STUDY FOR THE SECURITIES INDUSTRY ESSENTIALS EXAM (SIE) EXAM

Plan on taking the SIE Exam soon? Make sure that you understand the various risks associated with investments. FINRA publishes a Content Outline for the SIE Exam which lists the various investment risks in Section 2.2. Consider currency risk. This is a risk that U.S. investors take when they purchase securities of foreign companies that are denominated in currencies other than the U.S. dollar. Here's an example. Mr. Roberts purchases 100 shares of France Telecom for 75 euros per share, when the euro is at a parity with the U.S. dollar. Mr. Roberts pays US $75 per share. Mr. Roberts holds the shares for six months and France Telecom still is selling for 75 euros. In the meantime, however, the euro declines in value vis-a-vis the U.S. dollar. The result is, Mr. Roberts' investment in France Telecom is worth less than what he paid in terms of U.S. dollars. Bob Eder has devoted a whole chapter in his Study for the Securities Industry Essentials (SIE) Exam to Risks of Investing. He...

Before you go and sit for the Securities Industry Essentials (SIE) exam, make sure you know about different risk types. Be able to define and identify each of these types. FINRA publishes a Content Outline on its web site for the SIE exam, and in section 2.2 specifically mentions 10 different investment risks. Thus, FINRA is telling SIE candidates that they need to know these and be able to define and identify them. Bob Eder has a detailed analysis of each risk in his Study for the Securities Industry Exam on pages 145-151. Here is an example from Bob Eder's book: Management Risk (2.2) This is the risk of the uncertainty of the quality and ability of management overseeing the investment. A corporate management team may make good or bad decisions that will affect profits and stock prices. Although everyone knows that future happenings are related only tenuously to past history, the track record of management in the past often indicates improved chance of success in the future. H...