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Sources of wealth.

The manner in which an investor acquired wealth is likely to affect the investor's stance on risk. The following is a discussion of two of the most common sources of wealth.

Wealth created by entrepreneurial activity was actively created and probably indicates investor knowledge and experience with risk-taking decisions. More than likeky, a successful entrepreneur is familiar with putting everything on the line and, thus, is willing to take risks when making investment decisions. [...]

Wealth acquired through inheritance, one-time windfalls, or accumulated over long periods of secure employment may indicate an individual who has less familiarity with risk-taking activity. Wealth that was received passively may indicate not only the recepient's inexperience with risk-taking decisions but also his unfamiliarity of consequences associated with risky decision making. [...]

Schweser Study Notes

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