Understanding Risk Scores

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What is a Risk Score?

Your risk score (0-100) reflects your comfort with APY fluctuations, not the risk of losing your principal.

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The Three Risk Profiles

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Steady (Score 0-40)

Profile Description: With a risk score in this range, you prefer consistent, predictable growth with minimal APY fluctuations. Ideal for:

• Conservative investors who value stability
• Users who want to see steady, predictable balance growth
• Those depositing significant amounts ($50k+) who prioritize peace of mind
• Long-term wealth builders who don’t want daily volatility

What to expect:

• APY: Typically 5-15% annually
• Volatility: Very low - APY stays relatively consistent day-to-day
• Growth pattern: Smooth, predictable compound curve
• Strategy: Focus on the most stable yield sources with proven track records

Example: You deposit $100k. Your balance grows steadily at ~8% annually. You check your balance weekly and always see predictable upward movement.

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Balanced (Score 40-75)

Profile Description: With a risk score in this range, you’re comfortable with moderate APY variance to capture higher yield opportunities. Ideal for:

• Investors who want growth without extreme swings
• Users comfortable with some weekly variance in returns
• Those who understand markets fluctuate but want exposure to opportunities
• Medium-term investors (6-24 months)

What to expect:

• APY: Typically 5-20% annually (higher average than Steady)
• Volatility: Moderate - APY may range 10-18% week to week
• Growth pattern: Generally upward with some variance
• Strategy: Mix of stable sources plus tactical allocations to capture opportunities

Example: You deposit $10k. Some weeks you earn 14%, other weeks 18%. Over the year, you average 16% - higher than Steady profile.

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Opportunistic (Score 75-100)

Profile Description: With a risk score in this range, you embrace APY fluctuations to maximize long-term returns and capture the best yields. Ideal for:

• Aggressive yield seekers who understand DeFi volatility
• Users who don’t check balances daily
• Those comfortable seeing significant APY swings
• Long-term holders (1+ years) focused on total returns

What to expect:

• APY: Typically 5-25%+ annually (highest long-term returns)
• Volatility: High - APY might range 8-25% day to day
• Growth pattern: Strong upward trajectory with significant variance
• Strategy: Maximum yield optimization, capturing opportunities across all vetted protocols

Example: You deposit $5k. Monday you earn 1%, Wednesday 2%, Friday 1.5%. Some days are lower, some much higher. By year-end, you’ve earned 23% - significantly higher than other profiles.

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How Your Risk Score is Determined

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Initial Assessment

When you first join Sprout, you complete a questionnaire covering:

1. Financial Goals: Emergency fund, retirement, major purchase, wealth building
2. Time Horizon: Short-term (< 6 months), medium (6-24 months), long-term (2+ years)
3. Volatility Comfort: How you react to negative days, market swings
4. Past Behavior: How you’ve historically managed investments

This generates your starting risk score.

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Behavioral Learning Engine

Here’s where Sprout gets smart. Over time, we observe your actual behavior: What we track:

• How quickly you add funds during market dips
• Whether you withdraw during temporary downturns
• How you respond to APY fluctuations
• How long you maintain positions
• Your reaction to portfolio rebalancing

Why this matters: Most people’s stated risk tolerance differs from their revealed risk tolerance. You might say you’re conservative, but if you consistently buy dips and never panic-sell, your true risk tolerance is higher. Example:

• User claimed “conservative” (score 30) in questionnaire
• But consistently added funds during market dips
• Never withdrew during volatility
• After 4 weeks, behavioral engine adjusted score to 65
• Strategy shifted to Balanced profile
• Result: 40% higher returns by matching true risk tolerance

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Continuous Adaptation

Your risk score isn’t static. As your behavior evolves, so does your score:

• More confident? Score gradually increases
• Less comfortable? Score gradually decreases
• Life changes? Manually adjust in settings anytime

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Common Misconceptions

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”A score of 90 means I could lose 90% of my money”

False. Your risk score has nothing to do with potential losses. It reflects APY volatility comfort. All three profiles use the same vetted, audited protocols. A score of 90 doesn’t mean riskier protocols - it means more variable APY.

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”Higher risk score = always better returns”

Not necessarily. Higher scores target higher long-term returns, but:

• Some years Balanced might outperform Opportunistic
• Market conditions matter
• Your emotional comfort matters more than marginal return differences

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”I should maximize my risk score”

Only if you’re truly comfortable with volatility. The best risk score is the one that matches your actual emotional tolerance. A Steady profile that you stick with through all markets will outperform an Opportunistic profile you panic-exit during downturns.

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Risk Score vs. Safety

Let’s be crystal clear on what changes across risk profiles: What DOES change:

• APY volatility (day-to-day variance)
• Allocation mix (stable vs. opportunistic strategies)
• Rebalancing frequency
• Your emotional experience

What DOES NOT change:

• Protocol safety standards (all vetted and audited)
• Risk management processes
• On-chain monitoring
• Diversification principles
• Your ability to withdraw

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Adjusting Your Risk Profile

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When to Consider Adjusting

Increase your score if:

• You’re consistently comfortable during APY swings
• You’re adding funds during market dips
• You want to capture more yield opportunities
• Your financial situation has improved

Decrease your score if:

• You’re checking your balance anxiously every day
• Temporary negative days cause stress
• Your financial situation requires more stability
• You’re approaching a date when you’ll need the funds

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How to Adjust

1. Navigate to Settings
2. Select Risk Profile
3. Adjust your score
4. Confirm changes
5. Your strategy will rebalance within 48-72 hours

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The All-Weather Philosophy

Regardless of your risk score, Sprout builds all-weather portfolios designed to earn through both bull and bear markets. Your risk score determines how we optimize within that framework - not whether we can deliver consistent yields.