Risk questions are everywhere: How much stock is the right amount of stock in my portfolio given my age? Am I too conservative if I have x% in bonds today? I'm risk averse, will I be able to retire if I shy away from stocks? As I age, should I take some risk off the table, be more conservative?

Boy do I wish there were easy answers to the questions of how much risk to take on.

When it comes to risk, it boils down simply to what you want to accomplish in your life and how much you're willing to roll the dice to do it.

Suppose you're risk averse. You will have to accumulate an enormous nest egg if your goal is to retire and live off that nest egg without the benefits of capital appreciation (and it's associated risk). That's the reality of inflation protected interest income. It's very expensive. Just replacing your current income would require upwards of fifty times that income in these securities. And for that you don't ever get the chance to buy that retirement vacation home or start that foundation. You just get to keep living at your same standard of living for as long as you live.

Now there's an illustration of risk aversion being boring you might not have though of, eh?

Maybe you're a risk taker. Penny stocks, options, commodities... They're all out there. Ways to roll the dice and possibly strike it rich. How else could someone of limited means hope to retire and set aside all their financial worries? Lotteries work that way. You risk your entire investment each weak for a small chance at financial freedom.

Playing the lottery, writing puts and trading commodities are all risky investments. (And not the least bit boring.)

You should see this as a fundamental truth. The only way reach beyond your current means now, or in your future, is to take on risk. In your personal financial picture that means taking on as much risk as you're willing to bear in order to realize your goals.