A Guide to Risk Profiles | Charles Schwab

A Guide to Risk Profiles

September 30, 2024
Understanding where your portfolio is positioned across the risk spectrum from Conservative to Aggressive Growth is key to understanding how it would be expected to perform over time and in different market environments.

At Schwab, we believe investing in a diversified portfolio in line with the risk and return suited to your needs, staying the course and ignoring short-term market noise will help you achieve long-term investment success.

When you opened your account, you answered a series of questions about your goals and risk tolerance to place you into a portfolio best suited to your needs. Schwab Intelligent Portfolios® then provided a tailored portfolio from more than 80 variations (Figure 1).

Figure 1: 81 Total portfolios with portfolio features

Portfolio Strategies for global, US-focused and Income-focused portfolios and their features

Within your portfolio, there are many potential combinations of stocks, fixed income, and cash. Each combination entails different levels of risk. For example, an investor saving for retirement 30 years down the road might consider a portfolio that has higher volatility in the short-term in exchange for higher long-term returns. This type of portfolio would be more aggressive, meaning it has a greater allocation to stocks over fixed income and cash. By contrast, an investor nearing retirement or uncomfortable with volatility in returns would invest in a more conservative portfolio with a greater allocation to fixed income and cash instead of stocks.

Your recommended balance of risk and return, or "risk profile," informs which portfolio is recommended for you. Figure 2 provides a guide to the different risk profiles based on stock allocation, as well as descriptions of each risk profile.

Figure 2: Risk profiles across the spectrum for Schwab Intelligent Portfolios

Risk profileStock allocationDescription
Conservative20%These portfolios emphasize defensive asset classes such as Treasury Bonds and Cash while holding moderate amounts of volatile investments such as Stocks.
Moderately Conservative29–37%These portfolios have slightly more Stocks than the most conservative portfolios but emphasize less volatile asset classes such as Bonds and Cash.
Moderate42–50%These portfolios hold more Stocks than more conservative offerings but also include more stable Bonds and Cash to help moderate volatility.
Moderate Growth58–66%These portfolios have a sizable Stock allocation, as they are designed for moderate growth. The Bond allocation includes more stable asset classes such as Treasuries but can also include High Yield Bonds and Emerging Markets Bonds, which can be more volatile but provide diversification and upside potential.
Growth72–81%These portfolios have a large allocation to volatile asset classes such as Stocks, Real Estate Investment Trusts (REITs) and Emerging Markets Bonds. Cash helps provide some stability.
Aggressive Growth88–94%These portfolios emphasize volatile assets such as Stocks and have minimal defensive asset classes such as Cash.

Source

Charles Schwab Investment Management, Inc. as of 9/30/2024.

To determine your risk profile, log in to your dashboard and check the Portfolio tab. Use your stock allocation percentage to identify your risk profile using the table in Figure 2.

Figure 3: Example of a client's portfolio page

This client has 41.48% of their portfolio in stock, which is considered a Moderate portfolio.

Example of a client's portfolio page

For illustrative purposes only. Individual situations will vary.

Understanding your risk profile is key to helping you stay focused on your longer-term goals

Schwab Intelligent Portfolios recommends a diversified portfolio based on your goals, time horizon, and risk profile and keeps your allocation consistent through automated rebalancing as markets fluctuate to help you stay focused on your longer-term financial goals. Understanding where your portfolio is positioned across the risk spectrum from Conservative to Aggressive Growth is key to understanding how it would be expected to perform over time and in different market environments.

Please read the Schwab Intelligent Portfolios Solutions disclosure brochures for important information, pricing, and disclosures relating to Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs.

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are made available through Charles Schwab & Co., Inc. ('Schwab'), a dually registered investment adviser and broker-dealer. Portfolio management services are provided by Charles Schwab Investment Management, Inc. ("CSIM"). Schwab and CSIM are subsidiaries of The Charles Schwab Corporation.

The cash allocation in Schwab Intelligent Portfolios Solutions will be accomplished through enrollment in the Schwab Intelligent Portfolios® Sweep Program (Sweep Program), a program sponsored by Charles Schwab & Co, Inc. By enrolling in Schwab Intelligent Portfolios Solutions, clients consent to having the free credit balances in their Schwab Intelligent Portfolios Solutions brokerage accounts swept to FDIC-insured Deposit Accounts at Charles Schwab Bank, SSB through the Sweep Program. Funds deposited at Charles Schwab Bank, SSB are insured, in aggregate, up to $250,000 per depositor, for each account ownership category, by the Federal Deposit Insurance Corporation (FDIC). The interest rate on cash balances in the Sweep Program is set on the first business day of each month equal to the seven-day yield (with waivers) for the Schwab Government Money Fund – Sweep Shares (symbol: SWGXX) as determined at the end of the prior month. See Current Interest Rates for more details. Charles Schwab Bank, SSB is affiliated with Charles Schwab & Co., Inc. and Charles Schwab Investment Management, Inc. Certain conditions must be satisfied for FDIC insurance coverage to apply. Charles Schwab & Co., Inc. and Charles Schwab Investment Management Inc. are not FDIC-insured banks and deposit insurance covers the failure of an insured bank.

Diversification, asset allocation, automatic investing and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets.

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