Risk tolerance refers to how much risk you are willing to take on in pursuit of your financial goals. It’s an essential part of your wealth management strategy, as it determines the types of investments that are right for you. Some individuals are comfortable with more volatility for the chance of higher returns, while others prefer a more conservative approach to avoid large fluctuations in their portfolios. By assessing your risk tolerance through questionnaires and discussions with your financial advisor, you can create a portfolio that aligns with your comfort level.