Researchers have discovered some interesting things about investors’ perceptions of risk:

1. Fear of loss is exponential. Anxiety increases with the magnitude of the loss.

2. Happiness over a gain decreases as the size of the gain increases. Gaining your first million means much more than gaining a second million.

3. Risk is not symmetrical. Most of us hate losses much more than we love gains.

4. There can be a sudden jump in anxiety as returns go below a threshold, such as zero gain.

5. Each investor views the same risk differently from other investors and from their own views of that risk at other times.

The truth is there is no single method to accurately measure risk tolerance. That feeling is truly unique to each of us.