The Risk Tolerance Questionnaire

WHAT IS RISK TOLERANCE?

A psychological aspect of investing that relates to a person’s level of comfort in taking financial risk.
It helps determine an investor’s willingness to lose some or all of an investment in exchange for greater potential returns.
Investors generally differ in the amount of risk they feel comfortable taking.
While some people embrace risk, others may tend to avoid it at all cost.
 

Developed in 1999 by Professors
John Grable and Ruth Lytton to
assess financial risk tolerance.

Published in Financial Services
Review (FSR) and referenced in over a
hundred research publications.

Follow-up study in 2015 analyzed
160,279 investor responses and
confirmed the reliability of the RTQ.

13

Multi-choice questions

.77

Cronbach’s alpha score

19

Years in use

200,000+

Completed questionnaires

THE RESULTS

The RTQ results are scaled from 0 to 100, with 0 being the least comfortable taking financial risk and 100 the most comfortable.

The question responses should be used by an advisor to stimulate further discussion around risk with clients.

Advisors should use their best professional judgment in constructing an appropriate asset allocation based on the risk tolerance results, alongside other vital factors such as investment objective, risk need, capacity for loss and individual circumstances.