Risk tolerance

Risk tolerance — honestly defined: the largest drawdown you can watch without selling. It must be measured in pesos, not percentages (“−40%” is painless; “₱1.2M of the family’s money, gone on paper” is not), and rehearsed on paper before a bear market administers the live exam. If the honest rehearsal answer is “I’d sell,” the equity allocation is too big — resize now, calmly, not later, expensively.

First used in: 1.8 · Risk: what you’re actually paid for