In The Four Pillars of Investing, William Bernstein writes:
“If your portfolio risk exceeds your tolerance for loss, there is a high likelihood that you will abandon your plan when the going gets rough.”
This is an important point. For most people, there is a range of asset allocations that will meet their needs from a strictly mathematical point of view. To choose among those viable portfolio options, you then need to set aside the calculator and consult your tolerance for risk and volatility. That will help ensure you can stick with your portfolio through the market’s regular ups and downs.
