Yahoo, in association with Hansi Mehrotra, presents ‘#Ask Hansi’ a new series to help you get a better grasp of mutual funds and how you can invest smartly. Firstly, risk appetite…risk tolerance… risk profile…these are subjective terms. You can’t calculate or measure it in an objective way. All these terms are trying to measure two things. One is, how much risk you need to take to get from what you have today (say x) to what you’re going to retire on (say y). Note the gap may be such that you need to take a lot of risk. Say you need to be fully invested in equities to get your 10-15% return. But that may cause you to panic. So the sleep at night factor is the other aspect. So, one way to measure it is to do one sort of ‘balanced risk profile’, and divide your portfolio accordingly. Another simpler way to do it is simply divide your portfolio up into three-four buckets. One bucket goes into very safe assets. That is what you might need in the short term. And then there is another bucket that goes into fully into equities, and that is your retirement bucket so you can get invested and forget about it, you really never want to touch it until you retire. So, that way you don't have to calculate anything, you just divided up by time horizon. Hansi Mehrotra, a CFA with global experience and founder of The Money Hans, is a celebrity in the world of personal finance in India. A powerful influencer on in the corporate/banking/finance circles. She creates fine personal finance content that simplifies complex issues into easy-to-understand stuff which lay people can identify with.