How the investor profile is scored

How Ironlake turns your investor profile answers into risk capacity, tolerance, and need scores, and how it finds the return your plan requires.

Your written investment plan (IPS) starts with an investor profile: your objectives, your circumstances, how you respond to losses, and the stock range you choose. Ironlake keeps three risk measures separate, because they answer different questions and the lowest of them usually matters most. Every score is computed from your saved answers, so the same answers always produce the same scores. Ironlake never turns these scores into an allocation; you choose your own stock range.

Capacity: what your finances can absorb

Capacity asks how far the portfolio could fall before your plans change, regardless of how the loss would feel. Several answers start from your own records (your net worth, liabilities, and mortgages) and you can change any of them. Cash you hold outside the portfolio is something you enter, because recorded balances can't separate it from cash inside the portfolio. Each becomes a component from 0 to 10, and the components are averaged onto the 1-to-10 scale:

Time until the money is spent: years until withdrawals begin plus half the years they last. Twenty-five years or more scores 10.
Reserves outside the portfolio: cash set aside for spending, in years of spending. Three years or more scores 10.
Other income in retirement: Social Security, pensions, and similar income as a share of yearly spending, each source counted for the share of the withdrawal years it is paid (a pension starting halfway through counts half). Eighty percent or more scores 10.
Assets outside the portfolio: the smaller the portfolio's share of net worth, the more other assets cushion a loss. A 40% share or less scores 10; a 100% share scores 0.
Debt: debt as a share of assets. None scores 10; half or more scores 0.
Steadiness of earned income: steady earnings 9, no reliance on earnings 6, variable 5, uncertain 2.

The score needs the year withdrawals begin and at least three components. Optional questions you skip are left out rather than counted as zero.

Tolerance: how you respond to losses

Tolerance is measured three ways, because each one alone can mislead:

What you did: your actual actions in 2008, March 2020, and 2022. Past behavior is the best guide, so it carries 50% of the weight. If you were not investing in any of those periods, a single backstop question takes its place.
What you'd do: your choice after a 25% and a 40% decline in your own dollars, and the range of one-year results you would accept. It carries 30%.
How it would feel: how long you could stay below your starting value and how a 20% decline would feel. It carries 20%.

The weights are applied only to the parts you answer. When two parts are three or more points apart, the profile shows the difference rather than hiding it in the average.

Need: what the plan requires

Need asks how much return your plan actually depends on. Ironlake runs its deterministic projection engine in today's dollars: starting from your portfolio value, it adds your yearly savings until withdrawals begin, then withdraws your yearly spending, adds other income from the year each source starts, and places major expenditures and expected inflows in their years. It then searches for the lowest constant return after inflation, from 0% to 10% in quarter-point steps, at which the money lasts to your planning age and leaves the amount you want to leave.

Two results get their own message. If the plan works even at a 0% return after inflation, it does not depend on investment growth. If no return up to 10% works, the plan as written needs another look, and you can enter a required return yourself. The need score compares the required return with your linked model's expected return, so it appears once a model is linked.

Approach and philosophy

The profile also records how you invest and why. The approach questions (your experience, how involved you want to be, the building blocks you prefer, and limits such as the most you will hold in individual stocks, alternatives, or investments you cannot sell for a year or more) become part of the written plan. Ironlake uses your interests and avoids only as your own statement of preference and never uses them to suggest a fund or security.

The philosophy questions ask what the money is for, what enough would look like, and whether you would choose the highest long-run result or a plan you can stick with when the two conflict. Ironlake can string your answers into a draft paragraph, which you edit and save in your own words, along with a note to read the next time markets fall hard.

Limitations (read these)

Taxes on withdrawals are not modeled. Enter spending as the amount you expect to draw.
Returns are constant and inflation is set to zero so every figure stays in today's dollars. The projection page shows conservative and stressed paths; this calculation is the base case only.
One planning age. The plan uses one age and one withdrawal year for the household.
Not advice. The scores describe your own answers. The stock range is your decision.