Can financial advisors measure our risk tolerance?

10 Myths About Risk Tolerance and How to Accurately Measure It

Risk tolerance is an individual’s general willingness to take risk in managing their financial affairs. Risk tolerance reflects the balance between having too much risk and too little. An investor would not want to be overexposed to risk, thereby putting his or her financial well-being in danger. Nor would a person want to be underexposed to risk and miss out on financial opportunities. So risk tolerance is relevant to how people manage their financial affairs and, in particular, how well they sit with the riskiness of their investments. There are many myths about risk tolerance, what it is, and how it can be measured and applied in the financial planning process. Risk tolerance is commonly confused with other risk attributes such as risk behavior or risk capacity. FinaMetrica has examined 10 common myths, tackles the assumptions behind them and explains the reality. ….[READ]

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