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 is a 529 Plan?
529 plans are accounts designed to help families save for the future college expenses of young family members. A 529 Plan is designed to help you save money now to pay your child’s college expenses later. Investment companies who design a plan, which looks similar to a retail mutual fund account or IRA, will partner with state governments to offer the state’s official 529 plan. Families can invest in a 529 and gain access to an array of mutual funds. Continue reading...
For How Long Will I Receive My Social Security Benefits?
After the payments begin, you'll receive Social Security benefits for the rest of your life. People worry that the Social Security system will run out of money, but as long as there are some workers paying into the system, it will be able to pay at least a reduced benefit to retirees. The system can be tweaked easily enough for full benefits to continue to all those to whom it is owed, barring some reductions for taxation on benefits and possible reductions based on income from other sources. After the payments begin, you’ll receive Social Security benefits for the rest of your life. It works like a pension. Continue reading...
What is a market-on-open order?
Traders can enter time-specific trade orders in the form of opening or closing orders, which are only to be executed as close to the opening or closing price as possible. Market-on-open orders are looking to buy or sell immediately after the market opens, at the opening price. Market-on-open orders are instructions for a broker or floor trader (even though we don’t see those much anymore these days) to buy or sell shares at opening price of the stock being traded. Continue reading...
What is the difference between Common Stock and Preferred Stock?
A preferred stock is higher up the equity chain than a common stock - preferred stockholders receive dividends first and will be paid out first in the event of liquidation. The primary difference between a preferred stock and a common stock is that preferred stockholders have a greater claim to assets of the company. This can come in two forms: preferred shareholders being paid dividends first, and also having a higher claim to being paid out in the event a company goes bankrupt or liquidate assets. Continue reading...
What is the Dividend Payout Ratio?
The Dividend Payout Ratio represents the percentage of a company’s earnings/profits that they pay-out to shareholders in the form of dividends. Companies with higher dividend payout ratios tend to be older, more well-established corporations with long histories of dividend payments. Newer, more growth oriented companies will tend to take earnings and reinvest them in the company, whether via additional fixed investment, inventory expansions, hiring more people, or entering new markets. Continue reading...
Should I Trust an Article Such as “What Are The Best 10 Stocks For The Next 10 Years?”
It can be useful to at least give some deep thought to the picks that appear in such articles. There is some investment wisdom in reading and taking action on the advice of such articles, since they point you in the direction of the industries which are poised to grow in the foreseeable future. Unlike short-term stock picks, these articles are concerned with growth that will go beyond the short term uptrend that will undoubtedly follow the appearance of a ticker symbol in such a list. Continue reading...
What are asset classes?
Asset classes are types of appreciable investments that can be grouped and distinguished from one another based on the correlation of their price movements and the structure of their cash flows. Some of the most common asset classes are stocks, bonds, cash (and cash equivalents), commodities, and real estate. Many individual securities and sub-classes will fall into each of these. Asset classes are a large consideration when creating a well-diversified portfolio. Continue reading...
What does it Mean to be "Listed"?
To be “listed” means a stock has been registered and approved for trading on an exchange. The most relevant companies will aim to be listed on a major exchange, such as the New York Stock Exchange (NYSE) or the NASDAQ. Who are Venture Capitalists? Should I Listen to Commentators on Financial News Programs? Continue reading...
What are Materials Stocks?
Companies in the Materials sector have business interests in raw materials, such as steel, aluminum, and iron ore. The companies are generally involved in the discovery, processing, or sale of these raw materials. Materials companies rely on economic growth and infrastructure build-outs to thrive, so tend to perform better early in economic expansion cycles. Materials companies are categorically ‘cyclical’ stocks. Continue reading...