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Gauging Investment Risk

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  • #16
    I have risk tolerance as far as not acting rashly in the market. But my wife will tell you I’m awfully crabby during the corrections. And I wonder if your patience changes as your progress to the winter season of your life and time is actually not necessarily on your side.

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    • #17
      It is pretty easy to measure your risk tolerance vs. the risk in your portfolio. In retrospect that is. Until you live through a major drop, you will really never know.  I know many people who thought they had a high risk tolerance only to sell in 2008.  If you sell under those circumstances, especially with a long investment horizon, then you made a serious overestimation of your tolerance.

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      • #18
        Ben Carlson wrote a relevant blog related to OP comment/question:

        http://awealthofcommonsense.com/2017/10/risk-perception-vs-risk-profile/?curator=thereformedbroker&utm_source=thereformedbroker

        He points out to very important points when it comes to risk (IMO anyway):

        a. You need to know yourself, behavior, reaction etc to risk in your portfolio.

        b. You need to be able to sleep at night with your portfolio.

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