What are My 401(k) Investment Options?
401(k)s can offer many options for investment, but they generally only offer 15 or fewer in each plan. Investment options in your 401(k) are completely determined by the agreement between your employer and the custodian. Therefore, you’re limited to the investment instruments selected for you. The majority of 401(k) plans will offer fewer than 15 investment options, which are generally part of prepackaged 401(k) products from major broker-dealers or mutual fund companies. Large companies will frequently also offer stock of their company within the 401(k) plan architecture. Continue reading...
Can I Take a Lump-Sum Distribution From my Cash-Balance Plan?
Absolutely – this is what separates them from traditional pension plans. Yes. Cash balance plans maintain a hypothetical account balance for the participant, and the ending balance is known and guaranteed from the time the contributions occur. Many participants opt to take this lump sum balance and move it into their own IRA, or just to pay the taxes on it and be done with the plan. The other option is to have the balance paid out in the form of a life annuity, with equal payments for the rest of your life like a traditional pension. This option can be more risky simply because it is forfeiting the safety and security of monthly payments for life, in favor of a one-time distribution. Continue reading...
What is Income Risk?
Income risk is the chance that an investment which is used for income will fluctuate in an unfavorable way if the interest rate environment or market conditions change. Some mutual funds and ETFs are branded as income funds when they use lots of corporate bonds that generate regular income payments, but they are often sensitive to interest rate changes. The Federal Reserve Board and the market can affect changes in the interest rate environment as times goes on. Continue reading...
What is market risk?
Market risk is the chance that an investment will not maintain its value when it is dependent on the many factors that influence the health of the economy and the stock market. Investors must be aware that investing money in a stock or mutual fund is to tie the fate of that money to the fate of the company or companies that they have invested in. The other side of the coin, of course, is the potential for gains. The potential gains of an investment are the premium that is paid to an investor in exchange for allowing a company or mutual fund to take risks with the investor’s money. Continue reading...
What is a Ponzi Scheme?
A Ponzi scheme is a scandal where new investment money is used to create the illusion of returns. A Ponzi scheme (named after Charles Ponzi, who in the early 1900’s was the first to effectively implement such a scheme) is essentially a confidence trick. As an example, suppose 10 people each give someone $100 to invest, with the promise of a 10% return (in addition to the $100 principal) in a year. During the course of that year, 20 more people invest $100 each as well (for a total of $2,000 from the second group). Continue reading...
What are Consumer Discretionary Stocks?
Consumer Discretionary companies are those that sell ‘non-essential’ items, such as clothing retailers, media and entertainment, luxury goods, auto makers, and so on. Consumer discretionary companies tend to sell goods with elastic demand, meaning that demand goes up as economic conditions are good and falls when conditions are slowing or recessionary. Consumer discretionary companies are also categorically referred to as ‘cyclicals.’ Consumer discretionary stocks can also include companies in the service industry, like hotels and restaurants. Continue reading...
What is Ex-Date?
The Ex-Date is for a stock indicates the last date of the month where a dividend is payable. It is two days before the record date. If an investor buys a stock before the ex-date, they are entitled to the dividend that the stock is scheduled to pay that month. If the investor buys on or after the ex-date, then they will not receive the dividend payment for that month - the seller does. When checking Google Finance or a newspaper for a stock quote, the ex-date is typically marked with a lowercase “x.” Continue reading...
What is Revenue?
Revenue is a word describing any cash flowing into a business as a result of goods and services rendered. It is sometimes call gross income, and is a representation of income before all expenses. It is notable, though, that revenue only includes receivables in the current period. The Accounts Receivable on the company’ s books may include the entire cost of the goods or services rendered during that period, but the Revenue should generally only reflect the amount that is paid to the company in the current year. Continue reading...
What is the KAMA (adaptive moving average)?
The Kaufman’s Adaptive Moving Average (KAMA) was developed by analyst Perry Kaufman in an attempt to cancel out the noise of market volatility and inefficiency by using an efficiency ratio multiple. Kaufman’s algorithm is a bid to cancel out “noise” in the data used to create a moving average line. The Exponential Moving Average (EMA) is imperfect in part because of its reliance on historical data – if the data is not current, it tells traders nothing about how an asset may trend in the future. Some traders also believe that EMAs are biased by virtue of weighting recent data more heavily, which can lead to false signals and potential losing trades. Continue reading...
What is adaptive selling?
Adaptive selling is a sales and marketing principal where the product or services offered are framed or actually modified based on the preferences or demographics of the audience or client. Adaptive selling requires the ability to customize a shopper’s experience as they interface with the real or virtual storefront. The sales system leaves room to learn about the customer and to adopt the language and products offered based on changing interpretations of the customer. This may require a well-trained sales representative or a well-designed computer algorithm, as has been implemented on some e-commerce sites. Continue reading...