- What Is the Tax Loss Harvesting Limit?
Tax loss harvesting allows investors to offset capital gains by intentionally selling other investments at a loss, but there are limits to how much of these losses can be applied. The tax loss harvesting limit depends on whether the loss is used to offset capital gains or ordinary income. This strategy can be particularly useful… read more…
- Weak Form Efficiency: Definition, Examples, Pros and Cons
Weak form market efficiency is a concept that suggests past stock prices and trading volumes do not predict future stock prices. In a weak form efficient market, all historical information is already reflected in current stock prices. This means that technical analysis, which relies on historical data to predict future price movements, is considered unlikely… read more…
- What Is the Cost of Equity Formula?
The cost of equity formula is a financial metric that represents the return investors expect for holding a company’s stock. This formula can help you evaluate whether a company’s stock is generating adequate returns relative to its risk level. This is helpful for investors and companies alike, as it affects investment decisions, valuation and the… read more…
- What Is Shareholder Value and How Is It Calculated?
Shareholder value represents the return that shareholders get from a company’s profit growth and increase in stock price. It’s a key metric investors use to gauge a company’s success. Companies can increase shareholder value by generating revenue, maintaining cost efficiency and making smart investment decisions. This can help them estimate how well a company maximizes… read more…
- What Are Weather Futures and How Do They Work?
Weather futures are financial contracts that allow investors and businesses to hedge against unexpected weather conditions. These futures are typically linked to measurable weather events, such as temperature fluctuations, rainfall amounts or snowfall levels, and they are traded on commodities exchanges similar to other derivatives. Weather futures can be especially useful for industries directly impacted… read more…
- What’s a Fair Valuation for Tesla ($TSLA) Today?
Tesla stock ($TSLA) has been on a tear since the results of the 2024 election became clear. After closing just over $251 on Tuesday, November 5, the stock rose 27.8% by end of week to just over $321, putting $TSLA over a $1 trillion market cap for the first time since April 2022. While political… read more…
- 5 Benefits of Regularly Rebalancing Your Investment Portfolio
Rebalancing a portfolio involves adjusting the asset mix to maintain a desired allocation, which can help align investments with specific financial goals. The benefits of rebalancing a portfolio include helping to manage risk, as assets that have grown significantly may alter the intended balance of risk and reward. By periodically realigning the portfolio, investors may… read more…
- Differences of Fiat Money vs. Commodity Money
Fiat money and commodity money represent two distinct forms of currency, each defined by what gives it value. Fiat money is government-issued currency that has no intrinsic value but holds purchasing power because of government decree and public trust in its stability. In contrast, commodity money is backed by a physical good – typically precious… read more…
- Differences of Forward Market vs. Spot Market
The forward market and spot market offer two distinct approaches to trading assets, differing by timing, risk and pricing structure. In a spot market, transactions are settled “on the spot,” meaning buyers and sellers agree on a price, and the asset changes hands almost immediately. On the other hand, the forward market involves agreements to… read more…
- What Is the Extrinsic Value of an Option?
In options trading, the extrinsic value of an option represents the portion of the option’s price that’s based on factors other than the immediate value of exercising it. Also known as “time value,” extrinsic value reflects the potential for the option to become profitable before it expires. For options traders, the extrinsic value of an… read more…
- How to Calculate the Growth Rate of an Investment
The growth rate of an investment shows how much its value increases over time, helping to evaluate performance. A common way to calculate this is by using the compound annual growth rate (CAGR), which averages yearly growth with compounding. This is useful for long-term investments, and knowing this rate could help you determine whether an… read more…
- How Are Zero Coupon Bonds Taxed?
Zero coupon bonds are taxed differently because they don’t pay regular interest. Instead, they’re sold at a discount and reach full value at maturity. Each year, investors must report “imputed interest”—the difference between the purchase price and maturity value—even though they don’t receive cash until maturity. This amount gets taxed as ordinary income. Some, like… read more…
- Does Issuing More Stock Shares Decrease the Cost of Equity?
