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Finance Dictionary and Glossary of Investment Terms
An investor's ability to handle declines in the value of his/her portfolio.
Risk tolerance basically is the amount of psychological pain you''re willing to suffer from your investments.For example, if your risk propensity is high, you might feel fairly comfortable investing in futures contracts or other types of securities that can go up and down like a roller coaster. But if your tolerance for risk is low, you should stick to more conservative investments that aren''t subject to wild swings in value. No investment is worth losing sleep over.
The degree of uncertainty that an investor can handle in regards to a negative change in the value of their portfolio.