What are Industry-Specific Mutual Funds?
Industry-specific funds attempt to capture the movements of a single industry. Industry-specific mutual funds will usually limit themselves to investing in particular industries. There are thousands of such funds. Their focus can be very broad (such as technology - here) or very narrow (such as solar energy - here). Investors who would like to gain exposure to specific industries to round out their portfolios can do so with an industry-specific fund which offers diversification among many different holdings in an industry, as opposed to one or two stocks in an industry. Continue reading...
What are the Contribution Limits for My Keogh Plan?
The contribution limit for a Keogh Plan depends on what type of Keogh Plan you set up. There are Defined Contribution and Defined Benefit Keoghs. Defined Contribution plans could be profit-sharing or money-purchase plans. As of 2013, a Defined Contribution Keogh Plan allows the employer to contribute up to 25% of your income, or $53,000, whichever is less, and this will constitute the profit-sharing or money-purchase aspect of the plan. Continue reading...
Will My Cash-Balance Payments Affect My Social Security payments?
Social security can become taxable if a person has a certain level of income in retirement. Retirement income from pensions or 401(k)s and other taxable sources will contribute to the AGI of a person in retirement, but it will not ever disqualify a person from receiving their social security check in retirement if it is owed to them. Instead, social security benefits become taxable as income if a person has enough income in retirement to trigger the social security taxes. The level is actually quite low, and has not been adjusted for inflation recently. Continue reading...
What does asset allocation mean?
At the highest level, Asset Allocation refers to an investor’s decision of what percentage to allocate to stocks, versus bonds, versus cash (and cash equivalents), versus any other asset class (commodities, alternatives, real estate, etc…). It is believed that the asset allocation decision is responsible for the majority of an investor’s returns. In other words, there is a direct correlation between an investor’s long-term return and how long - and to what percent - they owned stocks over their lifetime. Continue reading...
What is the Triple Tops (Bearish) Pattern?
The Triple Tops pattern appears when there are three distinct minor Highs (1, 3, 5) at about the same price level. The pair is testing the upper resistance level (horizontal line formed by (1, 3, 5), but the price ultimately declines as buyers give up. This type of formation potentially happens when investors can not break the resistance price. There is a distinct possibility that market participants will sell out, and the price can move down with big volumes (leading up to the breakout). Continue reading...
What is the Interest Coverage Ratio?
Also known as the debt service ratio, The interest coverage ratio is a measure of how many times a company can pay the interest owed on its debt with EBIT. To calculate it, you simply divide EBIT (earnings before interest and taxes) by interest expense. A company with a low interest coverage ratio means it has fewer earnings available to make interest payments, which can imply solvency issues and could mean a company would be at risk if interest rates go up. Continue reading...
What is Yield to Maturity?
The payments remaining on an interest-paying bond or instrument, plus principal, are totaled up and then annualized, and this annual rate is the yield to maturity. Yield to maturity is a calculation that helps an investor decide if he or she is getting a good deal. If yield to maturity is greater than the coupon rate, the bond is trading a a discount. If yield to maturity is less than the coupon rate, it is selling at a premium. If they are equal the bond is trading at par value. Continue reading...
What are Consumer Staples Stocks?
Consumer Staples are generally defined as companies that sell goods with inelastic demand, meaning that economic conditions generally don’t impact a consumer’s need for the product. They are also referred to as ‘non-cyclical,’ meaning that demand should not significantly waver even if the economy enters a recession. Because the earnings of consumer staples stocks is generally less volatile, they have historically outperformed other stocks during prolonged market downturns. Continue reading...
What is Euro LIBOR?
The primary benchmark for short-term interbank loans around the world is the LIBOR, and the Euro Libor is the LIBOR denominated in Euros. There are 16 banks in London that set the LIBOR at the start of each day, and it signifies the average lending rate that the banks would charge each other for short-term loans. The EURO LIBOR is the same, denominated in euros. LIBOR stands for the London Interbank Offered Rate. Continue reading...
What is the Hindenburg omen and is there any merit to it?
The Hindenburg Omen is technical indicator meant to predict bear markets, sell-offs, and declines. It is named after the famous tragedy of the Hindenburg Zeppelin in Germany on May 6th, 1937. The “Omen” identifies several very complex technical patterns in the behavior of the NYSE, such as the number of new highs, new lows, and some other indicators. It claims to predict market crashes within a very short period of time (about 40 days). Continue reading...