A common rule of thumb states that if you lose sleep over investments, you likely have?

The rationale behind the idea that losing sleep over your investments indicates you might have too much risk is centered on the emotional response to financial uncertainty. When individuals experience significant anxiety or stress about their investments, it often points to a level of risk exposure that is not aligned with their risk tolerance.

Risk tolerance is an individual's ability and willingness to endure fluctuations in investment values. If an investment strategy causes considerable worry or sleepless nights, it suggests that the investor may have ventured beyond their comfort zone in terms of risk. Following a common rule of thumb, prudent investing aligns with achieving a level of risk that one can accept emotionally, which typically allows for peace of mind.

In contrast, having too little risk might lead to a missed opportunity for growth, and proper diversification is meant to mitigate risk rather than exacerbate it. Insufficient capital, while it can lead to other financial issues, does not directly correlate to emotional distress about market risk. Therefore, the assertion that excessive worry over investments usually signifies an overexposure to risk aligns with established financial principles regarding risk management.