Risk tolerance is the amount of uncertainty or investment return volatility that an investor is ready to accept when making investment decisions. Personality traits and demographic characteristics are used as differentiating and classifying factor of individual investors into different level of risk tolerance. So the purpose of the study was to examine the impact of personality traits and demographic characteristics on risk tolerance of individual investors in Bahir Dar city. The research design was explanatory. The population for this study was currently active individual investors live in Bahir Dar city. The sampling method was stratified random sampling. The data was collected through closed-ended questionnaires and analysis by using descriptive statistics and inferential statistics. To determine the association between dependent and independent variable the researcher used Pearson chi-square test and the impact of independent variables on dependent variable was determined by ordinal logistic regression models with the help of stata /SE14. Pearson chi-square test analysis indicated that there were a significant association between independent and dependent variables. The finding of this study showed that personality trait of extraversion, openness to experience and conscientiousness have positive significant impact on risk tolerance of individual investors which means that individual investors with these traits dimension can tolerate higher level risk than their counter parts. Agreeableness showed negative significant impact on risk tolerance of individual investors. Neuroticism was insignificant impact on risk tolerance. From the demographic variables; male investors, younger investors, married investors; highly educated individuals and individuals who have high income tolerate higher level of risk than their counter parts. For a good generalization purpose: future researchers who will studies on this issue should study by including other variables which were not included in this study and by considering all geographical areas in Ethiopia.