Am I Eligible for Social Security Benefits?
Social Security will pay benefits to those who have paid into the system, their beneficiaries in many cases, and also to some disabled individuals who have not paid into the system. In general, Social Security Benefits will only be paid in cases where individuals paid into the system. The exception is Supplemental Security Income (SSI), which is actually paid from the general tax revenue of the government, and not the actual Social Security trust funds, though it is administered by the Social Security Administration. Continue reading...
How do I Calculate my Expenses?
Keeping track of your expenses is one of the most important (and basic) steps to leading a responsible financial life. It might be tempting to “eyeball” your expenses and somehow get by without a plan, but in almost all cases, such carelessness will spell financial disaster. Budgeting your money for specific categories of expenses and carefully documenting the actual spending is critical. You should add up amounts spent on monthly mortgage and car payments, rent, groceries, clothing, entertainment, utilities, transportation, and other miscellaneous expenses, and try to get as close to possible to a monthly budget. Continue reading...
How Does Blockchain Technology Work?
Blockchains are intended to maintain integrity in the system without anyone needing to monitor or control it. By instituting a system of checks and balances that functions on its own accord through rules programmed into the protocol, and which also makes decisions and keeps records based on consensus throughout a peer-to-peer network, a blockchain oversees its own activities without requiring any trust in a central authority or the other parties involved. Continue reading...
A-/A3 — credit rating
A- — S&P / Fitch A3 — Moody’s Rating institutions assign various levels of credit ratings to signify the chance of default; the A-/A3 rating is considered Investment Grade, but it is getting closer to the Junk Bond range. If a company or debt issue has a rating of A-/A3, it means that S&P and Fitch have given it an A- and Moody’s has given it an A3 rating. They have their own symbology for their ratings system but these are at the same level on both scales: these ratings are at the 6th or 7th degree from the top possible ratings, which is AAA/Aaa. Continue reading...
BB+/Ba1 — credit rating
BB+ — S&P / Fitch Ba1 — Moody’s This rating is the highest non-investment grade category that the ratings agencies will give to a bond. When rating bond issues based on their risk of default, investment grade bonds will range from AAA/Aaa to BBB-/Baa3, in the parlance of Fitch, Moody’s and S&P. Below this level, starting with the BB+/Ba1 rating, are High Yield Bonds, also known as Junk Bonds. If an investor chooses wisely, high yield bonds can be some of the best investments in his or her portfolio. The further down the ratings scale a bond appears, the higher the yield; but there is also a higher risk of default. The higher yield paid out on higher-risk bonds is known as the “risk premium,” which is a concept present throughout the investment world. Continue reading...
What Does Capital Loss Mean?
Capital Loss refers to a loss realized when a security is sold for less than it was purchased for. In stock trading, if an investor purchases stock ABC for $30 / share, and then sells the stock a few months later for $22 / share, they have realized an $8 / share capital loss. At the end of every year, as per U.S. tax policy, capital losses can be used to offset capital gains, so as to help an investor reduce their tax burden. A common year-end strategic approach is to “harvest” capital losses in an effort to offset any capital gains made from trading that year. Continue reading...
What is a CUSIP?
CUSIP is basically like a Dewey Decimal number for stocks and U.S./local government bonds. CUSIP stands for Committee on Uniform Securities Identification Procedures. CUSIPs are alphanumeric identifiers of certain types of securities, but most commonly used for stocks and bonds. The first six characters identify the issuer and use letters; the seventh and eighth characters (which can be alphabetical or numerical) identify the type of issue; and the last digit is used as a check digit. Continue reading...
What does notional value mean?
Notional Value is used in futures, options, and forex markets to describe the total value of the principal of a contract or transaction, especially when either none or only part of that value has actually been exchanged. Notional value is used most often in interest rate swaps and futures contracts, and is "notional" because either no principal changed hands at the beginning of the contract (such as in an interest rate swap), or only a small payment was used to buy a larger position (such as in a futures contract). Continue reading...
What is a credit default swap?
A Credit Default Swap is a contract that provides a hedge against credit default risk. To guarantee against the non-payment of a loan, a Credit Default Swap can be purchased for a premium. The seller of the swap bears the risk of payment if a bond issuer defaults, or if there is a similarly threatening “credit event” which is agreed upon in the terms of the swap contract. Generally, the buyer of a credit default swap will pay quarterly premiums for the protection, and the annualized premium is called the "spread," which may be a set percentage of the notional amount. Continue reading...
What is an Interest Rate?
An interest rate is a simple financial principle that’s been around for centuries, whereby a borrower has to pay for money borrowed. The interest rate is agreed to between the lender and the borrower, and there may be provisions under which the rate could change over the course of a loan. In simple terms, an interest rate is the cost of money. Continue reading...