An investor's ability to tolerate changes in the value of their investments is referred to as their risk tolerance. Whereas investors with lower risk tolerance might favor a more conservative allocation with a highrummy rainbower percentage of bonds or cash equivalents, higher risk tolerance investors might allocate a larger portion of their portfolio to stocks. Investors should also match their diversification strategy with their investment objectives and time horizon. To attain both income and capital appreciation over time, long-term investors could concentrate on diversifying their portfolio by including both growth and dividend-paying stocks.