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What should I compare the performance of my portfolio with?

What should I compare the performance of my portfolio with?

Benchmark indices are used to gauge the performance of an investment portfolio. In order to evaluate the performance of your portfolio for any given period of time, find the corresponding index for each investment in your portfolio. For example, for US Equities, use the S&P 500 For your Small Cap portion, use the Russell 2000 Index, etc. You can also compute weighted index blends that correspond to your index allocation (e.g., 40% MSCI / 60% S&P). If your manager or the portion of your portfolio significantly (by more than a couple percent) underperforms the corresponding index, be sure to carefully monitor this manager or portion of your portfolio. Continue reading...

What is a bull call spread?

What is a bull call spread?

A bull call spread is a vertical spread that buys and sells calls in a way that benefits from upward price movement but limits the risk of the short position. Using calls options of the same expiration date but different prices, a bull call spread seeks to maximize profits for moderate price movements upward. A long position is taken in a call contract (meaning it is bought and held) that has a strike price near the current market price of the security or is at least lower than the other call contract used in this strategy. Continue reading...

How Long Will It Take Me to Pay Off Debt?

Paying off debt depends on a variety of factors, like the total amount of debt, your payment schedule, the principal amount, and interest rates. There are plenty of financial calculators you can access on the web, which would allow you to calculate your payment schedule. Your financial advisor should also have software available to run these numbers for you, or in the very least, a financial calculator to run the numbers quickly. The 'inputs' you need to complete the calculation are: the size of your debt, your planned payments, and the interest rate you’re paying. Continue reading...

What Should My First Savings Vehicle Be?

Start basic, and just open a savings account at a bank or create a brokerage account at a major custodian (Charles Schwab, Fidelity, for example). As a rule of thumb, you should have six months’ worth of living expenses in this account. Another good rule of thumb is to avoid touching this money at all costs, and never invest this money in risky assets like stocks. It’s better to keep the money as liquid as possible, so even buying Certificates of Deposit (CDs) may not be the best idea. The purpose of this money is not to make you rich – this is your safety net. Continue reading...

What is Face Value?

Face Value is the nominal value of a security or currency as written/stated by the issuer. It may vary from market price, since for securities like stocks the price is heavily influenced by supply and demand. In the case of bonds, interest is usually calculated as a percentage of face value. Also for bonds, the face value is generally equal to the par value (principal), usually the $1,000 paid to the holder at maturity. Continue reading...

What is Volume Weighted Average Price (VWAP)?

What is Volume Weighted Average Price (VWAP)?

The Volume Weighted Average Price (VWAP) helps traders consider the influence of volume on prices. VWAP is calculated by taking the average of prices from a time period and dividing it by the trading volume for the current day. Traders use VWAP to confirm trends and decide whether to take long or short positions, while large institutions are likely to use VWAP to avoid disrupting market prices, finding the liquid and illiquid price points and trading so as not to move prices away from the averages. Continue reading...

What is Account History?

Account history is a term especially useful for investment accounts, where transactions beyond a current month or year’s records are useful for reference. Most people are familiar with the transaction history that is available for the current month, quarter, or year on an individual’s savings, checking, and credit card accounts. These are often called “activity ledgers” or something similar. Account history that reaches further back might be more useful for investment accounts, where the current value of investments, and their cost basis, will depend heavily on account history from potentially years in the past. This sort of query can be made easily with online investment account viewing software from a broker or custodian company. Continue reading...

What is Revenue?

Revenue is a word describing any cash flowing into a business as a result of goods and services rendered. It is sometimes call gross income, and is a representation of income before all expenses. It is notable, though, that revenue only includes receivables in the current period. The Accounts Receivable on the company’ s books may include the entire cost of the goods or services rendered during that period, but the Revenue should generally only reflect the amount that is paid to the company in the current year. Continue reading...

What is a foreign fund?

What is a foreign fund?

A foreign fund is a mutual fund that invests solely in companies abroad and does not invest in corporations owned in the US. Owning foreign companies can be a very good diversification strategy and is considered a core holding in the portfolio of most investors. Foreign exposure means that if the US economy hits a rough patch, you may have a hedge in the foreign fund if the companies or markets in other parts of the world are not entirely correlated. Continue reading...

What is market neutral?

What is market neutral?

Market neutral is a term used to describe strategies of investing that are poised to benefit whether the market goes up or down, or even if it stays stagnant. Some professionally managed funds might take a market-neutral stance in their entirety, or investors might employ market-neutral strategies for specific parts of their portfolio. Market Neutral means that your position as an investor is neither bearish nor bullish, and you may be able to profit whether the market moves up or down, or even if it doesn’t move at all. Options traders, for instance, have a wide variety of market-neutral positions that they can take, since profiting may depend more on the presence of volatility rather than price movement in one direction or another. Continue reading...