What is market risk and how can it be managed?

Market risk is the risk of loss resulting from changes in the value of financial instruments due to fluctuations in market prices. It is the potential for an investment's value to decrease due to factors such as economic conditions, geopolitical events, and other market forces beyond an investor's control.

Market risk can be managed by diversifying an investment portfolio across different asset classes, sectors, and regions. This helps to reduce the overall risk of the portfolio as losses in one area can be offset by gains in another. Another way to manage market risk is to use hedging strategies such as buying put options or using futures contracts to protect against potential losses. However, it is important to note that these strategies also come with their own risks and costs. It is important for investors to consult with a financial advisor to determine the appropriate risk management strategy for their individual needs and goals.