What is a Coverdell ESA?
A Coverdell ESA is an account which can be used to save for educational expenses. These used to be called Educational IRAs until someone realized that didn’t make sense. A Coverdell Educational Savings Account (ESA) allows you to save money for your child’s future education costs. As opposed to a 529 Plan, which is limited to post-high school education, money from an ESA can be used as early as Kindergarten. Continue reading...
What is the Broadening Wedge Ascending (Bearish) Pattern?
The Broadening Wedge Ascending pattern forms when a security price progressively makes higher highs (1, 3, 5) and higher lows (2, 4), following two widening trend lines. This pattern may form when large investors spread their buying over a period of time. When initial buying occurs, other market participants react to rising price and jump on the bandwagon to participate. Then value investors begin to sell, believing the price has risen too much, which spurs the original large investor to resume buying again. Once these activities stop, the price may break out in either direction. Continue reading...
What is Ethereum?
Ethereum is an open-source, public, blockchain-based distributed computing platform. Ethereum provides a cryptocurrency known as ether. Ethereum is a decentralized platform that runs what are known as “smart contracts.” Smart contracts are applications that run on custom built blockchain, which functions on its own accord through rules programmed into the protocol, and which also makes decisions and keeps records based on consensus throughout a peer-to-peer network. A blockchain oversees its own activities without requiring any trust in a central authority or the other parties involved. Continue reading...
How Do You Mine Ethereum?
When mining on the Ethereum blockchain, you are rewarded in Ether, but you may need to do some calculations to find out it if will be profitable for you. Ethereum mining can still be done profitably, as of the time of this writing, by individuals on their home computers, as long as they have decent hardware. This is no longer the case for Bitcoin, Litecoin, and a few other coins, due to the development of ASIC (application-specific integrated circuits) mining rigs used by the nascent mining industry, which have rendered home computers obsolete and have begun to present a significant centralization threat on the decentralized blockchain. Continue reading...
What does “Buy the Dips” Mean?
“Buying the dips” is a bullish description of investing in stocks whose prices have gone down. We say this is a bullish sentiment because a bearish investor would be more likely to interpret the downturn as a sign of impending doom, or might prefer to play it safe. A “dip” can be loosely defined as a downtrend without much momentum or evidence to support a bearish outlook. Another way of interpreting a dip would be as an oversold condition, where investor sentiment has caused the price of a quality stock to fall. Bullish investors could maximize their gains in such a scenario by buying low and selling when the stock has recovered and pushed on to new highs. Technical analysis indicators such as Bollinger Bands can be used to identify favorable buying conditions. Continue reading...
What are Bank Fees?
Bank fees are penalties or maintenance requirements that may apply to checking, savings, or money market accounts. Banks may charge fees for specific types of transactions, if a check bounces, or just a monthly checking account fee. There are many other types of fees and reasons for them. They may be penalties, such as an overdraft fee, or they may be customary for the kind of transaction or account being used. Continue reading...
What is commodity paper?
Commodity paper is the contract for a loan which is secured by collateral in the form of a commodity held in a warehouse or in transit. This is basically a form of warehouse financing, where the inventory in storage is verified and the changing level of inventory insures a larger or smaller line of credit from the lender. In this arrangement, however, there is one agreed-upon loan and collateral amount. Continue reading...
What is a credit default swap?
A Credit Default Swap is a contract that provides a hedge against credit default risk. To guarantee against the non-payment of a loan, a Credit Default Swap can be purchased for a premium. The seller of the swap bears the risk of payment if a bond issuer defaults, or if there is a similarly threatening “credit event” which is agreed upon in the terms of the swap contract. Generally, the buyer of a credit default swap will pay quarterly premiums for the protection, and the annualized premium is called the "spread," which may be a set percentage of the notional amount. Continue reading...
What are Mid Cap Mutual Funds?
Mid cap mutual funds invest in medium-size companies. A middle capitalization mutual fund invests mostly in medium-size companies. While the definition of “medium-size company” varies, most professionals define it as a company with a market capitalization from $2 billion to $10 billion. Companies you may have heard of within this size range are Eaton Vance, Guess, and others. In general, mid cap companies are more volatile than large cap companies, and the choice of the right fund managers becomes more important. Continue reading...
What is a credit rating?
A credit rating is given to a company or debt issue after a disinterested third party evaluates the strength of the business or cash flow and rates its ability to pay all of its liabilities. Third-party institutions such as Standard & Poor’s (S&P), Moody’s, and Fitch will conduct research in order to give investors an idea of how likely a business, bond issue, or insurance company can pay all of its obligations. Continue reading...