According to many experts, asset allocation is the key determinant of long-term investment performance. Determining the most appropriate asset allocation is an election that each account holder must carefully make based on their own individual circumstances and needs. Keep in mind that there are numerous ways to define investment risk. The risk of not enhancing the purchasing power of your assets over time. The risk that a company will default on its obligations and possibly enter bankruptcy.
Risk tolerance refers to an investor's comfort with the risks inherent in any investment.
As an example, an investor in volatile stocks who is afraid of losing money and who would likely bail out at the first downturn in the market has a low risk tolerance. No one should invest beyond their risk tolerance level.