Risk tolerance
How much investment risk a family is willing to bear, by temperament and preference.
Risk tolerance is the willingness to accept volatility and the possibility of loss. It is distinct from risk capacity, the ability to bear loss, and a good policy reconciles the two.
Risk tolerance is easy to overstate in a rising market and underestimate after a fall. The useful version is the one a family can live with through a full cycle, not the one it feels on a good day. Pinning it down in writing, before the next shock, is half the value.