What are Industry-Specific Mutual Funds?
Industry-specific funds attempt to capture the movements of a single industry. Industry-specific mutual funds will usually limit themselves to investing in particular industries. There are thousands of such funds. Their focus can be very broad (such as technology - here) or very narrow (such as solar energy - here). Investors who would like to gain exposure to specific industries to round out their portfolios can do so with an industry-specific fund which offers diversification among many different holdings in an industry, as opposed to one or two stocks in an industry. Continue reading...
What is the Falling Wedge (Bearish) Pattern?
The Falling Wedge pattern forms when prices appear to spiral downward, with lower lows (1, 3, 5) and lower highs (2, 4) creating two down-sloping trend lines that intersect to form a triangle. Unlike Descending Triangle patterns, however, both lines need to have a distinct downward slope, with the top line having a steeper decline. This pattern is commonly associated with directionless markets since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. However, there is a distinct possibility that market participants will either pour in or sell out, and the price can move up or down with big volumes (leading up to the breakout). Continue reading...
How to use Open Interest in trading
Open interest, or OI, can be a very important number for futures, options, and other derivative markets, but it can also be important to traders in the traditional stock market. Open interest in derivatives of stocks indicates that there is a deep market for the stock itself, since many of the positions may eventually require the purchase of the stock. Increases and decreases in open interest may help a trader understand if there's significant action in a security's price movements, which can determine liquidity needs as well as whether the price movements are rooted in actual supply and demand characteristics. Continue reading...
What is an Asset-Backed Security?
Asset-backed securities are bonds or notes that come in several forms, but they typically use the cash flows from debt repayment as the asset that backs them. The assets that back the bonds called asset-backed securities (ABS) can be basically anything with a fairly predictable cash flow, but debt repayment cash flows tend to be used the most. These include credit card debt, home equity loans, auto loans, student loans, and so forth. Continue reading...
Should I consolidate my debt?
This seems to be a better choice than debt settlement, and it may make payments easier. Debt consolidation allows people to pay one bill a month towards their debt obligation, rather than many, and it may also give them a lower interest rate payment. A debt consolidation company or bank can settle the outstanding debts of the individual; this settlement amount plus fees becomes the principal loan amount or a new loan, which will probably be designed to have lower payments than the individual was paying before consolidation. Continue reading...
Can I Withdraw Money From My Pension Plan?
This is rarely an option, but the IRS does allow it. In general, you can’t withdraw money from a Pension Plan before you retire. You also may not be able to make non-recurring withdrawals after retirement, unless it is a lump-sum settlement. If your plan allowed it, the IRS would treat it just like withdrawals from a 401(k). Withdrawals before 59 ½ would be penalized with a 10% early withdrawal tax. Continue reading...
What is Federal Reserve Credit?
The Federal Reserve extends credit in the form of short-term loans to member banks. Banks avoid taking loans from the Fed if they can, because it is viewed as a sign of instability. The Federal Discount Rate applies to loans taken from what is known as the discount window at the Fed, and it tends to be a higher rate than what is charged between two banks. The Federal Reserve will extend credit only to banking institutions that are members of the Federal Reserve system. Continue reading...
What is Time Value of Money?
The Time Value of Money is a theme for discourse and calculations related to the effect of interest on money over time, and the interrelation between Present Value and Future Value. The Time in the equation of Rate of Return x Time x Present Value = Future Value has a value and an effect on the Future Value (or the Present Value depending on what you're solving for). The Time Value of Money is, at it's simplest, something which nearly everyone has seen but hasn't heard called by that name: turn this amount of money into that amount of money by letting it grow in the market for a length of time. Continue reading...
What is short interest?
Short interest is a term used to describe how many short positions are open for a given security or market at a given time. It is often expressed as a percentage of the total securities outstanding and is used for the short interest ratio. This serves as a gauge of bearish market sentiment, since short-sellers are expecting price action to trend downward. The short interest ratio (SIR) provides a context for the quantity of short interest outstanding by stating this amount in relation to the average daily trading volume. Continue reading...
How many investment choices should I have in my portfolio?
You can get substantial diversification through mutual funds and ETFs, but it is good to have increasing amounts of diversification the larger a portfolio is. Here are some general guidelines: If your portfolio is less than $50,000, probably 4-5 Mutual Funds will suffice. If your portfolio is from $50,000-$100,000, you might consider adding a few more exotic Mutual Funds or buying a couple of ETFs. Continue reading...