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Trading and Investment Terms

Risk Tolerance

Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand in their financial planning.

Risk capacity often has to do with an investor's income and financial resources.
Risk tolerance isn’t static. It can change over time, based on a person’s financial standing. 
For example 
A younger investor saving for retirement might be willing to purchase riskier assets because he has more time to recoup any losses.

Risk tolerance is essentially how much risk one is willing to take on where their investments are concerned. With any type of investment, there is always a risk, but how much risk one can withstand is their risk tolerance