What is investment risk?

Risk is the possibility your returns differ from what you expect - including losing money. The main types:

• Market risk - prices fall with the market (equity funds most exposed).
• Credit risk - a bond issuer defaults (debt funds).
• Liquidity risk - holdings are hard to sell (small-cap, low-rated debt).
• Concentration risk - too much in a few stocks or one sector.

A long horizon and diversification are the simplest defences.