- Does Rental Income Count as Earned Income?
If you earn money from renting out property, you’ll need to determine whether that income qualifies as “earned income” for tax purposes. This distinction matters; the IRS treats earned and unearned income differently. It’s a major factor when it comes to eligibility for certain tax credits, contributions to retirement accounts, and Social Security considerations. While… read more…
- Inflation vs. Stock Market: Can Your Portfolio Keep Up?
Inflation is an important factor in long-term investing. When prices and wages rise, it can hurt company profits and reduce spending, which may lower stock prices. But some companies, like those that can raise prices or sell commodities, may benefit. Because investors respond differently based on how inflation affects them and what they expect, it… read more…
- Stock Grant vs. Stock Option: Taxes, Pros and Cons, Examples
Equity compensation can take different forms, so it’s important to know the difference between stock grants and stock options. Stock grants give you shares up front, while stock options let you buy shares at a set price in the future. This difference affects how they’re taxed and the level of risk involved. A financial advisor… read more…
- Overweight vs. Underweight Stocks: Pros and Cons, Examples
When building an investment portfolio, understanding the concepts of overweight and underweight stocks can significantly impact your strategy and returns. These terms refer to how investors or fund managers allocate assets relative to a benchmark index. An overweight position means you hold more of a particular stock than the benchmark suggests, indicating confidence in its… read more…
- Mutual Funds vs. Stocks: Which Is Better for Your IRA?
The debate between mutual funds and stocks for your IRA is common among investors at all levels of experience. Mutual funds offer diversification and professional management, spreading risk across multiple securities while requiring less hands-on attention. Stocks, on the other hand, provide direct ownership in companies with potentially higher returns, though they come with increased… read more…
- Capital Stock vs. Treasury Stock: Which Should You Buy?
Capital stock represents shares that a company has issued to raise funds, including both common and preferred stock available to the public. These shares give investors ownership rights and potential voting power in company decisions. Treasury stock, on the other hand, consists of shares that were previously issued but have been repurchased by the company… read more…
- Bond Mutual Funds vs. Stock Mutual Funds
Bond mutual funds pool investors’ money to purchase various debt securities issued by governments, municipalities or corporations. They typically offer stable and regular income through interest payments, making them attractive for conservative investors or those nearing retirement. On the other hand, stock mutual funds invest in shares that provide ownership of individual companies. This approach… read more…
- Nasdaq vs. S&P 500: Differences in Historical Performance
The Nasdaq Composite and S&P 500 are two major U.S. stock indexes historically used by many investors as benchmarks for performance. The Nasdaq, driven largely by tech and growth stocks, has averaged annual returns of well over 10% from its inception in 1971 through 2024. The S&P 500, which represents a more varied mix of… read more…
- Roth IRA vs. Stocks: What’s the Difference?
When planning your finances, it’s important to know the difference between a Roth IRA and stocks. A Roth IRA is a type of account that gives you tax benefits, while stocks are investments you can hold in that account. The Roth IRA lets your investments grow tax-free, and stocks are one kind of investment you… read more…
- ETF vs. Stock vs. Mutual Fund: What Are the Differences?
Exchange-traded funds (ETFs) combine features of both stocks and mutual funds, trading on exchanges throughout the day while offering diversification across multiple securities. Individual stocks, meanwhile, represent ownership in a single company, potentially offering higher returns but with increased risk. Mutual funds pool money from multiple investors to purchase a portfolio of securities, typically managed… read more…
- Stocks vs. Bonds vs. Mutual Funds: What Are the Differences?
Stocks, bonds and mutual funds are all common ways to invest, with the first two considered asset classes and the third an investment vehicle. Each of these options operates differently in terms of structure, returns and risk exposure. Stocks represent ownership in a company and can offer growth through capital appreciation, but with greater volatility.… read more…
- Stocks vs. Options vs. Futures: What Are the Differences?
Stocks, options and futures represent three distinct ways to participate in financial markets, each offering different structures, risks and strategies. Stocks give investors ownership in a company, while options grant the right—but not the obligation—to buy or sell an asset at a specific price. Futures, on the other hand, are binding contracts to buy or… read more…
- Can You Buy into an ETF and Defer Taxes?
