Term
| 6 Segments of Financial Services |
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Definition
- Lenders
- Insurance Companies/Carriers
- Investment Bankers
- Securities Broker/Dealers
- Registered Investment Advisors
- Funds
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Term
| Product(s)/service(s) of Securities Broker/Dealers? |
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Definition
Broker - Trade Exceution
Dealer - Proprietary Trading |
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Term
| Product(s)/service(s) of Lenders? |
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Definition
- loans
- checking accounts
- credit cards
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Term
| Product(s)/service(s) of Insurance Carriers? |
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Definition
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Term
| Product(s)/service(s) of Investment Bankers? |
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Definition
- mergers & acquisitions consulting
- act as securities underwriters
- stocks and bonds from the primary market
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Term
| Product(s)/service(s) of Registered Investment Advisors (RIAs)? |
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Definition
| professional investment management |
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Term
| Product(s)/service(s) of Funds? |
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Definition
- Portfolio
- professional fund/money management
- stock in the fund
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Term
| Source of revenue for lenders? |
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Definition
- interest income
- origination fees
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Term
| Source of revenue for insurance carriers? |
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Definition
- premiums
- investment income
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Term
| Source of revenue for investment bankers? |
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Definition
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Term
| Source of revenue for securities broker/dealers? |
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Definition
- commission
- trading profits
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Term
| Source of revenue for RIAs? |
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Definition
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Term
| Source of revenue for funds? |
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Definition
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Term
| Which organizations register which professionals? |
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Definition
registered representative (stock broker) - FINRA
RIA - SEC
CPA - State
Certified Financial Planner - Certified financial planner board of standards |
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Term
| who pays floatation costs? |
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Definition
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Term
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Definition
not a government agency
self regulating organization (SRO)
SEC has oversight
watches stock brokers
basically the SEC has outsourced regulating brokers to FINRA |
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Term
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Definition
money manager
portfolio manager
asset mananger
investment manager |
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Term
| what is an RIA's fiduciary duty? |
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Definition
act in the client's best interest without any conflict of interest
commissions are conflict of interest
RIA's charge a fee which is a % of the principal |
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Term
| what is a typical minimum amount for an RIA? |
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Definition
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Term
| What types of funds are there? |
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Definition
- public - open to public investors
- mutual funds - investor redeems shares with fund company
- ETF (exchange traded fund) - investors sell shares in the secondary market (these funds compete with mutual funds
- private - not public, high investment minimums
- hedge fund - objective is to make money in any market
- private equity fund - a fund that invests in the stocks of private companies
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Term
| what do financial planners do? |
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Definition
| help with personal finance or wealth management |
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Term
| Financial planner synonyms? |
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Definition
financial planner
wealth manager
financial advisor
financial consultant |
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Term
| What is different about a certified financial planner vs a wealth manager? |
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Definition
certified by the certified financial planner board of standards
passed a 12 hour long exam |
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Term
| what is a private market? |
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Definition
- open only to certain investors
- institutional investors - insurance companies, pension funds, large banks
- accreddited individuals - high income & high net worth
- these investors are considered sophisticated
- lightly regulated
- hedge funds, private equity funds
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Term
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Definition
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Term
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Definition
a made up/hypothetical basket of securities designed to represent the investment performance of a financial market or other group of securities
These are used as benchmarks |
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Term
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Definition
Brazil
Russia
India
China |
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Term
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Definition
MSCI EAFE - oveseas stocks in developed countries
MSCI EMI - emerging markets index
S & P 500 - large cap stocks
Dow Jones - large cap
Russell 2000 - US small cap stocks |
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Term
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Definition
| index made up of 30 companies |
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Term
| underperformed/outperformed |
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Definition
under - returns worse than the comparison index
out - performed better |
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Term
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Definition
| price per share/common shares outstanding |
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Term
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Definition
- a fund comprised of securities of an index
- index providers license their index to fund companies
- most ETFs are index funds
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Term
| What is efficient markets hypothesis? |
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Definition
| one in which all the participants have access to the same information |
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Term
| what is high frequency trading? |
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Definition
- pre-public disclosure by the exchanges of public customers' securities orders to select market participants
- done by computers - in nano seconds
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Term
| what do you need to know about efficient markets? |
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Definition
- To beat the market consistently is impossible
- when info is available, it gets factored into the price of the security
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Term
| what are financial assets? |
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Definition
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Term
| what are some real assets? |
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Definition
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Term
| what are fundamental and technical analysis? |
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Definition
- fundamental - looks at economic soundness
- technical - relies on historic price information
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Term
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Definition
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Term
| what is a round lot of stock? |
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Definition
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Term
| what are the 2 components of total return? |
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Definition
- income - periodic cash flows (rents, dividends, interest)
- growth/appreciation/capital gain
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Term
| what is another name for minimal acceptable rate of return? |
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Definition
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Term
| what does diversifying mean? |
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Definition
| buying assets whose price fluctuations are negatively correlated |
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Term
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Definition
| a collection of investments |
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Term
| How many securities must you have to be diversified? |
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Definition
40 - book
12 - 20 advisors |
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Term
| What is interest rate risk? |
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Definition
| when interest rates go up, bond prices go down |
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Term
| what is market or non-diversifiable risk? |
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Definition
| the risk of losses from market-wide fluctuations that cannot be diversified away |
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Term
| what are money market securities? |
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Definition
| debt instruments with an original maturity of one year or less (T-Bills) |
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Term
| define modern portfolio theory |
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Definition
| efficient portfolio - provde either the greatest expected return for a given level of risk, or the least risk for a given expected return |
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Term
| what is expected return of a portfolio? |
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Definition
| the weighted average of the expected returns of a portfolio's component securities |
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Term
| what is stand-alone risk? |
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Definition
| the risk of an asset assuming it is the only one held |
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Term
| what is the objective in portfolio construction? |
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Definition
| to invest in assets whose price changes are negatively correlated |
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Term
| what is the conclusion about risk and return in portfolios? |
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Definition
| when you consider an investment, you need to consider how it impacts the risk and return of your entire portfolio |
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Term
| what is company specific risk? |
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Definition
| arisies from events and characteristics applicable to a particular company |
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