Risk tolerance is emotional. Risk capacity is practical (can you afford losses?).

Ignoring either leads to unstable decision-making.

Stocks offer higher long-term returns but more volatility. Bonds add stability.

Cash is for short-term safety and liquidity.

Over time, markets change your weights. Rebalancing brings you back to target.

Simple rule: rebalance once or twice per year or when drift is large.

Ask if you could stay invested during a 20-30% drop.

If not, reduce risk before a downturn forces you to sell.

Young long-term investors may accept higher equity exposure.

Medium-term goals like a house purchase often need more stability.

There is no perfect mix, only the mix that fits your life.

Write a simple policy: what you buy, how often, and when you rebalance.

Avoid checking daily. Focus on progress, not noise.