What is a Fixed Annuity?
Fixed annuities, generally speaking, are annuity products that give the purchaser of the annuity the guarantee of fixed income payments for life. Annuities must come with the option to be paid out in equal payments either over a certain number of years or the lifetime(s) of the annuitant(s). This is the case for variable and fixed annuities, and these payments will be fixed and guaranteed. Where they differ is how they are invested before any annuitization takes place. Continue reading...
What are Periodic Distributions from a 401(k)?
Periodic distribution is a planned intermittent payment of cash from a 401(k). If you choose to have your money distributed periodically, you will usually have a choice between monthly, quarterly, or even annual payments. Money distributed periodically is not subject to the same 20% withholding the lump-sum payment is. The periodic payments are treated as wages, and, because plan participants taking these payments in retirement may find it easy to calculate what their income will be for the year, they can instead plan for their actual tax bracket, or opt-out of withholding if they prefer. Continue reading...
What is the Difference Between a Will and a Trust?
A primary difference between a will and a trust is that a will goes into effect once you die, but a trust goes into effect when you create it. Beyond that, a will is a more basic estate planning document/tool that determines how your assets should be divided upon your death. On the other hand, a trust goes further in controlling how the assets are distributed. It may stipulate when, how, and to whom the assets will be distributed, and those distributions may not happen immediately but rather over a long stretch of time. Continue reading...
What is an Electronic Communication Network (ECN)?
An ECN is an alternative platform to an index for making trades. An Electronic Communication Network is a type of alternative trading system that allows for trading listed stocks and other exchange-traded products. Trading on an ECN is typically limited to institutions and broker-dealers, and trades are facilitated when the price on a buy order intersects with a price on a sell order. ECN’s must register with the SEC, and you must be a subscriber to trade on one. Continue reading...
What is Earnings Momentum?
Earnings momentum is an indicator that is computed by not just looking at the earnings performance and estimations of a company, but looking at the positive or negative direction of earnings and the acceleration in that direction. Momentum in securities is much like momentum in physics. Where there is momentum, it is hard to slow things down and charge direction. Instead of looking only at the growth of earnings, which could be the slope of the inclining line, momentum also looks for increases in change to the growth rate, making earnings growth more parabolic or exponential. Continue reading...
What is the Rectangle Top (Bearish) Pattern?
The Rectangle Top pattern forms when the price of a pair is stuck in a rangebound motion, and it bounces between support and resistance levels. Two horizontal lines are formed (top: 1, 3, 5) and (bottom: 2, 4) as a result. Depending on who gives up first – buyers or sellers – the price can Breakout in either direction. This pattern is commonly associated with directionless markets. Usually the pattern performs better when there is a strong uptrend leading into the formation. Continue reading...
What is the Risk/Return Trade-Off
There are investments which have the potential for very high returns, but they will always be that much riskier than the lower-yielding alternatives, and this is part of the risk/return trade-off. The relationship between risk and return is a positive linear relationship in most theoretical depictions, and if an investor seeks greater returns, he or she will have to take on greater risk. This is called the risk/return trade-off. For more stability and less risk, an investor will have to sacrifice some potential returns. Continue reading...
What are the main Accounting Methods?
There are two main kinds of accounting methods: accrual accounting and cash accounting. Depending on who is speaking, accounting “methods” may also extend to the GAAP vs pro-forma distinction. For the most part, accounting methods can be defined based on the year in which the revenues and expenses are put on the books. In cash accounting, only the revenues and expenses which are collected and paid in the current year or period are documented. Continue reading...
What is the FCC?
The Federal Communications Commission is a bipartisan regulatory body that oversees interstate communications media, grants licenses to entities which plan to use the bands available, and to some extent regulates the content of these communications in the public interest. Communications media, including radio, satellite, cable, telephone, and others, are overseen and regulated by the FCC. They help to standardize measures and regulate the commercial activity of the entities which seek to use these media, including licensing and content regulation. 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...