Let's talk about the "mini-crash," when the Dow dropped 1,000 points in about an hour. What did it make you think about?

The most important thing is to be careful about jumping to conclusions. To characterize it as a 1,000-point drop may not even be accurate. If it was an error, is that really a drop in the market? Did an error in order entry trigger algorithmic trades? People talk about that as if that's fact, but I don't think we know if it's true.

We do know that the fundamental qualities of companies and the U.S. economy did not precipitously fall as a reflection of the market's falling. There was a disconnect between what the market was telling us and what we all know to be true.

Even if this was noise level, investors still have a little post-traumatic stress disorder from 2008. Were your advisors back on the phones, telling clients not to worry?

Absolutely. Most advisors have seen enough market movements to know not to overreact. And so thoughtful, non-panicked financial advisors are going to manage client relationships and only make portfolio adjustments when they have confidence that they understand the etiology of the market movement.

Do you think the mini-crash will make people more risk-averse again?

Investors swing between enthusiasm for risk and fearing the loss of their capital. I don't know that any investor or community of investors stays in one camp for very long. One dilemma advisors face is communicating risk. It's one thing for an advisor to understand risk; it's something entirely different for the advisor to communicate that risk intelligently; and it's a third thing entirely for the investor to appreciate the risk.

One thing that always bothers me about the way risk is explained is the implicit promise that elevating your risk profile will reap a higher return. Doesn't risk mean uncertainty about eventual return? How could advisors communicate that more effectively?

The statistical reflections of risk have limited utility when you're talking about an individual managing a household economy and the day-to-day practicalities of investing dollars. There's an expression "you can't spend IRR," and it's a good one. So if you need to fund a lifestyle, tuition or retirement, you have a different expectation from your invested assets than if you're a large institution managing, in a somewhat dispassionate sense, large assets over a very long horizon.

So is a certain wariness appropriate?

Being wary causes people to reflect more on the decisions they're making. It should also have the impact of preventing reactive behavior, which can result in a cascade of buying or selling activity. In today's market, that's likely to be selling, which is not particularly healthy for an individual's portfolio.