Exchange-traded funds (ETFs) can be tax-efficient investments, but they are not tax-free. You don’t owe taxes when you buy shares, but you may owe tax on dividends or capital gains if they occur. ETFs use a structure that helps reduce taxable events when compared with mutual funds, especially through the in-kind redemption process. However, taxes… read more…
- How to Transition to Dividend Investing: Strategies & Examples
Switching to dividend-paying stocks can help you build long-term wealth and steady income. Unlike growth investing, which focuses on rising stock prices, dividend investing centers on companies that regularly pay out part of their profits to shareholders. This approach can offer both income now and growth over time, which may appeal to those nearing retirement… read more…
- Stock Split vs. Reverse Split: What’s the Difference?
When companies adjust their share structure, they typically use one of two strategies: stock splits or reverse splits. A stock split happens when a company expands its share count and reduces the price of each share to keep the total investment value the same. Think of it like cutting a pizza into more slices without… read more…
- Qualified vs. Non-Qualified Stock Options
Stock options are a common form of compensation, but the tax rules and eligibility can differ depending on the type. Qualified stock options follow specific IRS requirements and may offer favorable tax treatment. Non-qualified stock options are more broadly issued and come with different reporting rules. Comparing qualified vs. non-qualified stock options highlights key differences… read more…
- S&P 500 vs. Total Stock Market Index: Which Performs Better?
The S&P 500 Index and a total stock market index both offer investors a way to gain broad market exposure, but they differ in significant ways that can impact your returns. The S&P 500 tracks 500 of America’s largest companies, representing about 80% of the available market capitalization. Meanwhile, total stock market indexes cast a… read more…
- Class A vs. Class C Stock: Differences and Examples
Not all shares are created equal when it comes to buying stock. For example, Class A shares often come with more voting power, while Class C shares may offer limited or no voting rights but can still grant access to dividends or capital gains. These classifications can affect how much influence shareholders have over corporate… read more…
- Breaking Down the Stock Market Under Trump vs. Biden
Market performance under Donald Trump and Joe Biden reflects two very different economic environments. In his first term until the pandemic, Trump presided over steady growth and a bull market, with the S&P 500 delivering higher annualized returns. Biden took office during a volatile recovery, facing inflation, rate hikes and global uncertainty. While both saw… read more…
- Stock and Bond Allocations by Age
Building a portfolio often involves adjusting stock and bond allocations by age to reflect changing financial goals and risk tolerance. While age is only one of several factors that drive asset allocation decisions, investors of a similar age frequently have portfolios that resemble each other in important ways. Younger investors typically hold a higher percentage… read more…
- Historical Annual Yield Comparison: Stock Index vs. Bonds
Historically, stocks have offered higher returns over the long term, but with greater volatility. Meanwhile, bonds have provided steadier, though typically lower, yields. Factors such as interest rates, inflation, economic growth and market sentiment all influence whether stocks or bonds outperform in a given year. Knowing how these variables have played out historically — especially… read more…
- Tracking Stock: What It Is, Pros and Cons, Examples
Tracking stock is a class of shares issued by a parent company to reflect the financial performance of a specific division or subsidiary, rather than the company as a whole. Unlike traditional common stock, which represents ownership in an entire corporation, tracking stocks allow investors to focus on particular business segments within the company. These… read more…
- Equities vs. Stocks: Is There a Difference?
The terms “equities” and “stocks” are often used interchangeably, but they carry slightly different meanings depending on the context. Stocks typically refer to shares of individual companies. Equities is a broader term that includes all types of ownership interest in publicly traded companies. These may also include ownership through mutual funds and exchange-traded funds (ETFs),… read more…
- Small-Cap Stocks vs. Large-Cap Stocks: Differences to Know
When building your investment portfolio, understanding the differences between small-cap stocks and large-cap stocks is essential. Market capitalization, or the total value of a company’s outstanding shares, separates small-cap from large-cap investments. Large-cap companies typically have market values exceeding $10 billion and include household names like Apple and Microsoft. Small-cap stocks, meanwhile refer to companies… read more…
- Stocks vs. Options: Which Should You Invest In?
Stocks and options are two types of investment vehicles that offer unique advantages but come with different levels of complexity and risk. Stocks represent ownership in a company, providing a straightforward way to build wealth through potential appreciation and dividends. Options, on the other hand, give investors the right to buy or sell assets at… read more…