← Back to Academy

Risk Tolerance vs. Risk Capacity: Two Genuinely Different Questions

Portfolio Construction and Risk • Beginner Investing • 6 min

"How much risk are you comfortable with?" and "how much risk can you actually afford to take?" sound like the same question, but they're genuinely different — and confusing the two is a common, real source of poorly-suited portfolio decisions. Risk tolerance is the psychological, emotional side: how comfortable an investor genuinely feels accepting investment volatility and the real possibility of loss, largely a…

2 of 2 free lessons used

Create a free account to keep reading

You have read your 2 free lessons. Making an account is free and gives you 2 more straight away — plus your progress, streak and quiz scores saved as you go.

Learning through your school? Join your class — school students get everything, at no personal cost.