Tag: Investment

There are two aspects linked with an investor's risk tolerance actual financial capability (risk capacity) to bear unforeseen losses and emotional capability (risk tolerance) to live with the loss. If an investor is unable to emotionally bear the loss under an unforeseen circumstance, he may be tempted to exit the market with his loss in hand without thinking further, although he had the financial capacity to bear the notional loss. For such a category of investors, market volatility is unacceptable and emotionally forbidden. They move out of the market at the wrong time and swear never to return. That is a folly driven either by fear or greed. For example, had an investor made a bet on stocks a year before the lockdown started, out of fear, he would have sold all his equities in Marc...