What is a Corporation?
A corporation is a business entity which has filed articles of incorporation. Unlike a Sole Proprietorship or a Partnership, a corporation is a legal entity that is separate from its owners. They are often referred to as C-corporations or C-corps, to distinguish them from S-corps, which are named after the subchapter which describes them in the law (though technically speaking, S-corps are corporations, too). Continue reading...
Should I buy other currencies?
The U.S. dollar is the world’s reserve currency, so generally speaking, if you are not planning to travel to foreign countries or do not have the need for foreign currencies in your business, you might as well stay with U.S. dollars. If you are using foreign currencies in your investment portfolio, you must be prepared for volatility and continue to educate yourself on the Forex market as well as international trade. The famous example of George Soros, who almost destroyed the Bank of England, and made a couple of billion dollars along the way, might not necessarily be applicable to you. Continue reading...
How Can I Establish a SEP IRA?
SEP IRAs do not have to be established until taxes are filed for the year, and it can be done quickly. SEP IRAs require very little paperwork or trouble to establish. One form will notify the IRS that SEP contributions are being made for the year, and the amount. The only other documentation needed is a plan document, which establishes and outlines the eligibility rules for a particular plan, but this document only has to be kept on file at the business, and does not have to be submitted to the IRS or any regulatory authority. Continue reading...
What are the Withdrawal Rules for My Keogh Plan?
Withdrawal rules for Keoghs will be essentially the same as rules for IRAs and 401(k)s. Once you are age 59½, you may begin to make penalty-free withdrawals and only pay income taxes on the amount you withdraw, similar to a traditional IRA. If you decide to withdraw money before age 59½, you may have to pay a 10% penalty fee in addition to income taxes on the amount of your withdrawal. Of course, there are exceptions. One exception for most qualified plans is for employees who separate from service at or after age 55: this is the early retirement exception, and the 10% penalty will not apply. Keoghs will technically use the early withdrawal rules for 401(k)s and not IRAs, which differ slightly. Continue reading...
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 Weighted Average?
A weighted average is a calculation considers the relative importance or relevance of a piece of data. Weighted averages multiply numbers in the average by a predetermined factor, like time, that enhances the relevance given to the number. One example of a weighted average is the Exponential Moving Average (EMA), an alternative to the Simple Moving Average (SMA) line which gives greater weight to the more recent data. SMAs are effective in their simplicity, but their efficacy is most closely tied to how they are used. Continue reading...
What is a Multiple?
A multiple is a measure of a stock’s value, calculated by comparing one metric to another. The most common is the metric comparing a stock’s price to its earnings. The most commonly used ‘multiple’ calculation is price to earnings, or P/E. This tells you the price of stock relative to its earnings per share. P/E’s are most useful when comparing stocks in the same industry or sector. For instance, a P/E of 25x may seem high to most, but it’s actually quite normal for stocks in the technology sector. Continue reading...
What is market momentum?
Market momentum is the tendency of a trend to continue in one direction or another. Various analysis methods and indicators seek to identify the strength of trends and to find points of possible reversals and retracements. A market has strong momentum when trading volume is up and confirms the direction of price movement in the market. Bullish or bearish market sentiment will influence the degree of momentum that is present. Continue reading...
What is the currency carry trade?
Assets that are held are sometimes analyzed in terms of the cost of carrying them, called the cost of carry. In certain situations, there may be a potential for profit if an asset that might otherwise have a cost of carry could be traded for an asset that actually generates profit. The arbitrage opportunity that exists in that space, and the market formed by it, is sometimes called the carry trade, or the currency carry trade where it applies to currency. Continue reading...
What is the difference between active and passive money management?
The debate on whether active or passive management is better for investors has polarized many advisors and theorists for years. There are two schools of thought when it comes to long-term investing. One basically states that you should determine a proper allocation of asset classes for yourself, buy index funds to reflect each particular asset class, and possibly rebalance the portfolio periodically. This basically means “set it and forget it,” and the investor must be willing to ignore fluctuations in the markets and maintain a faith in an Efficient Market. Continue reading...