Multi-asset: Are some risk-rated funds inherently flawed?

There is one thing all risk profiling approaches have in common: assessing a customer’s capacity for loss. This is critical to sound financial advice because there is an enormous amount of evidence suggesting that, when capacity for loss is exceeded, investors make obvious investment mistakes, such as selling out at the bottom and buying back in once the market has gone up again. There are many ways of assessing capacity for loss. One way is to ask the question directly with a so-called psychometric assessment designed to understand what type of personality an investor has in an attem...