The risk that a downturn in the market may substantially reduce your investment principal is called ________.

Question

Quizplus · Accepted Answer

Market risk refers to the risk of investing in the overall stock market, and it is the risk that an investor faces with any investment in equities. If the market goes down, the value of the investment goes down, and this risk cannot be diversified away. The other options, such as purchasing power risk, interest rate risk, and liquidity risk, are not as directly related to market performance.

The Risk That a Downturn in the Market May Substantially