Glossary · Risk and suitability
Risk tolerance
Risk tolerance is a client's psychological willingness to accept volatility and loss — how much they can bear without abandoning the plan.
It is measured by questionnaire and it is the softest of the three risk dimensions, because answers given in a calm market and behavior exhibited in a falling one differ.
Tolerance is routinely collapsed together with capacity and requirement into a single score, and the collapse is where risk tooling stops being useful.
Read more: Risk tolerance is not one question →
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