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What are Actively-Managed ETFs?

At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...

What are the Expenses Associated with Buying and Holding an Annuity?

Annuities are generally the most costly financial product, because the investor has to pay fees/expenses in order to secure the insurance guarantees offered. Investors should take care to examine and understand all of the fees and expenses associated with annuities before purchasing. Many annuities are sold by insurance salesmen or commission-based advisors who will receive a commission around 5% or more. These charges are not always apparent to you up front, as they do not usually come out of your actual principal according to your account balance. Continue reading...

What are Load Mutual Funds?

“Load” mutual funds are those which have a fee structure that includes a front-end or back-end sales charge. All funds have expenses, but not all funds have loads. Loads are sales charges that are part of the fee structure of a mutual fund. Each mutual fund will typically offer a few types of shares classes to its investors, and the main difference between the share classes are their fee structures. There are front-end loads, which come out of your initial investment and can be up to 5%. Continue reading...

What are the Expenses Associated with Buying and Owning Mutual Funds?

Several forms of fees and expenses may be charged to those who own, buy, or even sell mutual funds. With mutual funds, there two types of charges that might be paid by the investor: expenses and fees. Different types of share classes may have different types structures to their fees and expenses. Expenses are the operating costs of the fund company, essentially, and these show up in all mutual funds, usually labeled as expense ratios. The returns reported by the fund will be after expenses. Continue reading...

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 are the Expenses Associated with the Purchase of ETFs?

There may be fees and commissions involved in the purchase of ETFs, and ongoing expenses that reduce earnings over time. Purchasing an ETF will probably involve paying some fees or commissions to the service or broker through which you acquired the shares, but these days those commissions are fairly minimal. These fees will be the same or less than you might pay for using their services to acquire positions in other securities. ETFs are a relatively cheap way to gain an exposure to a particular sector of the market or to take a position that might otherwise be difficult and expensive to research, calculate, and engineer. Continue reading...

Should I pay for financial planning services?

Any professional that you work with for financial planning is going to be compensated for the work they do, but there are different ways they earn their pay. Whether it’s worth it to you is another question. If you have enough knowledge and time on your hands, and your investment portfolio is not very complicated, you may be able to manage it on your own. This can save you some money on financial advisor fees. Continue reading...

What are No-Load Mutual Funds?

Mutual funds that do not charge a front-end or back-end sales load are known as no-load funds. What are Load Mutual Funds? While no-load mutual funds do not require the investor to pay sales charges (i.e., commissions) when buying or selling that fund, it’s important to remember that nothing is free, especially in the world of financial services. The portfolio manager of the fund and his team of analysts still have their salaries, bonuses, retirement benefits, and so on, and fees are needed to pay for it. Continue reading...

What is a foreign transaction fee?

Credit card companies and banks generally charge an additional percentage for all purchases made with a card in a foreign country. If you’re traveling abroad, you may want to find another way to pay. Most credit card companies and bank debit cards will charge an additional percentage on transactions made abroad, to help them pay the cost of clearing the transaction with international institutions. This is sometimes called a currency conversion fee. Continue reading...

What are Bank Fees?

Bank fees are penalties or maintenance requirements that may apply to checking, savings, or money market accounts. Banks may charge fees for specific types of transactions, if a check bounces, or just a monthly checking account fee. There are many other types of fees and reasons for them. They may be penalties, such as an overdraft fee, or they may be customary for the kind of transaction or account being used. Continue reading...

What is an Expense Ratio?

Generally associated with mutual funds and exchange traded funds, the expense ratio represents the total annual management fee. The expense ratio is the annual management fee charged to shareholders by ETFs and mutual funds. The annual fee typically comprises the annual management fee, 12b-1 fees (which are associated with research costs), operating costs, and all other administrative type fees that go into the product. The expense ratio encompasses all of these fees as one percentage. Continue reading...

What is a Lifeline Account?

