# PRAAMS FAQ ## PRAAMS Personal ### What is PRAAMS Personal? PRAAMS Personal is an investment research app for individual investors. It turns the risk and return of any stock, bond or ETF into one number — the PRAAMS Ratio — so you can compare assets, screen markets and build a portfolio without spreadsheets. It is available as a web app and as iOS and Android apps. ### What is the PRAAMS Ratio? The PRAAMS Ratio combines six return factors and six risk factors of an asset into one number. Return factors: valuation, performance, analyst / market view, profitability, growth, dividends / coupons. Risk factors: default risk, volatility, stress-test, selling difficulty, country risk, other risks. Each factor is scored from 1 to 7 against peers. Methodology: https://docs.praa.ms/ ### Which assets does PRAAMS Personal cover? 75,000+ stocks, 225,000+ bonds, 17,500+ ETFs, 150,000+ funds, 250+ cryptos and 100+ FX pairs. ### Is PRAAMS a broker or an investment adviser? No. PRAAMS does not provide individual, customised or general investment or financial advice, is not a registered investment adviser, is not affiliated with any investment firm and does not sell investment products. PRAAMS Personal provides analysis, not buy or sell recommendations. ### What is PRAAMS Personal? Are you a broker or an asset manager? PRAAMS Personal is a handy A-Z tool for individual investors that consolidates factual information about each asset and presents it simply and easily. PRAAMS is an IT company. We do not provide individual or customised or general investment or financial advice or issue recommendations, money or asset management, brokerage/dealership, or credit rating services of any kind to our clients under any regulation or law. Neither PRAAMS or its subsidiaries are a registered or authorised or qualified or eligible investment or financial adviser or planner, money or asset manager, securities broker/dealer, credit rating agency, or any other financial institution. ### What is the PRAAMS Ratio? PRAAMS Ratio is a powerful risk-return ratio. It shows how much return an asset offers per unit of risk. It takes one of 7 values: 1 is the lowest score, i.e., this asset has high overall risk and low overall return potential, and 7 is the highest score, i.e., overall return potential is high while the overall risk is low. It has not been designed to indicate whether you shall buy, hold, or sell an asset and shall not be considered as such. This is because overall risk and overall return potential scores are general in nature, combining all critical risk and return factors. These may not be suitable for you, and, of course, the PRAAMS Ratio does not take into account your personal risk tolerance, financial objectives and constraints, and investing style. One may think of the PRAAMS Ratio as an improved version of the Sharpe ratio. Sharpe ratio is a relation between an asset’s performance and its risk measured by standard deviation. PRAAMS Ratio outperforms the Sharpe ratio: - The Sharpe ratio is backward-looking, while the PRAAMS Ratio is forward-looking as it uses much more data to offer good forecasting power; - The Sharpe ratio considers only market risk (standard deviation), while the PRAAMS Ratio covers all key risks, including market, credit and other risks as well, as all these may affect the instrument’s price; - The Sharpe ratio is not standardised, ranging from minus to plus infinity, and it may be challenging to use for comparison across assets or portfolios. PRAAMS Ratio is standardised, varying from 1 to 7, for every asset class, and it is easy to compare individual assets and portfolios; - The PRAAMS Ratio is designed with long-term investing in mind. It works best for investing horizons from one to five years, as confirmed by its numerous back-tests. ### Where do you get data? How do you analyse it? We use information from publicly available sources, which are general in nature and commonly known to most investors and which we deem reliable. These include exchanges, government agencies, and public data repositories. PRAAMS uses several layers of data: each subsequent layer validates and enriches the previous layers to increase reliability. PRAAMS provides information only on assets where sufficient critical data is available. Thus, inactively traded assets or those with poor disclosure are not covered. Currently, we cover over 50,000 traded stocks and over 60,000 bonds worldwide. We plan to add more stocks and bonds as well as ETFs and other asset classes soon. ### How can newbies use PRAAMS Personal? If you don’t feel confident in investing, PRAAMS is a great start. Open the page of any asset, and it will take several seconds to understand the most important things. There is one number, from 1 to 7, on the top of the page, which is the PRAAMS Ratio. A score of 1 means the asset has poor return potential and very high risks. A score of 7 means this instrument has high return potential and low risks. A score of 4 is somewhere in between and performs along with the market. In other words, in the long term, the higher the score, the higher the return potential and the lower the risks. However, actual returns cannot be guaranteed in any way; please refer to our Terms & conditions. Next, there is PRAAMS Personal, a circle coloured in red and green. Returns are in green on the right, and risks are in red on the left. Each sector is on a standard 1-7 scale. Lower scores like 1 and 2 mean there is little return potential or negligible risk, as compared to peers. Lower scores are smaller in size and get coloured in pale. Higher scores are bigger in size and coloured in vivid green or red. For example, a large bright-red sector means this type of risk is high. Overall, if there are more green sectors than red, the instrument has more return potential than risks. If the picture is more red than green, risks exceed returns. ### How can pros use PRAAMS Personal? If you are an experienced investor or a professional, you are now able to analyse any