Should I buy physical gold instead of gold ETFs?
There are probably more important things you can do with your time than find a place to store your suitcase full of gold and hover over it like a mother hen. But it may be worth it to you, since owning shares of a gold ETF is not the same as owning actual gold. Gold ETFs work by holding some amount of gold in trust and then selling shares of the fund that owns it. There is a significant discrepancy between the dollar value of the gold which is held and the total value of the shares which are sold, however, and if there were ever a “run” on the fund, no one would be able to actually get gold bricks out of fund managers. Continue reading...
If I Want to Establish a Self-Employed 401(k), Do I Have to Establish One for All Owners of My Business?
This may be something you have to ask a CPA or tax attorney, but generally the answer will be yes. Some institutions will not allow you to open a self-employed 401(k) if you have more than one owner in the business, but by statutory definition these plans can be set up for partnerships. If you are part of a partnership and this is where your self-employed income is made, you will be getting on thin ice if you attempt to form an LLC for yourself as a conduit for the money, just so you can have a self-employed 401(k), because, while that is not recommended, it will be about your best chance of setting up a Solo K that does not include your partners. Continue reading...
What is an Income Bond?
Income bonds are issued by companies and they will only pay a coupon or interest rate if the company generates adequate earnings to do so. Non-payment of a coupon or interest rate does not necessarily mean that the company is in default. The principal amount plus some interest is due to the bondholder at maturity. Income bonds are sometimes issued by companies who are experiencing hard times and cannot guarantee a coupon payment to bondholders. Continue reading...
What is Income from Operations?
Income from operations will be the net income which is solely focused on revenue from operations minus the cost of operations. It excludes gains or losses from minority interest investments, or sale of assets. Income from Operations is also called Net Operating Income (NOI). In accounting terms it is arrived at by subtracting operating expense from gross profit, where gross profit is net sales minus cost of goods sold. Continue reading...
What is a Living Will? (in-depth)
A living will is sometimes called an advance directive or a medical directive, and it specifies a person’s wishes regarding life-prolonging medical procedures and other end-of-life issues. If a person is in a coma, for instance, it is intended to provide instructions for their care, including whether or not to use oxygen or “feeding tubes” to keep them alive. This might require a Do Not Resuscitate (DNR) waiver of some kind, which tells medical staff not to intervene if the person is dying. The living will is different than the “will” that most people are familiar with, which is a Last Will and Testament, stipulating the person’s wishes for their estate after he or she has died. Continue reading...
What is the Rising Pennant (Bullish) Pattern?
The Rising Pennant (or Bullish Pennant) pattern looks like a pennant with a mast. It forms when rising prices experience a consolidation period, and the price moves within a narrow range defined by the converging lines through points (2, 4) and (3, 5). After the consolidation, the previous trend resumes. This type of formation happens when anticipation of an uptrend is high, and when the price of a security consolidates within a range. It indicates growing investor interest in a potentially explosive uptrend. Continue reading...
What is Dilution?
Dilution is the disassociation of value from current common stock shares due to the issuance or conversion of additional shares of the same company into the market, causing value to be reallocated. If a company issues a follow-on (aka Secondary) issue of shares, or if many holders of convertible shares decide to use their conversion privilege, the share price will be diluted. Each share’s value will decrease because there are now an increased number of shares dividing up the same amount of earnings that the company generates. Continue reading...
What is Ginnie Mae?
Ginnie Mae is the colloquial name for the Government National Mortgage Association, or GNMA. It brokers mortgage-backed securities which are backed by the full faith and credit of the US Government. Among Ginnie Mae, Freddie Mac, and Fannie Mae, only Ginnie Mae is actually owned by the government and issues securities which are backed by the full faith and credit of the US Government. Ginnie Mae’s mission is to increase liquidity and decrease risk to mortgage lenders so that Americans are able to purchase homes. Continue reading...
What is the Dividend Payout Ratio?
The Dividend Payout Ratio represents the percentage of a company’s earnings/profits that they pay-out to shareholders in the form of dividends. Companies with higher dividend payout ratios tend to be older, more well-established corporations with long histories of dividend payments. Newer, more growth oriented companies will tend to take earnings and reinvest them in the company, whether via additional fixed investment, inventory expansions, hiring more people, or entering new markets. Continue reading...
What is active management?
Active management is the practice of attempting to outperform the market with selection and timing. Active management is a thoughtful and time-consuming approach to investing and is the opposite of Passive management. Active managers seek to outperform the benchmarks for their portfolio by researching and selecting stocks and other assets based on strategies and analysis methods thought to be superior. Continue reading...