What are Alternative Funds?
The idea with Alternative fund investing is to gain exposure to assets which are not highly correlated with the rest of your portfolio, and which use non-traditional approaches to fund management. Alternative Funds are mutual funds that invest in non-traditional asset classes such as commodities (gold, silver, oil, etc.), agricultural products (cocoa futures, orange futures, pork-belly futures), non-publicly traded companies and limited partnerships, and so on. Continue reading...
How Much Will Long-Term Care Insurance Cost?
The cost of long-term care insurance varies depending on the policy and the age of the insured. Generally speaking, however, the insured can expect to pay between a hundred to several hundred dollars a month. Typically the total cost adds up to at least a few thousand dollars per year. Furthermore, you will be required to continue paying the premium through your retirement (until you begin using the insurance), and if you fail to pay the annual fee, you might lose some or all of your coverage (regardless of how much you have paid up to that point). Continue reading...
What is Dividend Frequency?
Dividends are paid at certain intervals by companies who pay them. This might be quarterly, annually, or semi-annually. The dividend rate that investors should keep up with is the annualized amount, but there is a lot to be said for quarterly or monthly payments, particularly for those actually using dividends as income, but even if you are just reinvesting. Higher dividend payment frequency means higher liquidity, more control, and probably higher returns in your portfolio. Continue reading...
What is the Home Affordable Refinance Program (HARP)?
In 2009 the Federal Housing Finance Agency (FHFA) commissioned the HARP program to help Americans upside-down on mortgages to get approved for mortgage refinancing. This is only available to people whose mortgages are already owned by Freddie Mae and Freddie Mac. Many Americans find themselves upside-down, or underwater, on their home mortgages, particularly after the housing bubble popped in 2008. To be underwater means that there is more owed on the loan than the home can serve as collateral for. Continue reading...
What is a Life Income Fund?
Life Income Funds (LIFs) are available to Canadians who have left a job before retirement and who are entitled to a sum of money in their pension plan. LIFs offer some flexibility, more than some other alternatives, but the amount that can be withdrawn at a time is limited to a minimum and maximum. The former employee could choose to leave the funds in the pension plan, or to use one of the alternatives to LIFs, which include a Locked-In Retirement Account (LIRA), which is provincially-regulated, or a Locked-In Retirement Savings Plan (LRSP), which is federally regulated. LIRAs and LRSPs do not permit regular withdrawals, and are seen as savings vehicles rather than income vehicles. Continue reading...
What is the 'Non-Current Assets to Net Worth' Ratio?
The non-current assets to net worth ratio will give the analyst an idea of how much of a company’s value is tied-up in non-current assets. As a quick refresher, ‘non-current assets’ are those that most likely will not convert to cash within a year’s time, also known as a long-term asset. Where a company’s non-current asset to net worth ratio lies depends on the industry, but generally speaking a company wants to avoid having that ratio rise above 1 to 1.5. That means the company is highly illiquid, and could be vulnerable in the event of an economic shock. Continue reading...
What is Bad Debt?
Lending companies or other companies with Receivables may characterize certain unpaid accounts as Bad Debt and write off the losses. Bad debt is debt that is on the books and is in default, meaning payment has not been made on it in a long while. Creditors, banks, and companies may periodically get bad debt off of their accounting books by moving it out of Receivables. Most companies have attempted to calculate their exposure to default risk and bad debt, and have allocated amounts into accounts such as Allowance for Doubtful Accounts (ADA). It can be passed off to debt collection agencies, but most of the debt will never be recouped. Continue reading...
What is a market index?
Market indexes attempt to give an overall picture of the behavior of the market by tracking the performance of a representative sample of stocks. Different indexes have different focuses. The Russell 3000 samples more of the smaller companies than the S&P 500. Index mutual funds and ETFs track specific indexes but, as you’ll notice in their disclosures, it is impossible to invest directly in an index; they only follow the index by investing in as many of the companies as possible and minimizing lag as much as they can. Indexes give numerical values for the progressive fluctuations in the price action for specific sets of stocks. Continue reading...
What is a Callable Bond?
A callable bond, also known as a “redeemable bond,” is one where the issuer has the ability to pay off the debt prior to its maturity date, with certain conditions. Which the issuer has the right to redeem prior to its maturity date, under certain conditions. The primary reason that an issuer would choose to “call” a bond is that interest rates have declined since the bond was issued. By calling the bond, the issuer generally has to opportunity to refinance that debt at a lower rate. Once called, the issuer will notify the creditor and pay off the debt, typically with a slight premium added to close the deal. Continue reading...
What does 'call option' mean?
If you own a Call Option, you have the right (not the obligation) to purchase a security at an agreed-upon price from the seller of the option. Buying a call option means you are bullish on the security. For example, an investor may buy an August 2017 call on stock XYZ for $50/share (strike price). This means that the owner of this call option has the ability to buy XYZ on the expiration date (August) for $50/share. Continue reading...