Series 65 key terms

The total market value of all final goods and services produced within a country's borders in a given period, used to gauge the economy's size and growth rate.

Actions by a central bank to influence the money supply, interest rates, and credit conditions in order to pursue goals such as price stability and full employment.

Government decisions about taxation and spending that affect aggregate demand, budget deficits, and the overall pace of economic activity in a country.

The recurring pattern of expansion, peak, contraction, and trough in a country's economic activity, reflected in output, employment, and income over time.

A measure of the average change over time in the prices paid by urban consumers for a market basket of goods and services, widely used to track inflation.

A graph plotting yields of bonds of equal credit quality against their maturities; its shape signals expectations about future interest rates and economic growth.

A composite set of statistics, such as new orders and building permits, that tend to change before the overall economy does and help forecast turning points.

The buying and selling of government securities by a central bank to adjust bank reserves and short-term interest rates in the banking system.

An equity security representing ownership in a corporation, typically carrying voting rights and a residual claim on assets and earnings after creditors and preferred shareholders are paid.

An equity security with a stated dividend that generally has priority over common dividends and a senior claim on assets, often behaving like a hybrid of stock and bonds.

A measure of a bond's price sensitivity to changes in interest rates, expressed in years; longer duration means greater price volatility for a given rate change.

A debt security issued by a state, municipality, or other local entity, often exempt from federal income tax and sometimes from state tax for in-state residents.

A corporate bond that the holder may convert into a specified number of shares of the issuer's common stock, giving it both bond-like income and equity upside.

A fund whose shares trade intraday on an exchange like a stock, typically tracking an index and generally carrying lower costs than actively managed mutual funds.

A company that owns or finances income-producing real estate and must distribute most of its taxable income to shareholders to qualify for favorable tax treatment.

A contract giving the buyer the right, but not the obligation, to purchase an underlying asset at a specified strike price on or before an expiration date.

A mutual fund that invests in short-term, high-quality debt instruments and seeks to maintain a stable net asset value while paying current income.

An insurance contract whose value fluctuates with the performance of underlying subaccounts, offering tax deferral and optional guarantees such as death benefits or living benefits.

An investor's willingness and financial ability to accept fluctuations in portfolio value in exchange for potential higher returns, shaped by time horizon, goals, and experience.

The process of dividing a portfolio among asset classes such as stocks, bonds, and cash to balance risk and return according to the investor's objectives.

A measure of a security's or portfolio's sensitivity to movements in the overall market; a beta above one indicates greater volatility than the market.

A statistical measure of the dispersion of returns around their average, commonly used as a proxy for an investment's total volatility or risk.

A risk-adjusted performance measure calculated as excess return over the risk-free rate divided by standard deviation, indicating return earned per unit of total risk.

A model that estimates expected return as the risk-free rate plus beta times the market risk premium, pricing only systematic risk.

Risk that affects the entire market, such as interest rate changes or recessions, and that cannot be eliminated through diversification of a portfolio.

Investing a fixed dollar amount at regular intervals regardless of price, which purchases more shares when prices fall and fewer when they rise.

Periodically adjusting portfolio holdings back to target weights, which controls risk drift and can enforce a disciplined sell-high, buy-low process.

A framework showing that combining assets with imperfect correlation can reduce portfolio risk for a given expected return, producing an efficient frontier.

The obligation of an investment adviser to act solely in the client's best interest, including duties of loyalty and care, and to disclose conflicts of interest.

Federal law regulating persons who, for compensation, advise others about securities; it requires registration and imposes antifraud and disclosure obligations.

The registration and disclosure document filed by investment advisers with regulators, containing business information, fees, conflicts, disciplinary history, and other required details.

Model state legislation that state securities administrators adopt in varying form to regulate broker-dealers, agents, and advisers and to combat fraud.

Broad legal rules prohibiting deceptive or manipulative conduct in securities transactions, applying even when a person is not required to register.

A rule governing advisers who hold client funds or securities, requiring safeguards such as qualified custodians, surprise examinations, and account statements.

A transaction in which the adviser or an affiliate buys from or sells to a client's account for its own account, requiring disclosure and client consent.

The use of client brokerage commissions to pay for research or other services that benefit the adviser's clients, subject to disclosure and best-execution requirements.

The requirement that a recommendation be reasonable for a particular client given that client's objectives, financial situation, and risk tolerance.