MONEY MATTERS
& INVE$TING
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If it sounds too good to be true, it usually is! |
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P.T. Barnum (Barnum & Bailey Circus) once said that "a sucker is born every minute", don't be one! |
| GAINERS OR LOSERS? |
Regarding the minimum wage, it was certainly a good idea to move it up, as long as those gainers realized that someone must provide the new monies they now receive. Unfortunately, the local and federal government championed this increase, as it now provided a wind fall in new taxes due to the increase in wages. Compounding this situation, those who now enjoy the sought-after increase in wages are having to pay increases for everything to the tune of between 8-19%, and in some cases doubling, as their employers had to raise their prices in order to meet the new wages and everything went down-hill as to their new buying power. Every single provider of products and services had to pass cost down the line, as well as now every aspect of middle class and those in poverty are now experiencing run-away cost due to dramatic inflation. Who really gained? |
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MUNICIPAL BONDS When you purchase a municipal
bond, you lend money to the "issuer," the government entity
(states, cities, counties and other governmental entities) that issued the
bond. In exchange, the government entity promises to pay you a specified
amount of interest, usually semiannually, and return your money, also known
as "principal," on a specified maturity date. The money they raise
from these bonds is used for build highways, hospitals and sewer systems, as
well as many other projects for the public good. Not all
municipal bonds offer income exempt from both federal and state taxes. There
is an entirely separate market of municipal issues that are taxable at the
federal level, but still offer a state—and often local—tax exemption on
interest paid to residents of the state of issuance. Most of this booklet
refers to ‘munies’, which are free of federal
taxes. Because of the special
tax-exempt status of most municipal bonds, investors usually accept lower
interest payments than on other types of borrowing (assuming comparable
risk). This makes the issuance of bonds an attractive source of financing to
many municipal entities, as the borrowing rate available in the open market
is frequently lower than what is available through other borrowing channels. Municipal bonds are one of
several ways’ states, cities and counties can issue debt. Other mechanisms
include certificates
of participation and lease-buyback agreements. While these
methods of borrowing differ in legal structure, they are similar to the
municipal bonds described in this article. One of the primary reasons
municipal bonds are considered separately from other types of bonds is their
special ability to provide tax-exempt income. Interest paid by the issuer to
bond holders is often exempt from all federal taxes, as well as state or
local taxes depending on the state in which the issuer is located, subject to
certain restrictions. Bonds issued for certain purposes are subject to the
alternative minimum tax. The type of project or
projects that are funded by a bond affects the taxability of income received
on the bonds held by bond holders. Interest earnings on bonds that fund
projects that are constructed for the public good are generally exempt from
federal income tax, while interest earnings on bonds issued to fund projects
partly or wholly benefiting only private parties, sometimes referred to as
private activity bonds, may be subject to federal income tax. The laws governing the
taxability of municipal bond income are complex; however, bonds are typically
certified by a law firm as either tax-exempt (federal and/or state income
tax) or taxable before they are offered to the market. Purchasers of
municipal bonds should be aware that not all municipal bonds are tax-exempt. The risk
("security") of a municipal bond is a measure of how likely the
issuer is to make all payments, on time and in full, as promised in the
agreement between the issuer and bond holder (the "bond
documents"). Different types of bonds carry different securities, based
on the promises made in the bond documents:
In addition, there are
several other types of municipal bonds with different promises of security. |
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The tool of choice is the
Fed’s ability to influence the direction of interest rates. When interest
rates are low, working capital is easier to obtain. This can spur economic
development because, the more cash you have available, the more you are
likely to pay for something you want. Left unchecked, however, and the result
is “too much money chasing too few goods,” as the saying goes. Unfortunately,
this leads to inflation as businesses realize they can charge higher prices
for their goods and services. Suddenly, it costs you more for just about
everything, as they are most often tied together in one way or another, the
cost increases passed on from one supplier to the next, and of course, ends
up at the checkout stand. If interest rates are
too high,
however, the result can be a recession and, in extreme cases, deflation; the
result of which can be devastating for most of the economy. The discount rate is the interest rate banks are charged when they borrow funds overnight directly from one of the Federal Reserve Banks. When the cost of money increases for your bank, they are going to charge you more as a result. This makes capital more expensive and results in less borrowing. Spending goes down, this, it becomes more difficult for prices to rise; the opposite being true when capital becomes less expensive due to a decrease in the discount rate. The Federal funds rate is the rate that banks charge each other for overnight loans. The first question comes to mind, why do banks borrow from each other, the answer, the Fed can (and does) require banks to keep a certain percentage of assets in the form of cash on hand or deposited in one of the Federal Reserve banks. From time to time, it will establish a required ratio of reserves to deposits; when this ratio is increased, more cash must be kept in the vault at night, making it more difficult (and expensive) for funds to be acquired. When the reserve requirement is lowered, the money supply is loosened; because less cash has to be kept on hand it becomes easier to acquire capital. The much-heralded monthly Federal Reserve meeting is piloted by its Federal Open Market Committee, it targets a specific level for the federal funds rate. This rate directly influences other short-term interest rates, such as deposits, bank loans, credit card interest rates, and adjustable rate mortgages. The stock market watches the monthly FOMC meetings very closely, as it has a profound and sometimes dramatic effect on the market. It might seem a small amount, but, a 1/4 point decline in the rate not only stimulates economic growth, but sends the markets higher, unfortunately if it stimulates too much growth, inflation will raise its ugly head. Surprisingly, a 1/4 increase
in the rate will curb inflation, but has the ability to slow growth and
prompt a decline in the markets. Stock market analysts are ever watchful and
with a cocked ear for any casual uttered statement by anyone on or associated
with the Federal Open (FOMC) Market Committee, trying to get a clue as to what
the Feds next move might be. |
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If you are turned down for
credit or find an error in your credit (which is free, from the three major
reporting agencies) report, you are entitled to have it investigated by
the credit bureau and corrected at no charge. However, if negative
information on your credit file is accurate, then only time and responsible
credit habits can help restore a bad credit history. |
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Derivatives are financial contracts,
or financial instruments, whose values are derived from the value of
something else (known as the underlying). The underlying on which a
derivative is based can be a credit derivative based on loans, bonds or other
forms of credit. The main types of derivatives are forwards,
futures, options, and swaps. Derivatives can be used to mitigate the risk
of economic loss arising from changes in the value of the underlying. This
activity is known as hedging. Alternatively, derivatives can be used by
investors to increase the profit arising if the value of the underlying moves
in the direction they expect. This activity is known as speculation. Because the value of a derivative is
contingent on the value of the underlying, the notional value of derivatives
is recorded off the balance sheet of an institution, although the market
value of derivatives is recorded on the balance sheet In finance a
hedge is a position established in one market in an attempt to offset
exposure to the price risk of an equal but opposite obligation or position in
another market — usually, but not always, in the context of one's commercial
activity. Hedging is a strategy designed to minimize exposure to such
business risks as a sharp contraction in demand for one's inventory, while
still allowing the business to profit from producing and maintaining that
inventory. Some form of
risk taking is inherent to any business activity. Some risks are considered
to be "natural" to specific businesses, such as the risk of oil
prices increasing or decreasing is natural to oil drilling and refining
firms. Other forms of risk are not wanted, but cannot be avoided without
hedging. Someone who has a shop, for example, expects to face natural risks
such as the risk of competition, of poor or unpopular products, and so on.
