Personal Finance

Risk Capacity

Definition

What is Risk Capacity?

An investor's financial ability to withstand losses without jeopardising essential goals.

Example in practice

A person with stable income and no near-term need for funds has greater risk capacity.

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Money set aside rather than spent, often for emergencies or future goals.

Liquid savings reserved for unexpected expenses or income disruption.

Total assets minus total liabilities.

Annual portfolio withdrawals divided by the portfolio's starting or current value.

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