Do I Need Life Insurance if I have an Annuity?
If an annuity or pension will pay your spouse a survivor’s benefit that is adequate to support his or her lifestyle, then you may not need to a life insurance policy to cover this need. Annuities are seen as longevity insurance which protect against outliving money, while life insurance protects beneficiaries if the insured person dies younger than expected. If something happens to you and you have an annuity, your surviving spouse would either continue to receive periodic benefits or take a lump-sum distribution, depending on what kind of payout option you chose when you signed the contract. In the case of the lump sum it may only be for the amount of principal that had not been paid out yet in annuity payments. Continue reading...
What is the Fiduciary Standard?
The Fiduciary Standard stipulates that an advisor must place the client’s best interests first. The best way to understand the fiduciary standard is to think in terms of another standard, called the suitability standard. The suitability standard says that a broker/advisor need only recommend investment products that are “suitable” for the client - but those investments do not necessarily have to be in the client’s best interests. Continue reading...
What is Earnings Before Interest, Taxes ,and Depreciation (EBITD)?
Earnings Before Interest, Taxes, and Depreciation (EBITD) is one method of viewing the earnings of a company with some of the typical expenses added back into it. It is not to be confused with its close cousin EBITDA, which also adds amortization back in. Amortization is essentially the same thing as depreciation, but amortization applies to intangibles such as debt principal amounts and intellectual property. 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 Profit Margin?
Profit margin is a profitability ratio that measures, as a percentage, how much a company keeps per sale. Profit margin can be calculated by dividing net income by sales. A higher profit margin means a company keeps high percentage of each dollar sold as profit. For example, a 50% profit margin means that for every dollar earned, a company retains $0.50. It is often helpful for an analyst to look at how a company’s profit margins have changed over time, to measure whether it is becoming more efficient in the sales of goods. Continue reading...
What is a Federal Credit Union?
Federal Credit Unions are essentially banks that are owned by their clients instead of publicly traded or what-have-you. Instead of being part of the FDIC, they have the National Credit Union Association (NCUA). They tend to be able to offer higher interest rates on savings and lower interest rates on loans than banks can, due to their mutual-ownership structure. Credit Unions operate as non-for-profit businesses, which can allow their management to use 457 retirement plans, but they are not associated with the Federal government. They do, however, charter under federal regulations, as opposed to state banks. Continue reading...
What is the Federal Supplemental Education Opportunity Grant?
The Federal Government will give college students who have filled out a FAFSA and are found to be in dire financial need a grant of up to $4,000 a year. The grant does not have to be repaid. The Federal Supplemental Education Opportunity Grant provides funding for educational expenses to students with expected family contributions (EFCs). The maximum annual amount that can be received in a SEOG is $4,000 per student. Continue reading...
What should I look for in a good Mortgage Calculator?
Mortgage payment arrangements can be engineered in a number of ways, and a good mortgage calculator will give you enough flexibility to input the terms of your own. Ideally a mortgage calculator will be flexible enough to let you input the following: an adjustable rate, a rate cap, optional mortgage “acceleration” payments, balloon payments and resets, impound account calculations which take into account the property taxes and insurance you pay, as well as calculations which take any origination fees into account. Continue reading...
Should I Trust an Article Such as “What Are The Best 10 Stocks For The Next 10 Years?”
It can be useful to at least give some deep thought to the picks that appear in such articles. There is some investment wisdom in reading and taking action on the advice of such articles, since they point you in the direction of the industries which are poised to grow in the foreseeable future. Unlike short-term stock picks, these articles are concerned with growth that will go beyond the short term uptrend that will undoubtedly follow the appearance of a ticker symbol in such a list. Continue reading...
Is there such a thing as the “NFL effect?”
The “NFL Effect” suggests that the outcome of the Super Bowl can foretell market behavior. Some market statisticians have analyzed the correlation between the behavior of the stock market and the winner of the Super Bowl, and suggest that the DJIA will go up or down depending on whether the winner was from the AFC conference or the NFC conference. While the Super Bowl indicator has been right 33 times out of 41, to serious investors, this correlation does not imply causality. You can find lots of other time-series which are also strongly correlated to the stock market performance, such as the number of sunny days in the previous year. Continue reading...