Trading Securities and Portfolio Performance Measures
Trading and performance items test order terms, market roles, costs, best execution, return measures, yields, and benchmarks.
How to study the Series 65
Treat the Series 65 as an adviser competency exam: quantify risk, classify the product, profile the client, then apply fiduciary and registration rules.
Core concepts
Concept 1
Bids, offers, quotes, market, limit, stop, short, cash, margin, principal, agency, and payment-for-order-flow terms must be classified accurately.
Exam cue: Identify the trading term before assessing best execution or cost.
Concept 2
Broker-dealers, custodians, market makers, and exchanges play different market roles.
Exam cue: Choose the performance measure that matches cash-flow control.
Concept 3
Time-weighted, dollar-weighted, total, holding-period, annualized, inflation-adjusted, after-tax, risk-adjusted, and benchmark returns measure different things.
Exam cue: Compare performance to relevant benchmarks, not arbitrary indexes.
Risk pitfalls and guardrails
Using dollar-weighted return when cash flows are adviser-controlled.
Guardrail: Avoid answers that skip client profile, risk, disclosure, custody, approval, or fiduciary analysis.
Ignoring bid-ask spread and markup costs.
Guardrail: Avoid answers that skip client profile, risk, disclosure, custody, approval, or fiduciary analysis.
Comparing a bond portfolio to an equity benchmark.
Guardrail: Avoid answers that skip client profile, risk, disclosure, custody, approval, or fiduciary analysis.
Memory anchors
Bid
Bid is the price a buyer is willing to pay.
Offer
Offer is the price a seller is willing to accept.
Market Order
A market order seeks prompt execution at the best available price.
Limit Order
A limit order sets a maximum buy price or minimum sale price.
Short Sale
A short sale profits from decline but can have large loss risk.
Best Execution
Best execution requires reasonable diligence for favorable execution terms.
Time-Weighted Return
Time-weighted return reduces the effect of external cash flows.
Dollar-Weighted Return
Dollar-weighted return reflects timing and size of cash flows.
Current Yield
Current yield compares annual income with current market price.
Benchmark
A benchmark should match the portfolio's strategy and risk profile.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
An investor places a market order to buy a stock. How is a market order executed?
An investor places a limit order to buy a stock. How is a limit order executed?
Answer all questions to submit.
Next step personalized recommendations
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Move forward only after this module is stable.
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