Obligations
An individual who makes transactions on the account of others and on their own account.
What is a broker-dealer?
Categorizing and dividing your investment portfolio across different categories, such as stocks and bonds.
What is asset allocation?
Timing where you buy your investments low and sell them high for a profit.
What is market timing?
Collection of individual stocks and bonds that are priced at the end of each day, and can be actively or passively managed.
What are mutual funds?
This colorful chart shows the returnes of various asset classes over the last 20 years
What is the Callan Periodic Table of Investment returns?
Type of duty to act in the best interests of an investment planning client.
What is the fiduciary standard?
Asset allocation model that has the highest amount of equity and the lowest amount of fixed income.
What is a growth model?
Risk that cannot be reduced by increasing the number of securities because it permeates the entire economic system.
What is nondiversifiable risk?
Collection of individual stocks and bonds that are priced throughout the day and tend to be passively managed.
What are ETFs?
The Dalbar study surveys this yearly.
What is investor behavior?
A fund supervisor that regularly makes investing decisions (like buy or sell) in order to generate higher returns.
What is an active manager?
As your time horizon shortens, your asset allocation will shift to become more of this.
Conservative
Length of time you expect to have an investment before you’ll need to access your funds.
What is the time horizon?
Staggering the maturity rates of a certificate of deposit to avoid transfer penalties.
What is a CD ladder?
Graphic representation of asset mixes that balance risk and return potential.
What is the efficient frontier?
In a broker-dealer business model, this is the duty to provide services that are suitable but may not be the best standard.
What is the suitability standard of care?
There are multiple tests to determine this, and it reflects an individual’s attitude towards risk.
What is risk tolerance?
This investment strategy involves purchasing a diversified portfolio of securities to match the performance of a broad market index, with minimal buying and selling activity.
What is passive investing?
An asset allocation that rebalances itself and is set for a specific time.
What is a target date fund?
This cycle has 4 phases and usually lasts about 10 years
What is the business cycle?
In the Personal Financial Planning process, this is a duty to act as a fiduciary and disclose compensation for planning services.
What are CPA duties in investment planning?
Making adjustments to the total proportion of the different types of assets in your asset portfolio to meet a predetermined asset allocation percentages.
What is rebalancing?
Called “a diamond in the rough,” this is when an investor looks for a company's stock price that doesn't reflect their fundamental worth.
What is value investing?
Process of investing a fixed dollar amount into an investment at predetermined intervals.
What is dollar-cost averaging?
The Dalbar study shows that the average investor does this
What is underperform vs. the market?