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FINRA Series 6 > Suitability > Flashcards

Suitability Flashcards

1
Q

What type of security is nothing more than a collection of stocks and/or bonds.

A

A mutual fund

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2
Q

What are three varieties of mutual funds?

A

1) Equity funds (stocks)
2) Fixed-income funds (bonds)
3) Money market funds

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3
Q

What is the SAFEST Mutual Fund?

A

Money Market Fund

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4
Q

What type of securities consists of short-term debt instruments, mostly Treasury bills and is a safe place to park your money?

A

Money Market Funds
You won’t get great returns, but you won’t have to worry about losing your principal. A typical return is twice the amount you would earn in a regular checking/savings account and a little less than the average certificate of deposit (CD).

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5
Q

A type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment.

A

IncomeBonds

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6
Q

What type of securities provide a balanced mixture of safety, income and capital appreciation?

A

Balanced Funds

The strategy of balanced funds is to invest in a combination of fixed income and equities.

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7
Q

What type of securities provide long-term capital growth with some income?

A

Equity Funds

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8
Q

What type of securities invests only outside your home country?

A

International Funds

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9
Q

What type of securities invest anywhere around the world, including your home country?

A

Global Funds

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10
Q

What type of securities are targeted at specific sectors of the economy such as financial, technology, health, etc. Sector funds are extremely volatile?

A

Specialty/Sector Funds

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11
Q

What type of securities replicates the performance of a broad market index such as the S&P 500 or Dow Jones Industrial Average (DJIA)?

A

Index Funds

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12
Q

Explain Income Bonds

A

An income bond is a type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment.

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13
Q

What categories are used in portfolio diversification?

A

Safety, Growth and Speculation

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14
Q

What types of securities objective would be considered SAFE?

A

Cash, money market funds, CDs, US Treasury Securities, Bank Grade Corporate and Municipal Bonds, Blue Chip Stocks/Bonds

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15
Q

What types of securities objective would be considered GROWTH?

A

Growth and small cap stocks, Stock Options, nonbank grade bonds, growth oriented limited partnerships, growth stock mutual funds, commodities funds and variable annuities

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16
Q

What types of securities objective would be considered Speculative?

A

Speculative stocks and stock options, low-rated debt securities, precious metals, commodities and futures, speculative limited partnerships and speculative mutual funds

17
Q

What is the term used when people want immediate access to their money at all times

A

Liquid

18
Q

What are some liquid investments

A
  • Securities on an Exchange or Unlisted NASDAQ
  • Mutual Funds
  • Publically traded REITS
19
Q

What would your recommend if the investors objective is Preservation of Capital/Safety?

A

CDs, Money Market Mutual Funds, Fixed Annuities, Govt Securities and Funds, Agency Issues, Investment Grade Corp Bonds and Corp Bond Funds

20
Q

What would your recommend if the investors objective is Growth?

A

Common Stock, Common Stock Mutual Funds

21
Q

What would your recommend if the investors objective is Balanced/Moderate Growth?

A

Blue chips stocks and Defensive Stocks

22
Q

What would your recommend if the investors objective is Aggressive Growth?

A

Technology stocks and Sector Funds

23
Q

What would your recommend if the investors objective is Income?

A
  • Bonds but not Zero Coupons
  • REITs
  • CMOs
24
Q

What would your recommend if the investors objective is Tax Free Income?

A
  • Municipal Bonds
  • Municipal Bond Funds
  • Roth IRAs
25
Q

What would your recommend if the investors objective is High Yield Income?

A
  • Below investment grade corporate bonds or corp bond funds
26
Q

What would your recommend if the investors objective is Income from Stock?

A
  • Preferred Stocks
  • Utility Stocks
  • Blue Chip Stocks
27
Q

High tax bracket investors seeking income should invest in?

A

Municipal Bond Funds

28
Q

Investors seeking the highest possible income with little concern for risk should invest in?

A

Corporate Bond Funds

29
Q

Investors who are interested in income but want safety of principal should invest in?

A

Government Bond Funds

30
Q

Investors seeking the growth but are more conservative should invest in?

A

Balanced Growth Funds

31
Q

Investors who are interested in aggressive growth should invest in?

A

Technology Stock Funds or Stock Funds investing in new companies

32
Q

Investors seeking safety with high liquidity should invest in?

A

Money Market Funds

33
Q

Investors who wish to invest in a portfolio that mirrors the performance of the stock market should invest in?

A

Index Fund

FINRA Series 6 (6 decks)

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