What is a Traditional IRA?
A Traditional IRA holds money tax-deferred until retirement. An Individual Retirement Account (IRA) is an account which allows tax-deferred growth of assets. As its name implies, an IRA has to be opened in the name of the individual. A person can contribute to one, up to the annual limit, and deduct the entire amount from his or her taxes unless they are prevented from taking deductions due to participation in a workplace retirement plan and having income that exceeds certain limits. Continue reading...
What is Medicare Part D?
Part D is prescription drug coverage to supplement the coverage of Medicare Part A and Part B. It can be a standalone policy, or it can be included in a package with Part C. Medicare Part D is purchased through private insurers. While the premiums vary, they tend to range from $15- $150 a month. There was a maximum deductible of $360 for these plans in 2016, after which the insurer would trigger 75/25 coinsurance or something in that range. Continue reading...
What is Mortgage Fallout?
Mortgage fallout refers to the instance of proposed loans falling through before closing. This is something tracked by not only mortgage producers and their mortgage companies, but also economists who keep up with mortgages and the secondary market for mortgage derivatives. Since mortgages take two months or more to close, the fallout rate can indicate a stagnancy in the economy and trouble for the secondary mortgage market. Continue reading...
What is the Falling Pennant (Bearish) Pattern?
The Falling Pennant (or Bearish Pennant) pattern looks like a pennant turned upside down (the mast points up). It forms when falling prices experience a consolidation period, and the price moves within a narrow range defined by the converging lines through points (2, 4) and (3, 5). After the consolidation, the previous trend resumes. This type of formation happens when anticipation of downtrend is high, and when the price of a pair consolidates during a declining trend. It may indicate growing investor concern of an impending downtrend. Continue reading...
What is Subordinated Debt?
Subordinated Debt is a junior security which will be serviced after the Unsubordinated Debt in the event of a company bankruptcy. Subordinated Debt has been deemed less important than the Unsubordinated Debt that a company has taken on, in terms of what priority it will have for payment in the event of company default. The amount of money and length of term on the loan are considerations when making this distinction. Continue reading...
What is Accelerated Life Insurance?
Life insurance contracts sometimes contain provisions by which the death benefits can be paid out to an insured person while they are still alive. This is called “accelerating” the benefits. Certain terms must be met for the benefits to be accelerated, and different policies have different contract language and exclusions. Sometimes these provisions are attached to a regular contract as a Rider, which might require an additional premium, or might be included by default. Continue reading...
When was the Latest Housing Bubble?
The latest housing bubble burst in 2005, a few years prior to the stock market meltdown. Housing prices peaked in 2005, and over-leveraged homeowners started to feel the pinch of falling property values leading into the 2008 financial crisis. In the 2005 - 2012 period, housing prices fell some 30-80% in various parts of the U.S. Problems emerged when the loans outstanding on homes exceeded the home's value, and when job losses eventually resulted in mass defaults. Continue reading...
What are Bond Ratings?
The possibility of a company or municipal government defaulting on their bond obligations, usually by going bankrupt, is a real one. For this reason, all bonds are rated according to the financial stability of the issuer. A look at the history of corporate and municipal debt will illuminate the fact that the possibility of the issuer being unable to pay its obligations to bondholders is a very real one. There is an established system of bond ratings that gives a rough estimate of the bond's reliability. Continue reading...
How do I Invest in commodities?
Commodities can be acquired through brokerage services that can access the commodities markets, or you can buy the stocks of companies that bring commodities to market. Investors can also gain exposure to commodities through mutual funds and ETFs that focus on them. There are a few ways to invest in commodities. One simple way is to purchase the stock of companies that produce commodities. You can also invest through futures contracts, which are agreements to buy a certain amount of a commodity at a certain price at some point in the future; this is the primary way that commodities are traded. They can also trade at spot, which means at the current price, or through the use of other derivative instruments, such as options on futures contracts. Continue reading...
What is Pari-Passu?
“Pari-passu” is a Latin phrase meaning “equal footing,” typically in reference to treatment of creditors or beneficiaries when assets are distributed. Some examples of pari-passu in practice would be bankruptcy proceedings when credits are given ‘equal access’ to assets of the company, or in a probate hearing when assets are divided equally amongst beneficiaries. Continue reading...