The risk of the shopkeeper's inventory being destroyed by fire is unwanted,
however, and can be hedged via a fire insurance contract. Not all hedges are
financial instruments: a producer that exports to another country, for
example, may hedge its currency risk when selling by linking its expenses to
the desired currency. Banks and other financial institutions use
hedging to control their asset-liability mismatches, such as the maturity matches
between long, fixed-rate loans and short-term (implicitly variable-rate)
deposits. A hedger (such
as a manufacturing company) is thus distinguished from an arbitrageur or
speculator. (Such as a bank
or brokerage firm) in derivative purchase behavior. A derivative
instrument (or simply derivative) is a financial instrument, which derives
its value from the value of some other financial instrument or variable. For
example, a stock option is a derivative
because it derives its value from the value of a stock. An interest rate swap is a derivative because
it derives its value from one or more interest rate indices. The value(s)
from which a derivative derives its value is called its underlier(s). By contrast, we might speak of primary instruments, although the term
cash instruments is more common. A cash instrument is an instrument whose
value is determined directly by markets. Stocks, commodities, currencies and bonds are all cash instruments. The
distinction between cash and derivative instruments is not always precise,
but it is a useful informal distinction. Derivative
instruments are categorized in various ways. One is the distinction between
linear and non-linear derivatives. The former has payoff diagrams that are
linear or almost linear. The latter has payoff diagrams that are highly
non-linear. Such non-linearity is always due to the derivative either being
an option or having an option embedded in its structure. A somewhat arbitrary distinction is between vanilla and exotic derivatives. The former tends to be simple and more common; the latter more complicated and specialized. There is no definitive rule for distinguishing one from the other, so the distinction is mostly a matter of custom. |
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The basic types of auto insurance coverages are: |
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There
are several types of residential insurance policies. The HO-4 policy is
designed for renters, while the HO-6 policy is for condo owners. Both HO-4
and HO-6 cover losses to your personal property from 16 types of perils:
*Policies designed for
condominium owners primarily cover contents. However, there is a small
provision included to cover the portions of the dwelling that are your
insurance responsibility as defined by the governing rules of the
condominium. Generally, additional dwelling coverage may be purchased if the
provision included in the package is not sufficient. ** Renting a Residence – If you are renting a residence, coverage for your contents is available through renter’s insurance |
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Brokerage firms generally are
classified as full service, discount, or online organizations. Investors who
do not have time to research investments on their own will likely rely on a
full-service broker to help them construct an investment portfolio, manage
their investments, or make recommendations regarding which investments to
buy. Full-service brokers have access to a wide range of reports and analyses
from the company’s large staff of financial analysts.
These analysts research companies and recommend investments to people with
different financial needs. Persons who prefer to select their own investments
generally use a discount or online broker and pay lower commission charges.
Discount firms usually do not offer advice about specific securities. Online
brokerage firms make their trades over the Internet in order to keep costs
down and fees low. Discount brokerage firms usually have branch offices,
while online firms do not. Most brokerage firms now have call centers staffed
with both licensed sales agents and customer service representatives who take
orders and answer questions at all hours of the day. Brokerage firms also provide
investment banking services; that is, they act as intermediaries between
those companies or governments which would like to raise money and those with
money or capital to invest. Investment banking usually involves the firm
buying initial stock or bond offerings from private companies or from
Federal, State, and local governments and, in turn, selling them to investors
for a potential profit. This service can be risky, especially when it
involves a new company selling stock to the public for the first time.
Investment bankers must try to determine the value of the company on the
basis of a number of factors, including projected growth and sales, and
decide what price investors are willing to pay for the new stock. Investment
bankers also advise businesses on merger and acquisition strategies and may
arrange for the transfer of ownership. Companies that specialize in
providing investment advice, portfolio management, and trust, fiduciary, and
custody activities also are included in this industry. These companies range
from very large mutual fund management companies to self-employed personal
financial advisors or financial planners. Also included are managers of
pension funds, commodity pools, trust funds, and other investment accounts.
Portfolio or asset management companies direct the investment decisions for
investors who have chosen to pool their assets in order to have them
professionally managed. Many brokerage firms also provide these services.
Personal financial advisors can manage investments for individuals as well,
but their main objective is to be able to provide advice on a wide range of
financial matters.
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General information
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The fasted
growing crime in the US and it is not even done in the presence of the
victim. Most often the crime is performed on-line, by mail, on the telephone,
or on a fax-based transactions, This crime is known as
non-self-revealing.
TransUnion,
Equifax, Experian are the major credit reporting agencies in the US. -Do you look
over your monthly credit card statement each month to make sure there aren't
any charges showing up that are not yours? If there are charges not initiated
by you, immediately contact that company. |
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· Realtor commissions - typically 5-7% (7% is actually very high) of the
selling price. (It is a good idea to shop around at several different real
estate agencies to determine which one offers the greatest value for the
money). · Closing costs,
including attorney, and other professional fees. (Next to the commission on
the sale of the home, closing costs are often the biggest expense of selling
a home. One of the costliest parts of closing costs is often title insurance.
