NASAA Series 65 Cheat Sheet - Formulas, Investment Vehicles, and Adviser Rules

Use this as a rapid refresher alongside the Syllabus and Practice . It focuses on high-yield relationships, formulas, and compliance workflows you can apply under time pressure.

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Series 65 in 60 seconds (what the exam rewards)

• Process > trivia: pick the safest, client-first compliant next step.
• Know your products: risks, costs, liquidity, and tax consequences drive suitability.
• Portfolio logic: diversification, correlation, and risk/return tradeoffs show up everywhere.
• Adviser mindset: disclose conflicts, avoid misleading performance claims, document decisions.

    flowchart TD
	  A["Client scenario"] --> B["Collect facts<br/>objectives, risk, time, tax, constraints"]
	  B --> C["Choose tool<br/>allocation, product, strategy"]
	  C --> D["Check risks + costs + liquidity"]
	  D --> E["Check rules<br/>disclosures, conflicts, custody, advertising"]
	  E --> F["Document rationale + deliver disclosures"]

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Official topic weights (use for time allocation)

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1) Economics and business information (Topic I)

Macro map (high yield)

    flowchart LR
	  A["Inflation"] --> B["Interest rates"]
	  B --> C["Bond prices"]
	  B --> D["Equity valuation<br/>(discount rates)"]
	  E["GDP growth"] --> F["Earnings"]
	  F --> D
	  B --> G["FX and capital flows"]

• Rates up -> bond prices down (inverse price/yield).
• Inflation up -> purchasing power down (real returns matter).
• Tight policy -> slower growth (often pressures risk assets).

Financial statements (what each one answers)

Ratio quick sheet

Time value of money (TVM)

Future value (single sum)

$$ FV = PV(1+r)^n $$

Present value (single sum)

$$ PV = \frac{FV}{(1+r)^n} $$

Rule of 72 (approx.)

$$ \text{Years to double} \approx \frac{72}{%\ rate} $$

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2) Investment vehicles (Topic II)

A) Cash and cash equivalents

• High liquidity, low expected return.
• Inflation risk is the main long-horizon threat.

B) Fixed income: the must-know relationships

Price vs yield: inverse.

Duration intuition: longer maturity + lower coupon = more rate sensitivity.

Yield formulas (test-friendly)

Current yield

$$ CY = \frac{\text{Annual Coupon}}{\text{Market Price}} $$

Approximate YTM

$$ YTM \approx \frac{\text{Annual Coupon} + \frac{Par - Price}{Years}}{\frac{Par + Price}{2}} $$

Taxable equivalent yield (muni)

$$ TEY = \frac{\text{Muni Yield}}{1 - t} $$

Where $t$ is the investor’s marginal tax rate.

Bond risk cheat sheet

C) Equities (what the exam tests)

• Common stock: residual claim; growth potential; higher volatility.
• Preferred stock: fixed dividend; more rate-sensitive; sits above common in liquidation.

Equity valuation anchors (high level)

• Multiples (P/E, P/B, EV/EBITDA).
• Dividend discount concept (for stable dividend payers).

D) Pooled investments (mutual funds, ETFs)

NAV

$$ NAV = \frac{\text{Assets} - \text{Liabilities}}{\text{Shares Outstanding}} $$

Front-end load (public offering price)

$$ POP = \frac{NAV}{1 - c} $$

Where $c$ is the sales charge as a decimal.

High-yield differences:

• Mutual fund: priced once/day at NAV; purchases/redemptions with fund.
• ETF: trades intraday; can be shorted/margined like stock (broker rules apply).

E) Derivatives (the minimal toolkit)

Options breakevens

• Long call: $BE = K + P$
• Long put: $BE = K - P$

Where $K$ is strike and $P$ is premium.

Payoff intuition

Derivatives exam habit: focus on purpose (hedge vs speculate), leverage, and liquidity/complexity.

