When Should I Start Saving Money?
The answer is simple and needs only common sense to understand: you should begin saving as soon as you can! However, because of most people’s spending habits and the day-to-day realities of life, it is often difficult to follow that advice. Let’s compare how your savings would accumulate, depending on the age at which you begin to save. Your total savings will be much greater by the time you want to retire – say when you’re 65 – if you invest $5000/year at age 25 for just 10 years, than if you continuously invested $10,000/year at age 35, or $15,000/year at age 45. 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 a Distributed Ledger?
A distributed ledger is a records system in which the same information is held redundantly across many nodes in a network, and is essential to blockchain technology. Centralized databases used to be the primary way that important records of transaction histories and so forth were held. Databases validate the identity of those requesting access to the records by asking for and retaining personally identifying information. If that office building were to lose power, was hacked, or was destroyed, it is possible for all of the information to be lost or given over to hands of bad actors. Even with cloud storage backups, the security and financial risk to any one of these storage depositories remain a problem. Continue reading...
What is the Rising Wedge (Bearish) Pattern?
The Rising Wedge pattern forms when prices appear to spiral upward, with higher highs (1, 3, 5) and higher lows (2,4) creating two up-sloping trend lines that intersect to form a triangle. Unlike Ascending Triangle patterns, both lines need to have a distinct upward slope, with the bottom line having a steeper slope. This pattern is commonly associated with directionless markets, since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. There is a distinct possibility that market participants will sell out, and the price can move down with big volumes (leading up to the breakout). Continue reading...
What is Consensus?
Consensus in investing is a measure of how in line investor beliefs are with one another. It describes strong trends in both trading and investor sentiment, often manifesting as bullish or bearish outlooks on a security or market. Bullish or bearish outlooks can be misleading, however. Opinions are not facts, and the noise of opinions from news sources and pundits can make opinions seem more factual than they are. Many investors require time to develop and form opinions, or form opinions for the wrong reasons, and can succumb to a herd mentality Continue reading...
What is a Monopoly?
A monopoly is an unhealthy situation in the market in which a single company is the only option in a specific sector or area, which undermines the principals of a free market. In a free market, there is competition which keeps the prices and the quality of products as good as they can be for the consumer. The consumer will therefore receive the most value, and society will be in its best possible position, when the needs and demands of consumers are being addressed by several companies attempting to outdo each other to earn the consumer’s business. Continue reading...
What is Cash Collateral?
Cash collateral is liquid cash and cash equivalents designated as collateral for loans and debts of various sorts. One frequently used example of cash collateral is cash used in short selling of securities in a brokerage account. While securities equal to significantly more than the required cash margin can be substituted for cash, the most cost-effective and least risky way to maintain margin requirements is with cash and cash equivalents. Continue reading...
What is a Bond Ladder?
A bond ladder is a portfolio of bonds that have different maturities, that may range from months to years in difference. A bond ladder is designed to reduce interest rate risk and create predictable income streams. An investor will build a bond ladder often in an effort to reduce interest rate risk and also to create predictable income streams, where coupon payments happen at different times and principal is also returned in various intervals. Continue reading...
What does Investment Grade Mean?
Investment grade refers to the highest quality of debt available, and usually means the bond has little risk of default. Determining a bond’s credit rating is typically handled by ratings agencies, which is far from a perfect process. Ratings agencies like Moody’s and S&P notoriously failed to rate mortgage backed securities as high risk in the months/years leading into the 2008 financial crisis, instead keeping them as investment grade even as the crisis took hold. Continue reading...
What if I Cannot Get Individual Coverage?
Under current law (the Affordable Care Act), everyone is eligible to receive health insurance coverage. However, not everyone may be able to afford health insurance. There are subsidies provided by the federal government for those who cannot afford it, but cost may still be an issue for many. How Much Will Individual Health Coverage Cost? Can I Purchase Individual Health Insurance? What Health Insurance Do I Need if I Don't Have a Job? Continue reading...