Dr. Mary Anne Knolle, PhD, earns Albert Nelson Marquis Lifetime Achievement Award by Marquis Who’s Who!
The SORT Test©: Behavioral Finance Risk Tolerance Assessment
The only scientific test that tells you your investor Coping Strengths And Risk Tolerance (CART) Profile
How does a couple find investments that fit both of their risk tolerances?
First they need to know what both of their risk tolerances are. Then the couple uses both risk tolerances to select investments.
How do my spouse and I find out our risk tolerances?
You both take a Risk Tolerance Questionnaire (RTQ) that is valid and reliable.
How valid and reliable are current RTQs?
Financial Planner Michael Kitces’ article “The Sorry State of Risk Tolerance Questionnaires for Financial Planners” reports a study that Canadian financial planner software provider Plan Plus did on risk tolerance questionnaires all around the world.
(It found) only 10 solution providers (RTQs) of any broad reach, (of those) only 30% were able to document any form of psychometric validity to their risk tolerance questions and process…only 10% had been validated in any way.
What should a risk tolerance questionnaire be based on? What should it do?
Dr. John A. Lutjemeier, a university psychology professor in psychology, tells us.
Such a test should be based on psychological constructs because psychological constructs, such as coping strengths, remain relatively stable throughout life. Further, this test must provide a client risk tolerance in normal conditions as well as stress conditions.
Does The SORT Test© do what an investor risk tolerance test should do?
Yes. Dr. Lutjemeier addresses this.
This test is the ONLY scientific test on the web based on a psychological construct (coping strengths) that assesses client risk tolerances and yields scores in normal and in stress conditions.
To be credible such a test must have validity and reliability. Does it?
Yes. MBA students at Houston Baptist University took this test. They are investors and many are business owners. Dr. Lutjemeier addresses the test’s validity and reliability.
The SORT Test© has both validity and reliability. A valid test measures what it claims to measure.
A reliable test has consistent results when the same person takes the test more than once…its reliability of .75 is an acceptable one, (too).
AN ADVANTAGE: A person takes the SORT on this website. The site stores all scores, and each new SORT test is added to the questionnaire data base. This fact keeps the SORT up to date.
Even 30 years later (or any time) an investor can take the SORT again and revise the investment plan. When a financial planner retires the new financial planner has the client’s SORT Profile.
Ok, the SORT Test© is the only questionnaire that has validity and reliability. What are Coping Strengths?
Coping Strengths are the strategies we use to manage our lives, including our risk tolerance. By knowing both partner’s strengths, a couple can arrive at a harmonious investment strategy.
Each of the four Coping Strengths aligns with one kind of risk.
Coping Strengths and Kinds of Risk
| Coping Strength | Type of Risk |
|---|---|
| Achiever | High |
| Developer | Medium |
| Controller | Low |
| Facilitator | Balanced/Agreement |
What someone with each Coping Strength says
| “I like being an Achiever. | I have to take higher risks to get higher returns, and I will do that. I want 100% of the credit – and the money.” |
| “I am a Developer. | I do want the best. I am willing to take a medium amount of risk to get quality.” |
| “I am comfortable being a Controller. | I am going to play this safe. It’s low risk that works for me. I carefully analyze all options.” |
| “I like being a Facilitator. | I want others to be happy with what we invest together. I want us to get agreement on what to invest.” |
A person’s Coping Strengths and Risk Tolerance (CART) Profile shows the percent that the s/he wants to invest in each kind of risk – in Normal and Stress Conditions.
Ted’s Coping Strength And Risk Tolerance (CART) Profile
This is Ted’s Profile – but he did not know that.
1. In February, 2020 the market was close to its all time high. He is an Achiever. He put 50% of the family assets in with High Risk investments, 30% in Medium Risk, 0% in Low Risk, and 20% in Balanced Risk (money that he and his wife agree on what to invest). He was buying what is his Normal Coping Strength.
2. His portfolio loses 35% by March 23, 2020.
3. He wonders, “Why did I ever put 50% in High Risk investments?”
4. In his Stress Conditions he wishes that he had 0% of his portfolio in High Risk, 20% in Medium Risk, 50% in Low Risk, and 30% in Balanced Risk.
5. Ted’s wife Doris is very conservative – and is furious. She says, “You put 50% of our money in High Risk. Lost 35%! We are going to our financial planner and completely revising our portfolio – I will NOT let this happen again!”
This never has to happen to you and your spouse.
Why? The SORT Test© TELLS you that this is your Coping Strengths and Risk Tolerance (CART) Profile – in Normal and Stress Conditions.
You can buy your AVERAGE CART: 25% in High Risk, 25% in Medium Risk, 25% in Low Risk, and 25% in Balanced Risk.
If you are married: You and your spouse can each take The SORT Test©. Buy the AVERAGE CART of both scores. Or use them to structure a portfolio – or revise one.
Next you see how to take the test. You also see Ted’s and Doris’ Normal Coping Strength Profiles.
