Risk tolerance refers to how comfortable you are with your account value rising and falling with the markets.
When you review your investment choices, it's important to decide how much instability you can afford to risk over short and long-term investments. Investments with more risk may have higher returns, but may be more likely to rise and fall sharply over a certain period. You should have a thorough understanding of what your particular risk tolerance is before you choose an investment. Take our quiz here to learn more.