What is a primary risk associated with equity investments?

Market volatility is indeed a primary risk associated with equity investments. Equity markets are influenced by a multitude of factors, including economic conditions, interest rates, political events, and company performance, leading to fluctuations in stock prices. This volatility can result in unpredictable changes in the value of an investment over short periods. Investors must be aware that the potential for high returns in equity investments comes with the risk of significant losses due to market movements.

In contrast, other options such as guaranteed high returns and fixed interest rates do not apply to equities, as these features are more commonly associated with fixed-income investments like bonds or savings accounts. Low liquidity, while a concern in certain investments, is typically not a primary risk of equity investments, as publicly traded stocks generally have a relatively high level of liquidity, allowing for easier buying and selling compared to other asset classes.