Suresh is 52 now, a General Manager who’s swapped ambition for caution. These days, he’s less about “winning the game” and more about “not losing the lead.” At family gatherings, he’s the calm voice of reason, the one who says things like, “It’s not about making money fast, it’s about keeping it.” Every decision runs through his favourite filter: “Will this help future me?”
But rewind a few decades, and you’d hardly recognise him.
“In my 20s, I thought I was bulletproof. I was sure I could stomach any market storm,” he laughs, shaking his head.
Fresh into his corporate career, Suresh had his finances perfectly mapped out. A stable job, rising income, no dependents–all signs pointed towards an aggressive, equity-heavy strategy. “Why play it safe when I’ve got 30 years to recover?” he’d reasoned confidently.
Then came 2008.
The Nifty nosedived 56% in less than a year, and so did Suresh’s conviction. His once-proud portfolio was bleeding red. Numbers that used to symbolise progress now felt like slow heartbreak. The spreadsheets couldn’t capture what he was feeling anxiety, frustration, disbelief. The “temporary dips” his logical mind had accepted started stealing his sleep.
“That crash didn’t just show me the markets,” Suresh says quietly. “It showed me myself.”
The 2008 crash was more than a financial event; it was a collective emotional test. Investors who once claimed to be “long-term thinkers” found themselves panic-selling at record lows.
Here’s the uncomfortable truth:
Most people don’t really know their risk tolerance until they’re watching years of effort disappear from their screen.
Risk questionnaires and pie charts? They only measure what we think we can handle, not what we actually can when fear takes over.
Back in 2008, Suresh had 80% of his money in equities. On paper, it made perfect sense. He had time, income, and a safety net. But emotionally? He wasn’t ready for the ride.
Let’s break down what went wrong.
This is your financial muscle; how much loss your situation can handle before it affects your lifestyle or goals.
It depends on your income stability, time horizon, and liabilities.
Example:
A 28-year-old with no dependents and a long runway ahead has high capacity.
A retiree relying on savings for expenses has low capacity, even if they’re willing to take a punt.
This one’s in your head, not your wallet. It’s about whether you can stay calm when your portfolio drops 30% overnight.
Example:
Two people can have the same savings. One panics at a 10% dip, the other shrugs off a 30% fall.
Suresh thought he was the second type. Turns out, he wasn’t.
It’s your mood in disguise. Appetite is short-term, shaped by market noise and herd behaviour. Everyone’s brave in a bull market; everyone’s cautious in a crash.
In 2008, Suresh had capacity and appetite. What the market exposed was his tolerance, the weakest link.
The lesson from 2008 wasn’t “avoid risk”; it was “understand it.” When investors focus only on one type of risk, they set themselves up for pain:
The sweet spot lies in balancing all three.
Capacity sets your outer limits.
Tolerance keeps you steady through volatility.
Appetite lets you take smart, tactical bets, not reckless ones.
At 52, Suresh’s portfolio looks nothing like it did before the crash. He’s not risk-averse, just risk-aware.
“I’ve learnt to build a portfolio that helps me sleep at night,” he smiles. “And that’s worth more than chasing another percentage point.”
Suresh’s transformation didn’t come from new financial products. It came from introspection.
Here’s his three-step framework for understanding your true risk profile:
Ask:
If your “floor” isn’t stable, no amount of optimism will hold your strategy up.
Reflect:
If logic fails when fear sets in, you’ve gone past your tolerance.
Appetite isn’t good or bad; it’s temporary.
Recognise it, but don’t let it dictate your entire plan.
Use it for small moves, not structural shifts.
Risk isn’t a number on a questionnaire.
It’s personal, fluid, and it only reveals itself when markets test your limits.
Suresh’s 2008 wasn’t just a financial crash; it was his emotional audit. And every investor will face theirs sooner or later.
The trick is to build a portfolio not just for your money, but for your mind.
- The author is an experienced investment researcher and a chartered CFA
Disclaimer: This article is for educational purposes only. Please consult with a financial advisor for personalised advice.