Risk tolerance
Risk & psychologyThe volatility and loss an investor can sit through without abandoning the plan.
In plain terms
Not what you say when calm. What you did the last time you were down 30%.
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Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Risk capacity
Risk & psychologyAlso called: Risk-taking capacity, Capacity for risk
The arithmetic question of whether a fall can be lived through without selling into it — set by income, commitments and horizon rather than by temperament.
In plain terms
Not the same as risk tolerance. Two people can be equally comfortable with a 25% fall and only one of them can afford it, because only one has a salary still arriving while it happens.