- What Is SEC Rule 144A and How Does It Affect Investors?
Created by the U.S. Securities and Exchange Commission (SEC), Rule 144A allows qualified institutional buyers (QIBs) to trade restricted securities without a public offering. This rule improves liquidity and makes it easier for large investors to buy and sell private market securities. While mainly affecting institutions, it can also impact market conditions and investment opportunities… read more…
- The Augusta Rule: How to Rent Out Your Home for Tax-Free Income
The Augusta rule allows homeowners to rent out their primary residence for up to 14 days per year without paying federal taxes on the rental income. Originally created for Augusta, Georgia, residents during the Masters Tournament, this rule now benefits anyone using short-term rentals for extra income. However, it applies only to federal taxes—some states… read more…
- Transfer Pricing: What It Is and How It Affects Investors
Transfer pricing refers to the pricing of goods, services and intellectual property transferred between related entities within a multinational corporation. Companies use transfer pricing to allocate costs and revenues across different jurisdictions, which can impact taxable income and financial reporting. While the practice is legal, tax authorities scrutinize the details of how it is done… read more…
- What Happens in a Short Run and How Can It Affect Investors?
The short run in economics refers to a period when at least one factor of production remains fixed, limiting a business’s ability to fully adjust to changes in demand or costs. For example, a factory may not be able to quickly increase machinery to boost production. While often discussed in relation to individual businesses, short-run… read more…
- Parent’s Guide on How to Invest in Stocks for a Teenager
Teaching your teen about investing in stocks helps build financial literacy and encourages smart money management. Learning these skills early can help them make informed decisions about spending and saving for the future. A financial advisor can provide guidance on beginner-friendly investment options and strategies to help teens develop good financial habits. Why Early Investing… read more…
- Perpetual Bonds: Definition, Yield Calculation, Examples
Perpetual bonds have no maturity date, allowing them to pay interest indefinitely, making them appealing for long-term income. They come in different types, such as government and corporate bonds, each with varying risks and interest rates. To understand potential returns, investors should know how to calculate yield, which is found by dividing the annual interest… read more…
- What Is Short Covering and How Can Investors Use It?
Short covering is a stock trading phenomenon that occurs when traders who have previously sold a stock short buy it back to close their position. This process can drive up the stock’s price, especially if multiple traders rush to cover their positions at the same time. Short covering often happens when unexpected news or price… read more…
- What Is Short Interest Ratio and How Do Investors Use It?
The short interest ratio helps traders and analysts understand market sentiment and potential price moves. It compares the number of shares sold short to the average daily trading volume. A high ratio means more investors are betting against the stock, which may push prices down or lead to a short squeeze if buying demand rises.… read more…
- How a Naked Call Options Strategy Works in Investing
A naked call is an advanced strategy where an investor sells call options without owning the asset. It can be profitable if the stock stays below the strike price but carries unlimited risk when the price rises. Given the complexity of options trading, consulting with a financial advisor can help you develop a strategy based… read more…
- Taxes on REITs vs. Dividend Stocks: What’s the Difference?
Investors seeking passive income often choose between real estate investment trusts (REITs) and dividend stocks, both of which provide regular payouts. However, their tax treatment differs and can impact overall returns. A financial advisor can explain the tax differences between REITs and dividend stocks and help you choose an option for your portfolio. Taxes on… read more…
- How to Calculate Effective Gross Income (EGI) for Real Estate
Effective gross income (EGI) is a key metric for real estate investors looking to evaluate the income potential of a property. It represents the total revenue that a property generates after accounting for vacancy losses and other forms of additional income, such as parking fees or laundry services. By calculating EGI, investors can assess a… read more…
- Accredited Investor vs. Sophisticated Investor
Accredited investors must meet financial criteria set by the SEC, allowing them to invest in private offerings such as hedge funds and private equity. A sophisticated investor, on the other hand, does not need to meet these financial requirements but must demonstrate sufficient knowledge and experience to evaluate investment risks. When comparing the key differences… read more…
- How to Get an Accredited Investor Letter for Verification
An accredited investor letter is a document that verifies an individual or entity meets the financial criteria required to qualify as an accredited investor under U.S. Securities and Exchange Commission (SEC) regulations. Investors can obtain an accredited investor letter by providing financial statements, tax returns or brokerage account details to a verifying professional. Many private… read more…
- What Is a Non-Accredited Investor?
