If you need theball to land on red at the roulette wheel, you'll never winanything if the only thing you bet on is black. (Photo:Shutterstock)

"Curiosity killed the cat." However, it might not have, if youhadn't "let the cat out of the bag" in the first place. That catshould have never accepted the offer to leave the bag anyway. Youknow what they say about "Greeks bearing gifts."

Those metaphors work relatively well together. On the otherhand, you'll no doubt cringe in consternation when someone says,"Beware of Greeks bearing curious cats."

Christopher Carosa,CTFA, is chief contributing editor for FiduciaryNews.com, a leadingprovider of essential news and information, blunt commentary andpractical examples for ERISA/401(k) fiduciaries, individualtrustees and professional fiduciaries.

This is an example of a mixed metaphor. And a mixed metaphor canbe a very dangerous thing.

Especially when it comes to making financial decisions.

Related: The link between financial risk and benefitsselection

Risk stands in the middle of one of investing's greatest mixedmetaphors. On one hand, we have the hallowed concept of therisk/return tradeoff. On the other hand, we have the idea thatpeople should assess their risk tolerance before investing.

The trouble is, we're talking about two different kinds of riskhere. In the first instance, when we speak of the relationshipbetween risk and return, we allude to a theoretically objectiveconstruct that exists solely within the framework of a specificinvestment. In the second case, the risk in "risk tolerance" refersto a subjective feeling solely confined within an individual'sbrain.

The real problem occurs when practitioners and investors try tomix these metaphors. This, in fact, exposes the fallacy of tryingto manage investments via any factor involving personal risktolerance.

If you need to earn 5 percent to meet your goal, you can't letyour fear of volatility limit your investments toCDs yielding, well, hardly anything. In other words, if you needthe ball to land on red at the roulette wheel, you'll never winanything if the only thing you bet on is black.

The practice of relying on risk tolerance questionnaires tookoff in 1999 following the Financial Services Review publication ofJohn Grable and Ruth Lytton's risk-tolerance scale. The implicationis that risk tolerance has a valid place in making investmentdecisions.

At that time, there had been only a handful of academic paperspublished attempting to equate decision-making with emotions. By2014, a full 30 percent of all published psychological researchdealt with this subject. Needless to say, we've come a long waysince 1999.

One thing is clear: Emotions drive decisions. Of note, though,is this: Emotions don't drive small-money decisions. When it comesto big-money decisions, however, lower-income classes are morelikely to make emotional decisions.

We often see emotional decision-making among 401(k) investors.Recall how fear caused so many to sell their equity investmentsfollowing the 2008-2009 market crash. They couldn't tolerate the"risk," so they went with the "safe" choice.

Said another way, they bet on black when they really neededred.

Remember, those who bow to the Modern Portfolio Theory altarknow you won't get the return if you don't take the risk.

Actually, that's not really what that theory says.

Oh, well. I guess we'll burn that bridge when we come to it.

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