Risk
The possibility that an investment's actual outcome differs from what was expected, including permanent loss of capital.
How it is identified
Test: the range of possible outcomes is wide, and at least some of those outcomes are materially worse than the expected one
Unit
qualitative
In depth
Finance and ordinary language use the word differently, and the gap causes real confusion. Academic finance measures risk as volatility, because volatility is computable and works inside portfolio mathematics; most investors mean the chance of losing money permanently, which is a different thing. A share that falls 40% and recovers has been volatile; one that falls 40% because the business is impaired has caused a loss. Both matter, and which one dominates depends entirely on whether the holder can wait — volatility is only harmful if you are forced to sell into it.
Worked example
Two funds each returned 11% a year over a decade. One's worst twelve months was minus 9%, the other's minus 42%. Identical returns, and only the second forced most of its holders to sell at the bottom.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Risk” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.