Imagine for a moment that you owe a violent loan shark $10,000 by tomorrow morning. But today you have only $7,000.
Now suppose you visit an economist for help. You desperately ask, “What am I to do?!”
Our economist, being highly trained, administers a risk-tolerance questionnaire to gauge your preferences about risk. As it turns out, you are pretty risk averse.
“There is nothing I can do,” our economist sadly concludes. “There just isn’t enough time for a low-fee 60/40 portfolio to earn 43% by tomorrow.”