Legal Definitions - downside risk

Definition: Downside risk refers to the likelihood that the value of an investment will decrease. This is a risk that investors take when they invest in stocks or other securities.

Example: Let's say you invest in a company's stock. If the company performs poorly, the stock price may drop, and you may lose money. This is an example of downside risk.

Another example of downside risk is investing in a mutual fund that holds stocks in multiple companies. If one or more of those companies perform poorly, the value of the mutual fund may decrease, and you may lose money.

These examples illustrate how downside risk can affect investors and their investments. It is important for investors to understand the potential risks involved in any investment and to make informed decisions based on their risk tolerance and investment goals.