The theme this week on the Retirement Quick Tips Podcast is: 5 personality traits of self-made millionaires. These five traits when combined together can help predict those of us who will have a higher net worth, according to a recent research study in Germany. 

Today’s self-made millionaire trait is: higher risk tolerance. 

According to Investopedia: Risk tolerance is the degree of risk that an investor is willing to endure given the volatility in the value of an investment. An important component in investing, risk tolerance often determines the type and amount of investments that an individual chooses.

It makes a lot of sense that higher tolerance for risk is a predictor of wealth. According to multiple previous studies, “risk taking is an important characteristic for entrepreneurship - it’s worth noting that the vast majority of the self-made millionaires are also entrepreneurs, which requires a significant amount of risk-taking in getting a business off the ground, as well as ongoing risks 

I work with a lot of business owners as clients, and I see this as a distinguishing trait. They aren’t reckless risk-takers, but they understand and appreciate the trade-offs of taking risks in order to achieve their goals, and they are ok with the uncertainty and unknowns of those risks. 

I rarely have a client - business owner or not - who isn’t comfortable with risk. It’s a critical factor in wealth creation, investing, and performance. 

If you’re chicken little, the sky is always falling, and the only investments you’ll be willing to buy or hold on to for the long-haul are canned food, gold coins, and guns. And you’ll bury the rest in the backyard and never have a chance to grow wealth.

It’s important to note here, that there is a distinct difference in the risk tolerance among self-made millionaires and millionaires who came into their wealth through inheritance or marriage. This second group of inheritors had a significantly lower tolerance for risk than their self-made millionaire counterparts, suggesting that being born into wealth does not automatically lead to the development of the millionaire personality profile. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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