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Investment Strategies Basics on the SIE Exam The exam covers fundamental investment concepts, with "Understanding Products and Their Risks" representing 44% of the exam (33 out of 75 scored questions). The key strategies and principles tested include:
Risk Management & Types of Risk: Candidates must identify and understand different types of risks, including market/systematic risk, credit risk, interest rate risk, liquidity risk, and inflationary risk. Diversification & Portfolio Management: Understanding how to reduce risk by spreading investments across different asset classes (e.g., stocks, bonds, cash). Portfolio Rebalancing: Techniques for restoring a portfolio's original target asset allocation by selling or buying assets to manage risk. Hedging Strategies: Using derivatives, such as options, to offset potential losses in a portfolio. Fundamental vs. Technical Analysis: Basic concepts of analyzing securities, including company financial statements, business cycles (contraction, trough, expansion, peak), and economic indicators. Investment Goals & Suitability: Recognizing that investment recommendations must match a client’s risk tolerance, financial needs, and objectives.
Core Investment Product Knowledge The SIE covers the characteristics and risks of various products: Equities: Common stock, preferred stock, rights, warrants, and American Depositary Receipts (ADRs). Debt Securities: Treasury securities, municipal bonds, and corporate bonds. Packaged Products: Mutual funds, Exchange-Traded Funds (ETFs), and Exchange-Traded Notes (ETNs). Alternative Investments: Direct Participation Programs (DPPs) and Hedge Funds.
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