Limited Risk

Limited Risk - Limited Risk is an investment whose loss cannot exceed a specific amount, usually the amount invested. Paradigm include options, buying stocks, and buying bonds. It is the opposite of an unlimited risk. The risk of an investment that has predetermined maximum downside potential, which is usually the initial amount invested. When deciding a limited-risk investment, the investor is fully aware of the potential amount he or she could lose. For example, entering into an extensive position in a stock has restricted possibility because the investor can lose no more than the initial amount invested. The option contracts have limited risk.