How Risk Averse Are You? Here Are the Best Ways to Find Out
All of the recent hype surrounding Gamestop, cryptocurrency, non-fungible tokens (NFTs), and meme stocks made me question – is anyone risk-averse anymore?
The Definition of Risk
According to Merriam Webster, the definition of risk is the “possibility of loss or injury.”
Risk Averse Definition
If you are a risk-averse investor, you will seek out investments with a low probability of declining in value.
You are likely close to retirement and value security over high potential returns. Bonds, certificates of deposit (CDs), and interest-bearing accounts appeal to you because of their stability and liquidity.
You likely have a good handle on your personal finances but are not the gambling type.
Moderate Risk Aversion
You are not very risk-averse and are not afraid to gamble if the expected return and potential payoff are high.
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Risk Aversion: Why it Matters in Personal Finance
Understanding your level of risk aversion is a valuable step in ensuring you build an investment portfolio that suits your needs.
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