Investment Risk

Investment risk refers to the potential for an investment's actual returns to differ from the expected returns, which can include the possibility of losing part or all of the initial investment. It reflects the uncertainty surrounding the future performance of an asset and can arise from various factors, including market fluctuations, economic conditions, interest rate changes, and specific risks related to particular securities or sectors.There are several types of investment risk, including market risk (the risk of losses due to changes in market prices), credit risk (the risk that a borrower will default on a loan), liquidity risk (the risk of not being able to sell an asset quickly at its fair market value), and operational risk (the risk arising from internal processes, systems, or external events).Investors often seek to manage or mitigate investment risk through diversification, asset allocation, and due diligence, aiming to balance potential returns with the level of risk they are willing to accept. Understanding investment risk is crucial for making informed financial decisions and achieving long-term investment objectives.