Risk Tolerance refers to an investor’s ability and willingness to accept fluctuations in the value of investments. It plays a key role in determining an appropriate investment strategy.

Investors with a high risk tolerance may be comfortable holding a larger allocation to stocks, while more conservative investors often prefer bonds or cash equivalents. Factors such as age, financial goals, income stability, and personal preferences can influence risk tolerance.

Understanding your risk tolerance is essential for building a portfolio that you can confidently hold during market ups and downs.