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Topics Covered on the Series 7 License Exam (Part II) By Steven Kolinsky

November 19, 2011

Packaged securities: A collective term used to describe investment companies, real estate investment trusts, and variable annuities, packaged securities currently stand as one of the most regulated fields in the financial sector. Because packaged securities require a great deal of experience and knowledge of exotic instruments, the federal government has enacted a number of laws to ensure a high standard of ethical conduct among traders and advisors. On the Series 7 exam, candidates must demonstrate a working knowledge of various types of packaged securities, including unit investment trusts, mutual funds, and variable annuity contracts. The exam also requires a thorough understanding of concepts such as net asset value, dollar cost averaging, and mutual fund distributions.

Derivatives: Defined as a payment schedule and contract between two parties based on values of underlying variables, derivatives represent one of the most popular topics on the Series 7 exam. To pass the exam, test takers must understand the concept of options and how they relate to the value of underlying securities such as fixed-income securities, national currencies, commodities, and economic indices. Candidates must demonstrate a thorough knowledge of the two option types: calls, which allow the holder to buy an asset at a specific exercise price; and puts, which allow the holder to sell an asset at a specific exercise price. Above all, candidates must understand the inherent riskiness of the derivatives market and be able to describe the multitude of investment strategies regarding options.

Retirement accounts: As a registered representative, many Series 7 license holders help clients realize maximum growth regarding the investments in their retirement accounts. Series 7 candidates must understand the differences between the various types of retirement accounts and learn about the subtleties of employee-sponsored pension plans. Similarly, the exam requires an in-depth knowledge of federal estate and gift taxes, which can have a significant impact on the value of a retirement account.

Portfolio management: Defined as a group of investments, a portfolio requires a qualified, experienced manager to ensure continuously high returns on investment. Individuals taking the Series 7 exam must possess a firm grasp of the three primary portfolio management policies (aggressive, defensive, and balanced), as well as important concepts such as market indexes and averages, security market line, depreciation, fundamental analysis, and technical analysis.

About the Author

An accomplished financial professional with three decades of experience in the field, Steven Kolinsky holds a Series 7 license from the Financial Industry Regulatory Authority, as well as membership in the National Association of Insurance and Financial Advisors and the National Association of Securities Dealers. Kolinsky enjoys status as a Chartered Life Underwriter and a Chartered Financial Consultant and currently serves as Managing Member and Founder of Kolinsky Wealth Management, LLC, a financial planning firm located in Woodcliff Lake, New Jersey.


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