“Only those who will risk going too far can possibly find out how far one can go”

Risk tolerance as you know, is the degree of variability in investment returns that an investor is willing to withstand in their financial planning. 

There are two sides to it: 

1. How much risk you are able to handle
2. How much risk you are willing to handle

Here are some ways to increase your risk tolerance: 

1. Income Diversification: Diversifying your income with a second job with a more stable income or entrepreneurial pursuit increase your ability to tolerate investment related risk.

2. Proper understanding of investment : Even simple facts, like knowing that on average equity markets lose 10% every two years, 20% every five years, 30% every ten years, 40% every twenty-five years, and 50% every fifty years can be very comforting. If the future resembles the past, an investor with a 60-year investing career (30 years before retirement and 30 after) should expect to see 30 corrections, 12 bear markets, two to six big bear markets, and one or two real whoppers.

3. Market downturns: During downturns, investors focus more on the losses than the opportunities they can grab out of it. It is a great opportunity to buy low. Rebalancing a portfolio, where you sell assets that have done well and buy those which have lagged over the last year, also forces you to buy low, controlling risk and perhaps boosting long-term returns.