STUDY FOR THE SERIES 66 EXAM

If you plan to take the Series 66 exam, make sure that you know, and are familiar with, various valuation ratios. What are these ratios? The price earnings ratio. The PEG ratio. The Price to Book ratio. And the Price to Sales ratio. For this posting, we discus the PEG ratio, or price/earnings ratio divided by the growth rate expected in the current year. Here's an example. The price/earnings ratio of XYZ Corp. is 12, or its P/E multiple is 12. The growth percentage expected in the current year is 14. The PEG ratio is therefore 12 divided by 14, or 0.857. This example shows that the growth percentage expected of XYZ Corp. is greater than its P/E ratio. Thus, an investor in XYZ is getting a good value because XYZ's growth rate exceeds its price-to-earnings, or the P/E ratio is less than the growth rate.  Therefore, ideally no investor should buy a stock unless its growth percentage exceeds its P/E ratio. Our book  Study for the Series 66 Exam  covers the various valuation r...

As a candidate for the Series 66 exam, can you answer the following true/false questions?  Indicate which of the following statements pertaining to the definition of an investment adviser are true and which are false. 1.    Advice about market trends is not advice about securities. 2.    Advice about the selection and retention of other advisers is not advice about securities. 3.    Advice about the advantages of investing in securities versus other types of investments (e.g., coins or real estate) is not advice about securities. 4.    Asset allocation advice is not advice about securities. All of the statements should be marked false.  According to the SEC: Advice about market trends is advice about securities. Advice about the selection and retention of other advisers is advice about securities. Advice about the advantages of investing in securities is advice about securities. Advice about allocation of assets is advice about securiti...

Are you planning to sit for the Series 66?  This is the exam that is required by most states for those wishing to register as investment adviser representatives, provided that the applicant has a valid Series 7 registration (or plans to acquire one in the near future). If so, be aware that the   Series 66 Test Specifications   published by NASAA includes topics such as time-weighted return and dollar-weighted return. Therefore, do not go into the Series 66 exam unless you are adequately prepared how to apply the formulas for the above returns. For example, dollar-weighted return takes into account deposits of cash and withdrawals during the period, i.e., usually for the calendar year. It is  not  correct to simply take the gain (or loss) for the year and divide it by the beginning balance, as of January 1. Dollar-weighted return, a more correct but complex approach, makes adjustment for any withdrawals and for any deposits.  If, for example, a deposit is ma...

Study for the Series 66 Exam  by Bob Eder J.D. includes discussion of Regulation Best Interest, or Regulation BI, which now applies to dealing with retail customers.  Regulation Best Interest now requires every registered representative to view his/her recommendations through the prism of whether such recommendation is in the retail customer's best interests. Regulation BI went into effect on June 30, 2020. Prior to this date, a representative was required merely to assure that his/her recommendations met the test of suitability.  Furthermore, there was no requirement to present a retail customer with conflicts of interest in writing. Regulation BI now requires this disclosure. Regulation BI applies to recommendations also on which type of accounts to recommend to retail customers, not just to securities recommendations. This means before a representative puts a retail customer into a mutual fund account, or into a margin account, or into a wrap fee account, the represent...

The Series 66 covers the subject of alternative investments. These include exchange-traded notes, (ETN's), leveraged funds, inverse funds, structured products, and viatical/life settlements. Before sitting for the Series 66 exam, Bob Eder advises applicants to study these alternative investments, including their characteristics, risks, and uses. Bob Eder's  Study for the Series 66 Exam  includes a full treatment of alternative investments, in its Chapter 6, "Alternative Investments," pages 65 to 83. Study for the Series 66 Exam  is available from Amazon in either paperback or Kindle e-book versions.  Here is a link to Bob Eder's book on Amazon . Here is a link to NASAA's Content Outline for the Series 66 exam.  See especially Section II (E) for the Series 66's inclusion of questions on alternative investments. Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. He is a member of the ...

Going into the Series 66 exam, make sure you are familiar with prime bank investments. They are the subject of a popular scam, aimed especially at seniors and others with little investment experience. Here is what Bob Eder says in his book Study for the Series 65 Exam : 1.                "  Ther e i s n o suc h thin g a s "pri m e b a n k in v est m ents." I t i s a w e l l - k n o w n and w i d e - s p r e a d s c a m . D o a f av o r t o t h e i n v e s t i n g p u b l i c if ever someone offers you prime bank investments — r e p o r t th e s c he m e t o y ou r state’ s s e curitie s a d m inistrator. Fraudsters try to portray prime bank investments as a way for the little guy to participate in the huge earnings of money-center banks. But this portrayal is complete nonsense." Bob Eder's  Study for the Series 66 Exam  includes a full treatment of  ethical practices and prohibited scams, su...

The Series 66 exam is designed for those candidates who have already passed the Series 7 general securities exam, or for those who intend to sit for the Series 7 shortly. However, if you are thinking of sitting for the Series 66 exam, don't think that because you have a Series 7 this exam will be a piece of cake. Why do I say this? Because consider the topics contained in the Series 66 Test Specifications put out by NASAA, the creator of the exam. Section I (A) (2) discusses descriptive statistics, including mean, median, mode, range, standard deviation, alpha, beta, and the Sharpe ratio. Therefore, don't go into the test without being adequately prepared. Bob Eder's study text, Study for the Series 66 Exam , has a full treatment of descriptive statistics and the topics included, as mentioned above, in its Chapter 1, entitled Economic Analysis. For example, Study for the Series 66 Exam discusses standard deviation, and gives an example how to calculate it, then follows...