Can I Take Loans Against My 401(k)?
401(k) plans typically allow loans to be taken, so that investors don’t have to pay taxes or an early-withdrawal penalty on the money. Many 401(k) plans allow loans to be taken out on the account balance, up to certain limits, and on a strict repayment schedule. Most plans require loans to be repaid in under two years, but they can give participants up to 5 years to repay a loan. Taking money out as a loan allows participants to avoid early withdrawal penalties and taxes. If the loan is not repaid on-time, it can be treated as a distribution, however, which might cause the investor to incur taxes. Investors usually don’t fully realize the damage that loans (and early withdrawals) can do to the long-term account balance. Continue reading...
How Can I Use the Money From My Coverdell ESA?
Coverdell ESA accounts can be used to cover educational expenses. Similarly to a 529 Plan, the money from a Coverdell ESA can only be used for qualified educational expenses. However, the definitions for “qualified” are broader with this plan, and can be used for educational expenses from Kindergarten through high school, in addition to postsecondary (college) expenses. The downside is that Coverdell’s have a low contribution limit of only $2,000 per year. Continue reading...
What is a Monte Carlo Simulation?
Monte Carlo Simulations can help investors project future values and the impact to portfolios from market movements and cash flows. A Monte Carlo Simulation outlines the many possible outcomes of a situation with random variables, as well as the probability that any particular outcome will occur. It is used in a wide variety of professional fields from finance to engineering and even astrology. The technique has many applications in finance and is commonly used to help predict the future value of an asset when there are multiple variables involved. Continue reading...
What is a Mortgage Subsidy Bond?
Mortgage subsidy bond is another word for a mortgage revenue bond, which are municipal bonds which are used to fund mortgage relief programs and refinancing arrangements through the state or municipal government. In 1980, the Mortgage Subsidy Bond Tax Act established some rules and definitions surrounding mortgage subsidies and their bonds, and, more specifically, removing their exemption from federal taxation. Continue reading...
What has been the historical performance of IPOs?
Many studies have investigated the benefits of purchasing IPOs, and the results might surprise you. Despite the fact that new issues tend to be priced at a discount from the price that underwriters have decided is a fair valuation, their performance after the initial frenzy tends to be lackluster. While most investors think that IPOs are good investments, this is not exactly true. There are IPOs that have doubled or tripled in price during the first day, and there are IPOs that opened trading below the original IPO price (and anything in between). For short term trading, it can go either way, but if the IPO is a “hot issue,” meaning that there are more indications of interest than there are shares to fill the orders, the average investor will not be able to procure IPO shares anyway. Continue reading...
How Does Ethereum Mining Work?
Ethereum mining is the process of solving blocks of encrypted blockchain data using a proof-of-work algorithm and occasionally being rewarded with Ether. Blockchain data is validated and added to the distributed ledger by computers on the network performing the task of “mining,” which is continually attempting to solve puzzles, basically, which each unlock a block of encrypted data containing information about transactions, and, on the Ethereum platform, information about distributed application functions and smart contracts. Once a block is unlocked, the data within is shared with the network and added to the distributed ledger. Continue reading...
What is an Account Number?
An account number is a serialized identifier which is ascribed to a particular account holder or account at a financial institution, retailer, or other entity. Account numbers may include letters or numbers and may be of various length, but they usually exceed 5 characters. An account number is a way for a company or organization to uniquely identify the accounts associated with each individual customer. Continue reading...
What does Investment Grade Mean?
Investment grade refers to the highest quality of debt available, and usually means the bond has little risk of default. Determining a bond’s credit rating is typically handled by ratings agencies, which is far from a perfect process. Ratings agencies like Moody’s and S&P notoriously failed to rate mortgage backed securities as high risk in the months/years leading into the 2008 financial crisis, instead keeping them as investment grade even as the crisis took hold. Continue reading...
What is adaptive selling?
Adaptive selling is a sales and marketing principal where the product or services offered are framed or actually modified based on the preferences or demographics of the audience or client. Adaptive selling requires the ability to customize a shopper’s experience as they interface with the real or virtual storefront. The sales system leaves room to learn about the customer and to adopt the language and products offered based on changing interpretations of the customer. This may require a well-trained sales representative or a well-designed computer algorithm, as has been implemented on some e-commerce sites. Continue reading...
How to use Bollinger Bands in trading
Bollinger Bands were developed by famous trader John Bollinger as a technical analysis tool to discern the likely trading range of a security. A Bollinger Band is typically two standard deviations from a moving average line, both above and below the average. Standard deviation is another word for the average volatility of a price over a length of time. It is typical for a trader looking up the historical price chart for a security to compare it to a moving average line. Continue reading...