Which term refers to the level of risk one is willing to accept in investment decisions?

The term that best describes the level of risk one is willing to accept in investment decisions is risk appetite. Risk appetite refers to the amount and type of risk that an individual or organization is prepared to pursue or retain in order to achieve their investment objectives. It encompasses not just the willingness to take risks but also an understanding of the potential consequences and rewards associated with those risks.

Risk tolerance is sometimes used interchangeably with risk appetite, but it tends to focus more on the investor's emotional ability to handle investment risk and volatility in their portfolio. While both concepts deal with risk, risk appetite is more aligned with the overall strategy and decision-making processes regarding investment levels.

Investment readiness refers to the preparedness of an individual or organization to make investments, while financial capability speaks to an individual’s ability to invest based on their financial situation. Neither of these terms accurately captures the essence of the level of risk an investor is willing to accept. Thus, in the context of investment decisions, choosing the term that accurately reflects the concept of accepting risk leads directly to risk appetite.