In most cases title insurance ranges between $800 and $1,800, and varies
according to region, and rise with the cost of the home. · Excise taxes on the sale. (Some states are authorized to levy
a real estate excise tax on all sales of real estate, measured by the full
selling price, including the amount of any liens, mortgages and other debts
given to secure the purchase. · Property taxes and any homeowner association fees. (These are always pro-rated, split
by the buyer and seller, the amount set by the due dates on them).
Capital gain tax on home
sale:
The federal
Taxpayer Relief Act of 1997 says when you sell your home you can keep, tax
free, capital gains of up to $500,000 if you are married filing jointly or
$250,000 for single taxpayers, or married taxpayers who file separately. To
qualify for the exclusion, you must have used the home as your principle
residence for at least two of the prior five years. It is not a onetime tax
exclusion. You can use the exclusion as often as you meet the qualifications. The
federal Internal Revenue Service Restructuring and Reform Act of 1998 further
clarified the law and says you can prorate the $500,000/$250,000 exclusion
(not your specific gain) if unforeseen events, such as a job change, illness,
or some other hardship forced you to sell before you meet the two-year residency
requirement. |
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The common denominator
of those who have achieved financial success "Extreme Integrity" |
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If your employer offers a
401(k) plan, it makes a lot of sense to participate in it as soon as
possible. If you start early you can very likely have a million or more
dollars in your account by the time you retire. The primary advantages to a
401(k) are that the money is contributed before it is taxed and your employer
may be matching your contribution with company money. There is a small downside to the employer contribution, this being a "vesting schedule". Vesting means that there is usually a tiered schedule for when money the employer contributes to your account is actually yours. For example, your employer may have a three-year vesting schedule that increases your ownership of the money by one-third each year. After three years, the money is all yours and all future contributions are 100-percent yours. Congress declared in 1978
that Americans needed a bit of encouragement to save more money for
retirement, and not entirely depending on Social Security. They thought that
if they gave people a way to save for retirement while at the same time
lowering their state and federal taxes, they might just take advantage of it.
The Tax Reform Act was passed. Part of it authorized the creation of a
tax-deferred savings plan for employees. The plan got its name from its
section number and paragraph in the Internal Revenue Code -- section 401,
paragraph (k). 401(k) plans are part of a family of retirement plans known as "defined contribution" plans. Other defined contribution plans include profit sharing plans, IRAs and Simple IRAs, SEPs, and money purchase plans. They are called "defined contribution plans" because the amount that is contributed is defined either by you the employee or the employer. In a nut shell: -When you participate in a
401(k) plan, you tell your employer how much money you want to go into the
account. You can usually put up to 15 percent of your salary into the account
each month, but the employer has the right to limit that amount. It might be
worth your while to rally for a higher limit if it isn't as high as you would
like it to be. The IRS limits your total annual contribution. -The money you contribute
comes out of your check "before taxes are calculated", and
more importantly, before you have the opportunity to spend it. That makes the
401(k) one of the most effective ways to save for your retirement. -Usually, by not always, your employer will match a
portion of your contribution. |
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Mutual funds can invest in
many different kinds of securities. The most common are cash, stock, and
bonds, but there are hundreds of sub-categories. Stock funds, for instance,
can invest primarily in the shares of a particular industry, such as
technology or utilities. These are known as sector funds. Bond funds
can vary according to risk (high-yield junk bonds or investment-grade
corporate bonds), type of issuers
are government agencies, corporations, or municipalities, or maturity of the
bonds (short- or long-term). Both stock and bond funds can invest in
primarily U.S. securities (domestic funds), both U.S. and foreign securities
(global funds), or primarily foreign securities (international funds). Most mutual funds' investment
portfolios are continually adjusted under the supervision of a professional
manager, who forecasts the future performance of investments appropriate for
the fund and chooses those which he or she believes will most closely match
the fund's stated investment objective. A mutual fund is administered through
a parent management company, which may hire or fire fund managers. Mutual funds are liable to a
special set of regulatory, accounting, and tax rules. Unlike most other types
of business entities, they are not taxed on their income as long as they
distribute substantially all of it to their shareholders. Also, the type of
income they earn is often unchanged as it passes through to the shareholders.
Mutual fund distributions of tax-free municipal bond income are also tax-free
to the shareholder. Taxable distributions can be either ordinary income or
capital gains, depending on how the fund earned those distributions. Mutual funds offer several advantages over investing in
individual stocks. For example, the transaction costs are divided among all
the mutual fund shareholders, who also benefit by having a third party
(professional fund managers) apply their expertise, dedicate their time to
manage and research investment options. However, despite the professional
management, mutual funds are not immune to risks. They share the same risks
associated with the investments made. If the fund invests primarily in
stocks, it is usually subject to the same ups and downs and risks as the
stock market. |
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This is when investor purchases
a house at a considerable discount from market (estate, foreclosure) value.
The price may also be due to the condition of the property, such as the need
for major renovations and/or repairs needed or the owner(s) needing to sell a
house quickly, for whatever reason. The investor will then
perform necessary renovations and repairs, and attempt to make a profit by
selling the house quickly at a price nearer to full market value, hence,
"Flip". Many investors do this on
full-time basis, and some do very well. They have done their homework and
understand the various hurdles they will encounter. Unfortunately,
there is an adverse financial aspect to those who participate in
"flipping", when interest rates go up, the cause and effect
resulting in lack of sales, and major price depreciations (often far below)
their previous increases, results in a excessive
properties on the market at one time, obviously not selling due to lack of
buyers, due to the increase in interest they would have to pay, consequently
causing a serious downturn in local market and potentially the economy as a
whole causing a domino effect. Here the investor is really in trouble, since
they are paying the mortgage, putting time and money in the property, as well
as taxes and insurance, having to ride it out, until the real estate market
returns, which on occasion can be a few years. The method of escape from the
property is precisely why you see so many TV commercials attesting to those
"flippers" telling you how many LLC or Corporations they own, as
that is some badge of success, well it is not. All this does is to provide
them the opportunity to walk away from the property, giving it back to the
lender. Their liability being the actual dollars they have invested. |
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Day traders quickly buy and
sell stocks (sometimes only seconds to minutes) continuously in hopes that
their stocks will continue climbing or falling in value for the very short
period, they own the stock, allowing them to quickly lock in quick profits.
