Overview

We review your managed portfolio’s risk assessment yearly to ensure you’re on track to achieving your goals. This is our opportunity to give you an updated recommendation if you’re getting closer to your goal, or your information or goals have changed.

We'll send you an email and prompt you in the Wealthsimple app when it's time to complete your risk assessment. 

Understanding risk assessments

A risk assessment is a snapshot of your current financial situation that helps us select the most suitable portfolio for you. We recommend a portfolio that provides the highest likelihood of success by the time you need to access your money.  

A risk assessment considers your household financials, your goals, the importance of achieving those goals within a set time frame, and your comfort with price fluctuations.  

A successful portfolio offers a good range of potential outcomes for your goal, and we want to help you avoid outcomes that could prevent you from achieving what you want. Generally, the riskier the portfolio, the wider the range of potential outcomes.  

We consider four risk dimensions in your assessment:

1. Portfolio risk
2. Risk required
3. Risk capacity
4. Risk tolerance

We'll recommend a portfolio that aligns with your goals and gives you the highest chance of achieving them, whether it performs near the top or bottom of the expected range.  

Graph description: Range of returns assumes historical standard deviation and long-term cash rate and Sharpe ratios. Likely performance reflects returns between the 35th and 65th percentile. Less likely performance reflects returns between 10th and 35th percentile and the 65th and 90th percentile. Wealthsimple returns are based on performance composite and are shown net of fees. Past performance is not indicative of future performance.

Information we collect in your risk assessment

To provide an accurate assessment, we collect the following information:

• Household financials
• Account goals
• Risk tolerance

It's important to share accurate details so we can recommend the right portfolio for you.

Household financials

Household financials include your income, current savings, the value of your assets, and the value of your debts.  

• Your income indicates your tax bracket and helps us make your portfolio tax-efficient.
• The value of your savings across all bank and investment accounts shows us whether you can support yourself in an emergency. This can impact your capacity to take on risk.
• The value of your assets and debt indicates whether you're in a position to take on risk based on how much you've borrowed and need to repay. It isn't a good idea to invest when you have high-interest debt because your money should go towards paying it down. An investment portfolio is unlikely to provide a better, consistent return than the ongoing cost of your debt, which also limits your capacity to take on risk.

Account goals

Your account goals are what you're saving for and when you'd need to withdraw the money. This also tells us how much risk you need to take to achieve your goals.  

• If you have a long-term goal to maximize wealth, you tend to need more portfolio risk because expected returns are higher, and you accept the lower end of the expected outcome.
• If you have a goal of ensuring that you can make a specific payment in the short term and you're on track to have saved most of the money required, you tend to need a less risky portfolio.  
• Many investors approaching retirement still need to take on risk to meet spending goals. This is because they will hopefully have a long time to spend the money they have saved.

Risk tolerance

Investing can be unpredictable with inevitable ups and downs. Your risk tolerance indicates your willingness to withstand negative portfolio outcomes without making a panic-based investment decision.  

Our data suggests that most investors can withstand portfolio volatility and stay invested. However, some make damaging decisions, like exiting the market after a loss. These kinds of decisions can hurt long-term outcomes, so we try to help investors assess their ability to withstand these outcomes.  

We offer a lot of support for investors through the emotional process of withstanding volatility. We also offer lower risk portfolios to investors who don't believe they can withstand market volatility. The best portfolio is one that you can stay invested in. More experienced investors might consider how they've handled losses in the past and what they've learned to predict their future behaviour.  

Review your recommendation

Once you've updated all your information, we'll make new portfolio recommendations that align with your goals at this point. If your risk assessment is similar to the last time you took it, you might receive a recommendation to keep your portfolios as they are.  

Changing your risk level or theme

You can change your risk level or theme at any time. You don't have to wait for the risk assessment to make a change. To change your risk level or theme, follow these instructions.