What are Double and Triple ETFs?
Double and triple ETFs are also known as leveraged ETFs, and their goal is to magnify the performance of the index they follow. Using futures contracts and other derivative instruments, 2x or 3x ETFs attempt to magnify the performance of an index, with the goal of achieving the result daily. Because they also compound daily, they are not usually held for more than a few days. These are also called leveraged ETFs because they use margin, futures contracts, and other derivative instruments to give an investor this magnified exposure. They give you two or three times (respectively) the profits but also two or three times the losses, so one must be very cautious when dealing with them. Continue reading...
What is a Coverdell ESA?
A Coverdell ESA is an account which can be used to save for educational expenses. These used to be called Educational IRAs until someone realized that didn’t make sense. A Coverdell Educational Savings Account (ESA) allows you to save money for your child’s future education costs. As opposed to a 529 Plan, which is limited to post-high school education, money from an ESA can be used as early as Kindergarten. Continue reading...
What is Medicare Part C?
Medicare Part C, also known as Medicare Advantage, is offered in a few variations by several third-party carriers. These plans are approved by Medicare and a person must still pay their Part B premiums to get them, but the Medicare Advantage plans are designed to be more appealing with their deductibles and copays than original Medicare Part A and Part B. Medicare Part C, is a private plan that is mandated to be at least equal in coverage to Part A and Part B. 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...
What is Consensus?
Consensus in investing is a measure of how in line investor beliefs are with one another. It describes strong trends in both trading and investor sentiment, often manifesting as bullish or bearish outlooks on a security or market. Bullish or bearish outlooks can be misleading, however. Opinions are not facts, and the noise of opinions from news sources and pundits can make opinions seem more factual than they are. Many investors require time to develop and form opinions, or form opinions for the wrong reasons, and can succumb to a herd mentality Continue reading...
What is Burn Rate?
Burn rate is a term for negative cash flow, or the rate at which a company burns through capital, especially a startup company. Burn rate is used frequently in the world of startups and venture capital. Using a burn rate, investors can see how much longer operations can be sustained with the capital at hand, and this length of time is called a runway. Startups will normally need at least a few months before they start generating enough revenue to have a positive cash flow. Burn rate is normally expressed as the monthly negative cash flow. Continue reading...
What Websites and Apps Can Help Me With Personal Budgeting?
There is a thriving industry committed to helping people plan and maintain a personal budget through online tools and apps. Perhaps the most-used personal budgeting tool as of this writing is Mint, which allows a user to link their bank accounts into the budgeting software, and then sends the information right into a tax filing after the new year. A list such as this is almost definitely going to be outdated by the time you read it; your favorite search engine or app store may turn up more relevant results than this. Continue reading...
What is Return on Net Assets?
Return on Net Assets is a calculation used to determine how well a company performs, relative to its resources. Return on Net Assets gives investors an idea of how well a company uses its resources to generate profits. Net assets includes not only fixed, tangible assets, but also the net working capital of a business. Working capital is defined as Current Assets minus the Current Liabilities of the business. The net profits for a period are divided by the net assets to arrive at the Return on Net Assets. Continue reading...
What are foreign currency effects?
Companies with significant operations or sales abroad will be affected by changes in foreign currency exchange rates. If the dollar strengthens relative to a foreign currency, the price paid for the goods in the country will not be worth as much domestically when the company converts their profits back to dollars. Some foreign currencies fluctuate much more than the US dollar does, but even the dollar can behave unpredictably. This can have a tremendous effect on the bottom line of companies engaged in significant amounts of business abroad. Continue reading...
What is Credit Debt?
Credit debt or credit card debt is a type of consumer debt that is incurred through a short-term revolving loan facility. The most common of course is a credit card company issuing a card to a client to make purchases, with the client being responsible for minimum payments plus whatever interest rate applicable. Removing credit card debt from one’s balance sheet is often an effective way of improving your financial life. Continue reading...