Who's Afraid of a Big Bad Bear?

Because of the terrifying nature of market declines, one of the valuable services an adviser should provide is help in selecting an asset allocation that suits their client's investment objective and risk preferences. This process starts by understanding two aspects of risk – Risk Tolerance and Risk Capacity. Michael Kitces has a great article discussing those aspects and how they should interact in selecting an appropriate asset allocation. I want to dig a little deeper into Risk Capacity to show that investors shouldn't be too afraid of a quick stock market decline.