How much risk should a portfolio carry?

Detailed Explanation

Enough to meet the goal, and not more than your circumstances can absorb. Two constraints bind. Tolerance: the level of decline you can watch without abandoning the plan, since a portfolio sold at the bottom returns nothing regardless of how well it was designed. And runway: how long the money can stay invested before you need it, which determines whether a downturn is an inconvenience or a loss. Higher expected returns generally require accepting higher volatility. The mistake is not choosing risk — it is choosing a level you have not tested against a bad year.