A person’s risk tolerance is a measure of the person’s willingness and ability to bear risk. Willingness to bear risk is a psychological characteristic of each investor.  Ability to bear risk depends on several factors including:  net wealth, current income, prospects for future income, age, understanding of risk, needs for liquidity, needs for current income, and investment horizon.  Evaluating ability to bear risk requires systematic, careful analysis of each investor’s unique financial data.