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Risk tolerance varies among individuals from "summary" of A Random Walk Down Wall Street by Burton Gordon Malkiel
Different people have different attitudes towards risk. Some individuals are more willing to take on risk in exchange for the possibility of higher returns. They may feel comfortable with the idea of investing in volatile assets like stocks or cryptocurrencies, knowing that they could potentially earn significant profits. On the other hand, some people are more risk-averse. They prefer to prioritize the preservation of their capital over the possibility of higher returns. These individuals may choose to invest in safer assets like bonds or certificates of deposit, even if it means potentially earning lower returns. The varying levels of risk tolerance among individuals can be influenced by a variety of factors. Personal experiences, financial goals, time horizons, and overall financial situations can all play a role in shaping an individual's risk tolerance. For example, someone who has a longer time horizon for their investments may be more willing to take on risk, as they have more time to recover from any potential losses. Conversely, someone who is nearing retirement may be more risk-averse, as they have less time to recoup any losses before needing to access their funds.- Understanding your own risk tolerance is crucial in developing an investment strategy that aligns with your financial goals and comfort level. By recognizing and acknowledging your own risk tolerance, you can make informed decisions that are in line with your individual circumstances and preferences.
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