Not all investors have the same attitude towards taking risks. Some will have a higher tolerance for risk than others. Therefore, it is important to understand what your own tolerance for risk is and what your capacity for loss might be. In simple language your capacity for loss means how much money you could afford to lose without it affecting your standard of living. One of the first things a professional adviser will do is discuss this with you and, using risk and capacity for loss questionnaires, help you understand how much risk would be appropriate for your personal circumstances, aims and objectives. Once your risk tolerance and capacity for loss have been identified, discussed and understood, only then can you invest with realistic expectations and truly understand the relationship between risk and reward.