™Two investors with the same account value can differ in ability and willingness to endure losses because their horizon, income and obligations differ.
Risk & Portfolio
Risk tolerance
An investor’s willingness to accept uncertain outcomes and losses. Financial risk capacity—the ability to absorb those losses given cash needs and obligations—is a related but distinct constraint.
Plain-English context
Put the definition to work.
Distinguish emotional willingness from financial capacity and required liquidity; a questionnaire cannot settle suitability alone.
Further reading and verification. Examples are hypothetical, not current quotes or recommendations. Product terms, tax treatment and market rules can change. Investor.gov — asset allocation and diversification