"Risk" means different things to different people – danger, uncertainty, opportunity or thrill. In reality, though, there is risk in any situation where there is a chance of experiencing an unfavourable outcome.

We are all aware that, when it comes to taking risks, we each have our own comfort zone. We also know our friends, family members and colleagues often have different comfort zones from our own.

People react differently to risk. Some are habitually inclined to reject it, others to accept it. Risk tolerance is the level of risk a person is willingly to accept. It is best thought of as a continuum, with people ranging from risk-avoiders to risk-seekers.

Risk Tolerance is a psychological trait, as are intelligence, personality, aptitude, attitudes and values. Studies confirm that people generally do not accurately estimate their own risk tolerance. This is not surprising given the difficulties in communicating accurately about an intangible quality. As a result, most traditional risk evaluation tools used by the investment industry do not properly identify an individual's risk tolerance.

A Better Approach
Elysium Wealth Management uses a risk tolerance questionnaire that was developed by an Australian firm named FinaMetrica Limited, to accurately assess our client's investment risk tolerance. Their risk profiling system was created using the disciplines that apply to psychological testing and the test itself exceeds international psychometric standards. This approach to risk profiling is unique in the Canadian Financial services industry.

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