What does too much risk in an investment portfolio typically result in?

Investing in a portfolio that contains too much risk can lead to heightened stress and anxiety for investors. This is largely due to the volatility associated with high-risk investments, which can result in significant fluctuations in the value of the portfolio. When the market experiences downturns, investments may lose value rapidly, leading to feelings of uncertainty and fear regarding potential financial losses.

Investors who embrace high-risk strategies may constantly worry about their portfolio's performance, as their financial well-being can feel precarious in the face of market changes. Continuous monitoring and the emotional rollercoaster of watching investments rise and fall can contribute to a stressful experience, overshadowing the potential for higher long-term gains that some risky investments might provide.

In contrast, increased long-term returns often come with a well-balanced approach and are not guaranteed by simply having a more aggressive risk profile. Frequent market trading is a separate strategy that may not necessarily relate to risk tolerance but rather to an investor's approach to maintaining or adjusting investments. Lastly, better diversification aims to spread risk across various assets, which typically reduces anxiety rather than increases it, as it can mitigate potential losses.