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SIE	Series 6	Series 63	Series 26	MLO

CHANGE UNIT

Current Unit:

Unit 8 - Basic Economic Concepts	Unit 9 - Financial Reporting	Unit 10 - Analytical Methods
Unit 11 - Types of Investments	Unit 12 - Equities	Unit 13 - Debt Securities
Unit 14 - Investment Companies	Unit 15 - Insurance Products	Unit 16 - Calls, Puts, Derivatives
Unit 17 - Alt Investments & Assets	Unit 18 - Type of Client	Unit 19 - Client Profile
Unit 20 - Portfolio Management Styles, Strategies, Techniques	Unit 21 - Tax Considerations	Unit 22 - Trading Securities
Unit 23 - Performance Measures	Unit 24 - Retirement Plans

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SYSTEMATIC RISKS

Risk related to the economy such as war, global security threats, or inflation
Systematic Risk cannot be avoided through diversification, diversification has little effectiveness
MARKET RISK
- Stocks and portfolios are affected by the overall market.
- Negative reports about a company product can cause their stock to decline in the market
- If the stock market crashes, all investments with securities tied to it will decline in value, and vice versa
- You cannot avoid market risk but you can protect against it by having negatively correlated securities in your portfolio. They go up when others go down
INTEREST RATE RISK
- AFFECTS
  - US Treasury Bonds
  - Fixed income securities; Income never changes.
  - Utility Stocks; highly leveraged
  - Preferred Stocks; Changes in interest can affect price changes and dividend amounts
- If market conditions or the Federal Reserve push interest rates higher, the market price of all bonds will be affected
- Interest-bearing bonds carry interest rate risk and reinvestment risk
- Rise = Bond prices falls
- Fall = Bond prices increase
- Increasing inflation are accompanied by rising interest rates
- Rising interest rates can cause common stock prices to fall such as public utilities
PURCHASING POWER RISK
- Each payment
- Affects certainty of returns associated with any investment, such as cash or fixed income.

REINVESTMENT RISK
- AFFECTS
  - US Treasury Bonds
- Might not be able to reinvest to compound with original rates
- Interest rates decline = Investor with maturing bond will have difficulty finding other investment with similar yield
INFLATION RISK
- Inflation reduces the buy power of a dollar
- Moderate inflation means healthy growing economy
- Uncontrolled inflation causes uncertainty
- Treasury Inflation Protection Securities is an investment vehicle to protect against inflation
- MOST VULNERABLE is fixed-income securities or Long term bonds.
- Equity securities or short term bonds are the least susceptible

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