What is a Corporation?
A corporation is a business entity which has filed articles of incorporation. Unlike a Sole Proprietorship or a Partnership, a corporation is a legal entity that is separate from its owners. They are often referred to as C-corporations or C-corps, to distinguish them from S-corps, which are named after the subchapter which describes them in the law (though technically speaking, S-corps are corporations, too). Continue reading...
What is the minimum investment in a typical hedge fund?
Hedge funds can require initial investments that are quite large. This may be somewhere between $250,000 to $10,000,000. They will generally only accept Accredited Investors, meaning high net worth individuals that pass SEC standards which exempt the fund from some reporting and disclosure requirements. While the minimum investment varies, most Hedge Funds will accept only so-called accredited investors. Continue reading...
Do I Need a Trust?
Whether or not you need a trust depends on several factors, some of which include: your level of assets, the complexity of your estate planning goals, the control you wish to exercise over your assets after your death, your need for creditor protection, amongst others. Trusts have many features that make them an attractive option for wealthy people – it allows them to avoid taxes in some cases, avoid probate court for heirs, and the ability transfer control of your assets to someone you trust (your selected trustee). It also affords the ability to have the assets span multiple generations, if managed properly. Continue reading...
Do I Need a Will?
Yes, generally speaking any person that has assets and liabilities needs a will. In the absence of a will, a deceased person’s assets will be distributed by a court, which may not handle the assets as the deceased would have desired. Not having a will also subjects a person’s estate to legal disputes from heirs, creditors, and sometimes non-family members seeking to make a claim. The court costs to settling an estate without a will can be very high and taxing to the deceased’s immediate family and loved ones. Continue reading...
What is a Housing Bubble?
Bubbles form in markets when there is such a large amount of demand that it drives prices up to levels where it is no longer supported by inherent value. Bubbles have effects on an interconnected web of economic forces and institutions. It was postulated before 2008 that the housing market could not form a bubble in the same way the stock market could, but the subprime meltdown proved those theorists wrong. Bubbles are when a market suffers from unnatural price inflation due to speculation, bandwagon investing, and, to some extent, misinformation. Continue reading...
What are Actively-Managed ETFs?
At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...
What is Accounts Receivable Financing?
Financing companies can step in and take over the accounts receivables of a company who no longer wants to wait to be paid on their receivables. Financing companies, who are sometimes called Factoring Companies or Factors, will pay about 75% of the amount due to companies who want to offload or outsource their Receivables. The factoring company will then take over the task of collections, and will transfer most of the money received back to the original company, after their fees have been deducted from the proceeds. Continue reading...
What Does Having a Long Position Mean?
A long position in a security means owning shares and having a positive investment balance in a stock, bond, commodity, etc. This is done by simply buying and owning the investment. An investor with a long position in a stock will benefit financially when the price of the stock rises. What is a Short Position? What is Short Selling? Continue reading...
What is a Dividend Reinvestment Plan?
A Dividend Reinvestment Plan, referred to as DRIP, is a plan offered by corporations that allows investors to reinvest their dividends in full or partial shares of additional stock, on the dividend payment date. Accessing a DRIP is typically a good long-term investment play - it allows for the investor to repurchase shares at a discount to the share price, and by accumulating additional shares over time increases equity ownership in the company. Continue reading...
How large are market fluctuations?
Fluctuations are represented in terms of volatility, and different types of investments experience different levels of volatility. The answer here depends on which market you’re talking about. Generally speaking, the capital markets in fixed instruments, such as government bonds, are the least volatile. Market fluctuations of the price of commodities, small-cap stocks, and emerging markets are the largest, and can be as high as 30-40% per year. Continue reading...