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Investopedia explains 'Bernoulli's Hypothesis'
Related closely to the idea of diminishing marginal returns, Bernoulli's hypothesis essentially states that one should not accept a highly risky investment choice if the potential returns will provide little utility, or value. A young investor who still has his or her highest income-earning years ahead can be expected to accept greater investment risk, as the potential returns could be very valuable compared to such a person's relative lack of wealth. On the other hand, a retired investor with ample savings already in the bank should not be looking for a highly volatile or risky investment, as the potential benefits are unlikely to be worth the risk.
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