yton MacEachern AAA |
A:
Risk tolerance and risk capacity are two concepts that need to be understood clearly before making investment decisions for yourself or for a client. Together, the two help to determine the amount of risk that should be taken in a portfolio of investments.
Risk Tolerance
Risk tolerance is the amount of risk that an investor is comfortable taking, or the degree of uncertainty that an investor is able to handle. Risk tolerance often varies with age, income and financial goals. It can be determined by many methods, including questionnaires designed to reveal the level at which an investor can invest, but still be able to sleep at night.
Read more: What is the difference between risk tolerance and risk capacity? http://www.investopedia.com/ask/answers/08/difference-between-risk-tolerance-and-risk-capacity.asp#ixzz3jwL2G7UO
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