A risky business
risk appetite, risk tolerance, risk capacity, risk required. What on earth do all these terms mean, both to investors and to financial advisers? Or has the jargon become so over-used that it simply confuses even seasoned investors?
Misperceptions about what risk means are common, and they are in fact downright dangerous. They are — excuse the obvious old-school reference —risky business (except that Tom Cruise doesn’t feature).
A comparative scenario can aid our understanding.
