What is a No-Fee Mortgage?
No-fee mortgages are synonymous with no-cost mortgages, which might apply to first mortgages or refinancing arrangements where the closing costs are paid by the lender, broker, or bank, but a higher interest rate is charged on the loan as a means of recouping those waived fees. Closing costs and fees are calculated based on the total amount being loaned, and might be about 3% for a first mortgage and 1.5% for a refinanced mortgage. When the fees and closing costs associated with a mortgage loan are waived for the borrower, they are usually baked in to a higher interest rate on the loan. Continue reading...
What is Publication 503, Child and Dependent Care Expenses?
IRS Link to Publication — Found Here Publication 503 covers tax deductions and filing guides for individuals who pay for childcare. It does not address the employer side of things, for those who provide childcare as a fringe benefit, which is covered in IRS 15-b. Tax deductions are available for parents who have to pay for child-care so that they can work at a job and earn income. Publication 503 describes the circumstances under which this type of deduction is allowed and the filing requirements for it. Continue reading...
What is trend analysis?
Trend analysis is an attempt to explain market movements as general directional tendencies of various strength over various time frames. Trend analysis also works to predict future movements based on the probability of a trend continuing. The use of moving averages with support and resistance levels is the most commonly used methodology in trend analysis, and several trading strategies employ these tools in various ways. Trade volume, spreads, news, crossover points, and other market factors are also considered in the discipline. Continue reading...
What is Demand?
Demand is a measure of consumer’s desire to purchase goods and services. High demand for a product typically puts upward pressure on price, and vice versa. Demand is a key metric in reading price trends and a company’s ability to set price point. Weaker demand on a global macro level implies that countries are investing less, developing less, and therefore focused less on growth. Sustained downtrends in demand will generally lead to recessionary conditions. Often times, central banks will try to step-in and stoke demand by lowering the cost of money (interest rates). Continue reading...
What is Burn Rate?
Burn rate is a term for negative cash flow, or the rate at which a company burns through capital, especially a startup company. Burn rate is used frequently in the world of startups and venture capital. Using a burn rate, investors can see how much longer operations can be sustained with the capital at hand, and this length of time is called a runway. Startups will normally need at least a few months before they start generating enough revenue to have a positive cash flow. Burn rate is normally expressed as the monthly negative cash flow. Continue reading...
What does Capital Gain Mean?
A Capital Gain refers to the profits or gains made from selling a security at a higher price than the original purchase price. In stock trading, if an investor sells a stock for more than they bought it for (or the price inherited), the profit realized is a capital gain. The same applies to gains made in real estate. To note, assets held within tax-deferred accounts, like IRAs and 401(k)s, do not trigger capital gains when sold for profits. It only applies to taxable assets, like stocks held in a brokerage account. The capital gains tax is the tax paid on net capital gains in a given year. Continue reading...
What is a price-weighted index?
When creating an index, it must be decided what criteria will affect the value of the index, and in the case of a price-weighted index, the only consideration is the price of shares. A price-weighted index is created by adding up the individual price per share of the companies included in the index and dividing by the number of companies. Essentially what you've done is arrived at the average price per share of the companies included in the index. Continue reading...
What is the Capital Market Line?
The Capital Market Line is a complex concept, but put simply, it is a calculation meant to give the investor/analyst a range of potential returns for a portfolio, based on the risk free rate and the standard deviation of the portfolio. The Capital Market Line is a part of the capital asset pricing model (CAPM) that solves for expected return at various levels of risk. It takes into consideration a portfolio’s risk assets and the risk-free rate. Continue reading...
What is Common Stock?
A common stock is the one you’re most familiar with - having a share of ownership in a company. Owning common stock in a company is a vote of confidence that an investor thinks the company will perform well, and grow. Owning common stock also entitles an investor to equity ownership in a corporation, voting rights, and shared participation in a company’s success through dividends and/or capital appreciation. Continue reading...
What is a Jumbo Loan?
A jumbo loan is a mortgage loan that exceeds the conforming loan limits set by the Office of Federal Enterprise Housing Oversight. For borrowers with low debt to income ratios and good credit scores, jumbo loans are often utilized for purchases of larger or luxury homes. Often times jumbo loans are too large in size to be guaranteed by Fannie Mae and Freddie Mac, and are securitized in other ways. Continue reading...