Market risk refers to the potential for financial losses due to fluctuations in the overall market. This type of risk can affect various assets, including stocks, bonds, and commodities, as their prices can change based on economic conditions, investor sentiment, and geopolitical events. Investors must be aware that even well-performing investments can lose value if the market as a whole declines. There are different types of market risk, including equity risk, interest rate risk, and currency risk. Equity risk involves the possibility of losing money due to changes in stock prices, while interest rate risk pertains to the impact of changing interest rates on bond prices. Understanding these risks is essential for effective investment management.