One aspect I’ve been thinking about is whether appetite for risk is essentially a characteristic of personality? e.g. is the person who will drive through a flooded creek, taking the gamble of not getting washed away, also likely to take a similarly cavalier attitude to risk where money is concerned?
Or is risk in financial matters very specific, in that someone could be quite conservative in their everyday lives, yet unable to correctly evaluate the level of risk in e.g. mortgaging the family home to buy into the share market, especially if the investor is retired or close to retirement. We have seen examples of where this occurred and was followed by further gearing into the market via a margin loan on the shares purchased from the home loan.
I acknowledge that personally I’m risk averse and regard as my first priority always the protection and security of my existing assets, so perhaps my view that the above is an incredibly high risk strategy is coloured by my own bias.
What is your position on how much risk you are comfortable with? Does this change with your circumstances, e.g. earning capacity and age/years to retirement?
As an adjunct to the above, the following is an extract from a post by doobsy (thank you, doobsy) which has some at least oblique connection.
I do not want to focus on the specifics of the above, rather the overall subject of how we perceive risk.
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