Investors spend a lot of time thinking about risk. But they do it all wrong.

This is one of the main questions financial advisers want to know from clients. A typical questionnaire asks investors to rate their investment-risk tolerance on a scale from extremely low to extremely high.

The answer will largely determine how investors move forward as they look to increase their wealth. If you say you have high risk tolerance, it is taken to mean you are willing to invest in assets that can potentially bring you big, fast returns, but also bring you big, fast losses. Having a low risk tolerance means you aren’t inclined to take big swings, but are happy with slow and steady returns.

What is wrong with this picture? Pretty much everything, if your goal is to increase your wealth and happiness.

That’s because we are people before we are investors, and our lives extend beyond investments to careers, social life and more—each with its own risk. People who have high tolerance for investment risk don’t necessarily have high tolerance for career risk, such as switching jobs or changing careers. Nor does it mean they have a high tolerance for social risks, such as public speaking or networking.

But by focusing solely on investment risk and financial returns, people often misunderstand the best path to accumulating wealth and emotional satisfaction. Many people, for instance, think that the best way to increase wealth is by tolerating investment risk, perhaps picking stocks with spectacular returns. In truth, wealthy people gain their wealth mostly by tolerating career and social risks—risks that pay great returns in turning them into successful physicians and lawyers or owners of businesses large and small.

My big risk

Let me offer my own experience as an example. I had a job as a financial analyst at a large company in Israel when I completed my undergraduate and M.B.A. studies. My salary was sufficient to support my family, and a secure pension awaited me in retirement. But my job carried all sorts of negatives. The highest prestige in that company was accorded to its engineers; financial analysts would always be second to them. And my job was boring.

What did I do? I chose to tolerate career risk, coming to the U.S. to study for a Ph.D. I wanted to have a professor’s career that would provide a good salary, and emotional returns as a teacher and scholar and mentor.

The career risk I tolerated was great. I was married by then, and we were expecting our first daughter. What if I failed to obtain a Ph.D.? What if I failed to obtain a professor’s position? But I knew that the potential returns coming from my tolerance for career risk—financial as well as emotional—would be great. Indeed, that turned out to be true. In my late 70s, I am still a professor engaged in teaching and scholarship, with no plan to retire.

I combined my high career risk with modest investment risk by investing good portions of my income in a diversified portfolio of stock and bond index funds, and that portfolio continues to grow by the magic of compounding.

The willingness to take social risks is also a key to accumulating wealth. I marvel at my wife’s tolerance for social risk. She regularly initiates conversations with fellow shoppers at grocery stores, while I keep quiet as I gather my groceries and stand in the checkout line. Yet I have learned to tolerate social risk, overcoming my natural shyness in professional settings, able to speak not only to my many students in classrooms but also to large audiences of investors and investment professionals. Speaking engagements to investment professionals pay handsome fees, adding to my wealth.

Student experiences

I encourage the students who take my investing classes to similarly pay attention to career and social risks, beyond investment risk. And many tell me of their efforts. One student says she has taken a substantial career risk, moving to a new industry, and from the Midwest to the Bay Area. Moreover, like many of her classmates, she is pursuing an M.B.A. midcareer. “I believe if there is an opportunity for career growth then it is worth taking a leap now and then!" she says.

Another student says that the biggest career risk he took recently was to interview for a job offering twice his current salary. “The interview went badly and it was a punch to my ego," he says. But that bad job interview hasn’t discouraged him from pursuing good jobs and tolerating the social risk of further bad interviews. He has learned that a high tolerance for social and career risks is the surest path to greater wealth.

In the end, the main takeaway—which has guided my own life and which I try to impart to my students—is that the combination of risks and potential returns in our life portfolios are similar to their combinations in our investment portfolios. We do well when we have a high tolerance for career and social risks, and a lower tolerance for investment risk. Some returns of individual investments in our portfolios, whether investment or life ones, are likely to be exhilarating while others are likely to be disappointing. But it is the returns of the overall portfolios, whether investments or life, that really matter.

Meir Statman is a professor of finance at Santa Clara University’s business school and author of “A Wealth of Well-Being: A Holistic Approach to Behavioral Finance."