- Understand what you worst case looks like
- Find your neutral space
Your finances are personal, especially when it comes to investing. Setting objectives, timeframes and risk levels depend on age, lifestyle, circumstances and personality. There’s no one-size-fits-all, so investors should judge performance against their own goals and risk tolerance.
The idea of personalised risk management and targets is a postmodern portfolio theory (PMPT) innovation, which builds on the earlier work we’ve examined in this series. At its heart is the idea of maximising an investor’s utility from investing, based on how risk averse they are and what rate of return they need.