What kind of investments generally face credit risk?

Bonds and other debt securities are the investments that generally face credit risk because credit risk pertains to the possibility that the issuer of a bond may default on their obligation to pay back the principal or interest. Bonds are essentially loans made to governments, municipalities, or corporations, and if these entities encounter financial difficulties, they may struggle to meet their debt obligations, which can lead to a decrease in the bond's value or a total loss for the investor.

In contrast, real estate investments primarily involve risks tied to property value fluctuations rather than creditworthiness of a borrower. Stocks are subject to market risk, which is significantly distinct from credit risk, as they depend on the overall performance of the company and market conditions rather than their ability to pay back debt. Mutual funds that invest in commodities are also focused on intrinsic asset values and market supply and demand dynamics, not on the credit quality of issuers or borrowers. Therefore, it is bonds and debt securities that are most directly associated with credit risk due to their reliance on the financial health of the issuer.