Initial Wealth

CFA Book 2, Page 328/329: All else equal, the greater an investor’s initial wealth, the more that investor should allocate to risk free assets (or some other conservative strategy). Problem: The reading seems to derive that conclusion solely based on an assumption that human capital is less risky than the risky asset, rather than from the fact that HC is a smaller proportion of Total Wealth. How would you answer a question on this? It seems that the conclusion (greater initial wealth allocate more to risk free or bond assets) does not follow from the greater initial wealth, but more from the assumption about riskiness…

Let me know if this does not address your question.,1101694,1101884#msg-1101884

Perfect! Thanks!