Archive for June, 2010
You’ve probably seen a picture or video of the New York Stock Exchange sometime in your life- or any other stock exchange for that matter. When you think back on it, your mind probably recalls something similar to a crowded subway station- hundreds of people pushing and shoving into each other and incessant screaming and yelling.
Hardly seems like a refined place where business is done, right? Well, however you feel, stock exchanges function as the backbone of American capitalism and are very important as monitors and negotiators of the world of money.
Stock exchanges aren’t the only place where financial business is done, though. In the past century, normal, everyday people are becoming involved in profitable markets by becoming individual investors of companies by buying and selling stock.
Anybody can get in on the action, and there is money to be made in it. That is why so many people are getting to know the world of stocks and are starting to do their own types of business transactions.
But what about those that want a piece of the action but aren’t sure where to start? After all, those economics classes you took in college weren’t exactly a walk in the park.
The world of stocks is complex and sometimes hard to understand. Those who don’t have any knowledge of it have the door of opportunity slammed in their face.
Luckily there are trained professionals that can help any beginner get their own chance at the world of stocks. They are called stock brokers, and their job is to help you wade through the seemingly deep, murky waters of finance.
A broker is simply a person or an institution that is the middleman between a buyer and a seller of. They arrange the transaction that will be made between the two parties.
There are three types of brokers: full service, discount, or a bank/credit union. All three provide essentially the same services but each one goes about it in a different way.
The full service broker is the highest and most revered. They usually cost more every time you trade, but are desirable for those who want more personal service and who want intelligent investment advice that will help them get an edge on the competition.
A discount broker has lower quality than a full service one, but generally they cost less. Unlike full service, they don’t really offer any investment advice but just make the transfers.
A bank or a credit union is the third type. Sometimes, the bank or credit union will have a mutual agreement with a full service or discount handler. Instead of going to one of these, a person would go to their bank and buy or sell there.
Once you pick a certain type, there are three different types of service that the professional can give you. They are execution-only, advisory dealing, and discretionary dealing.
Execution-only services mean that the broker can only buy or sell when the client tells them to. This is the simplest of the three services because of the restrictions that guide it.
Advisory dealing involves the professional advising the client on what would be best to buy or sell. They will use their financial knowledge to try to help the client on the right path, but ultimately it’s the client’s decision.
Discretionary dealing basically gives most of the power to the professional. The client will inform them of the investment goals that they have, and then it is up to the broker to make all the financial decisions that would be best for the client.
Brokers are found all over the world: here in the United States, locations all over Europe, and also in Asian countries such as China and Singapore. They literally can be found anywhere where there is a chance of a potential investor being born.
Now that you know a little bit more about what brokers do to help their clients, you can take advantage of their financial knowledge. With one showing you the ropes, you can make your money work for you instead of having to work for your money.
There has been a lot of interest in mortgage refinancing ever since the housing crisis hit and people are facing foreclosures. Homeowners realize that it’s a way to lessen their monthly obligations while still remaining in their homes. Of course, any time you have avid borrowers, there are going to be scams and dishonest lenders who are looking to make money off of someone else’s misfortunes. It is a good idea to refinance, especially when mortgage rates are so low, but there are a few pitfalls you need to look out for when doing so whether you’re doing a Madison finance or one in Los Angeles, CA.
1.Watch out for prepayment penalties. Although most people think of these as being something they would have to pay if they repaid their loan in a shorter time than the original agreement stipulated, they can be applied to refinance loans, too. Find out in advance if you are going to be subject to any prepayment penalties, and if there are, choose another lender. These penalties can be large.
2.In order to refinance your home, you’re going to need to have a new appraisal done. When the lender learns the results of this appraisal, it may bring about a reassessment of your house. If the value of your home has decreased, you may get a property tax break; however, if the value has increased since the previous assessment was done, you may be faced with a substantial increase in property taxes. In that case, will your refinance really do you any good?
3.Although adjustable rate mortgages (ARMs) often have lower interest rates which make them attractive to those wishing to refinance, you need to find out if the lower rate is only a gimmick to get your business. Some of these ARMs entice customers with low interest for a short period of time, and then interest rates go back to higher than they were originally.
4.A refinance will cost you both fees and closing costs, just like your original mortgage did. Take a close look at the amount you will end up paying. It may cost you more to refinance than the decrease in interest rate is worth.
5.When lenders talk up the positive points about any given type of loan, there are usually hidden negatives that they aren’t going to discuss with you. Don’t let yourself get trapped in a situation like this. Spend time researching anything a lender tells you that seems too good to be true.
6.One type of refinancing that has become increasingly popular for older Americans is a reverse mortgage. This is one of the most expensive types of loans you can get, and there are a lot of hidden dangers that aren’t spelled out in the contract you sign. For example, when you make a monthly mortgage payment, taxes, insurance, and other things are taken from it before money is put into paying the principle of your loan. With a reverse mortgage, even though your contract says you’ll receive $x per month, it will actually be this amount minus the payments for taxes, insurance, and anything else you were paying.
7.Some banks advertise programs for refinancing loans for homeowners who are struggling to keep up with mortgage payments, but when you get into the process, you’ll find it’s not that easy. For some reason, huge lenders are unorganized and tell the government they’re doing one thing when they actually doing something else. One of the pitfalls here is that during the many months it will take to get a refinance approved or declined, homeowners pay lower payments just as if the new financing had been approved. Therefore, if it’s finally declined, the homeowner is left owing the balance of all the mortgage payments that were paid at the new rate which can add up to thousands of dollars.
