Risk Tolerance

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Definition

The term risk tolerance refers to the extent to which investors are risk averse. Investment advisers will ask their clients a series of questions to determine the degree of risk tolerance the client will have when it comes to making investment decisions.

These tests are designed to determine the investor's risk comfort level. This risk comfort level exists based on an emotional as well as a financial basis.

Bibliography

  • Dictionary of Finance and Investment Terms, Barron's Financial Guide, 2003.
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