What is risk? Risk is kind of like art. Its meaning resides in the eye of the beholder.
We use the word "risk" to refer to many different scenarios, situations, and outcomes. For example, "risk" for a soldier in a combat zone is very much different from "risk" for an investor in the markets, or the "risk" of making a marriage commitment*. As such, "risk" is dependent upon how the word is defined and the context in which it is framed.
Risk for an investor is generally market risk, and relates to the chance of loss and the potential magnitude of a loss. Prospective loss depends upon the investors position and the directionality of the market (ie. it relates to whether you are long or short). Risk is also highly time dependent.
"Real" investment risk however, is very much a function of the long run, and relates to return on investment after taxes and after inflation.
*Most people would probably consider getting killed a much greater "risk" than losing money, but also a different type of "risk" to committing your life to someone else for life - death and marriage have a certain absolute to them.
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