3. Suitable Risk Level

Suitable Risk is the amount of risk an investor should take with their investment portfolio to ensure that the risk of their overall wealth is right for them. It is the amount of risk which balances their investment portfolio with their remaining assets (and liabilities), future incomes and spending, as well as their emotional capacity to take risk. It also recognises their level of investment knowledge and experience. If an investor has no assets other than their portfolio, no future cashflows, and they have sufficient Knowledge & Experience, then their portfolio should simply be invested at their Risk Tolerance level.