What is a Partnership?
A partnership is a business owned by two or more people, usually designated as an LLC. They play a role in the operation of the business, and are responsible for the legal and financial liabilities. In a partnership, as in a sole proprietorship, there is no legal shield against law suits and liabilities unless they have filed as an LLC or S-Corp. If the partnership were to be sued, without any kind of legal shield in place, the owners would be held completely accountable. Continue reading...
How is a 403(b) Different From a 401(k)?
403(b)s are essentially the same as 401(k)s but there are a few notable differences. A 403(b) is extremely similar to a 401(k); the main difference is the type of employer than can offer each. 403(b)s are offered by public educational institutions, non-profit hospitals, non-profit organizations, religious groups and some government organizations. Due to the negotiating powers of many of those institutions, and their non-profit status, the administrative fees are smaller and they are not subject to some of the administrative oversight imposed on 401(k)s. Most 403(b)s are not subject to ERISA, which means they don’t have to satisfy as many auditing and reporting requirements. Continue reading...
What will Long-Term Care Insurance Cover?
Long-term care insurance is designed to pay benefits for the elderly in need of daily medical services, such as an at-home nurse, room and board in an assisted living facility, adult daycare, respite care, hospice care, and/or medical supplies needed for daily living. Depending on the insurance company offering the services and the policy selected, the menu of benefits will vary. The more benefits offered the higher the premium for the policy. Continue reading...
What is Investment Advice?
Professional investment advice is highly regulated, and all publications, seminars, correspondence and recommendations between professional advisors and clients must be kept on record and hold up to scrutiny. It is easy to mislead or misinform investors who have not had a chance to educate themselves, and their very livelihoods are at stake if their money is mishandled. Investment advice can be found at the local barber shop, bleachers, and beaches, but those who want to make sure their money is handled correctly will seek professional advice. Continue reading...
What is the Form 6251: Alternative Minimum Tax, Individuals?
IRS Link to Form — Found Here The Form 6251 is used to calculate the alternative minimum tax (AMT) for individuals who may have high income but relatively low taxes due after deductions. The individual first computes his or her adjusted gross income, which does not allow for some deductions that may have been taken for the tax filing. If the AMT is higher than the taxes already paid, the individual will have to pay the difference. Continue reading...
What is a Rate Swap?
A rate swap is the exchange of cash flows on underlying principals which are not exchanged. It is an over-the-counter contract between two institutions to trade the cash flows on two comparable principal amounts, but not to exchange the actual principal amounts. Institutions might prefer this arrangement because they only have access to floating interest rates or are overweight in them and would prefer to have some fixed rate interest cash flow, or vice versa. These swaps might occur between banks on opposite sides of the world to take advantage of rates elsewhere or to simply diversify their risks. Continue reading...
What are SPDRs?
SPDRs (Spiders) are index ETF shares that track the S&P 500, or could refer to other similar ETFs tracking other indices. The SPDR is the longest standing ETF (exchange traded fund), and has existed since 1993. Unlike index mutual funds that track the S&P, ETFs can trade intraday, can be sold short, and bought on margin. There are other SPDR ETFs that are spin-offs, and using “SPDRs” in the plural might refer to these as well. SPDRs are managed by State Street Global Advisors, and the S&P 500 SPDR is listed on the NYSE under the ticker symbol SPY. Continue reading...
What should I look for in a good Mortgage Calculator?
Mortgage payment arrangements can be engineered in a number of ways, and a good mortgage calculator will give you enough flexibility to input the terms of your own. Ideally a mortgage calculator will be flexible enough to let you input the following: an adjustable rate, a rate cap, optional mortgage “acceleration” payments, balloon payments and resets, impound account calculations which take into account the property taxes and insurance you pay, as well as calculations which take any origination fees into account. Continue reading...
What Are the Basics of Mutual Funds?
Mutual funds come in many varieties, but here are some basics to keep in mind to help you find your way. While most people have definitely heard the term mutual fund, many people do not understand how they work and how to use them. With over 10,000 mutual funds available in the marketplace today, the average person may have a hard time selecting appropriate mutual funds for his or her portfolio, determining a good asset mix, and understanding all of the charges associated with buying, owning, and selling mutual funds. Continue reading...
What is a short position in options trading?
Taking a short position is selling a security that you don’t own because you anticipate that its value is set to fall. In simple terms, an investor that takes a short position is betting against it. “Shorting” is the opposite of being “long” in a security, where being “long” means to actually own it and to wait for it to appreciate. When you contact your broker or custodian to take a short position on a security, you essentially sell shares you don’t own, and then after a period, you have to return those shares to the custodian. Continue reading...