A non-accredited investor is an individual or entity that does not meet the financial requirements set by the Securities and Exchange Commission (SEC) for accredited investor status. This typically means having a net worth below $1 million (excluding a primary residence) or an annual income under $200,000 for individuals, or $300,000 for joint filers. Non-accredited… read more…
- Accredited Investor: Definition, Qualifications, Rules
An accredited investor is an individual or entity that meets specific financial criteria giving them access to private investment opportunities not registered with the U.S. Securities and Exchange Commission (SEC). Typically, individuals qualify as accredited investors by having a net worth exceeding $1 million, excluding their primary residence, or an annual income of at least… read more…
- Which Investments Have the Least Liquidity?
Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its market price. While some investments, like stocks and bonds, are known for their high liquidity, others are not as easily tradable. Understanding which investments have the least liquidity is essential for making informed financial decisions, especially for… read more…
- Covered Bonds: What They Are and How to Invest
Covered bonds are a type of debt security issued by financial institutions and backed by a pool of high-quality assets, such as mortgages or public-sector loans. This means that investors are safeguarded by both the issuing bank and the underlying asset pool. This additional layer of security, known as a dual recourse structure, makes them… read more…
- How Deep in the Money Call Options Work
One common way to help increase investment returns is to use deep in the money call options. These options have strike prices much lower than the current market price of the asset, giving them high intrinsic value. This makes them less affected by market volatility, offering a more stable investment option when compared with at-the-money… read more…
- Downside Risk: What It Is and How to Calculate It
Downside risk refers to the potential for an investment to decrease in value. Unlike general risk, which considers both upward and downward price movements, downside risk focuses solely on the negative. This more targeted view of potential financial pitfalls can be helpful to investors who are particularly concerned about capital preservation. Common approaches to quantifying… read more…
- What Is Key Rate Duration and How Do You Calculate It?
Key rate duration measures a bond’s sensitivity to shifts in interest rates at specific maturity points along the yield curve. Unlike traditional duration metrics, which assume parallel interest rate movements, key rate duration isolates changes at different maturities to assess their impact on a bond’s price. This metric is particularly useful for evaluating exposure to… read more…
- How Does a Real Estate Investment Group (REIG) Work?
Investing in real estate can be lucrative, but not every investor wants to deal with the complexities of property management. A real estate investment group (REIG) offers a more hands-off approach, allowing investors to pool resources and collectively invest in real estate. These groups provide a structured way to gain exposure to real estate while… read more…
- Retention Ratio: What It Is and What It Tells Investors
The retention ratio measures the percentage of a company’s earnings that are reinvested rather than distributed as dividends. Investors use the retention ratio to assess how much profit a business retains for growth, debt reduction or operational improvements. A higher ratio suggests a focus on expansion, while a lower one indicates a commitment to returning… read more…
- Baby Bonds: Definition, Pros and Cons, Examples
Baby bonds are fixed-income securities issued by government entities and corporations, offering regular interest payments and a predictable return backed by the issuing authority. Often available in denominations under $1,000, these bonds are accessible to a wider range of investors. In the U.S., the term “baby bonds” sometimes also refers to publicly funded savings accounts… read more…
- How to Use a Bull Put Spread Strategy
A bull put spread is an options strategy where you sell a put option at a higher price and buy one at a lower price for the same asset and expiration date. This helps generate income and limits losses, making it good for traders expecting small price increases or stable prices. The most you can… read more…
- How to Use Buy Limit Orders When Investing
A buy limit order is a stock market order where investors set a maximum price for buying a security. This method lets investors control their purchase price and avoid paying too much in volatile markets. Unlike market orders that execute at the current best price, buy limit orders only fill if the stock’s price reaches… read more…