Financial risk-taking means different things to different people. That's why financial advisors offer a barrage of psychometric tests and questionnaires in an attempt to work out which risks are right for you.
But Dr Doug Turek of Professional Wealth thinks that throughout this process, the real definition of financial risk is often forgotten.
"Financial risk is simply the failure to fund your lifestyle goals, which could include paying your mortgage, funding a desired retirement or keeping the children in private school," he says. "Some in the investment community focus narrowly on 'volatility' or fluctuations in investment returns."
Of course, your life stage and current financial circumstances will have a big bearing on your goals.
If you're young, Turek suggests your biggest financial risk could be loss of earnings or worse becoming disabled or dying leaving behind a mortgage and insufficient funds the family you leave behind.
"Lump sum life insurance arranged through superannuation and long-term income protection arranged by an outside provider can help you mitigate life risks," he says. "Good career planning may help you avoid a loss of income."
If you're older and well into your working life, Turek says your risks change to ones related to saving and investment.
"The more surplus you have, the more investment risk you can take albeit most then don't need to. Conversely, those whose wealth can only just fund their future needs or aspirations have a very low 'risk budget' and can't afford to take much risk," Turek says.
For those funding retirement, "inflation is a risk that could undermine future income, which requires a different investment strategy," he adds. Plus, there is always "legislative risk" to consider, whereby a government of the day can change policy on things such as superannuation and retirement age.
Turek advises people to step back and look at all the things that could get in the way of them achieving their goals: use "dark not rose coloured glasses" when thinking about the big picture.
He suggests you take a good hard look at what you can afford to risk and what risks you need to take.
"Some people take more risks than they need, while some might not take enough to finance their objectives," Turek says.
"Have you pretty much funded your retirement, allowing you to back off on investment risk taking? Do you or will you soon have a giant mortgage that limits other risks you can take and demands that you top up your insurances? Factors like these define your risk budget."
Spend your risk budget carefully
Turek's top tip is to spend your risk budget wisely on investments that give you the maximum return for the minimum risk you need to take.
"Every financial decision involves risk but not all risks are rewarding enough or even worth taking," Turek says.
As a start, he thinks you should reframe the questions you have for your risk self-analysis or for a financial advisor: "First ask, 'What risks do I need to take to achieve my goals?' And then: 'What are the safest investments available for the risk I need to take?'," he says.
An important way to avoid investment disappointment is to not put all your eggs in one basket. As a starting position, Turek recommends considering the old maxim of keeping one third of your risk budget in cash, one third in shares and one third in property.
"Spread your money around in a variety of assets as each one can potentially disappoint", he cautions.
Margie Sheedy is the author of The Small Business Success Guide, published by John Wiley.