In investment strategy, what does "risk" typically refer to?

In investment strategy, "risk" primarily refers to the chance of losing money. This encompasses various types of risks that investors face, including market risk, credit risk, operational risk, and others. Understanding risk is crucial for making informed investment decisions, as it helps investors assess the likelihood of adverse outcomes in their investment portfolios. By recognizing the potential for loss, investors can better prepare for volatility, tailor their strategies according to their risk tolerance, and make balanced decisions that align with their financial goals.

While the potential for substantial financial return, market value of assets, and liquidity are all important concepts in investment strategy, they do not directly define risk in the same way. Instead, they are factors that can influence the risk an investor may encounter. For example, higher potential returns often come with higher risks, but risk itself is fundamentally tied to the potential loss aspect.