Market risk refers to the potential for financial losses due to changes in market conditions. This type of risk can arise from fluctuations in prices, interest rates, or foreign exchange rates, affecting investments and portfolios. Investors must be aware that even well-researched investments can lose value due to broader market movements. One common example of market risk is the impact of economic downturns on stock prices. When the economy weakens, companies may report lower earnings, leading to a decline in their stock prices. This risk is inherent in all types of investments, including stocks, bonds, and real estate.