In this article Sophie Temperton discusses the misunderstood role of risk tolerance in this industry. Risk tolerance questionnaires often ignore behavioral biases that investors often display, such as the tendency to feel losses much more acutely than gains. This simple metric also doesn’t capture the other important risks investors need to consider, such as goal risk (the risk required to achieve their goals) and risk capacity (the risk they can afford to take).
Portfolio Insights May 2019 – The misunderstood role of risk tolerance
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