Should I buy gold coins?
Gold bullion are an asset that will hold value due to their gold content; gold coins which are more numismatic, that is, collector’s items, may not retain the same value. The value of gold coins is twofold: the price of the gold in the coin and the numismatic value of the coin. There is an important distinction to be made, because some gold coins will have a lot of one, and not the other, and, if you want to make sure your investment is an investment in precious metal and not just a collector’s item, you should make sure you’re getting a coin that qualifies as bullion. Continue reading...
What if I Need the Money in My 401(k) Before I Retire?
Withdrawals and loans can be taken out of a 401(k) before retirement, but the money may be subject to penalties, conditions, and taxes. It is quite common that 401(k) funds are needed before retirement, even though the IRS wants you to wait until you’re 59 ½, and will generally want to levy a 10% penalty on any premature withdrawals. Most plans allow employees to take non-taxed loans out on their balance, which may stunt the growth of the account which was intended for retirement, but if the funds are paid back on-schedule, as stipulated in the plan’s loan agreement, the employee can get back on track quickly. Continue reading...
What is Form 1099-INT?
IRS Link to Form — Found Here Interest income, such as that paid in certain bank accounts and government bonds, will be reported to the taxpayer and the IRS by the payer of the interest income. Form 1099-INT is the form used by these businesses or entities to report the income. Interest income from bonds and interest-paying bank accounts, such as savings accounts, and certain investments, will be reported on Form 1099-INT. The payer of the interest will submit the form to the IRS even for very small amounts of interest payments. Continue reading...
What is a Buyback?
When a company decides to use excess cash to purchase its own shares from the market, it is called a buyback or “share repurchase program.” There are only so many things a company can do with earnings in excess of their projections; among these are issuing a dividend, paying off debts, expanding, acquiring another company, or buying back shares of its own stock. Buybacks are also known as Stock Repurchase Agreements. There may be guidelines in state law or the company’s contracts or buy laws that determine what options they have and how many shares can be repurchased. Continue reading...
What is a Debt Settlement Company?
A debt settlement company is a company who specializes in helping people with overwhelming debt settle with their creditors. Debt settlement companies can help individuals with debt issues settle with their creditors for less than they owe. Of course, this will give the individual’s credit score a significant dent that stays on public record for seven years, but at least it gets people out from under their crushing debt. A settlement company will attempt to negotiate a settlement deal on your behalf with one or all of your creditors. Continue reading...
What does it mean to 'exercise an option?'
An options contract does not affect the underlying securities until the option is exercised, meaning that the option or buy or sell the security is utilized. Many options trades do not directly touch the underlying securities – investors worldwide make plenty of money buying and selling the options contracts themselves. Options have time-value inherent in them based on how the underlying securities are priced and when the options expire, and traders will speculate on when and if someone might actually “exercise the option,” and thereby use the rights of the contract holder to buy or sell the underlying securities. The contract names the strike price at which the holder of a call option can buy a security; or, for a put option, the price at which the holder can sell the security. Continue reading...
What are credit derivatives?
Stemming from the hedging strategy of Credit Default Swaps, an entire speculative derivatives market continues to grow, in which tranches of credit risk and indices are traded. With the ballooning of consumer credit in recent years, it is only natural that a credit derivatives market would follow it. In essence, the risk associated with a loan or bond is separated from the actual asset and is passed on to a counter-party for a premium, and then other market participants become involved, perhaps in the form of futures contracts or other derivatives. Continue reading...
How are Mutual Funds Classified?
Mutual funds can be described, categorized, and screened using the various criteria involved in their construction and maintenance. When investors look for mutual funds, it may be useful to incorporate a mutual fund screener from a website. There are many criteria by which you can classify a mutual fund, such as investment style, market capitalizations of stocks in the fund, the industry sector or region in which the fund focuses, as well as the size of the expenses or type of sales load. Is the fund geared toward the short-term or long-term? Does it have a high turnover ratio? Continue reading...
What is the adaptive market hypothesis?
The Adaptive Market Hypothesis uses theories of behavioral economics to update the aging Efficient Market Hypothesis. There have been many debates surrounding the Efficient Market Hypothesis and its validity, and a lot of research over the last 15 years or so has been done which suggests that behavioral finance holds many of the keys to an accurate “universal theory” of the markets. A marriage between the two schools of thought has given birth to the Adaptive Market Hypothesis, coined in 2004 by Andrew Lo of MIT. Behavioral and evolutionary principals come into play when theorizing about the large-scale behavior and adaptation of humans in a system. Continue reading...
What is the Black-Scholes formula?
The Black-Scholes formula is a formula and market model for explaining or determining the price of European-style options. It was developed in 1973 by two world-renowned economists, Fischer Black and Myron Scholes, and it led to a Nobel Prize in 1997. As opposed to the American-style of options, which can be exercised at any time, European-style options can only be exercised on their expiration date, they are not exposed to dividends, and they have no commission structure to consider. Some are content to use Black-Scholes for quick applications to American-style, but It is not as accurate as it should be. Continue reading...