As Seen in Advisor Perspectives: The Impact of Emotions on Risk Tolerance
May 25, 2020
According to Advisor Perspectives, here is how emotions affect risk tolerance:
Emotions: Risk tolerance increases positive emotions towards investments and life and decreases with negative emotions.
Gender: Women are less risk-tolerant than men at all ages. They are also more fearful and nervous than men, with significant difference between the means.
Age: Risk tolerance decreases with age.
Income and Education: Risk tolerance rises with income, self-assessed investment experience, objectively assessed financial knowledge, and educational level.
Therefore investors and investment advisors alike need to be aware that risk tolerance varies not just over time, but also with changing moods and other factors.
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