There's always the possibility that your investments will underperform in the financial markets. This risk is called Market Risk. It can be caused by a number of factors, including economic conditions, political changes, and natural disasters. While you can't always predict when or how these events will occur, you can take steps to protect your portfolio from losses.Diversification is one way to reduce market risk. By investing in a variety of assets, you're less likely to experience big losses if one particular investment sector suffers setbacks.For example, if the stock market takes a hit due to an economic recession, your bond holdings may help offset some of those losses.Another way to manage market risk is through active monitoring of your investments. This means paying attention to news and developments that could affect their performance.For example, if there's talk of new regulations that could hurt the profits of banks or oil companies, it might be time to sell off those stocks before they lose value.