Lifeline accounts are offered by some banks, and are required in some states to be offered by all banks — they give low-income individuals an opportunity to bank without paying fees or observing a minimum balance. This is done in an effort to promote social mobility by giving everyone access to banking services. You are likely to be able to find a bank that offers free checking accounts anyway, but some states have mandated that banks allow for so-called “lifeline accounts,” which have fewer features than other checking accounts but which may be the only banking option available for low-income banking customers. Continue reading...

How Can I Use the Money From My 529 Plan?

You can technically use it however you see fit if you are willing to pay the 10% IRS penalty. Money from 529 Plans can be used for tuition, books, supplies, room and board and, as of recently, computers and electronic necessities. Always check if you’re not sure that an expense is covered by the 529 plan. Money used for anything other than the specified costs will be subject to federal income taxes and a 10% penalty on the earnings. You can also transfer the account to another beneficiary or yourself if you or someone else will need the money for college one day, without incurring any penalties or taxes. Continue reading...

What is a Mortgage Rate Lock?

Mortgages take a while to process, but a broker or bank can lock in a rate for themselves or their clients. Locking-in rates costs money somewhere along the line, and the longer the rate is locked in, the more it costs. 60 days is generally the longest time frame you will see a rate locked in, due to the cost associated with that risk. Mortgage rates can be locked in for a period of time long enough to underwrite the loan. This might be for a period as short as 20 days or as long as 60 days. Continue reading...

What is a Mortgage Broker?

Mortgage brokers act as agents for consumers looking for the best deal possible on a home mortgage loan. Lenders at banks may not be able to find the most competitive interest rates out there. Mortgage brokers can help consumers become more educated about the various kinds of loans out there, some of which are subsidized by the government. Mortgage brokers find and place mortgage loans with consumers who need it to buy a house. Continue reading...

How do I Buy an ETF?

ETFs are widely available through brokers and online trading services. ETFs can be purchased in the same way that you might purchase stocks. ETFs are priced continuously during the day, and reflect the underlying basket of stocks comprising this ETF. The fees and commissions investors pay for purchasing ETFs are exactly the same as those for stocks. The market for ETFs is highly liquid, with substantial trading volume every day. As such, ETFs are readily available and easy to acquire, but it is important to remember that they are not quite as simple as individual stocks. Continue reading...

What are My Keogh Plan Investment Options?

Keoghs can hold a wide range of investments, and it will mostly depend on your plan trustee. Keogh plans have the ability to include many investment options, from stocks to bonds, certificates of deposit to cash value life insurance, and so on. Keep in mind that Keogh Plan investments are usually determined by the financial institution at which your Keogh Plan is established. When opening a Keogh Plan, be sure to check what investment options the financial institution offers, and how much in fees and commissions they would charge for these investments. Standard ERISA rules apply, so all employees must be offered the same options. Continue reading...

What is Form 1099-Q?

IRS Link to Form — Found Here Distributions from qualified educational accounts such as 529s will be reported on a 1099-Q. This will be submitted by the institution serving as the custodian of the account. Qualified tuition programs (QTPs) might include Coverdell Educational Savings Accounts (ESAs) or 529 plans, and distributions from these plans are not taxable when used for qualified educational expenses, such as college tuition. Continue reading...

What is Medicare Part A?

Medicare Part A is the standard, baseline hospital coverage that comes at no cost as part of everyone’s Medicare benefits. It will pay for inpatient stays at hospital and skilled care facilities, but only for a certain number of days. Medicare Part A is hospitalization and inpatient care insurance. It will pay fully for about 20 days of care, but only if there is an inpatient procedure first and the patient appears to be convalescing. If the patient is not gradually recovering, their Medicare benefits will be suspended. Continue reading...

How do Advisors Charge and How Much Should I Pay?

It depends. There are three commonly used fee structures: fee-only, fee-based, and commission-based, Advisors can be compensated in three ways: It’s impossible to say exactly how much you will end up paying for an advisor – it really depends on the type of advisor you decide to hire, the amount of trading or planning you will be using them for, and the size of your portfolio. In some transactions with commission-based planners, you may not see any out-of-pocket cost; their commissions are built into the products in such a way that it may not appear that there is any direct cost for their services. Continue reading...