Question 1

Does higher return always mean higher risk?

Accepted Answer

Not always in the moment, but as a general rule a higher expected return comes with a wider range of possible outcomes, which means more risk. There is no setting that reliably offers high returns with no chance of loss.

Question 2

What is volatility?

Accepted Answer

Volatility describes how much and how quickly a price swings up and down over time. It is often used as a rough stand-in for risk, because a holding that swings hard can change in value a lot in a short period.

Question 3

What is the difference between risk tolerance and risk capacity?

Accepted Answer

Risk tolerance is how much swing you can stomach emotionally without panic selling. Risk capacity is how much loss your finances and timeline can absorb without derailing your plan. They are separate, and the lower of the two usually sets your real limit.