Which term refers to the risk of losing money on an investment?

The term that refers to the risk of losing money on an investment is capital loss. When an investment’s value decreases and the investor sells the investment for less than the original purchase price, it results in a capital loss. This concept is essential for investors as it directly impacts their overall financial performance and can have tax implications. Understanding capital loss helps investors manage their portfolios strategically and assess their risk tolerance.

In contrast, return refers to the profit or income generated from an investment, liquidity indicates how easily an asset can be converted to cash without significantly impacting its value, and volatility pertains to the degree of variation in trading prices over time. Notably, while volatility can suggest the potential for both gains and losses, it does not explicitly define the risk associated with an investment resulting in a loss.