Risk Appetite is an individual's readiness to take risks which depends on various factors-age, experience and knowledge.
Risk tolerance is an individual's ability to take risks, which depends on various factorsliquidity needs, nature of employment, time horizon and investment objectives.
Before making an investment or creating a portfolio, it is very important to know your ability (risk tolerance) and readiness (risk appetite) to take risk.
It will help you choose the right investment products to match your return objectives.
Furthermore, understanding risks and analysing them would be useful in determining a good balance of risk for you to maximize your returns.
A combination of risk tolerance and risk appetite should be considered before making any financial decisions