Day traders usually buy on borrowed money, hoping that they will reap higher
profits through leverage, but also running the risk of higher losses. Day trading is highly risky
and it is not illegal. Most individual investors do not have the temperament
to be a day trader, as well as be able to sustain the devastating losses that
day trading can bring. But if you are successful, the gains are sometimes
substantial.
A few pointers about
day trading: -Day traders live
their life in front of their computer screen, looking for a stock that is
either moving up or down in value. They want to ride the momentum of the
stock and get out of the stock before it changes direction. They do not know
for certain how the stock will move, they are hoping that it will move in one
direction, either up or down in value. True day traders do not own any stocks
overnight, because of the extreme risk that prices will change radically from
one day to the next, leading to some very big losses. -Don't believe snake oil claims that promise sure profits
from day trading. Before you start trading with a firm, find out about them.
Do some research, find out the percentage of their clients that are actually
making money and how many are not. If the firm does not know, or will not
tell you, think twice about the risks you take in the face of ignorance. |
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Quick Tip: There's no such as thing as "Get rich quick." That which can be achieved in one day, could be gone the next! |
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Investment strategies vary by
hedge funds, each offering different degrees of risk and return. A macro hedge
fund, for example, invests in stock and bond markets and other investment
opportunities, such as currencies, in hopes of profiting on significant
shifts in such things as global interest rates and countries’ economic
policies. A macro hedge fund is more volatile but potentially faster growing
than a distressed-securities hedge fund that buys the equity or debt of
companies about to enter or exit financial distress. An equity hedge fund may
be global or country specific, hedging against downturns in equity markets by
shorting overvalued stocks or stock indexes. A relative value hedge fund
takes advantage of price or spread inefficiencies. Knowing and understanding
the characteristics of the many different hedge fund strategies is essential
to capitalizing on their variety of investment opportunities. A wide range of hedging
strategies are available to hedge funds. For example: --Selling short - selling shares without owning them,
hoping to buy them back at a future date at a lower price in the expectation
that their price will drop.
Less than 5%
of hedge funds are global macro funds. Most hedge funds use derivatives only
for hedging or don't use derivatives at all, and many use no leverage.
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Limited Partnership: An
organization managed by a general partner and financially backed by limited
partners, offering limited liability to the extent of the amount invested by
each individual limited partner. A limited partner does not supervise the
daily operations or directly manage the partnership. |
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You can "bid" for a
bill in two ways:
Your Bid may
be: To place a noncompetitive
bid, you may use TreasuryDirect, Legacy Treasury
Direct, or a bank, broker, or dealer. To place a competitive bid,
you must use a bank, broker, or dealer. In a nut shell: Treasury
Bills are,
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Closing Costs: Also called settlement costs. The expenses involved in
transferring real estate from a seller to a buyer. Typically includes fees or
charges for loan origination, discount points, appraisal, property survey,
title search, title insurance, deed filing, credit reports, taxes, and legal
services. Does not include points and the cost of private mortgage insurance
(PMI). |
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REITs Congress created REITs (pools
of real estate that are sold as a public security) in 1960 to make
investments in large-scale, income producing real estate accessible to
smaller investors. This was a vehicle for average investors to invest in
large scale commercial properties the same way they invest in other
industries, through the purchase of equity. In the same way as shareholders
benefit by owning stocks of other corporations, the stockholders of a REIT
earn a pro-rata share of the economic benefits that are derived from the
production of income through commercial real estate ownership. REITs offer
distinct advantages for investors: greater diversification through investing
in a portfolio of properties rather than a single building and management by
experienced real estate professionals. Both foreign and domestic sources provide investment in the REIT market. REITs are owned by thousands of individuals, as well as large institutional investors including pension funds, endowment funds, insurance companies, bank trust departments and mutual funds. Investment goals for REIT share ownership are much the same as investment in other stocks current income distributions and long-term appreciation potential. The majority of REIT shares can be purchased on the major stock exchanges, and orders can be placed through stockbrokers. Financial planners and investment advisors can help to match an investor's objectives with individual REIT investment. Because REITs are, by definition, obligated to distribute 90% of their taxable income to investors, they must rely upon external funding as their key source of capital. Investors must consider a REITs potential for future success, assessing whether individual REITs have the access to debt or equity capital sufficient to fund their future growth plans. REITs that have the ability to properly leverage themselves usually will deliver superior returns. The most
common and widely purchased are shares of equity REITs, which invest in
commercially managed property that produce income. This is generally the type
of REIT that is referred to when discussing them as an investment tool. Typically, the trust invest in and
actively manages large commercial real estate projects. These ranging from
apartments to shopping centers to office complexes, as well as
many other large-scale projects, although most of the do trust specialize in
a certain type of investment. - REITs trade
like stocks, you can get into and out of them with ease, unlike limited real
estate partnerships or other forms of real estate ownership. REITs must meet specific criteria as established by the act:
REITs have
outperformed common stocks with less risk. On average, annual returns
have exceed 13% per year. Just like other stocks, strong earnings growth
moves REIT share prices higher. But earnings growth is even more significant
for REITs. Because REITs must pay out 90% of their net income to
shareholders, earnings growth also fuels dividend increases. So, you'll
usually get the best overall returns with REITs producing above-average
earnings growth. Due to a REIT’s diversification it may
provide some protection from the ups and downs of individual properties such
as occupancy rates, defaults on rents, and downturns in industry sectors or
local markets. |
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CERTIFICATES OF DEPOSIT (CD's) Investors searching for
relatively low-risk investments that can easily be converted into cash often
turn to certificates of deposit (CDs). A CD is a special type of deposit
account with a bank or thrift institution that typically offers a higher rate
of interest than a regular savings account. Unlike other investments, CDs
feature federal deposit insurance up to $100,000. When you purchase a CD, you
invest a fixed sum of money for fixed period of time – six months, one year,
