------------|
+| **A.** -5% | Very Low | Very Low | 20% stocks |
+| **B.** -10% | Low | Low | 30-40% stocks |
+| **C.** -15% | Medium-Low | Medium-Low | 40-50% stocks |
+| **D.** -20% | Medium | Medium | 50-60% stocks |
+| **E.** -25% | Medium-High | Medium-High | 60-70% stocks |
+| **F.** -30% | High | High | 70-80% stocks |
+| **G.** -40% or more | Very High | Very High | 80-100% stocks |
+
+**Scoring:**
+- A = 1 point
+- B = 2 points
+- C = 2.5 points
+- D = 3 points
+- E = 3.5 points
+- F = 4 points
+- G = 5 points
+
+**Key Insight:** This is the most important question. Be honest - what loss would cause you to sell in panic?
+
+### 4. Investment Timeframe and Patience
+
+**Question:** If your portfolio underperformed the market for 3 years straight, would you:
+
+| Answer | Risk Tolerance |
+|--------|----------------|
+| **A.** Immediately switch to index funds | Very Low |
+| **B.** Re-evaluate and likely make changes within 6 months | Low |
+| **C.** Review carefully, make changes if thesis broken | Medium |
+| **D.** Stay patient, 3 years is short-term | High |
+| **E.** Add more, contrarian opportunity | Very High |
+
+**Scoring:**
+- A = 1 point
+- B = 2 points
+- C = 3 points
+- D = 4 points
+- E = 5 points
+
+### 5. Volatility Preference
+
+**Question:** Which investment would you prefer?
+
+| Option | Expected Return | Possible Outcomes | Risk Level |
+|--------|----------------|-------------------|------------|
+| **A.** Conservative | 4% per year | Range: 2% to 6% | Very Low |
+| **B.** Moderate | 6% per year | Range: -5% to 15% | Low |
+| **C.** Balanced | 8% per year | Range: -10% to 25% | Medium |
+| **D.** Growth | 10% per year | Range: -20% to 40% | High |
+| **E.** Aggressive | 12% per year | Range: -35% to 60% | Very High |
+
+**Scoring:**
+- A = 1 point
+- B = 2 points
+- C = 3 points
+- D = 4 points
+- E = 5 points
+
+**Risk Tolerance Score (Emotional):**
+```
+Total Points: ___ / 25
+
+20-25 points: Very High Tolerance (comfortable with 80-100% stocks)
+15-19 points: High Tolerance (comfortable with 60-80% stocks)
+10-14 points: Medium Tolerance (comfortable with 40-60% stocks)
+5-9 points: Low Tolerance (comfortable with 20-40% stocks)
+0-4 points: Very Low Tolerance (comfortable with 0-20% stocks)
+```
+
+## Risk Requirement Assessment (Goals)
+
+Risk requirement is determined by what return you need to achieve financial goals.
+
+### 1. Return Needed
+
+**Question:** What annual return do you need to meet your financial goals?
+
+Calculate: Required Return = (Future Goal - Current Savings) / (Years × Current Savings)
+
+Simplified Self-Assessment:
+
+| Required Return | Risk Requirement | Suitable Allocation |
+|----------------|-----------------|---------------------|
+| **< 4%** | Low (bonds/cash sufficient) | 20-40% stocks |
+| **4-6%** | Medium-Low (conservative stocks work) | 40-60% stocks |
+| **6-8%** | Medium (balanced portfolio) | 60-70% stocks |
+| **8-10%** | Medium-High (equity-heavy) | 70-85% stocks |
+| **> 10%** | High (aggressive growth) | 85-100% stocks |
+
+**Scoring:**
+- <4% = 1 point
+- 4-6% = 2 points
+- 6-8% = 3 points
+- 8-10% = 4 points
+- >10% = 5 points
+
+### 2. Savings Rate
+
+**Question:** Are you contributing regularly to this portfolio?
