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Risk Tolerance

Glossary

Risk tolerance refers to an investor’s ability and willingness to endure losses in pursuit of potential returns. It varies based on factors like age, financial situation, investment goals, and emotional response to market fluctuations.

Levels of Risk Tolerance:

  • Conservative: Prefers low-risk investments like bonds and blue-chip stocks
  • Moderate: Accepts some risk for higher potential gains, balancing stocks and bonds
  • Aggressive: Willing to take high risks for higher potential returns, often investing in growth stocks and speculative assets

Understanding risk tolerance is crucial for building a portfolio that aligns with an investor’s financial objectives. Risk tolerance for individuals may very greatly, and your own tolerance for risk may not be the same as other traders; always define your own risk and reward ratios, and make your own educated decisions.