I’ve been thinking about a particular topic a lot recently.
How do wealthy people think about risk compared to the rest of us?
It’s the question that gnaws at you when you’re lying in bed after another brutal shift. You know you need to do something different to escape the hamster wheel, but everywhere you turn, someone’s shouting “no risk, no reward!” at you. The implication? To get wealthy, you need to take bigger and bigger risks.
But here’s where it gets interesting. And a bit confusing.
I’ve been watching two completely different paths to wealth, and they contradict each other entirely.
On one hand, there’s the “Steady Eddie” approach. You know the one. Invest more than you need to each month. Low risk. Boring even. Index funds, compound interest, and time. Over the course of 20 or 30 years, it yields incredible results. I’ve seen consultants retire comfortably doing exactly this.
On the other hand, there’s the high-risk entrepreneur route. Start a business. Nine out of ten fail. You might lose everything. Multiple times. But the ones who make it? They build serious wealth.
So which one is the “wealthy” approach?
Spoiler alert: Both. And neither. I’ve discovered something that completely changed how I think about risk and wealth, and it might just change how you think about your financial future, too.
You’ve Been Lied to About How Wealth Works
Let me say it straight: the relationship between wealth and risk-taking isn’t what you think it is.
I went deep into the research on this—and I mean properly deep, the kind of academic papers that make your eyes glaze over—and what I found was genuinely surprising. The answer to “do wealthy people take more risks?” isn’t a simple yes or no.
It’s more like: it depends on what you’re asking, how you’re measuring it, and when you’re asking the question.
Here’s what the research actually shows: there are mixed findings. Really mixed. Some studies found that wealthy people are more risk-tolerant. Other studies have found that individuals from lower socioeconomic backgrounds are more risk-seeking. And some found no clear pattern at all.
The pattern you see depends entirely on three things:
- The domain you’re looking at (business risk vs. investment risk vs. life-or-death decisions)
- How you measure wealth (absolute numbers vs. how people feel about their wealth)
- The context (stable times vs. economic shocks vs. environmental stressors)
Let me break this down with the actual data, because this is where it gets fascinating.
When the Wealthy Actually Do Take More Risks
In business and agricultural settings, research is fairly clear: wealthy individuals demonstrate greater risk tolerance.
Here are the numbers: one study found that a one-standard-deviation increase in self-rated risk tolerance was associated with a 2.7 percentage point rise in business investment among wealthy individuals, compared with just 1.2 percentage points for non-wealthy individuals.
That’s more than double.
Three separate studies found that wealthier individuals or groups were more risk-tolerant when it came to entrepreneurial investment or agricultural decisions.
So if you’re wondering why that wealthy property investor you know seems so comfortable putting another deposit down on a rental property, or why that entrepreneur friend can stomach starting their third business after two failures, there’s your answer. In business contexts, wealth enables greater risk-taking.
But—and this is a big but—that’s only half the story.
When the Poor Actually Take More Risks
Here’s where it gets really interesting, and a bit uncomfortable.
In other situations, particularly those involving mortality-related decisions, wealthy individuals have actually demonstrated lower risk tolerance. Lower. Not higher.
One study used mortality cues—basically reminding people they’re going to die one day—and found that poorer participants chose riskier options afterwards, while wealthier ones acted more cautiously.
Four studies found that poorer groups were generally more risk-seeking. And get this: lower perceived wealth was associated with more risk-taking behaviour overall.
So the very people who can least afford to lose are often taking the biggest risks.
Suppose you’ve ever wondered why lower-income people disproportionately buy lottery tickets, or why payday loans exist. In that case, you’re seeing this pattern in action. It’s not that poor people are irrational—it’s that the context in which their decisions are made is completely different.
The key insight here? Your wealth level doesn’t determine your risk tolerance. The context does.
And that changes everything about how you should think about your own financial decisions.
Why Context Matters More Than Your Bank Balance
This is where the research truly opened my eyes, and it will shift how you approach your own wealth-building journey.
Risk attitudes vary dramatically across different domains. The risk you’re willing to take in business is completely different from the risk you’re willing to take with your pension, which is different again from the risk you’d take in a life-or-death situation.
Entrepreneurial and agricultural risk-taking appeared far more sensitive to wealth levels than financial investment risk. Why? Because environmental factors matter. Weather risk for farmers. Mortality cues for everyone. Access to credit. These contextual factors completely change the wealth-risk relationship.
Let me provide a real-world example that illustrates this point.
The Wealth Shock Effect
Researchers studied what happens when people experience negative wealth shocks—you know, when the market crashes, or you lose your job, or your property value drops.
Generally, negative wealth shocks lead to increased risk aversion. People get more conservative. That makes sense.
But here’s the twist: shocks affect different groups in opposite ways.
Among the poor, negative shocks actually increased risk-taking. It’s the desperation effect. When you’re already struggling and things get worse, you’re more likely to take a punt on something risky because what have you got to lose?
Among wealthy people, negative shocks increased risk aversion. It’s in protection mode. When you have something to protect, you become more conservative when threatened.
A study of Lending Club investors found exactly this pattern. After experiencing wealth shocks, investors became more risk-averse in their lending decisions.
Now, think about what this means for you as a professional who’s comfortable but feeling trapped. You’re in an interesting position. You have enough to protect that you probably shift into conservative mode when things get uncertain. But you might not have enough to feel truly free to take business risks.