five years, or more – and, in exchange, the issuing bank pays you interest,
typically at regular intervals. When you cash in or redeem your CD, you
receive the money you originally invested plus any accrued interest. But if
you redeem your CD before it matures, you may have to pay an "early
withdrawal" penalty or forfeit a portion of the interest you earned. Although most investors have
traditionally purchased CDs through local banks, many brokerage firms and
independent salespeople now offer CDs. These individuals and entities – known
as "deposit brokers" – can sometimes negotiate a higher rate of
interest for a CD by promising to bring a certain amount of deposits to the
institution. The deposit broker can then offer these "brokered CDs"
to their customers. At one time, most CDs paid a
fixed interest rate until they reached maturity. But, like many other
products in today’s markets, CDs have become more complicated. Investors may
now choose among variable rate CDs, long-term CDs, and CDs with other special
features. Some long-term, high-yield
CDs have "call" features, meaning that the issuing bank may choose
to terminate – or call – the CD after only one year or some other fixed
period of time. Only the issuing bank may call a CD, not the investor. For
example, a bank might decide to call its high-yield CDs if interest rates
fall. But if you’ve invested in a long-term CD and interest rates
subsequently rise, you’ll be locked in at the lower rate. Before you consider purchasing a CD from your bank or
brokerage firm, make sure you fully understand all of its terms. Carefully
read the disclosure statements, including any fine print. |
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1/4 of 1 percent of Americans are worth 10 Million dollars and make $750,000 or more per year. |
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Quick
Tip: Make sure your new insurance policy is in effect before
dropping your
old one, or you could be very sorry. |
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Quick
Tip:
Be cautious in taking out Home Equity Loans. These loans
reduce the equity that you have built up in your home. If you
are unable to make payments, "you could lose your
home". |
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According to the EPA's Energy Star Program, Home electronics accounts for in excess of 15 prcent of all residential electric |
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Annual
Percentage Rate (APR) ATM
Card Balance
Computation Methods
Bankruptcy Co-Branded
Card Consumer
Credit Counseling Service (CCCS) Credit
Reporting Agencies Credit
Card Credit
Card Insurance Credit
Line Credit
Report Debit
Card Endorsed
Card Equal
Credit Opportunity Act (Implemented by Federal Reserve Regulation B) Fair
Credit Billing Act Finance
Charge Fixed
APR Grace
Period Interest
Rate Introductory
APR LIBOR
(London interbank offered rates) Minimum
Payment Previous
Balance Prime
Rate Principal Purchasing
Card Secured
Card Transaction
Fees Truth
in Lending Act (Implemented by Federal Reserve Regulation Z) Variable
APR If you are trying to pay off
a balance, most likely you are looking for a card that offers a teaser rate (or
"special" rate, "promotional" rate,
"limited-time-only" rate). It is simply the Very Special Interest
Rate the lender is offering at that time. As with most teasers, there are
time limits attached. Teaser and introductory rates are usually offered for
both fixed rate and variable rate cards. In all promotional materials for
cards carrying a teaser rate, you'll see reference to an "ongoing APR,"
as well. That is the interest rate you will be charged on balances once the
introductory "teaser rate" period has ended. |
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Fight identity theft by monitoring and reviewing your credit report. You may request your free credit report online You have the right to ask that nationwide consumer credit reporting companies place "fraud alerts" in your file to let potential creditors and others know that you may be a victim of identity theft ·
Equifax: 1-877-576-5734; www.equifax.com
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Experian: 1-888-397-3742; www.experian.com/fraud ·
TransUnion: 1-800-680-7289; www.transunion.com
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LifeLock = Helps protect your personal information.
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Quick Tip: Seniors control 79% of
America's Financial Assets. Seniors also spend $14 Billion Annually on gifts
just for their grandchildren. On average Seniors have over 26% more
disposable income than other consumers. |
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The expiration of options contributes to the once-per-quarter "triple-witching day," the day on which three derivative instruments all expire on the same day. Stock index futures, stock index options and options on individual stocks all expire on this day, and because of this, trading volume is usually especially high on the stock exchanges that day. In 1987, the expiration of key index contracts was changed from the close of trading on that day to the open of trading on that day, which helped reduce the volatility of the markets somewhat by giving specialists more time to match orders. You will frequently hear about both volume and open interest in reference to options (really any derivative contract). Volume is quite simply the number of contracts traded on a given day. The open interest is slightly more complicated. The open interest figure for a given option is the number of contracts outstanding at a given time. The open interest increases (you might say that an open interest is created) when trader A opens a new position by buying an option from trader B who did not previously hold a position in that option (B wrote the option, or in the lingo, was "short" the option). When trader A closes out the position by selling the option, the open interest either remain the same or go down. If A sells to someone who did not have a position before, or was already long, the open interest does not change. If A sells to someone who had a short position, the open interest decreases by one. |
Private Equity Funds |
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Reverse Mortgage
Reverse Mortgages: Get the Facts Before Cashing in on Your Home's Equity
Whether seeking money to
finance a home improvement, pay off a current mortgage, supplement their
retirement income, or pay for healthcare expenses, many older Americans are
turning to “reverse” mortgages. They allow older homeowners to convert part
of the equity in their homes into cash without having to sell their homes or
take on additional monthly bills. In a “regular” mortgage, you
make monthly payments to the lender. But in a “reverse” mortgage, you receive
money from the lender and generally don’t have to pay it back for as long as
you live in your home. Instead, the loan must be repaid when you die, sell
your home, or no longer live there as your principal residence. Reverse
mortgages can help homeowners who are house-rich but cash-poor stay in their
homes and still meet their financial obligations. To qualify for most reverse
mortgages, you must be at least 62 and live in your home. The proceeds of a
reverse mortgage (without other features, like an annuity) are generally
tax-free, and many reverse mortgages have no income restrictions. Loan Features: Reverse mortgage loan
advances are not taxable, and generally do not affect Social Security or
Medicare benefits. You retain the title to your home and do not have to make
monthly repayments. The loan must be repaid when the last surviving borrower
dies, sells the home, or no longer lives in the home as a principal
residence. In the HECM program, a borrower can live in a nursing home or
other medical facility for up to 12 months before the loan becomes due and
payable.
