How would you decide what level of risk is acceptable?

Answer 1

You weigh in potential gain and likely probability of gain and amount and likely probability of a potential loss. For example:

1) To bet 100$ with 51% chance of winning 200$ and 49% loosing is an acceptable risk

2) To bet 100$ with 1% chance of winning 12000$ is also an acceptable risk

3) To bet 100$ with 30% chance of winning 300$ is not an acceptable risk

I understand that you question probably does not relate to money, but I think it is easier to see the point that way. In real situations you would have to estimate probabilities and compare potemtial gains and losses.

Answer 2

The level of acceptable risk depends on your risk tolerance, financial goals, and timeline. It's important to assess how much loss you can handle emotionally and financially. Diversification and proper asset allocation can help manage risk effectively.