Title: Establishing a relationship between risk tolerance and the investor lifecycle

Authors: Anzel Van Den Bergh; Sune Ferreira; Jean Dommisse; Zandri Dickason-Koekemoer

Addresses: North West University, Vanderbijlpark, South Africa ' North West University, Vanderbijlpark, South Africa ' University of Stellenbosch, Stellenbosch, South Africa ' North West University, Vanderbijlpark, South Africa

Abstract: The concept of risk tolerance has increasingly gained importance in the financial industry after the Global Financial Crisis (GFC) in 2007/2008. Individual investors' risk perception and willingness to tolerate risk may vary during different phases of the investor lifecycle. However, it is important to analyse individual investors' risk tolerance during different phases of the investor lifecycle, as it will mainly influence their investment decisions. This paper aims to determine the influence of age, risk tolerance and risk perception on the investor lifecycle within a South African context and the deviation from theory during different phases of the investor lifecycle. The findings indicated that age is significant in predicting the probability of individual investors being categorised into one of the three phases in the investor lifecycle. Furthermore, the level of risk tolerance individual investors tolerate are not entirely according to theory and depends on individual investors' perceptions and attitudes towards risk.

Keywords: age; risk tolerance; risk perception; individual investors; investor lifecycle; South Africa.

DOI: 10.1504/IJAMS.2021.119751

International Journal of Applied Management Science, 2021 Vol.13 No.4, pp.275 - 291

Received: 09 Apr 2019
Accepted: 16 Oct 2019
Published online: 20 Dec 2021 *

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