Markets Quiz 2

Fiduciary responsibility

a professional that is required by lawto act in their clients' best interest.

Duty of care

fiduciaries are required to make informed business decisions by reviewing all of the available information about your financial life before making recommendations or plans.

Duty of loyalty

requirement that a fiduciary not use their position to further their interests, such as making financial product recommendations they may make a commission on

Investment Management

Designing investment portfolios alligned with the clients financial goals, risk tolerance, and time horizon.

Financial Planning

Wealth managers help clients develop planning that includes budgeting, saving, retirement, estate planning, and risk management.

Retirement Planning

Assist clients in creating retirement income strategies and estimating expenses for life after work.

Estate Planning

Distrubution of assets after death, minimizing taxes and ensuring wishes are carried out.

Tax Planning and Management

Identify tax efficent investment strategies, managing capital gains, and maximizing deductions.

Cash Flow Management

Analyzing income and expenses and optimizing debt repayment strategies.

SEC (Securities and Exchange Commison)

-Create security laws

-review of financial status of all publicly held companies

-Prohibtion of any form of security market manipulation

FINRA

-day-to-day operations

-works to foster market regulation

-monitors trade abuse and violations

SIPC (Securites Investor Protection Corporation)

-non profit not associated with gov't

-Focus is on restoring customer cash and securities left in the

hands of bankrupt of otherwise financially troubled brokerage

firms

Asset Classes

-Stocks

-Bonds

-Alternative Investments

-Cash

Diversification

he process of allocating investments across different assets or markets to reduce risk and maximize returns.

Wealth Management Regulations

Brokerage firms must register, pass licensing exams, and ensure investment suitability while disclosing risks and fees. They must also implement anti-money laundering measures, protect client data, and submit regulatory reports for compliance.

Rebalancing

Selling your wins, and buying your losses. (Quarterly or Annually)

Beta (β)

Measure of volatility or systematic risk of a security compared to the market as a whole. (Higher than 1 more volatile)

Alpha (α)

Ability to beat the market often referred as "excess return"

Pros and Cons of going Public

Pros

-Raise capital

-Better negotiating power

Cons

-Cost

-Transparency

Market Capitialization

Price Per Share x Outstanding Shares

Float

the number of outstanding shares available to be traded on the stock market.

Weighted Average Market Cap Index

Made on the market cap of stocks, large companies account for more than smaller in this index.

Price Weighted Index

index in which stocks are held in proportion to their share price

Equal Weight Index

Gives the SAME weighting to each stock (regardless of market cap, price, or any other factor)

S&P 500 Index

-Weight by market cap

-Every industry is represented

Dow Jones Industrial

-Price weighted index

-Adjusts for stock splits

-30 Holdings

NASDAQ Index

-Weight by market cap

-Technology based

-3,700 holdings

EAFA Index

-Market cap weighted

-Non U.S and Canadian Markets

Emerging Markets

-Market weighted

-25 nations, developing includes BRICS

Mutual Funds

an investment vehicle that pools money from

multiple investors to purchase a diversified portfolio of stocks,

bonds, or other securities (Active management)

ETF

a pooled investment security that can be bought and soldlike an individual stock. (Passive Management)

Mutual Funds Vs ETFS

ETFs trade like stocks throughout the day, while mutual funds trade only at the end of the day at NAV. ETFs are generally more tax-efficient and have lower fees compared to mutual funds.