What's investment risk?
Investing to accumulate wealth is, by definition,
a risky endeavor if what you mean by risk is that you could lose
some or all of your investment principal.
In fact, this risk is what makes investing different from saving.
Saving means putting money into accounts that insure your principal
and guarantee a return, while investing means buying products
that have the potential to increase in value, provide income,
or both, but that neither insure your principal nor guarantee
a return.
A range of risks
 Of
course not all investments are equally risky. For example, while
the U.S. Treasury doesn't guarantee that you'll be able
to sell 10-year notes in the secondary market for the amount you paid to buy them, it does promise
to pay interest regularly and to repay your investment at maturity.
And it has never defaulted on those promises.
In contrast, speculative stocks, high-yield bonds, and many derivative
products make no promises whatsoever about what you'll earn,
or get back. In fact, with certain investments you may even be
asked to acknowledge the risks involved before you're allowed
to commit your money. And other investments, which seem strong
for a period of months or years and therefore appear less risky,
may be unable to survive an economic downturn.
 That's not all
There
are risks you face apart from losing money when you invest to
preserve your capital. For example, there is always inflation
risk with insured products and fixed-income accounts. This means
that even though your principal may be protected against loss,
it may be worthless as the cost of living rises.
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Thomas J. Dorsey, President and
co-founder of Dorsey, Wright &
Associates 