Risk tolerance, a person's attitude towards accepting risk, is an important concept that has implications for both financial service providers and consumers. This paper attempts to characterize and profile the individual investor in order to determine whether the variables—age, occupation, designation, income and dependants—impact the risk appetite of an investor. The paper draws on data collected from the clients of an international bank operating in India. The data are analyzed in two stages. In the first stage, it analyzes whether demographics impact the risk appetite of an investor or not. In the second stage, it analyzes as to where people having specific demographics and risk appetite invest their money in reality. Some of the key findings are that age, salary and designation do impact the risk appetite of an investor. However, in reality, investors tend to invest in average risk mutual funds, irrespective of their demographics and risk tolerance. The findings provide some opportunities for purveyors of financial services to be selective in their approach to various groups of individual investors.

Risk tolerance, a person's attitude towards accepting risk, is an important concept that has implications for both financial service providers and consumers. For the latter, risk tolerance is one factor which may determine the appropriate composition of assets in a portfolio, which is optimal in terms of risk and return relative to the needs of the individual. Risk is often defined as portfolio volatility, or the fluctuation in the value of assets over time. At a personal level, risk can mean the chance that one will not achieve one's goals or the risk of losing one's savings. Understanding tolerance for risk, which differs for each investor, is a key to choosing an investment program. The tolerance for risk is a very personal characteristic that may be difficult to determine and may change over time.

Despite its importance in the financial services industry, there remain some unresolved questions with respect to the `determinants' of risk tolerance. Although a number of factors have been proposed and tested, a brief survey of the results reveal a distinct lack of consensus. First, it is generally thought that risk tolerance decreases with age (Wallach and Kogan, 1961; Mclnish, 1982; Morin and Suarez, 1983; and Palsson, 1996), although this relationship may not necessarily be linear (Riley and Chow, 1992; and Bajtelsmit and VanDerhai, 1997). Investment managers use this input (age) as a measure of the time remaining until a client's financial assets are needed to meet goals and objectives. In addition to being used as a proxy for time, investment managers also use age as a measure of someone's ability to recoup financial losses. Income and wealth are two related factors that are hypothesized to exert a positive relationship on the preferred level of risk (Lee and Hanna, 1991; Riley and Chow, 1992; and Schooley and Worden, 1996).

Investor Profiling, Investment Planning, Risk tolerance, Financial service providers, Risk mutual funds, Individual investors, Investment managers, Financial assets, Financial goals, Financial planning, Survey of Consumer Finances, SCF, Demographic variables.