Risk tolerance

How much decline in the value of your investments you can withstand financially and emotionally without abandoning your plan.

Example

Someone with stable income and a long time horizon can typically tolerate a bigger short-term drop than someone about to retire.

Risk tolerance is often overestimated until the first real decline actually happens to money that matters.

Risk — The chance that an investment's actual outcome differs from what you expected, in either direction.
Volatility — How much and how often an asset's price moves, up or down, over a given period.
Time horizon — How long before you plan to spend the money you are investing.

Asset allocation: the decision above the holdings — How much you hold in each broad type of asset shapes your experience far more than which particular items you choose inside them - and it is the decision most people spend the least time on. (14 min)
Is investing right for you, right now? — Not everyone should be investing everything they have, and not everyone should be investing yet at all. This lesson is the honest gate before the rest of the Academy. (10 min)
One scheduled review beats constant tinkering — A yearly review checks allocation, concentration, costs and whether holdings still match their purpose. Doing it on a schedule, in writing, prevents both neglect and reacting to every market move. (9 min)