The Truth About Risk Tolerance
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When the market is strong, everyone feels like a confident investor—but true risk tolerance isn’t about how you feel when things are going well. In this episode of Retirement Approved, Matt and Steve dig into the emotional and mathematical sides of risk tolerance—how much risk you can handle versus how much you’re willing to handle. Managing emotions can be just as important as managing returns, and this video will help you understand investor behavior better.
Here’s what we discuss in this episode:
🎲 Risk changes with emotion – Market highs make investors fearless; downturns make them cautious.
💵 Think in dollars – A 20% loss feels different when your portfolio is much larger.
⚖️ Capacity vs. tolerance – Understand both your financial ability and emotional comfort with risk.
🔁 Rebalance regularly – Lock in gains during strong markets to protect against future dips.
🧠 Avoid recency bias – Past success doesn’t guarantee future results, especially after long bull runs.
