The Difference Between Risk Tolerance and Risk Capacity

Risk tolerance refers to your mental willingness to take risk. Risk capacity is the amount of risk required to meet our financial goals. We know stock markets make, you know, somewhere between eight to ten %. If you were somebody who took a forty percent loss, and you had to make 67 % to get yourself back, it might take you seven years to get it back. And what are you building? You're taking on too much.