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Risk profiling: The basis of a successful investment strategy

A risk profile is a systematic assessment of an individual’s ability and willingness to take financial risks. It forms the foundation of a personalized investment strategy and ensures that investments are aligned with the investor’s financial goals, risk tolerance, and investment horizon.

The five key factors of a risk profile

Risk appetite

The psychological readiness to accept market fluctuations.

Risk tolerance

The financial capacity to tolerate losses without one's stability being impaired.

Investment horizon

The planned duration of an investment which decides the influence of market fluctuations.

Financial objectives

These objectives reflect whether the main goal of investing is capital preservation, maximizing returns, or retirement provision.

Investment experience

Trust in financial markets influences one's behavior in phases of turbulence.

Thorough risk profiling helps investors make informed decisions and plan their investments for the long term.

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Once we have explained the key factors of a risk profile, it is important to understand how these factors contribute to defining and selecting an appropriate investment strategy. One fundamental finding in financial planning is that greater risk appetite generally goes hand in hand with higher expected returns. Investors who are willing to accept more significant market swings can achieve potentially higher returns.

We distinguish between five different risk profiles that pursue different investment objectives:

Income: Capital preservation and stable returns

Yield: Defensive approach

Balanced: Optimal balance between security and return

Growth: Long-term capital growth

Equities: Maximizing capital growth

How to proceed

Establishing a risk profile is a multi-step process

1

Analysis of the individual risk appetite

  • Assessing emotional response to losses.

  • Determining personal return expectations.

  • Assessment based on standardized questionnaires and conversations with specialists.

2

Determination of financial risk tolerance

  • Determining the available capital, debt, and liquidity.

  • Comparing income and potential financial liabilities.

  • Making sure that the investments do not jeopardize one's standard of living.

3

Allocation to an appropriate risk profile

  • Fixed income: Focus on capital preservation and stable returns by investing exclusively in bonds and money market instruments.

  • Yield: Defensive approach with low volatility that complements regular income with a low equity ratio.

  • Balanced: Balance between security and return thanks to a balanced mix of equities and bonds.

  • Growth: Return-oriented strategy with high equity portion to achieve long-term capital gains.

  • Equities: Maximizing long-term capital growth with a full equity allocation and, as a result, higher volatility.

4

Constant monitoring and adjustments

  • Regular monitoring of the strategy, particularly amid changed circumstances.

  • Adjustment of allocation to optimally balance risks and opportunities.

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smzh for you

We support you in developing a sound risk profile and creating a strategy tailored to your individual needs. Our services include:

  • Individual risk analysis – Assessment of your financial and psychological risk tolerance.
  • Customized investment strategies – Development of a portfolio that optimally balances your security and return objectives.
  • Ongoing monitoring – Regular adjustments to your strategy in response to changing market conditions and personal circumstances.
  • Strategic diversification – Optimal allocation of your capital to minimize risks and maximize return opportunities.
  • Long-term support – Personal guidance and regular evaluation of your financial investments.

We handle questions such as those shown on the right on a daily basis. You don't need to deal with them by yourself – our 360° Check-Up is free of charge and non-binding.

A risk profile assesses your willingness and ability to incur financial risks. It helps you develop a suitable investment strategy and avoid losses that might jeopardize your financial stability.

With a detailed analysis of your financial situation, your risk appetite and your investment horizon. Questionnaires and expert analyses help make a sound assessment.

Fixed income: Focus on capital preservation and stable returns by investing exclusively in bonds and money market instruments.

Yield: Defensive approach with low volatility, supplemented by regular income from a low allocation to equities.

Balanced: Strikes a balance between security and returns through a well-diversified mix of equities and bonds.

Growth: Performance-oriented strategy with a high proportion of equities aimed at achieving long-term capital gains.

Equity: Maximizes long-term capital growth through a full allocation to equities, accepting higher volatility as a result.

Yes, especially during life changes such as marriage, retirement, or changes in income. Regular reviews ensure that your strategy remains aligned with your goals at all times.

Your risk profile determines the type of investments that are suitable for you. A conservative investor will prefer more defensive investments, while a more dynamic investor will be willing to tolerate greater fluctuations to achieve higher returns.