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Buying on margin means that you
are buying your stocks with borrowed money. If you are buying stocks in
cash, you pay $10,000 for 100 shares of a stock that costs $100 a share.
consequently, they are free and clear. But when you buy on margin, you
are borrowing the money to purchase the stock. For example, you don't have
$10,000 for those 100 shares. A brokerage firm could lend you up to 50% of
that in order to purchase the stock. All you need is $5,000 to buy the 100
shares of stock. Most brokerage firms set a
minimum amount of equity at $2,000. In other words, you you
have to put in at least $2,000 for the purchase of stocks. In return for the loan, you
pay interest, either upfront, or against your stock. The brokerage is making
money on your loan. They will also hold your stock as collateral against
the loan. If you default, they will take the stock. They are exposed to
little risk in the deal. The price of
your stock could always go down. By law, the brokerage will not be allowed to
let the value of the collateral (the price of your stock) go down below a
certain percentage of the loan value. If the stock drops below that set
amount, the brokerage will issue a margin call, which means that you
will have to pay the brokerage the amount of money necessary to bring the
brokerage firms risk down to the allowed level. If you don't have the money,
your stock will be sold to pay off the loan. In most cases, there is little
of your original investment remaining after the stock is sold, or if may have
fallen so far, you have to make up the difference. Buying on margin could mean a
huge return. But there is the risk that you could lose your original
investment. As with any stock purchase there are risks, but when you are
using borrowed money, the risk is increased. Buying on margin is usually
not a good idea for the beginner or normal, everyday investor. It is
something that sophisticated investors even have issues with. The risk can be
high. Make sure that you understand all of the possible scenarios that could
happen, good and bad. Suggestions
from the professionals:
If
executed correctly, margin strategy can provide for huge profits. The flip
side, you can lose your entire investment and any other assets you have.
Do Not venture into this aspect without understanding what you're doing. |
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Quick Tip: Read
the Fine Print! and "Beware" of Subprime or Alt-A loans. They
are somewhat riskier in nature than A credit, prime, or traditional loans. If
you can't afford to buy it, DON'T. |
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When seeking
a pre-approval, it's important not to misrepresent the facts on your
application. If a lender learns later that you've misrepresented or omitted
information on your application, your pre-approval may be rescinded. Once you find the home you
want to buy, the next step is to write an offer – which is not as easy as it
sounds. Your offer is the first step toward negotiating a sales contract with
the seller. Since this is just the beginning of negotiations, you should put
yourself in the seller’s shoes and imagine his or her reaction to everything
you include. Your goal is to get what you want, and imagining the seller’s
reactions will help you attain that goal. The offer is much more
complicated than simply coming up with a price and saying, "This is what
I will pay." Because of the huge dollar amounts involved, especially in
today's litigious society, both you and the seller want to build in
protections and contingencies to protect your investment and limit your risk. In an offer to purchase real
estate, you include not only the price you are willing to pay, but other
details of the purchase as well. This includes how you intend to finance the
home, your down payment, who pays what closing costs, what inspections are
performed, timetables, whether personal property is included in the purchase,
terms of cancellation, any repairs you want performed, which professional
services will be used, when you get physical possession of the property, and
how to settle disputes should they occur. In most purchase transactions
there usually some dips in the road, but they usually smooth out. There is
one issue that you want to deal with, your anticipating potential problems so
that if something does go wrong, you can cancel the contract without penalty.
These are called "contingencies" and you must be sure to include
them when you offer to buy a home. For example, some
"move-up" buyers often agree to purchase a home before selling
their previous home. Even if the home is already sold, it is probably a
"pending sale" and has not closed. Therefore, you should make
closing your own sale a condition of your offer. If you do not include this
as a contingency, you may find yourself making two mortgage payments instead
of one. There are other common
contingencies you should include in your offer. Since you probably need a
mortgage to buy the home, a condition of your offer should be that you
successfully obtain suitable financing. Another condition should be that the
property appraises for at least what you agreed to pay for it. During the
escrow period you are likely to require certain inspections, and another
contingency should be that it pass those inspections. Basically, contingencies
protect you in case you cannot perform or choose not to perform on a promise to
buy a home. If you cancel a contract without having built-in conditions and
contingencies, you could find yourself forfeiting your earnest money deposit. Now that you
and the seller have agreed on the price and the length of time (Escrow
Period, which can run from a few weeks to six months) before you move-in, you
begin Escrow, which defined, is a deposit of funds, a deed or other
instrument by one party for the delivery to another party upon completion of
a particular condition or event. Whether you are the buyer,
seller, lender or borrower, you want the assurance that no funds or property
will change hands until ALL of the instructions in the transaction have been
followed. The escrow holder has the obligation to safeguard the funds and/or
documents while they are in the possession of the escrow holder, and to
disburse funds and/or convey title only when all provisions of the escrow
have been complied with. The principals to the escrow:
buyer, seller, lender, borrower: cause escrow instructions, most usually in
writing, to be created, signed and delivered to the escrow officer. If a
broker is involved, he will normally provide the escrow officer with the
information necessary for the preparation of your escrow instructions and
documents. The escrow officer will
process the escrow, in accordance with the escrow instructions, and when all
conditions required in the escrow can be met or achieved, the escrow will be
"closed." Each escrow, although following a similar pattern, will
be different in some respects, as it deals with your property and the
transaction at hand. The duties of an escrow
holder include; following the instructions given by the principals and
parties to the transaction in a timely manner; handling the funds and/or
documents in accordance with the instruction; paying all bills as authorized;
responding to authorized requests from the principals; closing the escrow
only when all terms funds in accordance with instructions and provide an
accounting for same : the Closing or Settlement Statement. The selection of the escrow
holder is normally done by agreement between the principals. If a real estate
broker is involved in the transaction, the broker may recommend an escrow
holder. However, it is the right of the principals to use an escrow holder
who is competent and who is experienced in handling the type of escrow at
hand. There are laws that prohibit the payment of referral fees; this affords
the consumer the best possible escrow services without any compromise caused
by a person receiving a referral fee. If you are obtaining a loan,
your escrow officer will be in touch with the lender who will need copies of
the escrow instructions, the preliminary title report and any other documents
escrow could supply. In the processing and the closing of the escrow, the
escrow holder is obligated to comply with the lender's instructions. During
the escrow process, your escrow officer, upon request, can provide you with
an estimate of the escrow fees and costs as well as fees charged by others,
provided such information is available. It has become a practice of some lenders to forward their loan documents to escrow for signing. You should be aware that these papers are lender's documents and cannot be explained or interpreted by the escrow (they are not lawyers, nor can they provide you with legal advice. If you require legal answers, you should first consult with a lawyer) officer. You have the option of requesting a representative from the lender's office to be present for explanation, or arrange to meet with your lender to sign the documents in their office. At
the end of the Escrow period, the amount of closing costs will depend on what
items are customary for buyers and sellers to pay for in your area.
