Final answer:
(B) Market risk, also known as Systematic risk, includes the potential for day-to-day losses due to economic, political, or other external changes. It affects the entire market, in contrast to Unsystematic risk which is specific to a company or industry. Investors need to consider their life stage when balancing risk and return.
Step-by-step explanation:
The general risk of investing in a given market or economy, which includes the day-to-day potential for losses from fluctuations in security prices, is known as Market risk or Systematic risk. This type of risk affects all securities in the market and is caused by forces that are outside of an individual's control, such as economic changes, political events, or natural disasters. Throughout history, there have been instances where a high risk level has been detrimental to investment portfolios, such as during the 1970s or the stock market crash of 2008.
Market risk contrasts with Unsystematic risk, which is specific to a particular company or industry, and which can be mitigated through diversification. Investors need to think about their individual situations when making investment decisions; young workers may accept higher risk for higher returns over decades, whereas someone nearing retirement may prefer more stable, lower-risk investments. Tradeoffs between risk and return are an essential consideration in personal wealth accumulation.