Risk is omnipresent and includes stock market crashes, corporate bankruptcies, currency devaluations, changes in sentiment, in inflation and interest rates, and even major changes in the tax code. Risk is generally defined as return volatility, or the degree of ups and downs of returns. But there's more to risk than volatility. Risk and long-term reward are generally related. Risk is the chance that your actual return will be less than you expected.
People sometimes think that a good return can be achieved with little or no risk.
Unfortunately, that's impossible. To achieve your objectives, you need to assume certain risks and avoid others. Your ability to handle risk is related closely to your individual circumstances, including your age, time horizon, liquidity needs, portfolio size, income, investment knowledge, and attitude toward price fluctuations. What's highly risky to one individual may be no problem to another. Stock funds are actually less risky than money market funds for those with long time horizons.