What are the Vesting Rules for My Self-Employed 401(k)?
There is no vesting required for self-employed 401(k) (aka Solo K) plans, since you are the employer and the employee. Vesting is a process in which assets that were completely owned by one party are eventually made the property of another party who has had use of the assets. In retirement plans, employer contributions typically have a vesting schedule, partially to give employees a reason to stick around for a few more years. Continue reading...
What is a Cash-Balance Plan?
Cash balance plans are a type of pension in which the benefit is stated as a future account balance rather than an income stream. A Cash-Balance Plan is very similar to a normal Pension Plan. You do not technically contribute anything to the plan (unless you are an owner-employee), and you don’t have any control over the assets which are managed on your behalf. In a normal pension, the benefit waiting for you in retirement is a monthly income stream, but in a Cash Balance plan, your future benefit is stated as an account balance, which you will be able to take as either a lump sum or an income stream. Continue reading...
What is Probate?
Probate is the legal process that takes place after a person’s death, during which legal documents (such as wills and trusts) are reviewed and enforced. A person’s will generally must be validated by the court, after which the person’s assets are distributed to the heirs accordingly. If there is no will, then the probate court will decide how to distribute the assets, which may not be consistent with the deceased’s actual wishes. Continue reading...
What is the EURO STOXX 50?
The EURO STOXX 50 is an index designed to give a broad representation of stock performance across the euro zone. The EURO STOXX 50 is an index comprised of the 50 largest and most liquid stocks in the euro zone, and is designed to “provide a blue-chip representation of Super-sector leaders in the Eurozone.” The performance of the EURO STOXX 50 is generally a good indicator for how Europe’s economy is doing. Continue reading...
What are some strategies for diversifying a portfolio?
There are many ways to diversify a portfolio, but all of them center around a strategy of owning different types of asset classes. For equity investors, perhaps the best strategy for diversifying a portfolio is to own companies from different sectors in different style categories, maybe even across the globe. The S&P 500 has ten different sectors, and a very broadly diversified portfolio should have exposure to each one in some capacity. Continue reading...
What is the Three Falling Peaks (Bearish) Pattern?
The Three Falling Peaks pattern forms when three minor Highs (1, 3, 5) arrange along a downward-sloping trend line. This pattern often emerges at the end of a rising trend, when a security slowly rolls over. It potentially indicates sellers moving in to replace buyers, which pushes the price lower. If the price breaks out from the bottom pattern boundary, day traders and swing traders should trade with the DOWN trend. Consider selling the security short or buying a put option at the downward breakout price level. To identify an exit, compute the target price by subtracting the pattern’s height (maximum price minus minimum price within the pattern) from the breakout level the lowest low. When trading, wait for the confirmation move, which is when the price moves below the breakout level. Continue reading...
What is Return on Sales?
Also called net operating margin, return on sales can indicate how well a company makes use of its sales revenue. By dividing Operating Profit by Net Sales, we can arrive at the Return on Sales. Essentially what we’ve done is broken down profits on a per sales basis. We can see what percentage of sales ends up as profit, or, on the other side of the coin, how much profit is generated per unit of sales. This can be useful for a comparison of companies of different sizes, because it excludes their assets, capital structures, taxes, and interest. Continue reading...
What is an "Ex-Dividend"?
Ex-Dividend is a classification on a stock that indicates the dividend payable is to the seller of the stock, not the buyer. If a stock is sold on the ex-date or after, the seller will receive the dividend payment. More articles about Dividends — Found Here Continue reading...
What is Stop-Loss Order?
A stop-loss order is appended to a securities position being held long or short, and stipulates that the security is to be sold or bought if the price moves beyond the stop price, at which point the investor seeks to "cut his losses," or limit his potential exposure to losses. A stop-loss order will name a price below the market price on a long position and above the market price on a short position, at which point a sell order will be triggered for the long position and a buy order will be triggered to cover the short position, with the goal being to limit the potential losses to which an investor is exposed. Continue reading...
What is the Elliott Wave Theory?
Elliot Wave Theory incorporates the natural cycles of nature and waves with market movements in an attempt to explain and predict the historical and future prices of stocks. Penned by Ralph Elliott in the early 20th century, the Elliott Wave Theory attempts to organize the seemingly random behavior of the market into cycles. The theory visualizes a series of waves cycles, each representing a different length of time or magnitude of a trend or cycle. Continue reading...