+
+| Answer | Risk Requirement Impact |
+|--------|------------------------|
+| **A.** High savings rate (>20% of income) | Low (can achieve goals with lower returns) |
+| **B.** Moderate savings rate (10-20%) | Medium |
+| **C.** Low savings rate (<10%) | High (need higher returns) |
+| **D.** No contributions, portfolio must grow itself | Very High |
+| **E.** Net withdrawing from portfolio | N/A (preservation focus) |
+
+**Scoring:**
+- A = 1 point (don't need high risk)
+- B = 2 points
+- C = 4 points (need higher returns)
+- D = 5 points
+- E = 1 point (focus shifts to preservation)
+
+**Rationale:** High savings rate means goals can be met with lower investment returns; low savings requires taking more risk.
+
+### 3. Goal Flexibility
+
+**Question:** How flexible are your financial goals?
+
+| Answer | Risk Requirement Impact |
+|--------|------------------------|
+| **A.** Very flexible (can delay retirement, reduce spending) | Low (can afford conservative approach) |
+| **B.** Somewhat flexible | Medium |
+| **C.** Not flexible (specific retirement date, fixed expenses) | High (must meet return target) |
+
+**Scoring:**
+- A = 1 point
+- B = 3 points
+- C = 5 points
+
+**Risk Requirement Score:**
+```
+Total Points: ___ / 15
+
+12-15 points: High Requirement (need 70-100% stocks)
+9-11 points: Medium-High Requirement (need 60-80% stocks)
+6-8 points: Medium Requirement (need 40-60% stocks)
+3-5 points: Low Requirement (need 20-40% stocks)
+0-2 points: Very Low Requirement (can use conservative allocation)
+```
+
+## Synthesizing the Three Assessments
+
+### Step 1: Calculate Component Scores
+
+```
+Risk Capacity Score: ___ / 25 → Convert to 1-5 scale = ___
+Risk Tolerance Score: ___ / 25 → Convert to 1-5 scale = ___
+Risk Requirement Score: ___ / 15 → Convert to 1-5 scale = ___
+```
+
+**Conversion Table:**
+
+| Raw Score (out of max) | Converted Score (1-5) |
+|------------------------|----------------------|
+| 0-20% | 1 |
+| 21-40% | 2 |
+| 41-60% | 3 |
+| 61-80% | 4 |
+| 81-100% | 5 |
+
+### Step 2: Determine Overall Risk Profile
+
+**Method 1: Conservative (Recommended for Most Investors)**
+
+Use the **lowest** of the three scores. This ensures you don't take more risk than you can handle.
+
+```
+Risk Capacity: 4
+Risk Tolerance: 2 ← Lowest
+Risk Requirement: 4
+
+Overall Risk Profile: 2 (Low)
+Recommended Allocation: 30-40% stocks
+```
+
+**Rationale:** If emotional tolerance is low (2), it doesn't matter that capacity and requirement are higher - investor will sell in panic during crash.
+
+**Method 2: Balanced**
+
+Use the **average** of the three scores.
+
+```
+Risk Capacity: 4
+Risk Tolerance: 2
+Risk Requirement: 4
+
+Average: (4 + 2 + 4) / 3 = 3.33 → 3 (Medium)
+Recommended Allocation: 50-60% stocks
+```
+
+**Rationale:** Balances all factors, may take slightly more risk than emotional tolerance suggests.
