What is “contango?”
Contango is when the price of a futures contract is higher than the current spot price of a commodity, and the expected future spot price. Some contango falls within the normal range, but too much is generally unfavorable. Contango means that the price of a futures contract has become inflated beyond the expected price range of a commodity. Backwardation is the word for the opposite of contango, in which futures contracts are being sold for less than the current spot price and below the probable future spot price. Some backwardation and contango is part of life and considered normal, but contango markets can have a particularly negative impact on some ETFs. Continue reading...
What’s a 403(b) Plan?
403(b) are basically just 401(k)s for non-profit organizations. A 403(b) Plan is essentially a 401(k) for publicly-funded institutions such as public schools and universities, and certain hospitals, and non-profit organizations. They are sometimes called TSAs, short for Tax-Sheltered Annuity, but this is outdated, and a misnomer since they do not need to use annuity products. The contributions are deducted from the paychecks in the same manner they would be for a 401(k), and the assets grow tax-deferred within the account. A Roth 403(b) is uncommon but sometimes offered. Continue reading...
At What Age Should I Buy Long-Term Care Insurance?
Generally speaking, the earlier you purchase long-term care insurance the less expensive it will be in terms of monthly premium. Investors in good health should start thinking about long-term care insurance as part of their overall financial plan around their late 40’s/early 50’s. Medical history also plays a role. If your parents needed daily medical care later in life, then you should consider purchasing a long-term care policy sooner than later. Continue reading...
What is Investment Interest Expense?
IIE is deductible from taxes, and is usually used to deduct the interest paid on a margin loan used to buy taxable securities, when there is a gain to offset. Investment interest expense is the term for interest which has been paid in order to hold an investment position. It comes into play when filing taxes. An individual can list interest expenses on a Form 1040. The most common place to incur an interest expense when investing is through the use of margin in an investment account. Continue reading...
Can I Hold Bitcoins and other Cryptocurrencies in an IRA?
It is becoming increasingly popular today to have an IRA just for bitcoin. If you create a Self-Directed IRA, you can hold almost anything you want within it, if you can find a custodian and trustee willing to facilitate it. This isn’t overly difficult to do since many new companies are jumping at the opportunity to facilitate bitcoin and cryptocurrency IRAs. Examples of assets that can be held within a self-directed IRA include real estate, cryptocurrencies, precious metals, intellectual property, private businesses, hedge funds, private equity, tax lien certificates, livestock, and more. Continue reading...
What is the Rising Flag (Bullish) Pattern?
The Rising Flag (or Bullish Flag) pattern looks like a flag with a mast. It forms when rising prices experience a consolidation period, and the price moves within a narrow range defined by the parallel lines through points (2, 4) and (3, 5). After the consolidation, the previous trend resumes. This type of formation happens when the price of a pair is expected to move in a rising trend line, but some volatility along the way creates a consolidation period. Continue reading...
What is Cost of Debt?
The cost of debt is a calculation that determines the actual cost of a company’s debt financing. Since interest payments are generally tax deductible, the cost of debt may not be as simple as just adding up all of the interest paid on a loan. It would have to be adjusted for the tax savings, such that it is total interest paid less the tax savings. Continue reading...
What is Unsystematic Risk?
Unsystematic risk is idiosyncratic or unique risk that does not reflect a direct correlation with the risk present in the market, or systematic risk. Most securities and portfolios experience risk and variations which are not attributable to the market as a whole, and this is known as unsystematic risk. Systematic risk, on the other hand, is the risk borne by all investors in the market, where broad changes in the market cannot be avoided through diversification of a portfolio. Continue reading...
What does FDIC Insured mean?
The Federal Deposit Insurance Corporation (FDIC) is a government entity created by the Glass-Steagall Act of 1933, and its purpose is to protect savers from losing their deposits in banking institutions if the bank becomes insolvent. FDIC insurance only covers certain types of assets, up to certain limits for each person, and only at member banks. FDIC insurance will “make whole” any deposit amount up to $250,000 per person if the banking institution that held the funds declares insolvency. Most banks are members of the FDIC program, which was established by the Federal government in the 1930s. Continue reading...
What is MSCI?
MSCI Inc. is a company that is best known for its global indices. MSCI also provides research and pricing capabilities to institutional investors. MSCI was formerly a branch of Morgan Stanley, but grew to be so big that they spun off and formed the independent company, MSCI Inc. Perhaps its best known and used index is the MSCI EAFE, which tracks broad performance of Europe, Asia, and the Far East. Continue reading...