F) Alternatives, insurance, and digital assets

• Alternatives: illiquidity + valuation opacity are common risk themes.
• Insurance-based products: complexity, fees, surrender charges, and suitability constraints.
• Digital assets: volatility, custody, regulatory and operational risk.

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3) Recommendations and strategies (Topic III)

Client profiling checklist (KYC + constraints)

• Objectives (growth/income/preservation)
• Time horizon
• Risk tolerance and risk capacity
• Liquidity needs
• Tax status
• Knowledge/experience
• Special constraints (concentration, employer stock, restrictions)

The IPS workflow (how exam answers are structured)

    flowchart TD
	  A["Client facts"] --> B["Write constraints<br/>time, liquidity, tax, legal"]
	  B --> C["Set objectives<br/>return + risk"]
	  C --> D["Select allocation<br/>strategic mix"]
	  D --> E["Select vehicles<br/>cost, liquidity, tax"]
	  E --> F["Rebalance rules<br/>time or bands"]

Modern portfolio theory (MPT) mini-set

• Diversification works best when correlations are low.
• Total risk = systematic + unsystematic; diversification reduces unsystematic risk.

CAPM (high level)

$$ E(R_i) = R_f + \beta_i (E(R_m) - R_f) $$

Sharpe ratio

$$ \text{Sharpe} = \frac{R_p - R_f}{\sigma_p} $$

Beta intuition

• $\beta > 1$: more sensitive to market moves.
• $\beta < 1$: less sensitive.

Performance measures

Holding period return (HPR)

$$ HPR = \frac{(P_1 - P_0) + I}{P_0} $$

Arithmetic vs geometric mean

• Arithmetic: average period return.
• Geometric: compound growth rate (usually lower when volatility exists).

Taxes (concepts that show up a lot)

• Short-term vs long-term capital gains (conceptual).
• Cost basis drives gains; basis tracking matters.
• Wash sale disallows a loss if you repurchase substantially identical securities within the window.
• Tax-loss harvesting is a process: realize losses -> maintain exposure (not substantially identical) -> document.

Retirement plans (keep it high level)

• Traditional: tax-deferred growth; withdrawals taxed as ordinary income.
• Roth: after-tax contributions; qualified distributions tax-free (eligibility rules apply).
• Employer plans: rules vary; focus on tax treatment and suitability constraints.

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4) Adviser law, regulation, and ethics (Topic IV)

IA / IAR / BD / Agent: the classification habit

When a question is about “who can do what”, start here:

• Is this adviser activity (ongoing advice/management for a fee) or brokerage activity (effecting transactions)?
• Who is the actor: IA, IAR, BD, agent, or issuer/representative?
• What’s the state-law hook: registration, exemption, antifraud, advertising, custody?

Registration + compliance workflow

    flowchart TD
	  A["Advice for compensation?"] --> B["Potential IA/IAR"]
	  B --> C["Registration scope<br/>state vs federal covered"]
	  C --> D["Disclosures + contracts"]
	  D --> E["Books/records + supervision"]
	  E --> F["Ongoing monitoring<br/>updates, conflicts"]

Advertising and performance claims

• Avoid misleading statements and cherry-picked results.
• Disclose assumptions, fees, material limitations, and risks.

Compensation and conflicts

• Disclose fees/commissions and material conflicts.
• If an answer choice includes disclose + document, it’s often correct.

Custody and discretion

• Custody issues often require strict controls and escalation.
• Discretion requires clear authorization and supervision.

Prohibited practices (the classic traps)

• Misrepresentation or omission
• Unauthorized trading
• Churning
• Front-running / misuse of customer info
• Insider trading / MNPI misuse
• Borrowing/lending with clients (often restricted)

Cybersecurity, privacy, and BCP

Exam framing is simple:

• Protect client data.
• Use secure processes.
• Have a plan for outages and incidents.
• Document and report per policy.

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What to do next

• Use the Series 65 syllabus as your checklist.
• Build speed with timed mock exams .

Not legal or tax advice. Exam outlines and rules can change; confirm current requirements with official sources.

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