What is a defining risk of investing in stocks compared to other investments?

Investing in stocks is associated with a higher level of risk compared to other investments such as savings accounts and certificates of deposit (CDs). Stocks are subject to market volatility, meaning their prices can fluctuate significantly over short periods due to economic changes, investor sentiment, and company performance. This inherent volatility can lead to potential losses, especially if the investor needs to sell their stocks during a downturn.

In contrast, savings accounts and CDs typically offer more stability and lower yields, but they are virtually risk-free in terms of capital. The principal amount deposited into these accounts is protected, and while the interest earned is modest, the likelihood of losing money is very low. Therefore, the defining risk of stocks lies in their potential for significant price swings and the possibility of losing money, highlighting the elevated risk level that investors assume when they engage in stock market investment as opposed to more secure options like savings accounts and CDs.