Financial Product Risk Classification
CHEEK DEREK KRISTOPHER LLC
Company ID: 23669602 | EIN: 99-2559374
CRD Number: 6694 | SEC Number: 8-17983
Address: 4724 N 78th Dr, Phoenix, AZ 85033
President: Derek Kristopher Cheek
7-Level Risk Classification System
Our comprehensive risk classification system categorizes financial products into 7 distinct risk levels,
providing clear guidance for investors based on their risk tolerance and investment objectives.
Level 1 - Extremely Low Risk 🟢
- Expected Loss Probability: < 1%
- Volatility Range: < 5%
- Prediction Confidence: > 95%
- Typical Products: Money market funds, savings accounts, short-term CDs, Treasury bills
- Suitable For: Conservative investors seeking capital preservation
- Expected Returns: 1-3% annually
Level 2 - Low Risk 🟢
- Expected Loss Probability: 1-3%
- Volatility Range: 5-10%
- Prediction Confidence: 85-95%
- Typical Products: Government bonds, high-grade corporate bonds, bond funds
- Suitable For: Conservative to moderate investors
- Expected Returns: 2-5% annually
Level 3 - Low-Medium Risk 🟡
- Expected Loss Probability: 3-8%
- Volatility Range: 10-15%
- Prediction Confidence: 75-85%
- Typical Products: Large-cap stocks, balanced funds, investment-grade bonds
- Suitable For: Moderate investors seeking growth with stability
- Expected Returns: 4-8% annually
Level 4 - Medium Risk 🟡
- Expected Loss Probability: 8-15%
- Volatility Range: 15-20%
- Prediction Confidence: 65-75%
- Typical Products: Mid-cap stocks, equity funds, REITs
- Suitable For: Moderate to aggressive investors
- Expected Returns: 6-12% annually
Level 5 - Medium-High Risk 🟠
- Expected Loss Probability: 15-25%
- Volatility Range: 20-30%
- Prediction Confidence: 55-65%
- Typical Products: Small-cap stocks, sector funds, high-yield bonds
- Suitable For: Aggressive investors seeking higher returns
- Expected Returns: 8-15% annually
Level 6 - High Risk 🔴
- Expected Loss Probability: 25-40%
- Volatility Range: 30-40%
- Prediction Confidence: 45-55%
- Typical Products: Emerging market stocks, commodities, leveraged ETFs
- Suitable For: Very aggressive investors with high risk tolerance
- Expected Returns: 10-20% annually
Level 7 - Extremely High Risk 🔴
- Expected Loss Probability: > 40%
- Volatility Range: > 40%
- Prediction Confidence: < 45%
- Typical Products: Penny stocks, cryptocurrencies, derivatives, options
- Suitable For: Professional investors only
- Expected Returns: 15-30%+ annually (with high volatility)
Product Type Classification
| Product Category |
Risk Level |
Typical Volatility |
Expected Returns |
Liquidity |
| Cash & Money Market |
Level 1-2 |
< 5% |
1-4% |
High |
| Government Bonds |
Level 2 |
5-8% |
2-5% |
High |
| Corporate Bonds |
Level 2-4 |
8-15% |
3-8% |
Medium-High |
| Large-Cap Stocks |
Level 3-4 |
15-20% |
6-10% |
High |
| Mid-Cap Stocks |
Level 4-5 |
20-25% |
8-12% |
Medium |
| Small-Cap Stocks |
Level 5-6 |
25-35% |
10-18% |
Medium-Low |
| Emerging Markets |
Level 6-7 |
30-50% |
12-25% |
Low |
| Derivatives |
Level 6-7 |
40-100%+ |
Variable |
Variable |
Investor Risk Tolerance Matching
Understanding your risk tolerance is crucial for making appropriate investment decisions.
Our system matches investment products with investor profiles:
Conservative Investors (Risk Tolerance 1-3)
- Profile: Capital preservation priority, low volatility tolerance
- Recommended Products: Level 1-3 products
- Asset Allocation: 70-80% bonds, 20-30% stocks
- Target Returns: 2-6% annually
- Time Horizon: Short to medium term (1-5 years)
Moderate Investors (Risk Tolerance 3-5)
- Profile: Balanced approach, moderate volatility tolerance
- Recommended Products: Level 2-4 products
- Asset Allocation: 50-60% stocks, 40-50% bonds
- Target Returns: 4-10% annually
- Time Horizon: Medium to long term (5-15 years)
Aggressive Investors (Risk Tolerance 4-6)
- Profile: Growth priority, high volatility tolerance
- Recommended Products: Level 3-6 products
- Asset Allocation: 70-80% stocks, 20-30% bonds
- Target Returns: 8-15% annually
- Time Horizon: Long term (10+ years)
Professional Investors (Risk Tolerance 5-7)
- Profile: Sophisticated investors, very high volatility tolerance
- Recommended Products: Level 4-7 products
- Asset Allocation: Diversified across all asset classes
- Target Returns: 10-20%+ annually
- Time Horizon: Variable, often short-term trading
Risk Assessment Methodology
Our risk classification is based on multiple quantitative and qualitative factors:
- Historical Volatility: 1-year, 3-year, and 5-year volatility analysis
- Maximum Drawdown: Largest peak-to-trough decline in value
- Value at Risk (VaR): Potential loss at 95% confidence level
- Beta Coefficient: Sensitivity to market movements
- Sharpe Ratio: Risk-adjusted return measure
- Liquidity Analysis: Market depth and trading volume
- Credit Risk: Default probability and credit ratings
- Market Conditions: Performance across different market cycles
Important Disclaimers
- Risk classifications are based on historical data and may not reflect future performance
- Individual investor circumstances may require different risk assessments
- Market conditions can change rapidly, affecting risk levels
- Past performance does not guarantee future results
- Investors should consult with qualified financial advisors before making investment decisions
- All investments carry risk of loss, including potential loss of principal
Last updated: January 2024
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