What Kinds of ETFs Exist?
There are many ETFs on the market and more popping up all the time. Currently, there are over 900 ETFs available on the market, covering basically every market sector, industry, commodity, asset class, country, style of investing on the stock market. The amount of money invested in ETFs has increased exponentially over the last decade and is likely to continue in that direction. Many more ETFs are introduced to the market every year, many with different and creative strategies that have never been available in a single investment product before. These might use Forex, rate swaps, CMOs, futures, options, short-selling, and other advanced or institutional trading strategies, to create a new kind of position in a sector, industry, or geography to which the investor wants to gain exposure. Continue reading...
What are the Vesting Rules for My Keogh Plan?
Vesting rules depend on the type of Keogh contributions being made. The IRS imposes certain rules on Keogh Plans, which includes vesting restrictions. Different employers might have totally different vesting schedules, as long as they satisfy the IRS rules. It depends on the type of contribution being made, such as matching or profit-sharing or money-purchase contributions, whether the plan is a QACA, and so on. Many contributions are immediately vested, while some are gradually vested over a few years, and some are on a cliff-vesting schedule. Continue reading...
What is an Income Bond?
Income bonds are issued by companies and they will only pay a coupon or interest rate if the company generates adequate earnings to do so. Non-payment of a coupon or interest rate does not necessarily mean that the company is in default. The principal amount plus some interest is due to the bondholder at maturity. Income bonds are sometimes issued by companies who are experiencing hard times and cannot guarantee a coupon payment to bondholders. Continue reading...
What is Mortgage Suitability?
Mortgage suitability is a standard that does not technically exist in a regulatory way at this point, even though some legislators and consumer protection groups have sought such a standard. Some financial services representatives, for instance, operate under a suitability standard that takes the financial situation and goals of the individual into account when making investment recommendations. This protects consumers to the extent that it deters some professionals from taking advantage of the consumer and being possibly subject to fines, sanctions, and suspension or loss of license due to violations of the standard. Continue reading...
What are Accounts Receivable?
Accounts Receivable is part of the Assets on a Balance Sheet, and it details the money due to the company from its customers or debtors in the near future. Accounts Receivable will include money which should be received by the company from those who owe it. This appears in the Current Assets section of the Balance Sheet. The money should be receivable within the next 30 or 90 days, generally. This might be rent payments or other bills which are paid regularly or after the goods or services have been rendered. An account receivable also might include interest due. Continue reading...
What is Hyperinflation?
Hyperinflation is when a rate of inflation grows exponentially, and a currency is rapidly devalued. Hyperinflation occurs in the midst of dire economic circumstances. This is usually partially due to the piling on of downward price pressure in which newly printed currency rapidly floods the market as the government attempts to cover debt obligations. Sometimes this stems from situations where the government is having trouble receiving adequate taxes from the population. Continue reading...
What are Actively-Managed ETFs?
At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...
What is a currency peg?
The currency pairs you are most familiar with, such as EUR/USD or USD/JPY, are floating currencies, meaning that their value changes freely with market forces. Some countries have chosen to peg their currency to another currency, most commonly the USD. The exchange rate between their currency and the peg currency never changes, unless policy makers tweak things slightly. Currencies can also be pegged to commodities or baskets of other currencies. Pegged currencies are not discussed often in the Forex market because their value is tied directly to the value of another, more liquid floating currency, or to a basket of currencies, or to a commodity. Continue reading...
How are option prices computed?
Option prices are decided by the buyers and sellers in the marketplace, but are tied closely to the amount of risk inherent in the agreed upon expiration date and strike price. Option prices change as the market factors in the relevant information. The main factor is the strike price. The closer an option’s strike price is to the actual market price of a security, the higher it’s price will be. Once it’s in-the-money, it has inherent value that makes it essentially the same price as the market security that underlies it. The expiration date of the contract is also a factor because if the expiration date is closing in, and the strike price is not quite close enough to the market price of the underlying asset, there is little chance that the option will be useful. Continue reading...
How to use Bollinger Bands in trading
Bollinger Bands were developed by famous trader John Bollinger as a technical analysis tool to discern the likely trading range of a security. A Bollinger Band is typically two standard deviations from a moving average line, both above and below the average. Standard deviation is another word for the average volatility of a price over a length of time. It is typical for a trader looking up the historical price chart for a security to compare it to a moving average line. Continue reading...