What is a 457 Plan?
A 457 is a deferred compensation arrangement that is available to some government employers and non-profit organizations. A 457 Plan, offered to state and local public workers and employees of a few nonprofit organizations, functions similarly to a 401(k) or 403(b): the contributions are automatically deducted from your paycheck before taxes and transferred into your account, where they grow tax-deferred until retirement. Continue reading...
What Should My First Savings Vehicle Be?
Start basic, and just open a savings account at a bank or create a brokerage account at a major custodian (Charles Schwab, Fidelity, for example). As a rule of thumb, you should have six months’ worth of living expenses in this account. Another good rule of thumb is to avoid touching this money at all costs, and never invest this money in risky assets like stocks. It’s better to keep the money as liquid as possible, so even buying Certificates of Deposit (CDs) may not be the best idea. The purpose of this money is not to make you rich – this is your safety net. Continue reading...
What is the Investment Advisors Act of 1940?
The IAA sought to regulate an industry that was deemed to be of public concern and within the Federal jurisdiction, though it did define some state-specific jurisdictions. It defines investment advisors and made laws dealing with fraud, advertising, non-public client information, disclosures, handling of client funds, and so forth. The Investment Advisors Act of 1940 established definitions for the capacity in which an investment adviser and investment advice could be defined, and made rules concerning the standards by which advisors should operate. Continue reading...
How Do You Mine Ethereum?
When mining on the Ethereum blockchain, you are rewarded in Ether, but you may need to do some calculations to find out it if will be profitable for you. Ethereum mining can still be done profitably, as of the time of this writing, by individuals on their home computers, as long as they have decent hardware. This is no longer the case for Bitcoin, Litecoin, and a few other coins, due to the development of ASIC (application-specific integrated circuits) mining rigs used by the nascent mining industry, which have rendered home computers obsolete and have begun to present a significant centralization threat on the decentralized blockchain. Continue reading...
What is the Rising Wedge (Bullish) Pattern?
The Rising Wedge pattern forms when prices seem to be spiraling upward, and two upward sloping trend lines are created with the price hitting higher highs (1, 3, 5) and higher lows (2,4). The two pattern lines intersect to form an upward sloping triangle. Unlike Ascending Triangle patterns, however, both lines need to have a distinct upward slope, with the bottom line having a steeper slope. This pattern is commonly associated with directionless markets, since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. However, there is a distinct possibility that market participants will either pour in or sell out, and the price can move up or down with big volumes (leading up to the breakout). Continue reading...
What is trend analysis?
Trend analysis is an attempt to explain market movements as general directional tendencies of various strength over various time frames. Trend analysis also works to predict future movements based on the probability of a trend continuing. The use of moving averages with support and resistance levels is the most commonly used methodology in trend analysis, and several trading strategies employ these tools in various ways. Trade volume, spreads, news, crossover points, and other market factors are also considered in the discipline. Continue reading...
What is a Leveraged Buyout?
A leveraged buyout occurs when members of management use outside borrowed capital to buy a controlling share in the company. Often times, the assets of the company being acquired are used as collateral for the borrowed capital. The purpose of leveraged buyouts is to acquire another company without having to commit a lot of working capital up front. In a typical leveraged buyout, you may see a ratio of 90% debt financing to 10% equity used to acquire the company. Continue reading...
What is foreign exchange intervention?
If a central bank takes actions that intentionally and artificially affect the value of a currency, particularly its own, it is engaging in what is known as a Foreign Exchange Intervention, or an interventionist policy. Central banks occasionally use interventions in foreign exchange markets to achieve a desirable end. The banks will intentionally make trades and hold certain amounts of currencies or derivatives with the sole purpose of manipulating the value of their domestic currency. The reasons for that manipulation might be to slow down inflation or to make their county’s exports look more attractive by pushing the value of their currency lower. Continue reading...
What is the Capital Market Line?
The Capital Market Line is a complex concept, but put simply, it is a calculation meant to give the investor/analyst a range of potential returns for a portfolio, based on the risk free rate and the standard deviation of the portfolio. The Capital Market Line is a part of the capital asset pricing model (CAPM) that solves for expected return at various levels of risk. It takes into consideration a portfolio’s risk assets and the risk-free rate. 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...