1 Nov 2018, 12:58 — 2 min read
Definition: Risk tolerance refers to a degree of variability/deviation an investor/business owner is willing to take on a specific investment in anticipation of favourable outcomes. Often referred to as "Risk Appetite" in broader terms.
Example: Depending upon the degree of risk an investor/business owner is willing withstand, this can take multiple forms:
Aggressive Risk Tolerance: Usually savvy investors or business owners who have a very deep understanding, knowledge & experience of the business environment or the markets they are investing in.
Moderate Risk Tolerance: Investors & business owners undertaking safe investment or business ventures. They are willing to take risk however have defined timelines for their exit if the outcomes are not favorable.
Conservative Risk Tolerance: Individuals who are willing to take very mild to no risk & undertake relatively safe opportunities like investing government bonds, blue-chip stocks or easy to execute ventures like franchises, distribution licenses etc.
Business Insight: High risk tolerance is compensated by high return probabilities.
Posted byGlobalLinker Staff
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