What does it mean to have a high risk tolerance?

Having a high risk tolerance means that an individual is willing to endure significant fluctuations in investment values. This implies a comfort level with the potential for both large gains and large losses, understanding that market volatility is a part of the investment process. Investors with high risk tolerance are often more likely to invest in assets that are considered more volatile, such as stocks or high-yield bonds, because they believe in the possibility of achieving higher returns over the long term despite the accompanying risks.

In this context, individuals with high risk tolerance recognize that the potential for higher rewards often comes with the potential for greater fluctuations in value. They are typically more focused on the long-term growth of their investment portfolio rather than short-term stability, allowing them to ride out market downturns without panic.

The other choices do not align with the concept of high risk tolerance, as they suggest either an aversion to risk or a preference for stability, which contrasts with the willingness to accept potential volatility and loss inherent in high-risk investments.