As a result of some comments on another thread about how people perceived or failed to perceive risk, I'd be interested in members' attitude to risk.
One aspect I've been thinking about is whether appetite for risk is essentially a characteristic of personality? e.g. is the person who will drive through a flooded creek, taking the gamble of not getting washed away, also likely to take a similarly cavalier attitude to risk where money is concerned?
Or is risk in financial matters very specific, in that someone could be quite conservative in their everyday lives, yet unable to correctly evaluate the level of risk in e.g. mortgaging the family home to buy into the share market, especially if the investor is retired or close to retirement. We have seen examples of where this occurred and was followed by further gearing into the market via a margin loan on the shares purchased from the home loan.
I acknowledge that personally I'm risk averse and regard as my first priority always the protection and security of my existing assets, so perhaps my view that the above is an incredibly high risk strategy is coloured by my own bias.
What is your position on how much risk you are comfortable with? Does this change with your circumstances, e.g. earning capacity and age/years to retirement?
As an adjunct to the above, the following is an extract from a post by doobsy (thank you, doobsy) which has some at least oblique connection.
Borrowing - Australians still believe that banks are their friends and that debt is not a problem. Right or wrong we love bricks and mortar and believe it is safe. As the US, Spain etc are finding out, property is just another asset class that can have it's ups and downs. If a bank can see property prices heading south and I walk in wanting to borrow money to buy a property - is it their responsibility to tell me to come back in 6 months becuase prices will be cheaper and I won't have to borrow as much? Their first responsibility is to their shareholders to make money. #1. To not do so could get them sent to jail. Consumer protection is not their responsibility. The Govt has set rules on this and if they play by the rules then I don't see the drama. If they break the rules then watchout.I do not want to focus on the specifics of the above, rather the overall subject of how we perceive risk.A second part of this is borrowing for other purposes. How many people borrowed to invest in Gold Coast units or worse listened to a spruiker and pulled their super out to buy 2 units, or to start up a small restaurant business in Brisbane only to see GC units fall in value by 25% or Brisbane get flooded and have lost their capital. Where is their bailout?