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The Risk Number is a proprietary scaled index developed by Riskalyze to reflect a “risk score” for your unique Risk Fingerprint, or for a specific portfolio of investments. As you can see, it’s shaped like a speed limit sign, so a higher Risk Number means a higher level of risk and potential return.
Your unique Risk Fingerprint is a multi-dimensional variable reflecting the complexity of your specific risk tolerance. On the other hand, the Risk Number is a single-dimension variable designed to approximate the relative risk between people or portfolios. Thus, a “45” portfolio generally has more risk than a “44,” but two “45” portfolios may be quite different from each other.
The Risk Number is the first step, but the real challenge is in turning your multi-dimensional Risk Fingerprint into a comfort zone… a certain amount of downside risk you are comfortable taking over a six month timeframe, in exchange for the opportunity to achieve a certain amount of return.