My question is about Risk Capacity and Change in Goals.
According to CFAI answer keys,
#1. “Risk capacity is the investor’s ability to accept financial risk. It is determined by the client’s net worth, income, investment time horizon, liquidity needs, and so on.”
But…
#2. “A change in an investor’s personal circumstances that may alter her risk appetite or Risk Capacity is considered to be a change in goals.”
#3. “A change in constraints relates to material changes in constraints, such as time horizon, liquidity needs, asset size, and regulatory or other external constraints.”
My question is #2 if alter Risk Capacity is a change in goals, but Risk Capacity is defined by #1. But then #3 is suggesting changes in those constraints are classified as A change in Constraints. Are they looping or overlapping each other? Which is which? (I just copied & pasted the exact wording from the answer keys from the CFAI)