Definition of Risk Averse
What does it mean to be "risk averse"? What is the definition of the term "risk averse"?
If somebody is "risk averse", then this means that they prefer to invest in assets that are considered to be lower risk.
The "risk averse" person tends to shy away from higher risk stocks or financial instruments, even though this means that their expected returns will be much lower. For the risk averse person, this doesn't matter, as they are not prepared to accept a high level of risk.
In the past, older investors generally tended to be more "risk averse". The reason? They were more concerned with conserving their capital as they approached their retirement years.
Younger investors, on the other hand, could stomach more risk because they had many years before they would be hitting retirement age.
Over the past few years, many older investors have decided to take on more risk in an attempt to rebuild their retirement savings. The "Great Recession" obliterated the retirement savings of many Americans.
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