Abstract
OPINION article Front. Psychol., 15 November 2011Sec. Cognition https://doi.org/10.3389/fpsyg.2011.00329
Highlights
Individuals should differ in their tolerance for risky financial investments
Asking people about risk preferences using hypothetical gambles may lead to choices that fail to maximize their expected utility
Others have no use for luxuries and have no conflict with the single goal of trying to insure a no-frills retirement. These two extreme types do not seem to be differentiated by their risk attitude as assessed from hypothetical gambles
Summary
Individuals should differ in their tolerance for risky financial investments. A freelance writer typically faces considerable variability in income, and long-term unpredictability. These should generally be compensated by less risky investment. A tenured professor faces little variability or unpredictability and can afford to take more risks elsewhere, other things being equal. For another thing, people have different tastes for expenditures. Some people value the “finer things” that money can buy, while others are convinced that the best things in life are free
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