Investors with a Low-risk tolerance may have a short time horizon and are usually looking to maintain the value of their investments with minimal growth.
Investors that seek corpus security over asset appreciation fall within this category of risk tolerance. These investors' portfolios consist mostly of debt instruments and debt-based mutual funds. The tendency to sell shares as soon as prices start to drop is an illustration of low-risk tolerance.
Risk is the degree to which an asset's returns are susceptible to change. The ability to withstand market volatility in general and variations in investment returns, in particular, is so relevant. In other words, it relates to someone's willingness and ability to withstand brief market changes.
People with a low-risk tolerance, for instance, are willing to give up large returns in order to ensure the safety of their investments.
On the other side, if an investor chooses bigger returns over the security of their investment, this indicates that they have a high-risk tolerance.
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