Portfolio risk is the risk that an investment portfolio will not meet its investment objectives, either because the value of the investments in the portfolio decreases or because the portfolio does not generate the expected returns.
There are several types of risk that can affect an investment portfolio, including market risk, credit risk, and liquidity risk. Market risk is the risk that the value of the investments in the portfolio will decrease due to changes in the market. Credit risk is the risk that the issuer of a bond or other fixed-income security will default on their payment obligations. Liquidity risk is the risk that an investor will not be able to sell an investment in the portfolio when they want to, potentially causing them to miss out on opportunities or incur losses.
To manage portfolio risk, investors can diversify their investments across different asset classes, such as stocks, bonds, alternative investments like venture capital and cash, and can also invest in a variety of individual securities within each asset class. This can help to reduce the impact of any one investment on the overall portfolio.
Managing portfolio risk is an important aspect of investing, and can help investors to achieve their investment objectives while minimizing the potential for loss.