What is the definition of risk in investment terms?

In investment terms, risk is primarily defined as the possibility of losing money on an investment. This definition underscores the inherent uncertainty associated with investing; every investment carries a chance that the actual return will be different from the expected return, which may include losses.

Understanding risk is crucial for investors as it drives their decisions on asset allocation, portfolio diversification, and overall investment strategies. Risk can manifest in various forms, such as market risk, credit risk, liquidity risk, and operational risk, each representing different types of potential losses that investors must consider.

While the other options may pertain to different aspects of business or investing, they do not accurately capture the essence of risk. The possibility of earning a large profit does not encompass the potential downsides investors face. Assurance of receiving dividends is a characteristic of certain investments but does not relate to overall risk. The potential to increase market share pertains more to business strategy than investment risk. Understanding the fundamental concept of risk is key to making informed investment choices that align with one's risk tolerance and financial goals.