How Can I Establish a Self-Employed 401(k)?
Establishing an Individual 401(k) might only take you a matter of minutes. You can establish a Self-Employed 401(k) by going to an Individual 401(k) provider, or asking your Financial Advisor for help and/or recommendations. However, make sure that you are satisfied with the conditions your provider offers. There are dozens of choices available to you, all with different investment options and fee structures. There are plenty of good ones without annual plan fees, lost cost investment options, and a wide variety of investment choices. Continue reading...
What is the Difference Between a Thrift Savings Plan and Other Retirement Plans?
The main difference is that the TSP is only for Federal employees. A Thrift Savings Plan is essentially a 401(k) for employees of the federal government. It functions in the same ways and is subject to the same limitations. The contribution limits and catch-up limits are the same, as well as the employer contribution limit. The plan actually has lower fees than most 401(k)s, so that’s one difference. The investment options are fairly limited, but not much more than regular 401(k)s. There are basically 5 index funds to choose from and then a series of target-date funds that blend the index funds. Continue reading...
How Do I Allocate My Assets in Retirement?
How you allocate your assets in retirement depends on your goals and objectives for the assets, and the amount of growth you need to reach them. Your asset allocation also depends on your age and risk tolerance, all of which need to be factored-in each year when allocating your portfolio. The very first step in deciding an asset allocation is to determine your total level of liquid assets, what your desired level of growth and/or income is over long stretches of time, and your tolerance for risk/volatility. Most investors need more growth over time than they think, and often times it results in investors under-allocating to stocks or other risk assets. Continue reading...
What is Earnings Before Tax (EBT)?
Earnings before tax (EBT) is used to look at cash flows after expenses but before taxes. In a world without tax, this is what earnings would look like. Taking advantage of an advantageous tax-event, or hiring a better CPA, or merging with a company that can reduce the tax implications of some regular transactions, can bring earnings closer to their before-tax amount. Earnings before tax from an accounting standpoint is net income (which is another word for earnings) with taxes added together with it. Continue reading...
What is Earnings Power?
Earnings power is mostly a concept that investors talk about rather than a quantifiable amount, but there is a Basic Earnings Power (BEP) ratio that some analysts use. BEP is the EBIT (earnings before interest and taxes) of a company divided by its total assets (net assets), which is also called Return on Total Assets (ROTA). Earnings power is similar to the concept of staying power when most investors use it; a company that has had strong earnings and growth, and that seems to have the skill and resources to keep earnings up well into the future, is said to have earnings power. Continue reading...
How Do I Invest Money in My Pension?
Employees are not able to control investments in a Pension Fund, but you can control a few variables. You cannot direct investments in your pension. Since a pension is a type of Defined Benefit Plan provided by your employer, the company worries about the investments, and you will receive a fixed monthly payment that is calculated based on your age, salary, and number of years worked for the company. Continue reading...
What Does Having a Long Position Mean?
A long position in a security means owning shares and having a positive investment balance in a stock, bond, commodity, etc. This is done by simply buying and owning the investment. An investor with a long position in a stock will benefit financially when the price of the stock rises. What is a Short Position? What is Short Selling? Continue reading...
What is a bear straddle?
A Bear Straddle is another name for a short straddle, in which the investor writes (goes short) on both a call and a put, for the same strike price and expiration, on the same underlying stock. A short straddle can be called a bearish position because the investor believes that the underlying will basically hibernate until expiration. As long as the price of the underlying remains close to the strike price, the investor can make a profit, with the maximum profit being the premium collected from the sale of the options which have expired worthless. Continue reading...
What is active management?
Active management is the practice of attempting to outperform the market with selection and timing. Active management is a thoughtful and time-consuming approach to investing and is the opposite of Passive management. Active managers seek to outperform the benchmarks for their portfolio by researching and selecting stocks and other assets based on strategies and analysis methods thought to be superior. Continue reading...
What does nominal value mean?
The nominal value is the original stated value of a security or asset before it undergoes time value calculations that may change its market value. The nominal value is also known as face value when it refers to the value stated on a bond or other issued security. Taking accrued interest or time value into account for issued securities will give you the market value, but the nominal value will not change. Continue reading...