What is an Irrevocable Trust?
An Irrevocable Trust is one in which the grantor (the person who creates and funds the trust) cannot modify the trust once created. An irrevocable trust can only be modified or terminated if the beneficiary of the trust authorizes such changes. An Irrevocable Trust allows you to name a Trustee (the person that will handle your assets and will oversee their distribution to your heirs in the event of your incapacitation or death) and define the terms and conditions of the Trust while you’re alive. You can name yourself as the Trustee so you can manage your assets while you’re capable of doing so, and name a secondary Trustee to take over when you’re not. Continue reading...
What is the gordon growth model?
The Gordon Growth Model is also known as the dividend discount model (DDM). It is a model for pricing a stock that was developed by professor Myron J. Gordon in the 1960s. The model uses a stock’s present value relative to the present value of its future dividends to provide an intrinsic value for the stock. The model is a shaky one at best, especially given that companies these days often change the course of dividend payments, and many (particularly in the tech world) don’t pay any dividends at all. Continue reading...
What is Collateral?
Collateral is an asset/property that a borrower commits to a lender in exchange for a loan, which will be forfeited if the borrower defaults. A loan that has collateral attached to it will generally carry a more favorable interest rate, but that is not necessarily always the case. Some examples of collateral are a house when you take out a mortgage, your car when you take out an auto loan, or the stocks in your portfolio if you take your account on margin. Continue reading...
What is a Bank Statement?
A Bank Statement is a report issued to an account holder on a regular basis, such as monthly, which contains the account balance as of the date of the report and usually a history of transactions for the period. A Bank Statement will usually be mailed, either by the postal service or electronically, to a banking customer every month. The statement will represent a summary of the bank’s records for the recent month on a particular account, and will probably show all transactions posted to the account, along with the ending balance of the account as of the date of the mailing. Continue reading...
What are Consolidated Financial Statements?
Consolidated financial statements are required when one company owns a controlling interest in another company. They must adhere to the same accounting principals as a the financial statements for a single company. Some detail tends to be lost if the parent company and subsidiaries have very different operations. If a company owns more than 50% of another company, their financial statements will be consolidated into one, according to GAAP. Up to that point, the interest in another company can be accounted for using cost-method or equity-method accounting. Continue reading...
What is a Discount Broker?
Discount Broker is a financial organization that places trades at a discount to a full service broker, and also often will serve as a custodian for assets. With the onset of online trading platforms, the discount brokerage industry has seen plenty of growth over the last few years. In many cases, however, a discount broker will not offer any investment advice - hence the discounted price for trading services. An investor that wants a lot of personalized service should probably consider a full service broker over a discount broker, since a discount broker literally only focuses on trade execution and will not provide additional services, like research and advice. Continue reading...
What is the Lehman Aggregate Bond Index?
The Lehman Aggregate Bond Index is a broad bond index, widely considered the best total bond market index to track performance across various types of bonds. The index includes government bonds, mortgage backed securities, corporate bonds, and asset backed securities with maturities greater than a year. It is used by many money managers as a measuring stick for tracking the relative performance of a managed bond portfolio. Continue reading...
What is the Technology Sector?
The Technology sector consists of companies involved in the research, development, and sale of technology products. It is perhaps the most relevant and exciting growth sector in today’s world, with new technologies being developed and tested on nearly a daily basis. Technology is a cyclical sector, and one where leadership changes hands often. Companies can be in the business of developing hardware, software, web-based applications, and so much more. Continue reading...
Should I Listen to Commentators on Financial News Programs?
It’s easy to become drawn in by the financial media, but it’s important not to let them do your thinking for you. Commentators on the most reputable financial channels will always be sharp-looking, smooth-talking, and quoting a barrage of statistics that makes it seem like you didn’t know anything before you tuned in. Is this an indication of being camera-friendly? Without a doubt. Is it an indication of sound financial advice? Absolutely not. Continue reading...
What is the Elliott Wave Theory?
Elliot Wave Theory incorporates the natural cycles of nature and waves with market movements in an attempt to explain and predict the historical and future prices of stocks. Penned by Ralph Elliott in the early 20th century, the Elliott Wave Theory attempts to organize the seemingly random behavior of the market into cycles. The theory visualizes a series of waves cycles, each representing a different length of time or magnitude of a trend or cycle. Continue reading...