2008 AM Q1-B

They ask for things that deacrese their ability to take risk.

I said their current salary just cover their living expenses and is expected to continue to do so. No accumulation of capital will be done trough salary.

it was not in the answer, also their was this in the ability to take risk :

they are yound and they have more human capital.

So my question is, even if you are yound and have alot of human capital, if your salary just cover your living expenses, does it increase or deacrese your ability to take risk ?


I would think that it would fall somewhere between neutral and increase. I think they’re looking for things that rather obviously are a detriment to one’s ability to tolerate risk. Being able to meet your expenses with your salary and thus not have to invade your investment portfolio to meet expenses is considered a good thing in the context of portfolio management. It’s not ideal to have a lifestyle with so little margin, but purely from your investment portfolio’s perspective, it’s good. Not so good that I’d say it strongly increases their ability to take risk, but whatever.