How Should I Invest Money in My IRA?
Generally, you should choose an allocation that makes sense for your situation. There are many ways you can choose to invest, but there is no definite answer. General rules focus on diversification of assets and strategies that change with age. Many brokerage companies will have questionnaires and model portfolios that can point you in the right direction. The principles you use to invest your IRA assets are no different from principles you use for any other investments: time horizon, risk tolerance, and your intentional use of the money will all help you arrive at strategies that will be appropriate for you. Continue reading...
What are the Withdrawal Rules From My 457 Plan?
457 plans are the only retirement plan that does not require you to wait until a certain age to avoid an IRS penalty on withdrawals. Unlike 401(k)s and 403(b)s, you are allowed to take money out of a 457 Plan before the age of 59½ without a 10% early withdrawal penalty, but only if you’ve separated from service. Separation from service can mean retiring or just leaving to take a job elsewhere. Roth IRAs allow you to withdraw your principal amount early without penalty, but you will incur taxes and penalties if the gains are withdrawn. 457 plans do not have such stipulations. All other retirement accounts require certain exception criteria to be met for the IRS not to penalize you for early withdrawals. Continue reading...
What is the Difference Between a Blockchain and a Database?
Blockchains use distributed ledgers, which are decentralized and do not rely on centralized databases. Databases are the traditional way to store information and to keep it secure. When companies store information about their customers, or about the business itself, it is usually kept in a database connected to servers that handle requests for the information. The design for such a system tends to look like a wagon wheel: a central hub with numerous spokes connecting it to the outer wheel. Layers of security are heaped onto centralized servers and permit access to various levels of information is given to specific users. 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 bottom-up investing?
Bottom-up investing is the practice of looking for solid companies and investing in them as opposed to investing in indexes and basing that decision on broader market/macro conditions. In bottom-up investing, an investor or advisor takes the stance that the best investment portfolio will not be a broad allocation across market indices, but that an optimal portfolio should be built from the bottom-up with the stocks and bonds of individual companies whose fundamentals and individual potential have been analyzed. Continue reading...
Can I Take a Periodic Distribution from my Pension Plan?
Regular pension payments are periodic distributions. Yes. This will be the default option on pension arrangements, unless companies are trying to settle with pensioners for lump-sum amounts that will lessen the plan’s long term liability. The options for periodic distributions will always be for periods less than or up to a year in length. Periodic distributions can help you sleep better at night, knowing that you have a fixed stream of income for the rest of your life. It may not be enough to sustain your lifestyle completely, but it will give you a sense of financial security and prohibit overspending in a way that the lump-sum distribution does not. Continue reading...
What is a commodity pool?
Commodity pools are like the REITs of the commodity world, and some of them can be categorized as hedge funds or managed futures accounts (MFAs). Accredited investors, who meet qualifying requirements regarding income and total net worth, pool their money to be managed by a commodity pool operator (CPO) or commodity trading advisor (CTA) for the purpose of investing in commodities and commodity derivative instruments. Continue reading...
What is a strike price?
A strike price names the price of the underlying security in options or derivative contract at which the underlying security will trade at settlement if it is exercised. In a call option, for example, the option would name a strike price, and if the current market price of the underlying security was more than the strike price, an investor who held the call contract would invoke his right to purchase the stock from the issuer/seller of the option at the strike price, which, remember is lower than the prevailing market price in this example, and the investor can turn around and sell it in the market at or near its most recent, and higher, price, for a profit. Continue reading...
If Everyone is Talking about Buying Gold, Should I Buy Some for My Portfolio as Well?
Gold is one of those things that gets plenty of hype and that most investors think they understand well. Gold, as any other commodity (silver, platinum, palladium, oil, wheat, copper, coffee beans, etc), might be a valuable part of your asset allocation. It is important to recognize, however, that gold is an extremely volatile commodity, and there is frequent chatter and hype surrounding it that easily influences many investors. Continue reading...
What are Large Cap Mutual Funds?
Large Cap mutual funds primarily invest in companies with the highest market capitalizations. Large capitalization mutual funds, also called “large cap funds,” invest primarily in large companies with market capitalization of over $10 billion. Some examples include Microsoft, General Electric, Google, and other well-known companies. Some large cap mutual funds invest in all of the companies in an index (therefore closely following the performance of that index), and some pick and choose which large companies to select in an attempt to outperform the index. For more information about indices, see “What is Index Investing?” Continue reading...