How is a Roth 401(k) Different From a Regular 401(k)?
The main difference is that Roth contributions go in after tax and are not taxed on withdrawal. People sometimes don’t realize that Roth 401(k)s only exist as extensions of Traditional 401(k) plans. Some plans have been designed to also permit after-tax contributions, which become that employee’s Roth 401(k) account. This Roth side account has all of the same investment options as the rest of the plan on the traditional side. In fact, an employee can contribute to both the traditional 401(k) and Roth 401(k) with each payroll cycle. Continue reading...
What are My SIMPLE IRA Investment Options?
SIMPLE IRAs will have various kinds of investment options, depending on the trustee company that holds the plan assets. SIMPLE IRA investments are determined by the financial institution at which your SIMPLE IRA is established. When opening a SIMPLE IRA, be sure to check what investment options the financial institution offers as well as the fee structure. Standard ERISA rules apply, meaning that all employees must be offered the same thing. SIMPLE IRAs can only be held at trustee companies whose business model is on the IRS’s list of approved SIMPLE Trustees. Continue reading...
What is a 529 Plan?
529 plans are accounts designed to help families save for the future college expenses of young family members. A 529 Plan is designed to help you save money now to pay your child’s college expenses later. Investment companies who design a plan, which looks similar to a retail mutual fund account or IRA, will partner with state governments to offer the state’s official 529 plan. Families can invest in a 529 and gain access to an array of mutual funds. Continue reading...
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 a Mortgagor?
The mortgagor is the borrower in a mortgagor/mortgagee relationship, where the mortgagee is the lending institution that makes the mortgage loan. Mortgages are used to purchase real property, usually single family homes. The purchase of a home with a mortgage and the payments on the mortgage are one of the largest financial decisions or obligations that a mortgagor will ever make. If a mortgagor is delinquent on payments, he or she might be categorized as a home debtor, and the loan would be subject to foreclosure. If there is a foreclosure, the bank or lender will reposes the house, evict the former owner, and sell the house as quickly as possible, sometimes through an auction. Continue reading...
What does Oversold mean?
Oversold describes a situation in which a security has an inherent value greater than its price, which has decreased due to low demand. It is hard to determine when a security is oversold, but the Relative Strength Index (RSI), an momentum oscillator developed by Welles Wilder, is one tool that can help make a determination. In the RSI, the average gains and average losses over a specific time period (such as 14 days) are divided to calculate the Relative Strength, then normalized into the Relative Strength Index (RSI), which is range bound between 0 and 100. The RSI typically fluctuates between values of 70 and 30, with higher numbers indicating more momentum. According to this indicator, a security with an RSI under 30 (out of 100) can be considered oversold Continue reading...
What is a Warrant?
A warrant is an agreement giving the holder the right to buy (or sell) a certain number of shares of a company. Warrants are often requested or granted when a company engages in a loan from private investors - it will give the lenders the opportunity to buy and own shares in the company if its stock appreciates or if the opportunity seems attractive. If the company fails to grow and deliver, the warrants can simply go unused with no financial impact for the holder. Like options, there are warrants that confer the option to buy shares (call warrants) and those that allow the holder to sell (put warrants). Continue reading...
What does Capital Gain Mean?
A Capital Gain refers to the profits or gains made from selling a security at a higher price than the original purchase price. In stock trading, if an investor sells a stock for more than they bought it for (or the price inherited), the profit realized is a capital gain. The same applies to gains made in real estate. To note, assets held within tax-deferred accounts, like IRAs and 401(k)s, do not trigger capital gains when sold for profits. It only applies to taxable assets, like stocks held in a brokerage account. The capital gains tax is the tax paid on net capital gains in a given year. Continue reading...
What is Euro LIBOR?
The primary benchmark for short-term interbank loans around the world is the LIBOR, and the Euro Libor is the LIBOR denominated in Euros. There are 16 banks in London that set the LIBOR at the start of each day, and it signifies the average lending rate that the banks would charge each other for short-term loans. The EURO LIBOR is the same, denominated in euros. LIBOR stands for the London Interbank Offered Rate. 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...