Are you risk averse? Why??

[JamesR]

Jacob,

Good points about the separate camps of risk & perception issues.

I suspect my low risk-averseness is based on the notion that risk is largely controllable. For example, by applying the concept of money management & risk control (i.e. Kelly bet-sizing). That seems to be typically aimed at the volatility-type risk, but it could potentially be applied to value-type risk as well.

[JamesR]

mxlr650,

Seems risky to keep working for 3 decades. Talk about low risk averseness!

[mxlr650]

Seems risky to keep working for 3 decades

Invest for 3 decades is what i said.

If you have an hour to waste, read my journal. i am out of cage next year.

[EdithKeeler]

I've seen that there are some people on this forum that appear to be highly risk averse, and are seeking less than 3% interest overall in their investing.

I'm concerned that there's a combination of math fail & lack of understanding of risk here. Also don't forget inflation is 2-3%!

I AM pretty risk averse, mostly probably because I do risk management for a living. My career for the last 25 years has been all about managing risk--minimizing the highs and lows and keeping things constant. I'm sure that focus in my insurance career has spilled over into my personal investing. Also having lived through a couple of stock market drops--the one in 1987 caused me to leave my job of 1 year with a securities broker and move into another career--how's that for risk management??--I have a good idea of what can happen and how long it can take to recover. At the same time, I've been a VERY steady investor all of these years, and I'm starting to reap the rewards. And I'm NOT striving for a 3% return. Over half of my investments are in index funds, which some scorn, but to me they're just easier. I'm somewhat risk averse, also somewhat lazy. But I'm also diversified in other things--real estate, bonds, foreign equities, muni bonds, etc.

That said, too, I disagree with "inflation is 2-3%." Well, it officially may be that, but my personal rate of inflation is MUCH MUCH lower. I don't buy a lot of stuff, and when I do, I try to buy used. Inflation impacts me in food, gasoline, electricity... but that's about it. I guess I don't get too scared about inflation.

[GandK]

That said, too, I disagree with "inflation is 2-3%." Well, it officially may be that, but my personal rate of inflation is MUCH MUCH lower. I don't buy a lot of stuff, and when I do, I try to buy used. Inflation impacts me in food, gasoline, electricity... but that's about it. I guess I don't get too scared about inflation.

That's very true. Food, gasoline and local taxes are the only things that go up anywhere near that amount for our household. I suppose if we bought more things new instead of gently used (clothes, cars, furniture, etc.), the inflation rate would be a bigger deal, but we always try to find a high quality used alternative.