Exposure to a certain amount of risk is a central element of investment decisions. A risk profile is an evaluation of an individual’s willingness and ability to accept and take on risks. Risk profiling is a process adviser’s use to help determine a client’s tolerance to risk and is important for determining the appropriate asset allocation for that client.
As a general rule, the younger you are the greater amount of risk you can tolerate, and as you get older your risk tolerance reduces, but this is not always the case. Your risk profile can change over time and should be reviewed periodically.