Market risk: This is perhaps the most well-known type of investment risk, and it refers to the risk that the value of an investment will decline due to changes in the overall market or economy. This could be due to factors such as changes in interest rates, economic indicators such as GDP, or geopolitical events such as wars or natural disasters. Market risk can affect all investments in a particular market, such as stocks, bonds, and mutual funds, and it's important for investors to diversify their portfolio to mitigate this risk.



Credit risk: Credit risk refers to the risk that a borrower will default on their debt obligations. This can affect investments in fixed-income securities such as bonds, which provide regular interest payments but also carry the risk of default. The creditworthiness of the borrower is a key factor in determining credit risk, and investors can use credit ratings to evaluate the risk of default for a particular bond or other debt instrument.


Inflation risk: Inflation risk refers to the risk that the value of an investment will decline over time due to inflation. Inflation reduces the purchasing power of money over time, which means that the same amount of money will buy fewer goods and services in the future. This can affect all types of investments, but it's particularly relevant for fixed-income securities such as bonds, which provide a fixed rate of return that may not keep pace with inflation.


Liquidity risk: Liquidity risk refers to the risk that an investor will not be able to sell an investment when they want to, or at a price they desire. This can affect investments in less liquid assets such as real estate, private equity, or certain types of bonds. If an investor needs to sell an illiquid investment quickly, they may have to accept a lower price than they would if they had more time to find a buyer.


Political risk: Political risk refers to the risk that changes in government policies or regulations will affect the value of an investment. This can be particularly relevant for investments in certain sectors or industries that are heavily regulated, such as healthcare or energy. Political risk can also affect investments in foreign markets, where changes in government policies or geopolitical events can have a significant impact on the value of investments.