What is a 457 Plan?
A 457 is a deferred compensation arrangement that is available to some government employers and non-profit organizations. A 457 Plan, offered to state and local public workers and employees of a few nonprofit organizations, functions similarly to a 401(k) or 403(b): the contributions are automatically deducted from your paycheck before taxes and transferred into your account, where they grow tax-deferred until retirement. Continue reading...
What does Earnings mean?
Earnings is another word for the net income of a company. It is one of the most important numbers in corporate finance. If a company cannot show earnings, and growth in earnings, investors aren’t going to stick around. Earnings are normally computed as revenue minus taxes and expenses. It is synonymous with net income. Earnings is a positive cash outlay for the year, which means the company is not operating at a deficit. Continue reading...
What is the Symmetrical Triangle Bottom (Bearish) Pattern?
The Symmetrical Triangle Bottom pattern forms when the price of a security fails to retest a high or a low and ultimately forms two narrowing trend lines. Points 1 5 form the triangle patterns. The price is expected to move up or down past the triangle depending on which line is broken first. This pattern is commonly associated with directionless markets since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. However, there is a distinct possibility that market participants will either pour in or sell out, and the price can move up or down with big volumes (leading up to the breakout). Continue reading...
Can I Get Exposure to Virtual Currency Through ETFs, Mutual funds, or Stocks?
While there aren’t that many ways to use institutional-level, regulated vehicles to get exposure to bitcoin and other cryptocurrencies, there are some, and the market will likely expand. Money managers are finding ways to offer managed investments that offer exposure to cryptocurrencies, despite the hurdles presented by regulators and skepticism from large financial companies. On the over-the-counter market OTCQX, you can buy shares of the Bitcoin Investment Trust from Grayscale (Nasdaq: GBTC). This fund has seen massive gains recently but does come with a 2% fee. The Chicago Mercantile Exchange (CME) has stated that it would like to start trading cryptocurrency futures, but it may be a little time before this becomes a reality, due to significant red tape and guidance needed regarding cryptocurrencies. Continue reading...
What is the Debt-to-Equity Ratio?
Also known as ‘leverage,’ the debt-to-equity ratio indicates the relative proportion of a company’s debt to total shareholder equity. Given that debt is looked at relative to shareholder equity, the debt-to-equity ratio is often given greater consideration than the debt ratio for determining leverage and risk. Similar to debt ratio, a lower debt-to-equity means that a company has less leverage and a stronger equity position. Continue reading...
What is the Federal Open Market Committee?
The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System. The FOMC makes the decision on “raising” or “lowering” interest rates, which refers to moves in the federal funds rate. The FOMC consists of 12 members, which is comprised of the seven members of the Board of Governors and 5 of the 12 Reserve Bank presidents. The president of the Federal Reserve Bank of New York always has a seat on the FOMC, while the other presidents rotate for one year terms. This policy-making body meets eight times a year to decide monetary policy, which consists of setting the benchmark interest rate and make decisions regarding the supply of money. All dependent on economic conditions. Continue reading...
What is Dividend Adjusted Return?
An accurate historical return calculation for an investment should be done with the dividends in mind, such as assuming all dividends were reinvested, which is the most common way they are used. Accurate historical information concerning prices and return should take the stock splits, dividends, and so-on into account. In a lesser-known context, dividend adjustment means a payment of accrued but yet-unpaid dividend amounts to the bearer of convertible preferred stock at the time that he or she converts them to shares of common stock. Continue reading...
What is Maturity?
Maturity is the amount of time an investment exists - once the security matures, it is paid off to the investor and concludes the transaction. Maturities are most commonly used in the fixed income context, with bonds having maturities consistent with when their principal is paid back to the investor. What is Yield to Maturity? How Do I Structure My Bond Portfolio? Continue reading...
What are index futures?
Index futures are futures contracts written on an index in which a large position can be held with a relatively small margin requirement. Index futures can be used for hedging or speculation. A "good faith" initial margin deposit (also called a performance bond) of a fraction of the contract size is all that is required to hold a substantial position, with a notional value worth significantly more than the amount invested. Continue reading...
What was the “Tulip” Bubble?
Markets have been around for much longer than most people think. The Tulip bubble happened in the 1500's! In the last decade of the 1500’s, Tulips were brought to Holland from Constantinople by botanist Carolus Clusius. Within a few years, the Tulips began to spread through Holland like wildfire, becoming luxury goods. As demand rose to astronomical levels, prices skyrocketed along with it. Eventually, people would gain and lose entire fortunes on the beautiful (but not that beautiful) plants. Of course, the actual value of the tulip bulbs was nowhere near the thousands of dollars (if the amounts were converted into today’s standards) that the traders paid for them. Eventually, people began to sell their invaluable tulip bulbs for real cash, and a domino effect ensued. Continue reading...