What is a factor that generally increases the risk tolerance of younger investors?

A longer time horizon for investments is a key factor that increases the risk tolerance of younger investors. When individuals start investing at a younger age, they often have several decades before they need to access their funds, such as for retirement or major life expenses. This extended time frame allows them to ride out market volatility and recover from potential downturns. As a result, younger investors can afford to take on more risk in pursuit of higher potential returns, as they have the luxury of time to recover from losses that may occur along the way.

Investors with a longer time horizon can focus on growth-oriented investments, which may be more volatile but also have the potential for greater returns over time. This interplay between risk and reward is a fundamental principle of investing, and younger investors often embrace it because they can withstand fluctuations in their portfolio without the immediate pressure of needing to access their investments.