Risk tolerance versus risk capacity

01/30/2012 | InvestmentNews (free registration)

A new way to look at risk can help clients achieve their goals, some financial advisers say. Instead of focusing on risk tolerance, the level of worst-case-scenario losses that clients can watch their portfolios suffer, they should focus on risk capacity, the level of losses the investment can handle and still meet clients' objectives. "The financial disaster of the past several years destroyed many financial plans because investors had portfolios that were too risky for their objectives," said Robert Kreitler of Kreitler Financial.

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