What is a Limited Liability Company (LLC)?
A limited liability company (LLC) establishes a separate entity from the sole proprietor or partners in a business which shields them from some of the liability associated with the business. An LLC is a business entity that creates a distinction between the business’s assets and liabilities and the assets and liabilities of the owner or partners. Sole proprietors and partnerships who do not file for this distinction leave themselves and all of their personal assets at risk, in the event of a lawsuit or bankruptcy. Continue reading...
Should I invest in gold?
Gold can provide diversification in a simple way, since it has a history of being generally non-correlated with most other asset classes. It is not necessarily a hedge against anything specific, as some claim, since its price movement is too random. Conventional wisdom says that investing in gold might be a good hedge against inflation or market cataclysms. Some of these beliefs are unfounded. The price of gold appears to go up only when it is in high demand (such as when the price has gone up some already), rather than in tandem to any specific market force such as inflation or interest rates. If investors have some idea of when other investors are going to pile in, such as during times of uncertainty, they will likely be able to ride an uptrend in gold prices for a while. Continue reading...
How Can I Establish a SEP IRA?
SEP IRAs do not have to be established until taxes are filed for the year, and it can be done quickly. SEP IRAs require very little paperwork or trouble to establish. One form will notify the IRS that SEP contributions are being made for the year, and the amount. The only other documentation needed is a plan document, which establishes and outlines the eligibility rules for a particular plan, but this document only has to be kept on file at the business, and does not have to be submitted to the IRS or any regulatory authority. 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 After-Hours Trading?
After-Hours Trading on the Nasdaq can take place after market close from 4-8pm EST or in the pre-market hours from 4-9:30am EST. Pre- and Post-market trading used to be reserved for large institutional investors or high net worth individuals, but is now made possible through the improvements to electronic trading networks and the demand from individuals trading from their computers at home. Interestingly, institutional investors can trade anonymously on the after-hours Nasdaq market, such that virtually no one knows what positions they take during that time. This is called trading in “dark pools of liquidity.” Traders on the after-hours Nasdaq cannot make certain kinds of trades or use certain instruments. Continue reading...
What is an Active Index Fund?
Most index funds are known for using a completely passive strategy to track an index, but some take a more active approach. Some mutual funds track an index by passively using algorithms to buy the shares necessary to build a portfolio which closely replicates an index. Such a fund will have low turnover, will only rebalance slightly based on the market cap or other criteria set forth in the prospectus, and will basically ride out all of the ups and downs of the index in a blind faith for the efficient market hypothesis. Continue reading...
What is a Reverse Stock Split?
A reverse stock split consolidates stocks at a certain ratio and reduces the number of shares outstanding while increasing the value of each share, as opposed to a regular stock split, which divides existing stocks into more shares which are worth less apiece. A normal stock split, which increases the number of shares an investor owns without increasing the total value of his or her interest in the company, has the benefit of increasing liquidity with the shares and possibly narrowing the bid/ask spread. A reverse stock split reduces the number of shares in circulation by effectively combining the existing shares at a certain ratio (such as, 2 shares now equals 1 share). Continue reading...
Do I Need Professional Help to Prepare a Trust?
In most cases, you should consult a tax professional and/or an estate planning attorney for help in setting up a trust. If you’re setting up a trust in the first place, it is likely because you have estate planning needs – which also means you have a level of assets that requires estate planning. Preparing a trust on your own runs the risk of setting it up incorrectly, which can lend itself to legal risks such as challenges from heirs and/or creditors. Continue reading...
What is Deflation?
Deflation is an economic term used to describe a trend of broad-based price declines for goods and services. Deflation is generally considered a big negative in the realm of economics. If a country is experiencing deflation, it is usually because demand for goods has fallen substantially, pushing prices down. It can also be tied to falling investment and government spending, both factors that signal weak demand in an economy. Continue reading...
What is the Cup-and-Handle (Bullish) Pattern?
Pattern trading in the security market isn’t new. For years — decades even— traders have been scouring charts on a daily basis in search of pattern formations. The thinking has been that if you found a pattern early in its formation, maybe you could capitalize on a trade by predicting where the security was headed. The Cup-and-Handle pattern is a great example of how this works. Here is an image of the geometric pattern formation: Continue reading...