Question

What factors might impact an investor’s willingness to take on risk? How might the level of risk aversion vary over time? Explain using examples.

Answer 1

1. Portfolio requirement ( equity or debt)

2. Past experience with investing

3.Retirement plans

4. Current needs and current risk concentration

These may change over time. Example when person is young, retirement is very far and he/she is willing to take more risk. While when person is about to retire, he wants regular returns so he wants investments in fixed return investments like bonds and thus willingness to take risk is lesser