Loading the player...

What does 'Risk Averse' mean

Risk averse is 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.

BREAKING DOWN '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. Risk Lover

    An investor who is willing to take on additional risk for an ...
  2. Risk

    The chance that an investment's actual return will be different ...
  3. Country Risk

    A collection of risks associated with investing in a foreign ...
  4. Mean Return

    1. In securities analysis, it is the expected value, or mean, ...
  5. Expected Return

    The amount one would anticipate receiving on an investment that ...
  6. Risk Profile

    An evaluation of an individual or organization's willingness ...
Related Articles
  1. Investing

    Understanding Risk Averse Investing

    Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ...
  2. Financial Advisor

    How To Construct A High-Risk Portfolio

    Over time, intelligent and disciplined risk-seeking behavior can produce substantially above-average returns.
  3. Investing

    Low Vs. High-Risk Investments For Beginners

    Understanding risk is key to better investing.
  4. Investing

    Determining Risk And The Risk Pyramid

    Many investors do not understand how to determine the risk level their individual portfolios should bear.
  5. Investing

    Where to Invest Your Money? 10 Steps to Financial Success

    Learn where to invest your money ten steps. Included is how to develop a proper investment plan, different investment products and brokerage options.
  6. Financial Advisor

    When Couples Have Different Risk Appetites

    Communication, compromise and frequent monitoring will lead to successful investing for spouses with different risk tolerances.
  7. Investing

    What are Excess Returns?

    Excess returns are investment returns that exceed a benchmark or index with similar risk.
  8. Managing Wealth

    How Risky Is Your Portfolio?

    Find out how you could be subject to larger losses than you think.
RELATED FAQS
  1. What kind of securities should a risk-averse investor buy?

    Understand what risk aversion means in terms of investment, and learn the investment options available to investors who prefer ... Read Answer >>
  2. What are some of the limitations of only looking at the rate of return for an investment?

    Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >>
  3. How do interest rates impact risk aversion in the market?

    Learn why interest rates and risk aversion have an endogenous relationship in the market, and why interest rates play such ... Read Answer >>
  4. Is there a positive correlation between risk and return?

    Learn about the positive correlation between risk and the potential for return, and understand how risk is used to construct ... Read Answer >>
  5. Why are mutual funds subject to market risk?

    Find out why mutual funds, like all investments, are subject to market risk, including how the different types of market ... Read Answer >>
  6. How do I find out my own risk tolerance?

    Learn why risking capital can be risky business, how much risk can you afford and how to determine the right amount of risk ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center