What Payout Options Do I Have?
Payout options in the realm of annuities tend to be guaranteed by the insurance company providing the annuity, and may come in many forms depending on the investor’s preference. Annuities can pay income to the annuitant in a few ways. One of the ways is to turn the entire balance of the annuity into a pension-like income stream for life, or jointly on two lives. The payout tends to be higher than the safe withdrawal rate than investors can use in an investment account, and it provide guarantees and surety where it wouldn’t exist otherwise. You can also elect to have these payments start off slightly lower, and then to increase at a guaranteed rate, to keep up with the cost of living. Continue reading...
How does Bitcoin Mining Work?
Anyone with a computer connected to the internet can potentially be a bitcoin miner. Bitcoin’s blockchain technology requires that a large network of computers, running the same client software, be used to randomly succeed at validating blocks of encrypted transactions every 10 minutes or so. That’s where bitcoin mining comes in. Mining is the act of letting one’s computer run what’s known as the “hash function” over and over and over in an attempt to crack the codes on the blocks that need validation. The codes that need cracking are all similar and are only difficult enough to require an average of 10 minutes for a random mining computer to get the right answer. The code and the answers are only significant in that they take time to complete, and that they allow the transactions to be validated and added to the ledger of all bitcoin transactions. Continue reading...
How to use the Accumulation/Distribution in trading
The Accumulation/Distribution Indicator (originally called the Cumulative Money Flow Line) tracks cash flow into or out of a security and correlates the cash flow changes to changes in the security price. By following the trading volume into or out of a security, it establishes the degree of correlation between this trading volume and the price of the security. Accumulation/distribution is designed to reveal divergences in price trends (specifically between stock price and trading volume). These divergences indicate the degree to which a security may be overbought or oversold at a given time. Continue reading...
What is Enterprise Value?
Enterprise Value is the total cost to acquire a company. The Enterprise Value of a company is the amount that would have to be paid for full ownership of it, which would include market capitalization (price per share x shares outstanding) + net debt (all liabilities - cash and equivalents). Market cap alone is technically just shareholders equity, and not capital from debt, so Enterprise Value adds that in for consideration. Enterprise value is the numerator in EV/E (Enterprise Value over EBITDA), a very common valuation ratio. Continue reading...
What is the Glass-Steagall Act?
The Glass-Steagall Act was passed in 1933 to place a dividing wall between commercial banking and investment banking. It was in an effort to protect consumers and the economy from the risks of speculative investment banking. JP Morgan and other large institutions were targeted. The act was partially repealed and replaced in 1999 by the Gramm-Leach-Bliley Act. After 2008, some opined that the repeal of the original act contributed to the financial crises, and they instituted the Volcker Rule, which reinstated part of the original Glass-Steagall act. Continue reading...
What are Accelerated Benefits?
Some life insurance policies allow for death benefits to be accelerated as living benefits under certain conditions. Accelerated benefits are often included in life insurance contracts, but it is possible that they can also be added as Riders for an additional fee. Riders are addendum to a contract that contain additional contractual provisions. What an accelerated benefits rider stipulates is that if certain conditions are met, a portion of the death benefits on a life insurance policy can be paid to the insured person during their lifetime. These conditions may be that the insured person has been diagnosed with less than 12 months to live, or that they have another serious health condition which is covered. Sometimes this includes the payment of monthly benefits if a person requires long-term care. Continue reading...
What is a foreign institutional investor?
Institutional investors are corporations, banks, pension funds, mutual funds, and other forms of pooled capital which act as one entity to engage in securities transactions in the best interest of the constituents or company that they represent. Foreign Institutional Investors are those whose company is based in another country. Investments made on behalf of foreign companies, foreign financial institutions, and foreign funds (such as the foreign equivalent of hedge funds, mutual funds, and pension funds) are foreign institutional investments. There are usually reporting requirements for both the foreign government for the county in which the interests are held and for the domestic government of the institutional investor. Continue reading...
What is a market-on-close order?
A market-on-close order is used to execute a trade at the last possible moment before the market closes for the day. This may be an order to sell or buy. Market-on-close orders are instructions to execute a trade just before the market closes for the day, at the best price available at the time. The exchange will actually settle all of the market-on-close orders at the same price. Why would an investor enter this kind of trade order? Continue reading...
What is currency depreciation?
The value of a currency can depreciate in relation to the value of other currencies or to another benchmark. Currencies can have their value determined by the cost of a basket of consumer goods from one period to another, but this is really just a measure of inflation. Inflation (or “deflation”) is a subset of the appreciation/depreciation metric, but changes in the exchange rates between currencies are typically seen as the most relevant measure of a currency’s value. Continue reading...
What is a hedge fund?
Hedge funds are private investment groups that attract high net worth individuals (and in some cases institutions), and use investment strategies that may be riskier than would be suitable for the average investor. While the name "hedge" implies that the fund serves a defensive purpose, today’s hedge funds use wide array strategies, and more often than not the goal is total return. The strategies used are often speculative, contrarian, or alternative compared to most investment options in say mutual funds or traditional long-only asset managers. Continue reading...