Ch.6 · ARN and EUIN Rules · medium
What is risk profiling and why is it essential before recommending mutual funds?
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EXPLANATION
Risk profiling is the process of assessing an investor's risk tolerance (psychological comfort with loss), risk capacity (financial ability to absorb losses), and risk need (returns required to meet goals). It is essential to ensure the recommended scheme's risk level matches the investor's profile, preventing unsuitable investments.
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