stock or bond in seconds and enjoy the more advanced features. Apart from the PRAAMS Ratio and PRAAMS Personal circle, you will find in-depth information on each risk and return factor. We value your time and tried to make it as concise as possible. You can also make peer comparisons in seconds, comparing two instruments or one instrument to a peer group based on region, country, sector, and industry. Finally, you can instantly generate trade ideas based on geography, sector and individual factors. If you are interested in the B2B integration of PRAAMS Personal, please visit our B2B website or contact us at client@praa.ms ### Shall I buy or sell a particular stock or bond? Information provided by PRAAMS does not take into consideration and has not been intended and designed to take into consideration all your personal investment goals, preferences, constraints, financial and tax situation, and other factors. The information is not intended to be used and does not constitute a personalised or customised recommendation or advice. Furthermore, we do not collect this information from you. Therefore, we do not and cannot provide recommendations that will suit you. The final investment decision belongs to you; we can help with factual analysis of risks and returns. ### Can I compare asset classes, e.g., a stock and a bond? Comparing two asset classes has always been a significant problem in the investment industry. We solved it. You can use the PRAAMS Ratio to compare stocks and bonds, and even ETFs composed of stocks and bonds. ### Can I share your reports? You can download PDF reports on every 100K+ assets covered by PRAAMS Personal. You can read it later in a more comfortable way, or you can share it with friends and colleagues. Please remember that the information in PRAAMS Personal is updated daily, and the report may quickly become outdated. ### How do I find investment ideas? You can use the Explore tab to screen instruments and instantly research them. Select the relevant parameters, for example, country, sector, valuation, dividends, or default risk, and click the Explore button. The system will return results that match your search criteria. You can then order them using any parameter. Then, you can compare instruments to find the best match for you. PRAAMS does not offer any brokerage or asset management services, nor is it an authorised financial advisor. We cannot and do not recommend that you buy, hold, or sell any security. For more details, please refer to our Terms of service. ### How do I search assets? PRAAMS Personal uses an intelligent search system. You can search by company name, instrument ticker or ISIN. If you don't remember the name or ticker, start typing, and the system will provide several suggestions. Also, we designed the system to auto-correct minor typos. Sometimes, you may find several instruments related to one company, e.g. AAPL and AAPL.NE and AAPL.BA. These are Apple's shares listed on different exchanges. Because different listings may have different liquidity and other risk factors, we treat all of them as separate instruments. Tips from PRAAMS: - We strongly recommend double-checking where the instrument you are interested in is listed. The suffix after the ticker, e.g., '. NS' or '.PA', indicates the exchange where this instrument is traded, NSE and Paris Euronext in this case. The best check combines the instrument's ISIN and the exchange suffix. - We use the following convention to produce a bond ticker: issuer's equity ticker + coupon + maturity date. For example, for Apple Inc.'s bond with a 2% coupon maturing on 11 April 2035, the ticker will be 'AAPL 2% 11-Apr-35'. ## Plans and access ### How much does PRAAMS Personal cost? Premium costs €27 per month or €270 per year, paid in advance; cancel at any time. 1% of every payment is donated to the International Committee of the Red Cross. ### Where can I use PRAAMS Personal? In the web app at https://praa.ms/login and in the mobile apps: - iOS: https://apps.apple.com/us/app/praams-personal/id6474065222 - Android: https://play.google.com/store/apps/details?id=com.praa.ms.praams_mobile ## BehaviouRisk ### What is BehaviouRisk? BehaviouRisk determines your behavioural investment profile: it maps the 19 most common cognitive and emotional biases that shape your investing decisions and helps correct investing mistakes. Details: https://praa.ms/en/behaviourisk ### Is BehaviouRisk free? Yes. While PRAAMS is in alpha testing, BehaviouRisk is offered at no cost. ### What is the difference between standard risk profiling and behavioural investment profiling? Risk profiling seeks to establish a client’s risk tolerance, i.e., the maximum amount of risk he can comfortably manage. Risk tolerance then serves as a guide to which products he should be sold. Standard risk profiling focuses on quantitative aspects (investing experience, time horizon, personal assets and liabilities etc.). Behavioural investment profiling enhances standard risk profiling and focuses on qualitative or psychological aspects described in terms of the presence of cognitive and emotional biases and their degree. Standard risk profiling classifies a person as highly risk tolerant, i.e., can manage high volumes and wide varieties of risk, if he is young, has extensive experience as an active investor, has invested in different asset classes, has a long investment horizon, follows financial markets news, has a degree in economics or finance, and, most importantly, has enough wealth outside of his brokerage account to withstand significant drawdowns. Behavioural investment profiling confirms that a person is highly risk tolerant when he has no cognitive or emotional biases, or these are of a limited nature, i.e., this person is capable of consistently making rational decisions and is free of unwarranted emotions (like Mr Spock). ### Which is more important – standard risk profiling or behavioural investment profiling? Both are essential. One cannot (and must not) rely only on