Risk, for a person, is less a number and more a question: could you watch your money fall by a third and not sell at the bottom?
← From ZeroWhat it is Why it matters The numbers The trap Where you see it In one lineNext · 8.2Sell a bit of what has risen
A mix that looks fine on paper is wrong for you if a real fall would make you sell in a panic. The right amount of risk is the amount you can actually sit through.
A mostly-shares portfolio can fall 30% or more in a bad year. A mostly-bonds one usually falls less, though in 2022, when rates jumped, it fell about 17%. It also grows slower over decades. Picking between them means picking the fall you could sit through.
Answering this question calmly, before any money moves, gives a very different answer than answering it mid-crash. A limit set during a fall is usually the wrong one.
Work out −30% on your own money today, while calm, and write down whether you could actually sit through it.
The right risk is the fall you could actually sit through, decided while calm, not mid-crash.
Do it today
Work out −30% on your own money.
Episode done · saved to your path