I Will Know These Flashcards
PITI
Nouns used with CFP
Certificant Practitioner Professional Certification Mark Exam Registrant* (Not currently certified but certified by CFP Board in the past and generally entitled to use the CFP marks
Investing by age for kids education
<13y = Equities 14-17y = Fixed Income 17y+ = Cash
SEC
• Regulates disclosure requirements (ADV)
Series 6
Mutual Funds
UITs
New Issue Variables
Open Ended Funds, 529s
Series 7
General securities
2ndary UITs
Closed End MF
Series 63
Blue Sky
Uniform Securities Agent State Law Exam
Series 65
Uniform Investment Advisor Exam
Series 66
Combines 63 & 66
Uniform Combined state paw exam
CFP Revocation
PERMANENT!
*Behavioral Finance* Life change Job change Divorce Move
Gather new data
Reevaluate
Reestablish the scope of the relationship
CFP Suspension
30 days to appeal suspension
Automatically Published
CFP practitioner must notify their clients
Heuristics
A strategy that ignores part of the information.
- Trial and error
- Rule of thumb
- Educated guess.
Anchoring
Becoming attached to a specific price as the fair value of a holding
Handling it:
Force yourself to evaluate an investment only as if you were making the purchase no.
Attachment Bias
My grandfather left me this stock so I can never sell it
Endowment Bias*
Feeling that because you own the asset, it is more valuable and special since it is yours.
“Inherited a family summer home and wouldn’t ever sell it even though it is a money pit”
Cognitive Dissonance
Remembering the positive part of an experience but forgetting the negative
- Domestic Abuse *
Confirmation Bias
Tendency to accept any info that confirms preconceived position or opinion
Diversification Errors
Tend to diversify evenly across whatever options are available
Fear of Regret
Tendency to take no action rather than risk making the wrong one
Gambler’s Fallacy
Onset of certain random event is likely to happen following an event or series of events
“Liquidate a position after it goes up. It is likely to DROP”
Herd Behavior
FOMO
- Tech Bubble
- Crypto
Hindsight Bias
Looking at a past event and thinking we understand it, when in reality we may not.
People now claim they saw signs of the tech bubble of the 90s = creating over confidence
Inappropriate Extrapolation
Tendency to look at recent events and assume that those conditions will continue indefinitely
Analysis Paralysis
Hold that a superior solution is a short step away, and sill in its endless pursuit with no concept of diminishing returns.
Mental Accounting
Looking at sums of money differently, depending on their source or the intended use
Outcome Bias
Investor wants to double his money in an investment without doing adequate research
Self-Affirmation Bias
Belief that when something goes right, it is because you were smart and made the right decision.
If it does not work out, it is someone else’s fault, or simply bad luck.
Risk Capacity v Risk Tolerance
Capacity - NEED TO TAKE
Tolerance - WANT TO TAKE
CFP Unable to attain the information needed
- Terminate the relationship
2. Limit the scope to those able to provide
College Tuition
Retirement Benef Received
Family Needs
Begin or End Mode
Begin Mode
401k deferrals
Profit-sharing Contributions
Bond interest paid
Mortgage Payments
Begin or End Mode
End Mode
Deduction v Credit Calculations
(Deduction)(tax bracket) = equiv Credit
Tax Credit / tax bracket = equiv Deduct
