Types of Risk Scores
Optimize your investment strategy with Notum's Risk Assessment Framework: Easily navigate risk grades A to F to align your choices with your risk tolerance for better, informed financial decisions.
Introduction
Understanding risk grades is crucial for making informed investment decisions, as they offer a clear indication of potential risks and rewards, helping investors align their choices with their risk tolerance and investment goals.
The Risk Levels and Grades
Notum's Risk Assessment Framework (RAF) evaluates investments considering protocol, asset, and pool risks, providing a comprehensive and nuanced understanding of each investment's risk profile, thus empowering investors to make more informed and tailored investment choices.
In Notum's system, there are 3 risk levels, each characterized by two risk grades.
A and B represent low-risk investments, indicating stable and reliable opportunities;
C and D signify moderate risks, pointing to average investments with some potential drawbacks;
E and F indicate high-risk investments, often with significant issues, suitable for those willing to take greater risks for potentially higher rewards.
How to Use Risk Grades on Notum
Assume you are considering an investment in yCRV, a token associated with Yearn Finance's Curve yield. To make a weighted investment decision, you can navigate to Notum and find required Yearn vault there.
Step 1: Connect to Notum
Log into Notum and navigate to the yCRV page under the investment options.
Step 2: Review the Assigned Risk Grade
On Notum, yCRV is currently assigned a risk grade of 'B', indicating it is a low-risk investment. This suggests stability and a lower likelihood of sudden value fluctuations.
Step 3: Align with Your Investment Strategy
As an investor with a preference for lower-risk, stable investments, the 'B' grade aligns well with your risk tolerance. It suggests that yCRV is expected to offer steady returns with minimal risk exposure.
Step 4: Making the Investment Decision
Given the low-risk grade and your investment profile, you decide to invest in yCRV. This investment complements your strategy, aiming for consistent returns while minimizing risk.
This example illustrates how an investor can use Notum's risk grades to make a balanced and informed decision based on individual risk preferences and investment goals.
FAQs
Conclusion
Notum's risk grades provide valuable insights for informed investment decisions, aligning opportunities with individual risk tolerances and goals. While these grades, ranging from low to high risk, are crucial tools, they should complement a broader investment strategy that includes personal research and market analysis. Utilizing Notum’s comprehensive Risk Assessment Framework empowers investors to navigate the financial landscape more effectively and make decisions that resonate with their long-term investment objectives.
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