The ‘Risk-Aversion’ Misnomer

Financial advisers often discuss investors who are “risk-averse.” But people, on the whole, are not terribly averse to risk. We are, on the other hand, extremely averse to loss. Imagine the following game show scenario: You are offered the choice of receiving $3,000 in hand, right away, or the potential for $4,000 with a 20 percent chance of getting nothing at all. There are some daring souls who would go …