INVESTMENT VEHICLES — SERIES 66 CHEAT SHEET

FIXED INCOME SECURITIES

Bond Calculations & Key Metrics

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Duration Rule: Bond price sensitivity to rate changes; longer duration = greater rate risk.

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Bond Types & Risk Profile

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Critical Bond Risks

Interest Rate Risk → Duration (longer = more sensitive) Credit Risk → Spread (wider = higher default risk) Call Risk → Reinvestment (issuer calls when rates drop; YTC < YTM) Prepayment Risk → Mortgage-backed (homeowners refinance when rates drop) Inflation Risk → TIPS (Treasury Inflation-Protected Securities adjust principal)

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EQUITY SECURITIES

Stock Classifications

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Key Distinction:

• Growth stocks = High P/E, long cash flow duration; suffer in rising rate environment

• Value stocks = Low P/E, stable cash flows; benefit from rising rates

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MUTUAL FUNDS & ETFs

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Load Types:

• Front-load → Charged at purchase (reduces initial investment)

• Back-load (CDSC) → Charged at sale (contingent deferred sales charge)

• No-load → No sales charge; rely on expense ratio

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ALTERNATIVE INVESTMENTS

Hedge Funds vs. Private Equity

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REAL ESTATE INVESTMENT TRUSTS (REITs)

REITs = Pooled real estate investments; required to distribute ≥90% taxable income.

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Advantage: Liquidity, diversification, tax-advantaged income Disadvantage: Rising rates → rising cap rates → property values decline; REITs carry debt

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ANNUITIES

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Metric	Formula	Use Case
Current Yield	Annual Coupon ÷ Current Price	Quick income snapshot; ignores maturity
Yield to Maturity (YTM)	IRR of all coupon + principal payments	Market price of bond; gold standard
Yield to Call (YTC)	IRR assuming call at call price/date	For callable bonds; often < YTM
Bond Price & Rates	INVERSE relationship	↑ rates → ↓ price; ↓ rates → ↑ price
Bond Type	Issuer	Credit Risk	Rate Risk	Yield
Treasury	U.S. Government	None	High (longer maturity)	Lowest
Agency (GNMA)	GSE, govt-backed	Minimal	High	Slight premium to Treasury
Corporate	Corporation	Credit spread dependent	High	Treasury + credit spread
High-Yield (Junk)	Weak credit corp	High default risk	Lower (shorter duration)	Highest
Municipal	State/local govt	Varies by credit	High	Tax-exempt advantage
Type	Characteristic	Risk	Dividend	Cycle Timing
Blue Chip	Large-cap, stable	Low	Often yes	Mature/defensive
Growth	High earnings growth	Higher	Usually no	Expansion phase
Value	Low P/E, undervalued	Moderate	Often yes	Contraction/trough
Cyclical	Economy-dependent	High	Variable	Expansion → peak
Defensive	Stable in downturns	Low	Often yes	Contraction/recession
Small-cap	<$2B market cap	Higher	Varies	Growth potential
Feature	Mutual Fund	ETF
Pricing	Once daily (NAV)	Intraday (market price)
Trading	Buy/sell through fund company	Buy/sell on exchange
Costs	Higher expense ratio typical	Lower expense ratio typical
Liquidity	Daily redemption	Real-time trading
Tax Efficiency	Lower (annual distributions)	Higher (in-kind redemptions)
Minimum Investment	Often $1,000–$5,000	1 share
Factor	Hedge Fund	Private Equity
Strategy	Long/short, derivatives, leverage	Long-term ownership, buyouts
Holding Period	Flexible; redemption gates	5–10+ years; illiquid
Fee Structure	"2 & 20" (2% mgmt, 20% performance)	Similar (varies)
Accreditation Required	Yes (high net worth)	Yes (high net worth)
Regulation	Less regulated; private	Less regulated; private
Risk Profile	Moderate–high; active hedging	High; illiquidity & leverage
REIT Type	Focus	Income	Rate Risk
Equity REIT	Property ownership	Rent + appreciation	High (debt-funded)
Mortgage REIT	Mortgages/debt	Interest income	Very high (rate-sensitive)
Type	Payout	Guarantee	Risk	Tax Treatment
Fixed	Fixed amount	Insurance company	Low	Tax-deferred growth
Variable	Tied to subaccount performance	No guarantee	Market	Tax-deferred; upside
Indexed	Linked to market index (with floor)	Partial	Moderate	Tax-deferred; capped upside
Immediate	Starts within 1 year	Yes	Low	Partly tax-free (cost basis)
Deferred	Starts later	Varies	Varies	Full tax deferral

Suitability Rule: Annuities subject to strict suitability; high costs & surrender charges; NOT suitable for short-term investors.

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QUICK DECISION RULES

✓ **Rising rate environment