Risk tolerance gets lower and lower as you get closer to needing the money from your investment.
If you don't need the money for 50 years, you are more likely to take risks in the stock market or other higher risk investments in return for higher rewards. If you need the money tomorrow, you will not be willing to risk it all in the stock market because even though it could double, you might lose it all.
Risk tolerance is the degree of variance that an investor is consenting to hold up in their financial planning. It gets lower as an investor get closer to necessitating the money from the investment.
Risk tolerance is the stage of changeability in investment returns that an investor is willing to hold up in their financial planning. It is an important component in investing.
It also defines as a mensuration of how much of a failure an investor is willing to put up within their portfolio.
Let suppose an investor do not need the money for 30 years, he/she is more liable to take risks in the investments in return for higher payoffs.
If he/she needs the money in a 24-hour interval, he/she will not be willing to risk it all because even though it could double, he/she might lose it all.
Therefore, the risk tolerance gets lower and Lower as an investor get closer to necessitating the money from the investment.
Learn more about the risk tolerance, refer to:
https://brainly.com/question/7284286
