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The purpose of this risk profiling assessment is to accurately determine the parameters of your investment portfolio by measuring your attitude and tolerance to investment volatility and risk. All individuals have varying knowledge, behaviours, preferences and tolerances to investments and the variability and volatility of their returns and values. This is especially acute during severe market corrections or prolonged recessions.
Please answer the questions below without referring to anyone for assistance. It is important that your answers are not influenced by your advisor or anyone else. Couples are required to complete the assessment separately and independently.
The value and income of any of the securities or investments and the price of shares and the income derived from them, which are recommended by Yellow Capital, may fall as well as rise. Investors may not receive the original amount invested in return. Investors should also be aware that past performance is not a guide to future performance.
Investment risk as defined by the dictionary is the permanent loss of capital. Many theoretic and scientific measures and analyses of risk have been developed; such as CAPM, Value at Risk and Standard Deviation. These measures have created a pseudo science of risk that is dependent on historic data in an unpredictable world of finance. Investing in the stock market is risky and it carries much volatility, therefore one must reasonably expect the possibility of a loss of capital value if you are investing for the shorter-term. Investing in the stock market is by its nature a long-term exercise.
Volatility is not an accurate measure of risk and should not be relied upon; Yellow Capital does not share the common view of risk as variation or volatility of returns. While the stock market is inherently unpredictable, the investment process and strategy followed by Yellow Capital is predictable and stable.
Yellow Capital developed its risk assessment system from the work and research carried out by James Montier, a Chartered Financial Analyst and author of Behavioural Finance and Behavioural Investing.
Behavioural finance is now a recognized feature in most business schools and leading investment firms. Human behaviour (bias) is proven to be the single largest contributing factor to poor investment performance. Discipline and non-emotionally charged thought patterns are vital to success in the stock market.
Date: 24 May 2013