Understanding where you stand in this dynamic can help you make more informed decisions about when and how to take risks.
How You Measure Wealth Changes Everything
Here’s something else that blew my mind: the way researchers measured wealth in these studies completely changed what they found.
Some studies used absolute measures—your actual net worth, your income in pounds or dollars. Six studies did this.
Other studies used relative measures—where you perceive yourself in the wealth distribution compared to others, or how your group compares to other groups. Seven studies took this approach.
And guess what? They found different patterns.
The studies that examined behavioural experiments in controlled settings (six of them) found different results than the studies that examined real-world field observations (three of them).
The insight here? The tools we use to measure wealth and risk shape what we discover. And more importantly for you: how you think about your own wealth matters just as much as the actual number in your account.
This brings me to what is the most important finding of all.
It’s Not How Much You Have—It’s How You Feel About What You Have
Several studies emphasised the importance of relative wealth and social comparison. And honestly, this is where the real action is for most of us.
Your perceived placement in the wealth distribution drives your risk-taking behaviour more than your actual wealth level. Think about that for a second.
Feeling “behind” your peers creates a different risk appetite than feeling “ahead.” The subjective and social dimensions of wealth are critical moderators of your risk attitudes.
This is why a doctor earning £80,000 might feel poor if all their colleagues drive Teslas and take exotic holidays. In contrast, someone earning £40,000 might feel wealthy if they’re the first in their family to own a home.
It’s not the number. It’s the story you tell yourself about the number.
And here’s another layer: your childhood wrote your risk script.
Research indicates that childhood socioeconomic status has a lasting impact on adult risk preferences. Life history theory suggests that early resource scarcity or abundance shapes your later risk strategies. Growing up poor versus growing up wealthy creates different risk “operating systems” in your brain.
If you grew up watching your parents stress about money, you’re likely carrying that programming into your adult financial decisions. And if you grew up comfortable, you’ve got different programming.
Neither is right nor wrong. But understanding your programming helps you make conscious choices instead of unconscious reactions.
What This Actually Means for Your Financial Future
Right, let’s bring this home. What does all this research mean for you, sitting there after a long shift, wondering how to build wealth without losing your mind?
First, the answer to the question “Do wealthy people take more risks?” is: it depends.
The relationship is non-linear and context-dependent. Some studies suggest that the wealthy are more risk-tolerant, particularly in business. Other studies show people with low incomes are more risk-tolerant, especially under stress or after shocks.
However, what matters to you is this: stop comparing your risk tolerance to that of billionaire entrepreneurs.
That comparison is useless. Elon Musk’s risk tolerance is irrelevant to your life. His context is completely different. He’s playing a completely different game.
The “right” level of risk for you depends on three things:
What kind of risk are we talking about? Entrepreneurial risk differs from investment risk, which in turn differs from career risk. I might be conservative with my pension but aggressive with a side business. That’s not contradictory—that’s context-appropriate.
How do you measure your wealth? Are you considering your absolute income or how you feel in relation to your peers? Because that feeling matters more than you think. If you’re constantly comparing yourself to consultants earning £120k, you’ll feel poor on £70k. But £70k is wealthy compared to most of the country. Your reference point shapes your decisions.
When are you making this decision? Are you in a stable period or just after a setback? Your risk appetite will be completely different, and that’s okay. After a financial shock, it’s natural to be more conservative. After a win, you feel more expansive. Neither is wrong—they’re contextually appropriate responses.
Here’s What You Should Actually Do
Let me give you three action steps you can take right now:
Identify your domain. Be specific about what type of risk you’re considering. Business risk is distinct from investment risk, which in turn differs from career risk. You can be conservative in one area and aggressive in another. That’s smart, not contradictory. You could keep your pension in boring index funds (low risk) while you build a side business (higher risk). That’s a context-appropriate strategy.
Check your context. Are you making this decision from a scarcity mindset or an abundance mindset? Are you reacting to a shock or operating from a state of stability? Your context should inform your strategy. If you’ve just experienced a financial setback, now isn’t the time for a big business risk. However, it might be the perfect time to adopt a steady investing approach.
Measure what matters. Focus on your relative progress, not absolute comparison to wealthy outliers. Are you better off than you were last year? Are you building momentum? That matters more than whether you’re keeping up with some entrepreneur’s Instagram feed. They’re in a completely different game.
The Bottom Line
Here’s what I want you to take away from this: the wealthy don’t have a secret risk formula.
They don’t have some magic ability to stomach more risk than you. What they have is context-appropriate risk strategies. And you can have those too.
The Steady Eddie approach works. The entrepreneur approach works. Sometimes a combination works. What doesn’t work is unthinkingly copying someone else’s strategy without understanding the context that makes it work for them.
Your job isn’t to become more risk-tolerant or less risk-tolerant. Your job is to become more context-aware and more intentional about matching your risk decisions to your actual situation, not to some mythical wealthy person’s situation.
You’re not building someone else’s wealth. You’re building yours. And that requires a strategy that fits your life, your goals, your psychology, and your context.
You deserve wealth. You deserve freedom. And you don’t need to bet everything to get there.
See you next week.
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This post is for educational purposes only and does not constitute financial advice. Always do your own research and, if needed, seek guidance from a qualified financial adviser regulated by the FCA.
Good luck on your journey!
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