What is a straddle?
Straddles are options strategies that use both a call and put on the same underlying asset at the same strike price and expiration. The Straddle strategy involves either buying a call and a put with the same strike price and expiration, or selling a call and a put with the same strike price and expiration. The former is known as a Long Straddle, and the latter is known as a Short Straddle. Long straddles profit from significant price movement in either direction on the underlying asset. Continue reading...
What is a Dividend Tax Credit?
In Canada, the dividend tax credit eliminates tax liability for eligible dividends. Eligible dividends can come from public companies, foreign-owned companies operating in Canada, and many privately owned companies. It allows Canadian citizens to avoid having their dividends double-taxed. Canada offers a dividend tax credit that allows investors to eliminate their taxes on dividends paid from eligible companies. Continue reading...
What is CAGR?
The Compound Annual Growth Rate (CAGR) is the compound discount rate which an investor would have to get to go from a present value to a future value. The compound annual growth rate can be computed using the ending value of an investment and taking the Nth root of it for the number of compounding periods (usually years). The idea is to have a smoothed average number that an initial would have to have received in a compounding investment to end up at the future value. Continue reading...
What is Cash and Cash Equivalents?
Cash and cash equivalents are negotiable instruments which have a stable value and are highly liquid. Cash and Cash Equivalents is a phrase used often in the financial world. Generally money market accounts are the most used cash equivalent. They are invested in currency, and their goal is to preserve the value of the the investor’s dollars. Money market accounts are basically completely liquid, and investors can even write checks and make ATM withdrawals from their money market accounts. Continue reading...
If I Leave My Job, Will I Still Get a Pension?
You may not be vested in a pension if you lave too early, or you may have to accept a lower payout. This depends on how many years you worked for your employer, and other factors which are described in your pension plan document. In some cases, the employer can specify a minimum number of years you have to work for the company in order to receive a Pension. Otherwise, the amount you receive will be vested in portions over a few years, until you will be able to leave your job and keep 100% of the accrued Pension benefits. Continue reading...
How Do I Invest Money in My Pension?
Employees are not able to control investments in a Pension Fund, but you can control a few variables. You cannot direct investments in your pension. Since a pension is a type of Defined Benefit Plan provided by your employer, the company worries about the investments, and you will receive a fixed monthly payment that is calculated based on your age, salary, and number of years worked for the company. Continue reading...
What is Terminal Value?
The "end" value at a specified date in the future of an investment or cash flow. Terminal value is a term used in value calculations looking forward toward the future value of an asset or cash flow, and also in calculations which start with the Terminal Value and depreciate the asset over the intervening years until one arrives at the Present Value. Can be used in calculations regarding a business, an index, a cash flow, or an asset. Horizon Value is a synonym, and is perhaps better suited to describe the way the calculation chooses a time horizon of a specific number of years, but otherwise uses the same numbers in an equation that will estimate the value if the business or index went on growing at the same rate into perpetuity. Continue reading...
What is a Bond?
A bond is a contract which “binds” the lender to the debtor, where an individual investor is generally the lender and the debtor is the company or government which has borrowed funds. When a company or government entity needs more capital, whether to fund operations or a specific project, it can borrow money from investors instead of from a banking institution. Where there is a risk of the investor not being repaid, the interest rate will be proportionally higher. The simplest way a bond works is with set payments at set intervals that gradually repay the debt and interest owed to the investor over a set amount of time. Continue reading...
What Happens to the Price of a Bond After I Buy It?
Bonds can be traded on exchanges before their maturity date, but the price might fluctuate based on the current interest rate environment. As the buyer of, say, a $1,000 bond, you should be aware that as long as the company does not go bankrupt, you will receive $1,000 back at the date of maturity. During the life of the bond, however, the price at which you can sell that bond might oscillate depending on the interest rate environment and the perceived financial health of the company. Continue reading...
What is the MSCI ACWI Index?
The MSCI ACWI is the “All Country World Index” - providing the broadest measure for global stocks. The MSCI ACWI tracks performance of stocks from all over the world - literally. It includes all markets and gives the broadest picture for how world stocks are performing. Developed markets account for some 75% of total global output, so the MSCI ACWI includes many countries that are not necessarily palatable contributors to world growth. Continue reading...