risk tolerance

An investor’s willingness to accept high risk in the hopes the investments will increase in value. A risk-averse investor has investments whose values are relatively stable—they will neither increase greatly nor decrease greatly. An investor with a high risk tolerance has investments whose value might increase dramatically or fall dramatically. An individual’s risk tolerance varies by personality and other factors, such as life stage. A retired person is typically less willing to pursue high-risk investments than a younger person, for example.