What term refers to the potential loss associated with an investment decision?

The term that refers to the potential loss associated with an investment decision is risk. In finance and investment contexts, risk is a key concept that represents the uncertainty regarding the returns on an investment. It encompasses various types of potential negative outcomes, from fluctuations in market value to overall financial instability, that could lead to a loss on an investment.

Understanding risk is crucial for investors as it helps them assess the potential downsides of different investment options and make informed decisions. It's important to recognize that risk can vary depending on the nature of the investment, the market environment, and external factors. Investors often balance potential risk against potential profit as they seek to maximize returns while minimizing exposure to possible losses.

In contrast, cost pertains to the total expenditure associated with making an investment, profit refers to the financial gain after expenses have been deducted, and liability represents an obligation or debt that arises during the course of business, none of which directly capture the concept of potential loss in investment decisions.