Glossary · Risk & Strategy
Risk tolerance
How much potential loss an investor is comfortable with.
Risk tolerance is your personal capacity and willingness to endure declines without abandoning the plan. It mixes financial facts (time horizon, income stability, emergency savings) with emotional comfort.
Matching strategy to risk tolerance matters more than chasing the highest possible return. If a portfolio’s swings force you to panic-sell, it is too aggressive for you — even if it looks optimal on paper.
Example
One investor can watch a 25% drawdown and keep contributing monthly. Another loses sleep after a 10% drop and moves to cash — those are different risk-tolerance profiles.