Risk Averse

AAA

DEFINITION of 'Risk Averse'

A description of an investor who, when faced with two investments with a similar expected return (but different risks), will prefer the one with the lower risk.

INVESTOPEDIA EXPLAINS 'Risk Averse'

A risk-averse investor dislikes risk, and therefore will stay away from adding high-risk stocks or investments to their portfolio and in turn will often lose out on higher rates of return. Investors looking for "safer" investments will generally stick to index funds and government bonds, which generally have lower returns.

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  3. Equivalent Martingale Measures

    In asset pricing, a probability distribution of expected payouts ...
  4. Risk Curve

    A two-dimensional plot of real or projected financial harm/risk ...
  5. Price Risk

    The risk of a decline in the value of a security or a portfolio. ...
  6. Consumption Capital Asset Pricing ...

    A financial model that extends the concepts of the capital asset ...
Related Articles
  1. Entrepreneurship

    7 Steps To A Successful Investment Journey

    Before you start investing, educate yourself on financial ideas and develop a strategy that agrees with your personality.
  2. Investing Basics

    Do You Understand Investment Risk?

    Many investors overestimate their level of financial knowledge.
  3. Entrepreneurship

    Women And Finances: Is There A Gender Bias?

    Uncover some very complex reasons for female gender biases in the finance world.
  4. Active Trading Fundamentals

    3 Psychological Quirks That Affect Your Trading

    There are human tendencies that can block the road toward achieving our financial goals. Here's how to get around them.
  5. Active Trading Fundamentals

    Matching Investing Risk Tolerance To Personality

    Understanding risk tolerance is crucial to the advisor/client relationship and any good investment policy statement.
  6. Investing Basics

    Determining Risk And The Risk Pyramid

    Many investors do not understand how to determine the risk level their individual portfolios should bear.
  7. Options & Futures

    Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  8. Bonds & Fixed Income

    Are High-Yield Bonds Too Risky?

    Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
  9. Mutual Funds & ETFs

    Is Biased Investing Holding You Back?

    Risk aversion seems to come to us naturally, preventing us from stepping into unfamiliar territory. But feeling comfortable isn't always the best thing for your portfolio.
  10. Retirement

    Why Financial Advisors Disagree

    Financial advisors sometimes offer conflicting opinions that can be confusing for many investors.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center