Risk Appetite
a.k.a. Risk tolerance
How willing investors are, at a given moment, to take chances in search of higher returns.
In plain English
How willing investors are, at a given moment, to take chances in search of higher returns.
Risk appetite is the market's hunger for adventure. When it is strong, investors buy stocks, emerging-market currencies and high-yielders like the Aussie and Kiwi. When it fades, they retreat to safer assets.
It shifts with the news: good growth data and calm markets fatten it; wars, crashes and recession fears shrink it. On a personal level, your own risk appetite should shape how big your trades are, not the other way round.
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