Part 2/9:
In the financial industry, risk is generally seen as the potential for an investment's value to decline. However, this perspective may not encompass the full picture. Risk can be understood in three dimensions that together form a risk profile:
Behavioral Loss Tolerance: This reflects your psychological capacity to endure losses without panicking or selling investments at a low point.
Ability to Take Risk: This is your financial capacity to hold onto investments without having to liquidate them for immediate expenses.
Need to Take Risk: This measures how much risk you must take on in order to achieve your financial goals.