Securities Trader Representative (Series 57) Practice Exam

Investment risk refers to the uncertainty associated with the potential returns of an investment, recognizing that actual returns may vary from what was initially anticipated. It encompasses both the possibility of not achieving the expected returns and the risk of incurring losses. This definition is aligned with the idea that financial markets are influenced by various factors including economic conditions, market volatility, and changes in interest rates, all of which can impact an investment's performance.

The other options do not accurately capture the essence of investment risk. While the first choice suggests a possibility of earning more than expected, it overlooks the fundamental aspect of risk, which involves the potential for losses. The third option discusses insurance, which is unrelated to the concept of investment risk itself. Finally, the fourth option refers to guaranteed returns, which contradicts the inherent uncertainty that defines investment risk. Thus, focusing on the variability of actual returns compared to expected results is the key element that best encapsulates what investment risk entails.