This study examines the interplay between financial capacity, investing experience, and self-reported risk tolerance among affluent US investors. Data were collected via an online Qualtrics survey administered to members of the Precision Sample research panel in 2023. Participants were required to actively manage their household investments. The design intentionally oversampled high-income households, defined as those with combined spousal or partner incomes between $200,000 and $300,000, as well as high-net-worth individuals, defined as those with a net worth exceeding $1 million (excluding the value of their primary residence and any associated loans). Using hierarchical clustering, K-means clustering, ANOVA, and generalized linear modeling, investors were segmented into three statistically distinct profiles defined by their financial knowledge, investment experience, and financial capacity. The highest risk-tolerance group was neither the most experienced nor the most knowledgeable, whereas the most financially knowledgeable and skilled group exhibited the lowest willingness to take risks. These findings challenge the assumption that greater financial sophistication automatically equates to higher risk tolerance. Findings highlight the significant role of psychological and situational factors in investment decision-making. The results have implications for those who provide investment and financial advice, client risk profiling practices, and regulatory approaches to assessing investor suitability.

Accepted Oral Presentation