Permanent loss of capital

Permanent loss of capital is money that's actually gone for good, as opposed to a paper loss that can still recover if a position is held. It happens when a business's own value is genuinely destroyed, through bankruptcy, a severe and lasting decline in its earning power, or a sale made at a loss that locks the loss in rather than waiting it out.

This is a different concept from volatility, which measures how much a price swings without saying anything about whether the underlying business itself was actually damaged. A stock can be highly volatile and still never produce a permanent loss, and a quiet, low-volatility stock can still produce one if the business itself is deteriorating underneath a calm looking price.