What is an S-Corporation?
S-Corporations, also called S-corps, are a cross between a traditional corporation and an LLC. S-Corporations are companies which, as opposed to C-Corporations, do not pay any federal income tax on their earnings, except in a few exceptional cases. Instead, the earnings (or losses) are passed to the shareholders and will appear on their individual income tax reports. The “S” comes from the subchapter of the Internal Revenue Code where the taxation laws are outlined. S-corps can actually be owned and operated by a sole proprietor after incorporating or starting an LLC in the state of residence and filing IRS form 2253 (link to instructions and form — found here). Continue reading...
What are the Basics of Annuities?
Annuities are financial products/contracts generally sold by insurance companies to protect an investor’s assets against downside market risk and long life expectancies. Investors have to pay premiums/fees in order to secure the guarantees. Annuities are very important investment instruments, and can be an indispensable part of your overall investment portfolio. Keep in mind that annuities are very aggressively marketed, and it is very important to understand exactly how they work. Continue reading...
What are the contribution limits for my Roth 401(k)?
Roth 401(k) contributions have the same limits as regular 401(k) contributions. The contribution limits for your Roth 401(k) are the same as the contribution limits for a traditional 401(k), which, in 2016, is $18,000, but these limits are adjusted upwards to account for inflation. If you’re over 50, you can add a catch-up contribution of $6,000 on top of the $18,000 for a total contribution of $24,000. Continue reading...
What is “efficient market hypothesis”?
The Efficient Market Hypothesis (EMH) states that it is impossible to beat the market consistently over time, since all available information is priced efficiently into stock prices. But what the EMH misses is the impact that sentiment can have on price discrepancies in the short-term. Emotions can lead to gross mis-valuations (as we saw with the tech bubble in 2000), and market corrections can see stocks selling off dramatically for no fundamental reason. Continue reading...
What is IRS Publication 535, Business Expenses?
IRS Link to Publication — Found Here Businesses can refer to Pub. 535 to get a better grasp on what expenses can help lower their corporate tax bill. Many of the costs required to do business can be deducted or depreciated. The guide addresses employee compensation, inventory, research and development, and much more. Many of the expenses that could fall into the category of “overhead” can be deducted by a business. Continue reading...
What are Corporate Earnings?
Earnings are the net revenue of a company after expenses and, sometimes, taxes. Also known as profit. Corporate earnings are an important metric for individual companies and the economy as a whole, because it shows how much money has been made. Revenue is the inflow of money to a company, and earnings are the net revenue, or profit, after expenses have been taken out. Of course there is also EBITDA, which is Earnings Before Interest Taxes Depreciation and Amortization, but this is a non-GAAP method. Earnings are usually calculated on a quarterly basis. Continue reading...
What is a currency symbol?
Currency symbols are characters written or typed in a specific arrangement alongside the numerical values of a currency amount, to denote the kind of currency in which the amount of money is held. An example would be the dollar sign ($), which is placed at the beginning of the numbers which describe the amount of currency in question, despite the fact that in most languages the word “dollars” follows the numbers when spoken. Many currencies have their own symbol but not necessarily all do. Continue reading...
What is Common Stock?
A common stock is the one you’re most familiar with - having a share of ownership in a company. Owning common stock in a company is a vote of confidence that an investor thinks the company will perform well, and grow. Owning common stock also entitles an investor to equity ownership in a corporation, voting rights, and shared participation in a company’s success through dividends and/or capital appreciation. Continue reading...
What are Collateralized Debt Obligations (CDOs)?
Collateralized Debt Obligations (CDOs) are bond-like investments backed by debts such as mortgages. The mortgages or debt obligations are pooled together and divided into tranches based on the maturity date and coupon payments and sold as securities (CDOs). If interest rates change and the borrowers in the underlying pools can refinance their debts, the CDOs will experience some volatility as the obligations are paid off early, but how much volatility depends on which tranche the investment is in. Continue reading...
Day trading with RSI
The Relative Strength Index (RSI) is a momentum oscillator developed by Welles Wilder. In the RSI, the average gains and average losses over a specific time period (such as 14 days) are divided to calculate the Relative Strength, then normalized into the Relative Strength Index (RSI), which is range bound between 0 and 100. The RSI typically fluctuates between values of 70 and 30, with higher numbers indicating more momentum. According to this indicator, a security with an RSI over 70 (out of 100) can be considered overbought, while a security with an RSI under 30 (out of 100) can be considered oversold. Continue reading...