It is fairly easy to invest in foreign corporations, because these corporations need to register these securities with the SEC. These companies are subjected to the same rules as U.S. companies.
It is fairly easy to invest in foreign corporations, because these corporations need to register these securities with the SEC. These companies are subjected to the same rules as U.S. companies.
Stocks are traded in quantities of 100 shares, called round lots. Any quantity of stock under 100 shares will be considered an odd lot.
Most stocks are common stocks. However, there is another type (known as preferred) which gives certain advantages regarding dividends. Generally, preferred stockholders do not have the same voting rights that the holders of common shares do. Common stocks are based on company performance, while preferred stocks will usually have a stated dividend.
Mutual funds sometimes will distribute back to shareholders monies that haven't been attributed to the funds earnings. This is a non-taxable distribution.
Funds will generally give you the opportunity to automatically reinvest in the fund. This does not prevent you from paying tax on your assets, but this reinvestment will prevent you from paying more "buy" fees to get into the fund, so it is advantageous.
All mutual funds distributions should be reported as income, whether you reinvest or not. Taxable distributions come in two forms, ordinary dividends, and capital gains. The distributions of ordinary dividends represent the net earnings of the fund and are paid out periodically to the shareholders. Since these payments are considered to be dividends to you, they must be accounted for accordingly.
Capital Gain Distributions are the net gains of the sales of securities in the fund's portfolio and will be taxed at a different rate than that of ordinary dividends. Yearly, your mutual fund will send you a form, called the 1099-DIV, which will have a detailed breakdown of all of these.
A bond mutual fund has within it multiple bonds, and for that reason, it is impossible to lock in the payment rate or the principal, which you would be able to do if you were directly buying a fund.
A bond mutual fund is an investment company which manages a portfolio of individual bonds. The investors buy ownership in the company, and each share represents ownership in all of the company's holdings. Managers will use these investments to buy and sell bonds that align with the objective of the fund.
Because a bond fund manager has more resources to deal with, they can invest in a vast array of bonds - much more than could any individual investor. There are also certain investments that cost tens of thousands of dollars a share - a bond fund costs far less.
Liquidity plays a major role in bond buying. If you purchase a bond individually and wish to sell it, you must find a buyer for your bond, but if you are invested in a bond fund, that fund has to buy your shares back at any time you wish.
A "call" is when the issuer of the bonds has an opportunity to redeem the bonds after a certain specified amount of time has passed. This doesn't guarantee a continuation of a high yield after the call date - it limits the appreciation of the bonds, and it makes the investment more risky. These call provisions can be complex, so it is best for investors that don't have strong knowledge to avoid bonds with a call feature.
Generally bond prices and interest rates have an inverse relationship - as interest rates drop, bond prices rise and vice versa.
A bond is simply a certificate which the borrower promises to repay within a certain time period. For the privilege of using the money, the government entity, municipality or company will agree to pay a certain amount of interest per year, usually, an exact percentage of the amount loaned.
Bondholders do not own any part of the companies they lend to - they do not receive the benefits of dividends or the privilege to vote on company matters as stockholders would, and the success of the investment isn't related to that company's record in the market either. A bondholder is entitled to receive the amount that was agreed upon, as well as the principal of the bond.
Corporate bonds are generally issued in the denominations of $1000. This price is referred to as the face value of the bond - this is the amount that is agreed to be paid by the company at the time that it matures. Bond prices can differ from their face values because the prices of the bonds are correlated to the current market rates. When these rates change, the value of the bond will as well. If one were to sell the bond before the time that it matures, the bond may be worth less than was initially paid. A callable bond is one that the issuer may choose to buy back at full face value before the maturity date.
There are three major features of bonds:
Short-Term Bonds mature in two years or less and long-term bonds mature in ten or more. Intermediate is between two and ten years.
Bond quality is the rating of the creditworthiness of an issuing organization. There are organizations that specialize in judging bond quality. The higher the rating, the lower the risk of the investment. The rating system uses letters A through D. The only bond considered to be risk-free is the U.S. Treasury Bond.
IRAs are just like any other investment - you should take into consideration how much risk you are willing to take on and act accordingly.
For people who are more risk-averse, fixed short-term investments could be more fitting.
Be careful about investing in municipal bonds - by doing so you will sacrifice return that would convert tax free income into taxable income.
The yield is the amount paid annually by an investment. The yield is most commonly a percentage of the market price of an investment, which does not take into account the appreciation. Since money market funds and certificates of deposit don't fluctuate like stocks and bonds do, the yield would be the same as the total return.
The rule of 72 is a quick way to calculate how long it will take your investments to double at different interest rates.
Take the rate of yearly return on your investment and divide 72 by that number. The result is the number of years it will take for you to double your investment.
The total return is the amount of money that a fund makes after reinvesting and receiving dividends. This will deliver the most benefit from the compounding interest. The total return is a way to accurately gauge the real return on investment that you will get with a mutual fund.
IRAs are just like any other investment - you should take into consideration how much risk you are willing to take on and act accordingly.
For people who are more risk-averse, fixed short-term investments could be more fitting.
Be careful about investing in municipal bonds - by doing so you will sacrifice return that would convert tax-free income into taxable income.
Derivatives are investments whose values derive from the security which they are based on. Options can be useful in making a portfolio less risky. Derivatives can also be futures contracts or swap agreements.
Stock options are a contract that allows one to sell or buy 100 shares of stock at a given price and in a specific time frame. These can be traded on numerous exchanges.
When an option is bought, an investor will buy a premium, which is the commission plus the price of the option. If an investor is to buy a "call" option, they are predicting that the price of the security will increase before the option period expires; on the other hand, if the investor buys a "put" option, then they are predicting that the price will decrease.
This can be a useful tool in an investment portfolio, but not recommended for beginners, if you are interested in trading options, be sure to do your homework.