Your investment strategy should be determined by the lesser of (1) your financial capacity for risk and (2) your emotional capacity for risk. Otherwise, you are likely jeopardizing your financial goals.
What’s the difference you ask?
Financial capacity is the ability to achieve your financial goals even after a severe stock market decline.
Emotional capacity is the ability to stomach volatility and losses in a severe stock market decline.
A couple examples will help illustrate these concepts.
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