Is Lending a Risky Business?
In This Chapter
• Learning about risk tolerance
• Determining your risk tolerance
• Understanding risk capacity
• Decreasing risk by diversifying your portfolio
• What to do when borrowers default
Have you ever taken a glucose tolerance test? This test is used to determine blood sugar levels. The lucky patient has to fast after midnight and then report to the doctor’s office the next morning to drink a bottle of glucose. If your body can’t adjust its blood sugar levels, you start feeling pretty yucky—and you might get a diagnosis you don’t want.
Risk tolerance is a little bit like that. If you take on more risk than you’re mentally equipped to handle, you may start feeling pretty yucky. That’s why it’s a good ...