What is a ratio call spread?
Ratio call spreads are options strategies where the investor combines purchased calls and short calls at the same expiration but with different strike prices. A Ratio Call Spread starts off as a delta-neutral strategy, which means that even if you have two long calls and one short call, the sensitivity of your overall position to move in the underlying is equal whether it moves up or down by small amounts. Continue reading...
Can I Leave My 401(k) With My Former Employer?
Generally a plan will allow you to leave your assets in there indefinitely, but this is probably not ideal for you. Most custodians will be happy to hold onto your account dollars as long as you’re willing to leave them there. They don’t have to spend any time servicing your account since you can’t make contributions and probably aren’t even able to reallocate your assets, and they will continue to make money on your account with the built-in fees. You may be charged inactive account fees or small account fees as well. Continue reading...
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...
Where do I Get Started in Saving for Retirement?
Your employer is usually the best place to start, but you can also open your own retirement account (an IRA or Roth IRA, for instance) at your bank or a major custodian (like Charles Schwab or Fidelity). In some cases, there are income limits for contributing to a retirement account, which a financial advisor can discuss with you. A smart idea is to set up an automatic contribution to your retirement account, such as 10% of your monthly income. That way you’re automatically saving, and saving regularly. Continue reading...
What is the Broadening Top (Bullish) Pattern?
The Broadening Top pattern forms when the price of a pair progressively makes higher highs (1, 3) and lower lows (2, 4) following two widening trend lines. The price is expected to move up or down past the pattern depending on which line is broken first. What distinguishes a Broadening Top from a Broadening Bottom is that the price of the pair is rising prior to entering the pattern formation. This type of formation happens when volatility is high or increasing, and when a pair’s price is moving with high volatility but little or no direction. It potentially indicates growing investor nervousness and indecisiveness. Continue reading...
What is Economies of Scale?
Economies of Scale is an economic concept that says the efficiency of production rises as the quantity of goods produced increases. With scale, the costs associated with production should decrease thereby allowing a company to increase profitability with more goods produced. However, in many cases the upside potential is not necessarily unlimited. A company may experience diminishing marginal returns to producing more goods. Continue reading...
What is the Law of Demand?
The Law of Demand states that as prices increase, demand will decrease, and vice versa. That is to say, price and quantity are inversely related. There are some things which have an inelastic demand, meaning the quantity demanded will remain constant no matter the price. Medicine is a good example. Vices to which people are addicted are as well, so some degree, and tobacco stocks are considered fairly safe and defensive in bad economic times. Continue reading...
What is a REPO?
REPO is shorthand for Repurchase Agreement. It is a money-market practice where two entities agree to buy/sell government securities overnight and reverse the transaction the next day for the sake of providing the selling entity with short-term cash. Repurchase Agreements provide the selling party with short term liquidity, and are considered a money-market instrument. A third party usually acts as a clearing agent. Continue reading...
What is Mortgage REIT?
Mortgage REITs are a type of Real Estate Investment Trust (REIT) which offers investors income distributions which result from the interest payment on mortgage loans. Investors enjoy REIT investments as a high-yield income investment which offers exposure to an asset class which is not necessarily correlated with other major asset classes. Mortgage REITs are a subset of this asset type which derives income from the interest due on mortgage loans, which are generally purchased in the form of mortgage-backed securities. Equity REITs are the other major type of REIT, and they invest directly in income-producing properties. 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...