Traditions vary greatly from one area of the country to another. The escrow holder has no control over the
costs of other services that are obtained, such as the title insurance
policy, the lender's charges, insurance, *property taxes, recording charges,
etc.. In some
areas, for example, the buyer pays for title insurance. In other areas, it is
the responsibility of the seller. In still other areas, the cost is split
between buyer and seller. Your Agent can give you specific information on the
items that are customarily paid for by buyers in your area. In addition, the
amount of closing costs will depend on the amount of points you will be
paying with your mortgage loan, since these are generally paid for up-front.
(A point is 1% of your mortgage loan amount). Supplemental Property Taxes
is another concern of the buyer. Upon transfer of real property, a
supplemental tax bill is generated. This is accomplished in cooperation with
the County Assessor and the County Tax Collector. Shortly after the close of an
escrow involving the conveyance of real property, the County Assessor will
request information about the property from the buyer. This information
assists the Assessor in determining the value of the property for taxation
purposes. The escrow holder may have previously supplied some of the
information at the time of the closing of the escrow, via Preliminary Change
of Ownership form that should accompany each deed when it is recorded). Sign on the dotted lines (lots and lots), wait the legal
waiting period in your state (usually 24 hours), congratulations, pick up the
keys, the home is yours. |
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Large Cap stocks are companies with
extremely large market capitalization, or "market cap", which is
the product of the number of shares outstanding and the price of the stock. |
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Quick Tip: Be Patient & Prudent & seek wisdom |
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the Dow Jones Industrial Average (DJIA) and other averages like S&P 500 or Russel 2000 are "market averages" designed to tell you how companies traded on the stock market are doing in general. The Dow Jones Industrial
Average is simply the average value of 30 large, industrial stocks. Big
companies like General Motors, Goodyear, IBM and Exxon are the kinds of
companies that make up this index. The Dow Jones Industrial Average has
simply chosen 30 companies and averaged their values together by following a
specific formula. Nothing more, nothing less. There are all many others out
there with, the largest being the Dow and the S&P 500, which is the
average value of 500 different large companies. If you follow the Russel
2000, you find that it tracks the averages of 2,000 smaller companies. The averages tell you is the general health of stock prices as a whole. If the economy is "doing well," then the prices of stocks as a group tend to rise. If it is "doing poorly," prices as a group tend to fall. The averages show you the direction in the market as a whole. If a specific stock is going down while the market as a whole is going up, that tells you something. Or if a stock is rising, but is rising faster or slower than the market as a whole, that tells you something as well. |
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The benefits of tax lien
certificates are potentially rewarding in a way that is rarely seen in real
estate: fixed interest rate returns and a potential chance to purchase
property at a fraction of the normal cost. The Downside in purchasing tax lien certificates is to later discover the property they thought they had purchased at a value was really worth nothing. For one, if a homeowner declares bankruptcy while the tax lien is outstanding, the bankruptcy court could outweigh the rights of investors, leaving the tax lien certificate worthless in the wake of the IRS. Other problems could include a property that has significant damage, making the structure uninhabitable or the property so damaged (slide, flood, earthquake, etc.) thereby making the sale worthless. Prior to ever proceeding with the investment, the investor should perform physical inspections and surveys on property before making a decision. the loss to your investment portfolio could be much more significant than any potential gain. Due diligence would be to confirm that the property has no other liens against the title, as well as tell you whether or not the person whose name is on the lien actually has legal rights to the property. When you do purchase TLC's, keep in mind that you must make payment within 48 hours and in cash. |
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Did you ever notice those senior's enjoying their Golden years? That is because they lived within their means and not on a mass of burdening credit. Can you imagine jointly making 100K or more each year and being broke? a huge portion of America is doing just that. Today's modern family financial woes are because of many living a life of must have it right now, forgetting the pending disaster of debt. BIG MISTAKE. |
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Easy Credit is a path to bad credit and misery,
and the house of cards is most likely going to fall on you. |
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The net
asset value, or (NAV),
is the current market value of a fund's holdings, less the fund's
liabilities, usually expressed as a per-share amount. For most funds, the NAV
is determined daily, after the close of trading on some specified financial
exchange, but some funds update their NAV multiple times during the trading
day. The public offering price, or POP, is the NAV plus a sales charge.
Open-end funds sell shares at the POP and redeem shares at the NAV, and so
process orders only after the NAV is determined. Closed-end funds (the shares
of which are traded by investors) may trade at a higher or lower price than
their NAV; this is known as a premium or discount,
respectively. If a fund is divided into multiple classes of shares, each
class will typically have its own NAV, reflecting differences in fees and
expenses paid by the different classes. |
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It is
exactly the opposite of buying a stock. If an investor/speculator
thinks the price of a stock will go down, they essentially believe the
current price of the stock is a good price at which to sell. They would ask
to borrow a certain number of shares from a bank to sell immediately. Once
the stock is sold, the borrower still has the obligation to return the shares
to the bank. That means the borrower will have to eventually buy the stock
back on the stock market at a later date – also known as “buying to cover” or
“covering a short position”. However, in order to make a profit, the borrower
wants to buy the stock at a lower price than the price at which they
originally sold the stock. The concept of shorting stock remains to buy low
and sell high, however, shorting a stock requires you to perform these two
steps in reverse order than when making “long” investments. The obvious incentive for a
bank is to charge an interest fee on the value of the sale proceeds generated
on the stock they lend. Plus, they know that they'll get the stock back in
the future, a fact which limits their own portfolio risk: Banks know that
they will be better off lending than not, because regardless of the direction
of the stock’s price movement, they will have the same amount of stock, but
will also have the added interest income associated with lending the stock. Though shorting is often used
to mitigate risk associated with investing in the stock market, it is
important to realize the concept of “unlimited losses” that are associated
with short investments. When the investor makes a long investment, the most
they can lose is the total value of that investment (the amount they paid for
the stock) in total. In the case of shorting, if the stock goes up instead of
down, they face the possibility of having to make up the loss. As an example,
let’s assume that shares in LCI are currently sell for $10 per share. A short
seller would borrow 100 shares of LCI, and then immediately sell those shares
for a total of $1000. If the price of LCI shares later falls to $8 per share,
the short seller would then buy 100 shares back for $800, return the shares
to their original owner, and make a $200 profit. This practice has the
potential for an unlimited loss. For example, if the shares of LCI that one
borrowed and sold in fact went up to $25, the short seller would have to buy
back all the shares at $2500, losing $1500. It’s this potential risk of
unlimited losses that requires an investor to be very savvy (thorough
knowledge of the proposed shorted stock) when shorting in the stock market. Over the long-term, the stock
market enjoys a average gain of about 12% per year.
