A portfolio that aligns with your risk tolerance

Person 1: I am not able to sleep for the last 1 week.

Person 2: Why?

Person 1: I have lost 5% of my portfolio value over the last 1 month.

Person 2: If you do not have the stomach to weather even a 5% decrease, you should have chosen a less risky portfolio, which usually has lower probability of a large decrease.

Person 1: Yes, you are right. I need to choose a portfolio that aligns with my risk tolerance.