Risk tolerance is the degree of uncertainty an investor can put up with when there is a negative change in the value of their portfolio. Risk tolerance varies throughout a person’s lifetime. Older people generally have lower levels of risk tolerance.
Do you want to gauge your level of risk tolerance? There is a useful risk tolerance questionnaire from Rutgers here. This will give you a picture of your ability to tolerate investment risks as well as your financial capability to take risks.
Once you have determined your capacity for risk how should you handle your portfolio? Always step back and take a look at all your investments rather than focusing on one individual one. Its so easy to get dragged into micromanaging specific parts of your portfolio rather than taking in the big picture. By looking at your overall portfolio you will be able to increase the risk of your individual investments.
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When all is said and done, what risk tolerance, from an investing point of view, boils down to is your level of discipline plus also how much time you have. If you have the time and the discipline you can let your money grow untouched so that the stock market can ultimately provide the best returns.