Risk-averse


Risk-averse

Describes an investor who, when faced with two investments with the same expected return but different risks, prefers the one with the lower risk.

Risk Aversion

The subjective tendency of investors to avoid unnecessary risk. It is subjective because different investors have different definitions of unnecessary. An investor seeking a large return is likely to see more risk as necessary, while one who only wants a small return would find such an investment strategy reckless. However, most rational economic actors are sufficiently risk averse such that, given two investments with the same return and different levels of risk, they would choose the less risky investment.