> ## Documentation Index
> Fetch the complete documentation index at: https://docs.sproutfi.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# Understanding Risk Scores

> Your risk score is the foundation of your personalized yield strategy

## What is a Risk Score?

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

<Warning>
  A higher risk score doesn't mean your funds are more at risk. It means you're comfortable with more variable daily APY in exchange for potentially higher long-term returns.
</Warning>

## The Three Risk Profiles

### 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.

### 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.

### 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.

## How Your Risk Score is Determined

### 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.

### 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

### 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

## Common Misconceptions

### "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.

### "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

### "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.

## 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

## Adjusting Your Risk Profile

### 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

### 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

<Note>
  You can adjust anytime. There's no penalty for changing your mind.
</Note>

## 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.