What are the two specific categories of investment risk?

Investment risk can be classified into various categories, with two primary types focusing on the potential outcome of investments. The first category involves the possibility of losing some or all of the initial investment. This aspect of risk is fundamental, as it highlights the inherent uncertainties in investing; market fluctuations, economic downturns, or poor company performance can all lead to capital losses.

The second category pertains to the risk that the returns generated from an investment do not meet investors' expectations. This encompasses instances where an investment may perform poorly compared to projected objectives or historical returns, which can lead to dissatisfaction even if the capital is preserved.

Together, these two categories—loss of principal and poor performance relative to expectations—encapsulate the essential elements of investment risk that investors must consider when making decisions. The remaining options do not accurately reflect the fundamental types of investment risk, as they either suggest guaranteed outcomes or do not account for the full spectrum of potential investment challenges.