Risk averse describes a low level of risk an investor is willing to accept on his investments.  An investor who is risk averse prefers little risk and is willing to accept a lower return because of this preference.For instance, a person is given a choice between a guaranteed $100 or participating in a bet where he has a 50% chance of receiving $200 or a 50% chance of receiving nothing.  A risk averse person will choose the guaranteed $100 rather than take the fifty-fifty chance he might receive $200. When setting up a brokerage account, investment advisors assess the customer’s risk tolerance to gauge what type of investments to recommend. If the investor is risk averse, the broker will suggest safer investments such as index funds and government securities.  The trade-off for these safer investments is a lower return.