What kind of venture capital funds exist?
Different venture capital firms focus on different types of funding. Some are more attuned to late-stage funding for proven companies who still have not gone public, while others prefer to help startups with bright futures. There are large venture capital firms, which might invest in any start-up company, as long as they think that the company has potential. There are also more narrow VC firms specializing only in one or a small number of industries, such as clean energy, or semiconductors. Continue reading...
When Will Social Security Go Bankrupt?
Most estimates project that the Social Security Trust Funds will be depleted by 2037. The system could still function at 70% of their full obligations by transferring cash flow directly from social security taxes to the retired beneficiaries, which most people don’t realize when they spread the news that the system is tanking. Adjustments to the system and interest rates could change how this plays out and keep it operating closer to full capacity. Continue reading...
What is Income Inequality?
Income inequality is the difference in the average income of the lower/middle class and the upper class. Naturally the high income of very rich people in the country, which constitute a very small percentage of the population, will dwarf the average income of those who are not very rich. The worrisome thing is when the gap between them widens at an accelerating rate and the lower classes are not able to break through to the upper classes. Continue reading...
What is a Mortgage Rate Lock?
Mortgages take a while to process, but a broker or bank can lock in a rate for themselves or their clients. Locking-in rates costs money somewhere along the line, and the longer the rate is locked in, the more it costs. 60 days is generally the longest time frame you will see a rate locked in, due to the cost associated with that risk. Mortgage rates can be locked in for a period of time long enough to underwrite the loan. This might be for a period as short as 20 days or as long as 60 days. Continue reading...
What is the 'Fixed Assets to Net Worth' Ratio?
The fixed assets to net worth ratio is a calculation intended to measure the solvency of a company. It generally tells the analyst what percentage of a company’s assets are cash vs. fixed assets. To calculate the ratio, you divide net fixed assets into net worth. A fixed assets to net worth ratio greater than 0.75, generally, means that a company has too much of their net worth tied up in assets like equipment, machinery, land, and so on. Continue reading...
What is a Mortgage?
A mortgage is a debt instrument typically used as a finance mechanism to purchase real estate. When purchasing a piece of property or a home, new owners typically do not purchase the entire piece of real estate up front. As a mechanism to make a claim on the property while agreement to a set arrangements of payments to purchase it, a mortgage can be initiated. Over a period of several years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. Continue reading...
What is CAGR?
The Compound Annual Growth Rate (CAGR) is the compound discount rate which an investor would have to get to go from a present value to a future value. The compound annual growth rate can be computed using the ending value of an investment and taking the Nth root of it for the number of compounding periods (usually years). The idea is to have a smoothed average number that an initial would have to have received in a compounding investment to end up at the future value. Continue reading...
What are Articles of Partnership?
Articles of Partnership lay out the nature of the agreement entered into by partners in business entity. Also called a ‘partnership agreement,’ articles of partnership plainly describe the nature of the partnership, which partners are General Partners and which are Limited Partners, and other important details. Partnerships can take the form of Limited Liability Partnerships, General Partnerships, and even S Corporations (but those file articles of incorporation instead). Continue reading...
What is the commodity market?
The commodity market is an international network of exchanges which trade commodity spot contracts, futures contracts, and derivatives. The largest commodities exchange in the world is the CME Group in Chicago. Futures are a large part of commodities trading, and the commodities futures market includes currency futures and swaps, index futures and single-stock futures, and other derivatives based on futures contracts. Continue reading...
What is a naked call?
A naked call is a type of option contract where the seller of a call does not own the underlying security, thereby exposing them to unlimited risk. Investors have the ability to “write” or sell options contracts as well as to buy them. The seller of a call option has opened a position in which the buyer is given the right to buy 100 shares of a stock at the strike price named in the contract. The seller – along with all other sellers of calls for that security – are the ones who must cover and close the open positions if the call owners exercise their options. Continue reading...