quantitative aspects without considering qualitative aspects, and vice versa. An intelligent, risk-aware investor should take into account both standard risk profiling (quantitative) and behavioural investment profiling (qualitative) ### I have never seen behavioural investment profiling before. My investment firm never offered it. Why? Behavioural investment profiling in the finance industry has existed for several decades. There are three reasons it has not become widespread: Conflict of interest among investment firms If executed correctly, i.e., covering all investing biases and using science-validated approaches, behavioural investment profiling typically reveals that individual investors have many risk and investment decision-making irrationalities. This may imply low true risk tolerance. Standard risk profiling, which is easy to manipulate, produces much higher risk tolerance categories for the same clients. In the finance industry, low risk tolerance means that the investment firm should offer only low-risk products to the respective client. However, the higher the product’s risk, the greater the profit that can be earned selling it. Conducting behavioural investment profiling for every client would mean lower average risk tolerance and, consequently, lower investment firm profits. Financial regulators worldwide, including SEC, FCA, and ESMA, have been fighting conflicts of interest and mis-selling (when a firm sells unsuitable, usually higher-risk, financial products to its clients to earn more) among investment firms for many years. However, to date, the consensus solution remains standard risk profiling, which, as we know, is incomplete and misleading because it ignores the client’s unique risk behaviour. Some investment firms offer behavioural investment profiling but only to selected premium clients (e.g., private banking with $50mn+ accounts). These clients are very valuable to investment firms and they don’t want to lose them. To ensure complete client satisfaction and avoid any possible mistakes, investment firms offer premium clients many VIP services, including behavioural investment profiling. Proper behavioural investment profiling involves additional costs – creating and validating questionnaires, explaining the benefits of the new service, administering the process, changing asset management operations, and so on. In any business, if the extra effort and cost are not legally required and do not result in commensurate extra profits, they are unlikely to be undertaken. ### I heard there were many different biases. Why does BehaviouRisk focus on only 19? You are correct. Behavioural economists and psychologists have determined over 200 different biases. BehaviouRisk focuses on 19 for the following reasons: Behavioural economics as a science covers every economic aspect of our lives, whereas behavioural finance, a subfield of behavioural economics, focuses on human behaviour in the financial markets only. Therefore, fewer biases are relevant to investing. Different names have often been assigned to identical or very similar behavioural patterns. BehaviouRisk combines several closely related ideas for the purposes of simplification and time. BehaviouRisk focuses only on those with the most considerable negative effect on individual investors. The result is the 19 most relevant and critical behavioural patterns. ### Is it bad or unusual to have cognitive or emotional biases? Do professionals have them? It is very common and perfectly acceptable to have biases. Even professionals are prone to some! We have analysed thousands of client cases, ranging from newcomers to professional traders, and we know it is common and perfectly acceptable to have biases. The number or degree of your biases do not make you a bad or a good investor. Rather, the identified biases indicate which potentially detrimental behavioural patterns need your attention. What distinguishes a genuinely risk-aware investor is a readiness to honestly acknowledge one’s own biases, seek the knowledge required to overcome them, and then have the discipline to apply this knowledge. Professional traders are also human and thus are also prone to some biases although seasoned professionals have fewer cognitive biases thanks to experience. Emotional biases are more difficult because these are driven by personality traits, which are much harder to change. Emotional biases require permanent discipline and control in addition to awareness. Trained professionals accumulate good self-control skills over time, which alleviate the influence of emotional biases, although they frequently fall into the overconfidence trap fostered by extensive experience. Importantly, top investment firms have secret weapons in the form of risk IT systems designed to monitor all varieties of risk and quickly correct traders’ losing behavioural patterns. ### Can I overcome cognitive and emotional biases? Is it difficult? The good news is that you can overcome biases, especially if you are equipped with risk IT solutions. However, it takes some effort and learning although we prefer to think of it as an investment in yourself, one of the greatest investments you can make. Cognitive biases, i.e., mistakes in thinking, can be effectively eradicated by education, such as the advice in your BehaviouRisk personalised report or our book, Practical Behavioural Finance for Risk-Aware Investors. However, emotional biases, i.e., errors in emotional reactions, are more difficult to overcome and require permanent discipline and control in addition to awareness, although the advice from the report and the book will once again prove tremendously helpful. Optimally, you should use a risk IT solution such as PRAAMS to obtain bias-free, professional, and complete advice. ## Contacts ### How do I contact PRAAMS? Email client@praa.ms or use https://praa.ms/en/contacts. PRAAMS Personal is operated by PRAAMS SL (Andorra, NRT L-717584-B); the European entity is PRAAMS EUROPE SL (Barcelona, NIF B56567084).