+
+**Method 3: Adaptive**
+
+Weight the scores based on individual circumstances:
+
+```
+Typical weighting:
+Risk Tolerance: 50% (most important - behavioral)
+Risk Capacity: 30% (financial constraints)
+Risk Requirement: 20% (goals)
+
+Example:
+Capacity: 4 × 0.30 = 1.2
+Tolerance: 2 × 0.50 = 1.0
+Requirement: 4 × 0.20 = 0.8
+
+Weighted Score: 1.2 + 1.0 + 0.8 = 3.0 (Medium)
+```
+
+### Step 3: Map to Asset Allocation
+
+| Overall Risk Score | Risk Profile | Recommended Stocks % | Recommended Bonds % |
+|-------------------|--------------|---------------------|---------------------|
+| **1.0 - 1.5** | Very Low (Conservative) | 20-30% | 60-70% |
+| **1.6 - 2.5** | Low (Conservative) | 30-40% | 50-60% |
+| **2.6 - 3.5** | Medium (Moderate) | 50-60% | 35-45% |
+| **3.6 - 4.5** | High (Growth) | 70-80% | 15-25% |
+| **4.6 - 5.0** | Very High (Aggressive) | 85-100% | 0-10% |
+
+### Step 4: Resolve Conflicts
+
+**Conflict Example:**
+
+```
+Risk Capacity: 5 (Very High - young, stable income, long horizon)
+Risk Tolerance: 2 (Low - can't handle volatility emotionally)
+Risk Requirement: 4 (High - need high returns to meet goals)
+```
+
+**Resolution:**
+
+This investor **needs** to take risk (requirement), **can** take risk (capacity), but **can't handle** risk emotionally (tolerance).
+
+**Options:**
+
+1. **Conservative approach (Recommended):**
+   - Use risk tolerance as limit (30-40% stocks)
+   - Accept that goals may not be met with investment returns alone
+   - Increase savings rate to compensate for lower returns
+   - Work longer or reduce spending goals
+
+2. **Education approach:**
+   - Work on improving risk tolerance through education
+   - Start with moderate allocation (50% stocks)
+   - Gradually increase equity exposure as comfort grows
+   - Build tolerance through experience
+
+3. **Mismatch acceptance (Not Recommended):**
+   - Use higher allocation (70%+ stocks) despite low tolerance
+   - **Risk:** Will likely panic-sell in crash, locking in losses
+   - **Outcome:** Worst of both worlds - volatility AND poor returns
+
+**Best Practice:** Never exceed emotional risk tolerance. If goals can't be met with acceptable risk level, adjust goals or increase savings.
+
+## Risk Profile Classification
+
+### Conservative Profile (Risk Score: 1-2)
+
+**Characteristics:**
+- Low risk tolerance (can't handle >10-15% loss)
+- Near retirement or retired
+- Portfolio represents most of wealth
+- Needs capital preservation and income
+
+**Recommended Allocation:** 20-40% stocks, 60-80% bonds
+
+**Behavioral Tendencies:**
+- May sell stocks during corrections (>10% drop)
+- Prefers stability over growth
+- Anxious about volatility
+- Needs reassurance during downturns
+
+**Management Approach:**
+- Conservative allocation with high bond allocation
+- Focus on dividend income and bond interest
+- Avoid volatile stocks (high-beta tech)
+- Regular communication during volatility
+- Emphasis on stability and capital preservation
+
+### Moderate Profile (Risk Score: 2.6-3.5)
+
+**Characteristics:**
+- Medium risk tolerance (can handle 15-25% loss)
+- Mid-career, 10-20 year horizon
+- Balanced income and growth needs
+- Some anxiety about volatility but can stay the course
+
+**Recommended Allocation:** 50-60% stocks, 35-45% bonds
+
+**Behavioral Tendencies:**
+- May consider selling in bear markets but likely holds
+- Wants growth but also wants to sleep at night
+- Seeks balanced approach
+- Needs data and reassurance during volatility
+
+**Management Approach:**
+- Balanced portfolio with stock and bond components
+- Diversified across sectors and asset classes
+- Regular rebalancing to maintain targets
+- Education on long-term perspective
+- Quarterly reviews with clear communication
+
+### Growth Profile (Risk Score: 3.6-4.5)
+
+**Characteristics:**
+- High risk tolerance (can handle 25-35% loss)
