tag:blogger.com,1999:blog-5465015914589377788.post5313887651863962726..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Tolerance for RiskMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5465015914589377788.post-24224240892403483472008-08-14T22:51:00.000-04:002008-08-14T22:51:00.000-04:00CC: I guess it's not too surprising that people l...CC: I guess it's not too surprising that people like volatility when their stocks go up and don't like it when they go down. I guess it's the tendency to expect the near future to be like the immediate past that causes people to be least cautious when stocks are peaking.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-31527381795398371852008-08-14T22:11:00.000-04:002008-08-14T22:11:00.000-04:00In addition to the problems you point out, there i...In addition to the problems you point out, there is a further issue. A person's feelings towards risk (as in volatility) isn't static either. Most people become risk averse in bear markets (by funneling cash into money market accounts) and blind to equity risk in bull markets (equity funds do roaring business).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-10881931242719837272008-08-14T15:23:00.000-04:002008-08-14T15:23:00.000-04:00MG: Part of the problem is the word "risk". As it...MG: Part of the problem is the word "risk". As it is used technically in the financial world, risk means volatility. But, this isn't the common use of the word "risk". Your example of the savings account illustrates this nicely. The fact that you'll lose out to inflation and taxes makes the savings account risky in the common sense. But, because this bad outcome is fairly certain, it is not risky in the technical sense. It's no wonder that most people are confused about investing.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-84375179904270322912008-08-14T14:33:00.000-04:002008-08-14T14:33:00.000-04:00Personally, I think most people do not take enough...Personally, I think most people do not take enough risk with their money. <BR/><BR/>Actually most people do not even understand what is risky and why it is risky in the first place. In my opinion bank savings accounts that offer less than 2% interest are risky. Reason being that you are pretty much guaranteeing you'll lose money after inflation and taxes. Most people are lost on this.<BR/><BR/>If the average person has their capital decline in an equity mutual fund over a one year period they chalk that up to the fund being lousy. They have no concept of time vs. volatility vs. risk etc.MG (moneygardener)https://www.blogger.com/profile/09118524634677340463noreply@blogger.com