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RISK MANAGEMENT BASICSRisk Appetite | Risk Capacity | Risk Tolerance
RISK APPETITE Your willingness to take risk.
Eg: You might be willing to take a risk of ₹10,000 on a particular stock. Having a good risk appetite does not mean you should take risk.
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RISK CAPACITY Your ability to take risk.
Eg: You might be willing to take a risk of ₹10,000 on a stock but your financial situation like an upcoming loan EMI might not permit you to take that risk. Age, income level, job stability affects your risk capacity.
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RISK TOLERANCE How much risk you can actually bear.
Eg: If you take a risk of ₹10,000 on a stock and within 2 weeks the stock price falls and your investment becomes ₹5000. Below this you might not be able to tolerate the risk and might exit your position.
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