+- Long time horizon (15-30 years)
+- Focus on capital appreciation
+- Emotionally stable during volatility
+
+**Recommended Allocation:** 70-80% stocks, 15-25% bonds
+
+**Behavioral Tendencies:**
+- Stays invested during downturns
+- May add to stocks during corrections
+- Comfortable with volatility
+- Understands risk/reward tradeoffs
+
+**Management Approach:**
+- Equity-heavy portfolio with growth focus
+- Diversified across sectors and geographies
+- Limited bond allocation (volatility dampening only)
+- Emphasis on long-term performance
+- Semi-annual or annual reviews
+
+### Aggressive Profile (Risk Score: 4.6-5.0)
+
+**Characteristics:**
+- Very high risk tolerance (can handle >35% loss)
+- Very long time horizon (25+ years)
+- Seeks maximum growth
+- Views volatility as opportunity
+
+**Recommended Allocation:** 85-100% stocks, 0-10% bonds
+
+**Behavioral Tendencies:**
+- Buys during crashes
+- Comfortable with extreme volatility
+- Focuses on long-term compounding
+- Rational decision-making during panic
+
+**Management Approach:**
+- Equity-focused or 100% equity portfolio
+- Growth-oriented stock selection
+- International and emerging market exposure
+- Minimal to no bonds
+- Annual reviews with emphasis on strategy
+
+## Questionnaire Summary
+
+Use this simplified questionnaire for quick assessment:
+
+```
+INVESTOR RISK PROFILE QUESTIONNAIRE
+
+Name: _______________  Date: _______________
+
+1. Age: ___ → Time horizon: ___ years
+
+2. Investment time horizon before major withdrawal:
+   [ ] 0-5 years  [ ] 5-10 years  [ ] 10-20 years  [ ] 20+ years
+
+3. What is the maximum portfolio decline you could tolerate?
+   [ ] -5%  [ ] -10%  [ ] -15%  [ ] -20%  [ ] -30%  [ ] -40%+
+
+4. Income stability:
+   [ ] Very stable (pension)  [ ] Stable (salary)  [ ] Variable (commission/business)
+
+5. This portfolio represents what % of your net worth?
+   [ ] <25%  [ ] 25-50%  [ ] 50-75%  [ ] >75%
+
+6. Emergency fund status:
+   [ ] Fully funded (6+ months)  [ ] Partial (3 months)  [ ] None
+
+7. If market crashed 25%, would you:
+   [ ] Panic sell  [ ] Sell some  [ ] Hold steady  [ ] Buy more
+
+8. Investment experience with bear markets:
+   [ ] Never experienced  [ ] Experienced, sold stocks  [ ] Experienced, held  [ ] Experienced, bought more
+
+9. Return needed to meet goals:
+   [ ] <4%  [ ] 4-6%  [ ] 6-8%  [ ] 8-10%  [ ] >10%
+
+10. Primary investment objective:
+    [ ] Capital preservation  [ ] Income  [ ] Balanced growth & income  [ ] Growth  [ ] Aggressive growth
+
+SCORING & RECOMMENDATION:
+
+Risk Capacity Score: ___ / 25
+Risk Tolerance Score: ___ / 25
+Risk Requirement Score: ___ / 15
+
+Overall Risk Profile: [ ] Conservative  [ ] Moderate  [ ] Growth  [ ] Aggressive
+
+Recommended Allocation:
+Stocks: ___%
+Bonds: ___%
+Cash: ___%
+
+Notes:
+________________________________________________________________
+________________________________________________________________
+________________________________________________________________
+
+Advisor Signature: _______________  Client Signature: _______________
+```
+
+## Summary
+
+**Key Principles:**
+
+1. **Three-dimensional assessment:** Capacity, Tolerance, Requirement
+2. **Tolerance is the constraint:** Never exceed emotional tolerance
+3. **Honest self-assessment:** Past behavior predicts future behavior
+4. **Resolve conflicts conservatively:** When scores conflict, use lowest
+5. **Periodic reassessment:** Risk profile changes with age and circumstances
+6. **Allocation must match profile:** Mismatch leads to behavioral errors
+
+**Remember:** The best allocation is one you can stick with through market cycles. It's better to have a moderate allocation you can maintain than an aggressive allocation you'll abandon in a crash. Behavioral discipline matters more than optimal allocation.