Risk tolerance refers to an individual's or organization's ability and willingness to take risks in pursuit of higher potential returns. It is a measure of how much uncertainty an investor can bear, which affects their choice of investments. Investors with high risk tolerance are more likely to invest in stocks, options, or other securities that have the potential for high returns but also carry significant risks. On the other hand, those with low risk tolerance may prefer safer investments such as bonds or cash, which offer lower returns but less volatility and risk of loss. Risk tolerance is an important factor to consider when creating a personalized investment portfolio, as it helps determine the appropriate balance between risk and reward for each individual investor.