Money For the Rest of Us · Wednesday, August 12, 2026
In retirement portfolio workshops, David Stein emphasizes assessing retirees' 'loss capacity' – their ability to sustain portfolio drops – as distinct from their 'loss aversion,' which is the emotional reaction to losses. He uses past experiences, like the Great Financial Crisis, to gauge this.
“Next, we sought to understand the loss capacity. What would happen to these retirees if their portfolio fell 30%? What's the capacity to sustain those losses? That's different from their loss aversion. The emotional weight they feel when they experience losses.”
“And as a result, I have 20% of my investable assets in stocks. It's diversified among many different types. But I'm not comfortable having 70% in stocks, like many retirees are.”