wealth between, wealth

yuoska

If I think I am poor but I spend extravagantly then does it mean by measure of wealth shows I have high risk tolerance? Is there any relationship between these at all?

aidebaobao

It means you have a high willingness to take risk not necessarily a high ability to take risk. You have to evaluate the two but usually the lowest one the two takes precedence. So if you have money but you are conservative, you have a low risk tolerance. If you are broke but spend a lot of money (like your example), generally that would be perceived as having a low risk tolerance.

skycfa

Spending a lot doesn't mean you have a higher risk tolerance, it means you need to have a higher risk tolerance. If other factors indicate you cannot take that level of risk, then you'll have to adjust your spending goals. Speaking only about measure of wealth, thinking you're poor would be low tolerance.

Anyway, I might be forgetting something. A week off of the curriculum and it's shocking how many of the little details you lose.

Unforseen

In that case the opposite should also be true. Meaning if I think I am rich, but I act like a miser then risk tolerance is just about average.

zwjy

Rich act like a miser:ability high, willingness low/average - risk tolerance=low/average
poor but spend extravagantly: ability low, willingness high - tolerance is still low

tolerance is the lower of ability and willingness.

CP

Zestt

I got my answer and I am happy