What are General Market ETFs?
General market ETFs seek to capture the movements of the market as a whole by tracking major market indices. General Market ETFs track the performance of major market indices such as the S&P 500 (SPY), the Dow Jones Industrial Average (DJIA), and NASDAQ-100 (QQQQ). Most funds that track indexes do so by purchasing shares of all the publicly traded companies within an index, usually proportionally weighted by the market cap of the company (but there are other popular weighting methods). Continue reading...
What is a C-Corporation?
C-corps are generally the larger, more established companies in the country – most publicly-traded companies are C-corps. C-Corporations are companies which, as opposed to S-Corporations, are subject to federal income tax entirely separately from their owners. In addition, the earnings (or losses) are distributed among the shareholders (usually as dividends) and will appear on their individual income tax reports. This is the double-taxation for which C-corps are infamous. Continue reading...
What will Long-Term Care Insurance Cover?
Long-term care insurance is designed to pay benefits for the elderly in need of daily medical services, such as an at-home nurse, room and board in an assisted living facility, adult daycare, respite care, hospice care, and/or medical supplies needed for daily living. Depending on the insurance company offering the services and the policy selected, the menu of benefits will vary. The more benefits offered the higher the premium for the policy. Continue reading...
What is Annual Percentage Yield (APY)?
APY is an annualization of an interest rate which may be assessed on a different schedule, such as on a monthly basis, and is useful for comparing debt and loan agreements that use different schedules. Annual Percentage Yield is a way to compare products and loans with different interest rates and different schedules for calculating the interest. It is a calculation of the effective annual rate, and it takes into account the effects of compounding interest, which a similar calculation for APR (Annual Percentage Rate) does not do. Continue reading...
What are Subprime Loans?
Subprime loans are loans made by institutions to individuals who do not meet the industry standards for a desirable loan client. Lenders such as banks and mortgage companies are able to shift much of the risk of loans they make by selling the debt off to investors and investment banks in the form of collateralized mortgage obligations and other forms of securitized debt. This paves the way for lenders to adopt more liberal guidelines around who can receive a loan for their home purchase and so forth. A thorough banker who is preserving the financial stability of his employing institution will perform due diligence to prove that a client can meet the repayment schedule for the loan by showing adequate cash flow and credit history. Continue reading...
What are Accounting Policies?
Accounting policies are the internal controls of a company which stipulate the methods by which the books will be kept. Accounting policies are the agreed-upon accounting methods, conventions, and practices of an accounting cycle. A business must establish guidelines and training to ensure that accounts are kept in ways that satisfy their needs for documentation, security, liquidity, management, and the observation of applicable laws. Continue reading...
BB-/Ba3 — credit rating
BB- — S&P / Fitch Ba3 — Moody’s The BB-/Ba3 rating is given to bonds and companies who have a moderate risk of default, and this rating appears around the middle of a scale with over 20 ratings. There are two symbols in this example which are the same rating: Fitch and S&P use BB-, and Moody’s uses Ba3. These are the Big Three of the Credit Ratings Agencies (CRAs) that the SEC has sanctioned to issue ratings which can be used for internal regulation within industry groups. Continue reading...
What was the "Flash Crash"?
On May 6, 2010, investors around the world were shocked when the Dow Jones Industrial Average fell nearly 1,000 points in a matter of minutes. The market recovered just as quickly, finishing the day down a much lesser 348 points. The so-termed "flash crash" was caused by a trader's technical errors in entering order amounts, which caused a few stocks to post erroneous numbers (notably Procter & Gamble, which showed a 37% loss, before recovering to a 2% loss on the day). Continue reading...
What is the black swan theory?
The Black Swan Theory serves as a reminder to investors that unpredictable events can radically change our lives, society, and the markets. The Black Swan Theory, based on a recent book by Nicholas Nassim Taleb called “The Black Swan: The Impact of the Highly Improbable,” analyzes how events that were completely unexpected, or perhaps considered impossible, radically changed the world. Historical events such as the attacks of September 11th, 2001 and the invention of the personal computer are categorized as Black Swans: they were unforeseeable, and their enormous impact on human civilization was only explainable in hindsight, according to Dr. Taleb himself. Continue reading...
What are trading models?
Trading models are emotionless systems for decision-making in trading that can be automated or just used for reference. They tend to have logical parameters, such as “if x, then y” which can use popular trading indicators to implement a strategy that might only be used in certain conditions. Trading models are strategies employed with a specific design. Different trading models will use different technical indicators or types of charts to define and search for certain conditions in which a strategy can be used. Once the conditions are met, the model provides the decision-making logic that is intended to carry out a profitable trade without guesswork or emotion. Continue reading...