Risk tolerance
How much loss you can accept, in money and in nerves, in exchange for the chance of higher returns.
It has two parts. Ability is whether a drop would actually hurt your plans. Willingness is whether you would hold on or sell in a panic.
Along with your time horizon, it sets your asset allocation. A mix you can keep through a crash usually serves you better than a bolder one you abandon.
Example
With $12,000 in stocks, a 30% drop is $12,000 × 30% = $3,600 lost on paper. If that would make you sell, a lower stock share fits you better.