Thinking About Risk

How do you think about risk? Last year, the Canadian Investment Regulatory Organization (CIRO) adopted a two-pronged test for retail investors. The tests are risk tolerance (how much loss can you tolerate psychologically) and risk capacity (how much loss can you financially withstand). When asked to explain how these tests might be applied, regulators look at their shoes and offer banal platitudes to the firms expected to enforce them.. Many people may have reasonable definitions and...