Why Should I be Extremely Careful with Commodities ETFs?
There are some things to keep in mind when investing in commodities and their ETFs. Most commodities trading revolves around who owns a hard asset and when. ETFs occupy a space in the commodities world that is somewhat unique. An ETF such as the Crude Oil Index does not physically buy millions of barrels of oil and store them. It buys financial instruments which theoretically should reflect the price of oil. Continue reading...
When should I sell my IPO shares?
If you see that there is a high premium that others are willing to pay for your IPO shares, you may want to sell them as soon as possible, or you may feel that you got a reasonable price and are more willing to hold the shares for a long time because you believe in the long-term growth potential of the company. If there is a lot of hype surrounding the IPO, and share prices are driven upward in the following weeks, it may be a good strategy to immediately sell them while the frenzy is on. After the Lock-up Period of 90 -120 days, the insiders and investment bankers who were required to hold onto their shares may start to sell theirs off, and in some cases, this can cause a significant price drop as they flood the market. Continue reading...
What are the Vesting Rules for My Keogh Plan?
Vesting rules depend on the type of Keogh contributions being made. The IRS imposes certain rules on Keogh Plans, which includes vesting restrictions. Different employers might have totally different vesting schedules, as long as they satisfy the IRS rules. It depends on the type of contribution being made, such as matching or profit-sharing or money-purchase contributions, whether the plan is a QACA, and so on. Many contributions are immediately vested, while some are gradually vested over a few years, and some are on a cliff-vesting schedule. Continue reading...
What Types of Life Insurance Exist?
There are more than a few types of life insurance, and more are introduced as time passes. There is group life, term life, whole life, universal life, variations of these, as well as situations that use these products in contexts that warrant their own category such as bank owned life insurance (BOLI), captive insurance companies, and others. Term life insurance is the most common type of life insurance, and it serves as pure insurance, with no cash value, and a limited time in which it has level premiums or will pay the guaranteed death benefit. Continue reading...
How Do I Measure My Risk Tolerance?
Your risk tolerance should be a measure of how willing you are to absorb losses in your portfolio. Studies in behavioral science show that investors loathe losses about two and a half times more then they enjoy gains. Everyone can likely relate to this stat. But, to be a successful investor that achieves long-term equity like returns, one has accept some level of risk inherent in the stock market. Continue reading...
What is a No-Appraisal Mortgage?
Most mortgages require that an appraisal or at least inspection is done before any loan is made. There are exceptions to this, in the form of no-appraisal mortgages which are available to lower-income homeowners, qualifying members of the military and its veterans, and some farmers. Most no-appraisal loans are through federal programs such as HARP, FHA, and the VA. The purpose of these loans is to keep people in their homes and to keep the economy relatively stable. These are generally not first mortgages, but are relief, modification, and refinancing arrangements to qualifying homeowners that already have a mortgage outstanding. Continue reading...
What is Inflation?
Inflation is the increase in the cost of goods and the decrease in the buying power of a denomination of currency. Inflation is measured in a few ways, and one is by the cost of a broad basket of consumer goods. Increases year to year are reflected as the rate of the Consumer Price Index (CPI), but be mindful that there are other indexes. Inflation is not only the effect of the cost of goods rising, but of the actual buying power of a currency decreasing. Continue reading...
What is Federal Reserve Credit?
The Federal Reserve extends credit in the form of short-term loans to member banks. Banks avoid taking loans from the Fed if they can, because it is viewed as a sign of instability. The Federal Discount Rate applies to loans taken from what is known as the discount window at the Fed, and it tends to be a higher rate than what is charged between two banks. The Federal Reserve will extend credit only to banking institutions that are members of the Federal Reserve system. Continue reading...
What is Chapter 10?
Chapter 10 is a bankruptcy filing available to smaller corporations where they agree to have their management replaced to oversee a restructuring, and they also agree to have their debts repaid within three years. If a company does not have more than $2.5 million in debt, they may be able to file Chapter 10 bankruptcy. The company and its attorney will put together a plan for reorganization and explain how the plan will ensure that the company meet its obligations in the future. Continue reading...
Can You Pay More Than Nominal Value for a Bond?
Yes, and this is part of what’s called the interest rate risk of bonds. If someone purchased a $1,000 bond with a 5% coupon, and a year later, the company issued new $1,000 bonds with a 4% coupon, in order to buy the 5% coupon bond from the owner, you would obviously need to pay more than $1,000 (since the new bonds issued by the company have a 4% coupon). What does Nominal Value mean? What Happens to the Price of a Bond After I Buy It? Can You Sell a Bond for Less Than the Price You Paid For It? Continue reading...