Investors often consider the impact of a company issuing more stock shares, particularly on the cost of equity. The cost of equity represents the return that investors expect for holding a company’s stock. When a company issues additional shares, it can influence the stock price, investor perception and even the company’s overall financial structure. A… read more…
- How to Choose Investment Objectives for Your Portfolio
Investors need investment objectives to provide a clear direction for their portfolios. These objectives can help align their investments with specific financial goals, risk tolerance and time horizons. Investors use them to select a mix of assets, such as stocks, bonds, or alternative investments, that aims to achieve outcomes like growth, income, or capital preservation.… read more…
- How a Gross Lease Works in Commercial Real Estate Investing
A gross lease in real estate is a commercial lease where the tenant pays fixed rent while the landlord covers most property operating expenses, including taxes, insurance, utilities, and maintenance. This setup offers predictability for tenants and simplifies expense management for landlords. Knowing how a gross lease works helps investors and business owners assess potential… read more…
- What Is Upside Risk and How Does It Work?
Upside risk refers to the potential for an investment or strategy to perform better than expected. Unlike downside risk, which focuses on the likelihood of losses, upside risk highlights the chance that positive outcomes could exceed projections. Investors and financial advisors consider upside risk when analyzing growth opportunities, as it can influence asset allocation, portfolio… read more…
- Fiat Money: Definition, Examples, Pros and Cons
Fiat money refers to a type of currency that holds value because a government declares it as legal tender, rather than being backed by a physical commodity like gold or silver. Most modern economies rely on fiat money, with examples including the U.S. dollar, the euro and the Japanese yen. Its value depends on the… read more…
- Enterprise Value (EV) Formula: What It Is and How to Use It
The enterprise value (EV) formula measures the total value of a company, considering both its equity and debt. It reflects what it would cost to acquire the business, including adjustments for cash and debt, offering a more comprehensive view than market capitalization alone. The enterprise value formula is pretty simple: add a company’s market capitalization… read more…
- Intrinsic Value vs. Extrinsic Value in Options Trading
In options trading, assessing intrinsic and extrinsic value can help determine an option’s price. Intrinsic value shows the profit from immediate exercise, while extrinsic value accounts for factors like time and volatility. Changes in these values with market conditions can reveal potential returns and risks. A financial advisor could also help you identify options that… read more…
- Explaining the Relationship Between Interest Rates and Inflation
The relationship between interest rates and inflation is an important concept for investors to understand because of the widespread impacts it can have on the greater economy. When inflation increases, central banks often respond by raising interest rates to cool down the economy and slow price growth. Changes in interest rates impact everything from borrowing… read more…
- What Does It Mean If a Company Is Maximizing Shareholder Value?
When a company focuses on maximizing shareholder value, it’s actively working to increase the wealth of its shareholders. This could mean boosting profits, increasing dividends or driving up the stock price. For investors, this can indicate the company is committed to providing a strong return on investment. However, there can also be negative impacts of… read more…
- What Short-Term Investments Are Generally Considered Safer?
Short-term investing isn’t inherently safe, but certain investments can provide liquidity, stability and a reasonable return with minimal risk. As the name suggests, these investments typically mature within one to three years, making them most suitable for those who need access to the funds in the near future. Safety, in this context, means a lower… read more…
- Forward P/E vs. Trailing P/E: What’s the Difference?
When evaluating stocks, investors often come across two important valuation metrics: forward P/E and trailing P/E. Both ratios help gauge whether a stock is priced fairly relative to its earnings, but they rely on different sets of data. The trailing P/E ratio looks backward, using a company’s actual earnings from the past 12 months, while… read more…
- 13 Exit Strategies for Business Owners and Investors
Exit strategies allow business owners and investors to sell or transfer ownership of assets or companies. They can use these strategies when seeking to retire, cash out or shift focus to new ventures. Common owner strategies include selling to a third party, merging with another company or passing the business on to family members. Investors… read more…
- What Investing Strategies Allow You to Bet Against a Stock?
Most stock investment strategies bank on shares increasing in value, but how do you bet against a stock? Also known as shorting, betting against a stock involves profiting from a stock’s decline in value. However, there are a few ways to do this. Short selling is one way and involves selling borrowed shares at the… read more…