What is risk tolerance and why is it so important?
Risk tolerance basically is the amount of psychological pain you’re willing to suffer from your investments. For example, if your risk tolerance is high, you might feel fairly comfortable investing in futures contracts or other types of securities that can go up and down like a roller-coaster. But if your tolerance for risk is low, you should stick to more conservative investments that aren’t subject to wild swings in value. No investment is worth losing sleep over.
