- 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…
- How to Use a Bear Call Spread Strategy
A bear call spread is an options strategy where you sell a call option at one strike price and buy another at a higher strike price for the same stock and expiration. This approach caps both potential profit and loss, and provides upfront credit. Traders use this method when they expect the stock price to… read more…
- What Is a Trust Indenture in Bond Investing?
A trust indenture is a legal agreement between a bond issuer and a trustee, such as a bank, that outlines the terms of a bond issue. It details the issuer’s responsibilities, the rights of the bondholders and how the trustee monitors the issuer’s compliance. This document helps maintain transparency and protect investors from potential defaults.… read more…
- How to Use a Bull Call Spread Strategy
A bull call spread is an options strategy used to profit from moderate increases in the underlying asset’s price while limiting risk. It involves buying a call option at a lower strike price and selling another at a higher strike price, both expiring on the same date. The cost to enter this trade is the… read more…
- What Are Sovereign Bonds and How Can You Invest in One?
Sovereign bonds are debt securities issued by national governments and are typically seen as safe investments, especially those from economically stable countries. They provide fixed income returns, making them attractive for conservative investors looking to diversify their portfolios. If you’re considering sovereign bonds, a financial advisor can help you choose options that align with your… read more…
- What Is Retracement and How Is It Used in Investing?
A retracement in investing refers to a temporary reversal in the direction of an asset’s price that occurs within a larger trend. It represents a short-term dip or pullback before the asset resumes its previous trajectory. Traders use retracements to identify potential entry points, often relying on technical analysis tools like Fibonacci retracement levels to… read more…
- Money Market Yield: What It Is and How to Calculate It
Money market yield measures the annualized return on short-term, low-risk investments like Treasury bills and commercial paper. It helps investors compare the earnings potential of different money market instruments while accounting for the impact of compounding. The calculation involves adjusting the discount rate of a security to reflect a 360-day year, making it useful for… read more…
- What Is Call Protection and How Does It Work?
Call protection is a bond feature that prevents the issuer from buying back the bond for a certain period. This guarantees that investors receive steady interest payments during this time, regardless of changes in market conditions or interest rates. The duration and specific terms of call protection are specified in the bond’s agreement and vary… read more…
- How Bearer Bonds Work and How to Invest in Them
Bearer bonds are a type of unregistered fixed-income securities that provide ownership rights to whoever physically holds them. Unlike traditional bonds, bearer bonds do not require the holder to be listed in any records, making them transferable through simple possession. These bonds were popular in the past because they provided anonymity. Nowadays, they are rare… read more…
- How Investors Use Economies of Scale to Evaluate Companies
Investors can evaluate economies of scale to determine if a company can increase profitability and stay competitive as it grows. This happens when a company reduces production costs by producing more units, which can spread fixed costs or enhance operational efficiencies. Understanding how companies scale operations helps investors assess their growth potential and competitive position.… read more…
- What Is an Open-End Fund?
An open-end fund is a type of mutual fund that allows investors to buy and sell shares on demand. This makes open-end funds highly accessible and flexible for investors seeking to diversify their portfolios. Commonly managed by professional fund managers, open-end funds pool money from multiple investors and can serve a range of investment goals.… read more…
- How to Use Autocorrelation to Evaluate Investments
Autocorrelation, a statistical measure that evaluates the relationship between a variable’s past and present values, can provide insights into patterns and guide investment decisions. By analyzing how a financial instrument’s returns correlate with its previous performance, investors can identify potential trends or repetitive behaviors that might otherwise have gone unnoticed. This technique is often used… read more…
- What Is a Bullet Bond?
A bullet bond is a type of debt security that does not make any principal payments until its maturity date. This means that, unlike other bonds that may offer periodic principal repayments, a bullet bond pays the entire principal amount back to the investor in one lump sum at the end of its term. This… read more…