How do you decide what is the right balance? There is no single right answer to that question. It depends on the individual person's risk tolerance. Let's say you saved up enough money to live out your life in relative comfort but without the ability to make extravagant expenditures. I come along and offer to give you ten-to-one odds on the flip of a coin. The only catch is that you have to bet your entire net worth. That bet has a tremendous edge, but it is probably a bet that you wouldn't want to make, because the value of what you can gain, even though it is a much larger sum of money, is much less than the value of what you could lose. If, how- ever, you are just out of college with $10,000 in savings and your whole earnings career ahead of you, you would probably want to take the same bet. As a fund manager, the correct answer as to how to maximize your edge will depend not only on your own risk char- acteristics, but also on your perception of the risk profiles of your investors-