During his recent discussion on Twitter Spaces, Jeffrey Gundlach discussed how to determine your risk level tolerance. Here’s an excerpt from the discussion:
Gundlach: It’s pretty easy to gauge the appropriate risk tolerance at an individual level. You just, if you’re thinking about those Investments every day, or if it’s time you feel like there’s some sort of gloom hanging over you of fear, then you have too much risk.
There’s, I think it was, I can’t remember who it was one of these legends who said, sell down to the sleep at night point.
In other words if you can’t be relaxed about what you own you own too much rip and so that’s different for a lot of people.
I mean I’ve met people that just can’t get enough leverage. They take a one sector approach, they leverage it like crazy, and they can get very wealthy that way. And then one day they wake up and they’re bankrupt.
It’s like Jesse Livermore, the famous stock operator, who is basically the inspiration for reminiscences of a stock operator, which is a book that everybody should read that’s in in the investment business because it shows you how that… many specifics have changed.
Because that goes back to the early 1900s. Many of the specifics have changed but the way people operate in the markets and things that motivate, fear and greed, and all those sort of things they’re absolutely forever.
So it’s a pretty interesting… Livermore made a fortune many times and lost it every single time and shot himself in the coat room of some restaurant in New York City. So anyway that’s an extreme risk taker but people just have to be able to sleep at night.
You can listen to the entire discussion here:
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