This does make shorting appear to be a poor direction to be going, as it
seems as though the general market is bound to move higher, or against the
wishes of a short-seller. However, in the short-term, the market does fall in
value (sometimes simply adjusting from un-ups), and on an individual basis
there will always be stocks that perform poorly. It is when observing these
select opportunities where short-selling can make sense as an investment
strategy. Shorting can be used as an
effective portfolio hedge, helping to eliminate some risk associated with
long term investments in the market. But due to the possibility for unlimited
losses, it should be thoroughly investigated, as it has the potential of
financial ruin for the investor. In a nut Shell: |
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REVERSE MORTGAGE A reverse mortgage is a
special type of home loan that lets a homeowner convert a portion of the
equity in his or her home into cash. The equity built up over years of home
mortgage payments can be paid to you. But unlike a traditional home equity
loan or second mortgage, no repayment is required until the borrower(s) no
longer use the home as their principal residence. HUD's reverse mortgage
provides these benefits, and it is federally-insured as well. To be eligible for a HUD
reverse mortgage, HUD's Federal Housing Administration (FHA) requires that
the borrower is a homeowner, 62 years of age or older; own your home
outright, or have a low mortgage balance that can be paid off at the closing
with proceeds from the reverse loan; and must live in the home. You are
further required to receive consumer information from HUD-approved counseling
sources prior to obtaining the loan. You can contact the Housing Counseling
Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a
HUD-approved counseling agency and a list of FHA approved lenders within your
area. Yes. It doesn't matter if you
didn't buy it with an FHA-insured mortgage. Your new HUD reverse mortgage
will be a new FHA-insured mortgage loan. Your home must be a
single-family dwelling or a two-to-four-unit property that you own and
occupy. Townhouses, detached homes, units in condominiums and some
manufactured homes are eligible. Condominiums must be FHA-approved. It is
possible for individual condominiums units to qualify under the Spot Loan
program. With a traditional second
mortgage, or a home equity line of credit, you must have sufficient income
versus debt ratio to qualify for the loan, and you are required to make
monthly mortgage payments. The reverse mortgage is different in that it pays
you, and is available regardless of your current income. The amount you can
borrow depends on your age, the current interest rate, and the appraised
value of your home or FHA's mortgage limits for your area, whichever is less.
Generally, the more valuable your home is, the older you are, the lower the
interest, the more you can borrow. You don't make payments, because the loan
is not due as long as the house is your principal residence. Like all
homeowners, you still are required to pay your real estate taxes and other
conventional payments like utilities, but with an FHA-insured HUD Reverse
Mortgage, you cannot be foreclosed or forced to vacate your house because you
"missed your mortgage payment." No! You do not need to repay
the loan as long as you or one of the borrowers continues to live in the
house and keeps the taxes and insurance current. You can never owe more than
your home's value. When you sell your home or no
longer use it for your primary residence, you or your estate will repay the
cash you received from the reverse mortgage, plus interest and other fees, to
the lender. The remaining equity in your home, if any, belongs to you or to
your heirs. None of your other assets will be affected by HUD's reverse
mortgage loan. This debt will never be passed along to the estate or heirs. The amount you can borrow depends
on your age, the current interest rate, and the appraised value of your home
or FHA's mortgage limits for your area, whichever is less. Generally, the
more valuable your home is, the older you are, the lower the interest, the
more you can borrow. There are five different way
to receive your payments:
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THE DILIGENT PROSPER |
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Annuities only make sense for
a minor group of investors. Mutual funds are acceptable for the rest of
investors. The reason they are so much heralded, is that the commissions are
5% or more, that is why the sale of variable annuities have gone through the
roof since 2000. Should you wish to participate in Annuities,
it is wise to select one with low costs and good investment options, from
mutual fund companies. A variable annuity is
basically a tax deferred investment vehicle that comes with an insurance
contract, usually designed to protect you from a loss in capital. Thanks to
the insurance wrapper, earnings inside the annuity grow tax deferred, and the
account isn't subject to annual contribution limits like those on other tax
favored vehicles like IRAs and 401(k)s. Typically you can choose from a host
of mutual funds, which in the variable annuity world are known as "sub
accounts." Withdrawals made after age 59 1/2 are taxed as income.
Earlier withdrawals are subject to tax and a 10% penalty. Variable
annuities can be immediate or deferred. With a deferred annuity the account
grows until you decide it's time to make withdrawals. And when that time
comes (which should be after age 59 1/2, or you owe an early withdrawal
penalty) you can either annuitize your payments (which will provide regular
payments over a set amount of time) or you can withdraw money as you see fit. Residents of some states may
pay even more taxes on non-qualified variable annuity accounts. (That is,
accounts that are not purchased within an IRS approved retirement plan like a
401(k), 403(b) or IRA.) Some states also add a tax for variable annuities
purchased within a qualified account. Having
to face the issue of income tax due on annuities, there is no way of avoiding
the fact that, if
you die with money remaining in your annuity, your beneficiary will inherit
all the taxes that you have deferred. Compare this to a mutual fund, whose
basis is stepped-up at death. In that case, your beneficiary would owe no
taxes on the gains. |
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