Investment assessment: why is it important?

Modified on Fri, 20 Feb at 5:30 PM

Investment assessments: why they matter?

Investment assessments help match you with products that fit your knowledge, experience, and risk tolerance. They are not a “test to pass” — they’re a way to check whether certain products (especially higher-risk ones) are appropriate for your profile. Your answers can affect which products you can access, so it’s important to complete the assessment carefully and honestly.

Risk: the essential starting point

All financial products involve risk. There are no risk-free investments and no guaranteed returns. You can lose some or all of your invested capital. Leveraged products can increase both potential profits and potential losses — and losses can happen faster.

Choosing an approach: CFDs vs traditional investing

A key part of the assessment is understanding how you prefer to invest or trade:

CFD trading tends to suit people who are active: follow news and charts, react to market movements, and may use leverage.

Traditional investing tends to suit people who prefer a steadier, long-term approach with less frequent activity and no leverage.

Market exposure: how you participate

Market exposure describes how you access the market:

Traditional products are often used for long-term investing.

CFDs are more flexible and can allow trading in both rising and falling markets — but they typically involve higher risk ? and also potentially require higher deposits to keep a position in the market when required.

Leverage and margin - core concepts for CFDs

Leverage lets you open a larger position with a smaller amount of your own money.

Example: to open a €1,000 position with a 20% margin requirement, you may deposit €200. But if the market moves against you, losses are based on the full €1,000 position, which can quickly reduce or exceed your €200 margin..

Margin is not a fee. It’s the minimum amount needed to open and keep a leveraged position.

If your margin level drops too low, you will receive a notification that your position is at risk to be closed - Margin Call, or even get your position closed automatically by Stop out, starting with the most unprofitable one.

Why CFDs require more knowledge and experience

CFDs can be useful for experienced traders because they offer flexibility and leverage, but they are not suitable for everyone. To trade CFDs responsibly, you need to understand:

margin requirements

how leverage increases exposure and risk

how losses can grow

risk-management tools and how to use them

If you’re still building experience, it may be more suitable to start with non-leveraged products such as shares or ETFs (on Invest accounts) and move to leveraged products later.

Experience, risk management, and loss tolerance

Experience isn’t only “live trading.” Learning basics, following markets, and practising on a demo account all help build real understanding.

Risk can be managed with tools and habits such as:

stop-loss orders

appropriate position sizing

diversification

discipline and planning

Loss tolerance means understanding how much of your deposited funds you could realistically afford to lose and honestly assessing what level of risk you are comfortable taking — especially when trading leveraged products.

Leveraged products significantly increase your exposure to risk. If you trade CFDs, it is particularly important to carefully consider this when completing the assessment or suitability test.

Complete assessments carefully

Investment assessments work best when you answer thoughtfully and truthfully. They’re designed to help ensure the products you use match your profile — and to support more informed decision-making as you invest and trade.