Risk tolerance is the ability of an individual to discern a certain amount of risk. Select one: True False

The statement provided is True.

Risk tolerance refers to an individual's or an institution's ability and willingness to endure losses in their investments or any other financial endeavor. It encompasses various factors, including financial capability, emotional resilience, and the time horizon for investments. People with high risk tolerance may be more inclined to invest in stocks or other volatile assets, expecting higher returns over time, while those with low risk tolerance often prefer stable, lower-yield investments, such as bonds or savings accounts. Understanding one's risk tolerance is crucial for effective financial planning and helps in choosing appropriate investment strategies that align with their comfort level regarding potential financial losses.