A good financial plan balances your goals with your capacity to take investment risks and your risk tolerance. As a beginner investor, knowing your risk profile can benefit you in multiple ways:
Take the right risk – as per your capacity and requirement.
Tapping suitable investment opportunities – get to know the right investment asset mix depending on your risk profile (e.g., appropriate balance of stocks, bonds, derivatives, different types of mutual funds, etc.).
Readiness to manage surprises in returns – you are more aware of how you may react and how best to keep your emotions from getting in the way.
An investor makes investments to achieve certain financial goals. A risk profile helps an investor understand how much risk they can take vs how much risk they should take to achieve their goals.