Knowing If You Can Stomach the Next Big Market Swing

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That quiz your financial adviser gave you isn’t really a good way of understanding your tolerance for risk, writes JasonZweig

If I ask you in a questionnaire whether you are afraid of snakes, you might say no. If I throw a live snake in your lap and then ask if you’re afraid of snakes, you’ll probably say yes—if you ever talk to me again.

Investing is like that: On a bland, hypothetical quiz, it’s easy to say you’d buy more stocks if the market fell 10%, 20% or more. In a real market crash, it’s a lot harder to step up and buy when every stock price is turning blood-red, pundits are shrieking about Armageddon and your family is begging you not...

 

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jasonzweig Fnancial advisors should sign contracts swearing a fiduciary trust to their client. If they fail to live up to this contract, they should be sued or put in prison.

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