Which risk is associated with financial loss due to a decrease in the value of an investment?

The correct answer is market risk, as this type of risk specifically refers to the potential for financial loss stemming from a decline in the value of investments. Market risk can arise from various factors affecting the overall market, including economic changes, political events, or shifts in investor sentiment. This risk is inherent in all types of investment, such as stocks, bonds, and real estate, because their values fluctuate based on market conditions.

Understanding market risk is critical for investors as it helps them make informed decisions on asset allocation and investment strategies to mitigate potential losses. While other risks exist in the investment landscape, market risk specifically addresses the broader forces that can lead to declines in the overall market value, thus impacting individual investments and portfolios.