What are Domestic Stock Funds?
Domestic equity funds invest in companies domiciled in the United States. Domestic Equity Funds, as the name suggests, invest primarily in stocks of U.S.-based companies. These come in many varieties: some invest in companies within a certain size range, some focus on specific sectors, some seek value or growth stocks within sectors, and so on. Domestic stocks funds usually represent the majority of the holdings in an average American citizen’s portfolio. Continue reading...
How do I get exposure to other currencies?
There are two main ways to get exposure to other currencies: you can buy them in the open market (FOREX), or you can buy instruments (such as ETFs) which reflect the currencies’ cross rates. For example, FXE reflects the rate of exchange between the US dollar and the Euro. It is trading in units of exchange rate times 100 (for example, if today, FXE is trading at $130, it means that the rate of exchange is $/Euro = $1.30). Continue reading...
What Should I Know About Roth IRAs?
Roth IRAs are a very popular and useful accumulation vehicle, and there are some things you should be aware of. Along with Traditional IRAs, Roth IRAs are very important retirement tools and should be taken into careful consideration while deciding upon the account that is right for you. The first thing you’ll want to know is whether you can contribute, based on income limitations, so check the current IRS website to find out. Continue reading...
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 a Mortgage Company?
Most mortgage companies today are brokerages that do not underwrite or fund the loans themselves. They help to place customers with the most competitive loans that make sense for their situation and personal finances. Many small mortgage companies went bankrupt in the housing bubble of 2008. Mortgage companies are known as loan originators since they pair customers with loans that suit them and get the process started. Some companies also fund mortgage loans, but most are basically brokerage services that do not lend the money themselves. Continue reading...
What is the Broadening Top (Bearish) Pattern?
The Broadening Top pattern forms when a pair price makes higher highs (1, 3, 5) and lower lows (2, 4) following two widening trend lines. The price is expected to move up or down past the pattern depending on which line is broken first. What distinguishes a Broadening Top from a Broadening Bottom is that the price of the pair is rising prior to entering the pattern formation. This type of formation happens when volatility is high or increasing, and when a pair’s price is moving with high volatility but little or no direction. It indicates growing investor nervousness and indecisiveness. Continue reading...
What is Profit Margin?
Profit margin is a profitability ratio that measures, as a percentage, how much a company keeps per sale. Profit margin can be calculated by dividing net income by sales. A higher profit margin means a company keeps high percentage of each dollar sold as profit. For example, a 50% profit margin means that for every dollar earned, a company retains $0.50. It is often helpful for an analyst to look at how a company’s profit margins have changed over time, to measure whether it is becoming more efficient in the sales of goods. Continue reading...
What is the Current Ratio/Liquidity Ratio?
The current ratio is a measure of a company’s immediate liquidity, calculated by dividing current assets by current liabilities. The value of this ratio lies in determining whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are sufficient enough to pay-off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). Generally speaking, the higher the current ratio, the better. Continue reading...
What is Accelerated Life Insurance?
Life insurance contracts sometimes contain provisions by which the death benefits can be paid out to an insured person while they are still alive. This is called “accelerating” the benefits. Certain terms must be met for the benefits to be accelerated, and different policies have different contract language and exclusions. Sometimes these provisions are attached to a regular contract as a Rider, which might require an additional premium, or might be included by default. Continue reading...
What is a foreign currency swap?
These are generally referred to as currency swaps or cross-currency swaps , since “foreign” is a little redundant (currencies are from different countries anyway). Central banks and large institutions sometimes swap principal amounts and loan interest in their domestic currency in exchange for a foreign currency, to provide liquidity and a hedge. Currency swaps are where banking institutions, particularly central banks, exchange a loan in one currency for a loan in another currency. Continue reading...