How Risk Averse Are You?
Here Are the Best Ways to Find Out
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All of the recent hype surrounding Gamestop, cryptocurrency, NFTs, and meme stocks made me question-
is anyone risk-averse anymore?
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It felt like a good time to reexamine why I’m passing on these types of investments in the first place-
because of the risk they carry.
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The Definition of Risk
According to Merriam Webster, the
definition of risk
is the “possibility of loss or injury.”
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the
possibility of loss
. Specifically, financial loss.
In this case, when dealing with the world of personal finance, we will focus on the first three words-
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Though, risk is not a binary measure… the other variable to consider when determining risk is
time
.
The longer you hold an asset, the less risky it gets (usually).
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Risk Averse Definition
Risk aversion
is defined as avoiding risk. Pretty straightforward.
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If you are a risk-averse investor, you will seek out investments with a low probability of declining in value.
This is because you value preserving your money more than seeking out the best possible return.
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