Stocks tend to develop a unique sense of character over time, composed of features particular to specific businesses. They are divided into different groups and classified based on a number of characteristics.
What are Stocks?
A stock is a certificate of ownership over a portion of the company. There are many types of stocks.
Common Stocks
A common stock, as you can tell by its name, is one of the most common types in the market. Each stock you possess provides you one voting right in the company. The vote is used to vote for the officers of the company and sometimes a few other pertinent company issues.
The common stock is the least secure option of investment in the stock market. Should the company experience problems that become public news, you may not earn your dividend from it, then being paid last after all other people involved with the company are first paid.
On the other hand, as long as there are no major problems, common stock has the potential to be the most profitable.
Preferred Stocks
An alternative to common stock is preferred stock, which offers a fixed payment but no voting rights in the company. As a shareholder, you receive your dividends before payments are made to holders of common stock.
It is possible that the dividends of common stocks are higher than those of the preferred stock, but depends on corporate decisions and performance. The company also has the option to purchase the stocks back from the shareholders.
In addition to these, there are also different classes of stocks. Such stocks have specifically-defined voting rights in the company, based on the discretion of the company.
The company allocates votes in this instance so that some groups of shareholders have more votes per share of stock while others have less of a vote.
What is a Dividend?
A dividend is a form of payout extended to shareholders based on the number of stocks they own. These are paid regardless of the company’s performance, but the actual amount of the dividend payment is determined by company policy.
Penny Stocks
Stocks that trade for less than a dollar are known as penny stocks. One reason they tend to be so cheap is because they are new or without an established company reputation.
Though it may seem counter-intuitive, penny stocks are actually a very risky form of stock. They could wind up being very successful for you or potentially lose a lot of money.
Blue Chip Stocks
This term applies to stocks in high value companies such as GE, IBM, Apple, HP or a number of other major companies. The price of these stocks are generally higher, but tend to be relatively safe investments over time.
There are a few things in life that often we dread doing such as summiting our tax return tax refunds. It is of utmost importance to pay taxes. In fact, there are advertisements on television and other media forms which reminds us of our tax obligations. Tax serves various purposes, mainly the four ‘Rs’.
Revenue is one of the main purposes served for by taxes. It is the income gathered by the government from the taxpayers. Taxation makes it possible for the government to raise funding for their public projects including repair of roads, building of hospitals and construction of schools. This collected revenue from taxes also pays for government functions like the judiciary and executive system regulations.
The net income of the government is actually computed by decreasing the amount of expenses from the total revenue collected. Revenue or turnover includes the proceeds coming from income taxes paid for by companies and individuals, sales of services and goods, custom duties, dividends and interests. The approximate income is dependent on the rules laid down by the government and its agencies and based on certain accountancy practices.
Redistribution is the second effect or purpose of taxation. It means allocating or transferring money from the rich sectors of the society to the less endowed members of the same society. In economics, the definition of redistribution is almost similar, income, wealth and property are redistributed to many individuals and citizens of the nation.
The aim of redistribution is to achieve equality in economics. It also aims to create a uniform income among individuals and how much they are supposed to earn. Above all, redistribution also functions as a means to correct and solve the inability of the market economy to compensate an individual worker with a sufficient salary according to the amount of work they put in. In actuality it is no duty of the rich people to actually transfer their money to the poor, it is a rule of morality alone, so the government instead redistributes the wealth collected from taxes to the poor people.
Repricing is the third purpose of taxation. Taxes aims to address the external consequences of the production. To illustrate, tobacco has a higher amount of tax compared to other goods in order to discourage consumers from excessive smoking. We all know the bad effects of smoking to our bodies and health. Taxes and subsidies effectively alter the pricing of goods, thereby changing the rate and quantity of consumed amount of goods.
Goods, when imposed with taxes and considering that any of the variables remain constant, in effect increases the market price or the price paid by the end users. However, the prices which the sellers pay for the goods the merchandise are decreased. The marginal tax is on the other hand imposed on the consumption of goods.
Representation is the fourth purpose of taxes. This simply means that the tax payers ought to be provided with the proper representation of the taxes they pay to the government and should seek their tax agents if there are any queries. The governments owes the public tax payers an accountability. Direct taxation is more likely to account for good governance whereas indirect taxation may have less substantial effects.
The number of business financing alternatives that are available to small and medium sized companies has dropped dramatically as a result of the financial crisis. Until recently, most owners could get a business loan by posting their house as collateral. Now that real estate prices have dropped substantially, banks find themselves saddled with worthless collateral and are being extremely careful with their loan portfolios. Only companies that can show profitable operations for a number of years, strong financial statements, demonstrated management leadership have a reasonable chance at getting business loans. Everyone else will need to find an alternative.
One alternative is a type of self liquidating transaction called invoice factoring. A self liquidating transaction is one that carries it’s mechanism for its own repayment. This feature makes them a very attractive source of financing to some companies.
Factoring is commonly used by companies that give 30 to 60 days invoice terms to their clients. Although large clients demand these payment terms, many small to medium sized companies can’t afford them. They need to get paid sooner so that they can meet their operating expenses. This is where invoice factoring comes in.
In a conventional factoring transaction, the client makes the sale, sends the invoice to the client and the finances it using a factoring company. The factoring company funds the invoice in two payments. The first payment covers about 80% of the invoice and is given soon after invoicing. The second payment of 20 % (less fees) is sent once the invoice is paid in full. The second payment closes – or liquidates – the transaction.
One immediate advantage of invoice factoring is that it allows clients the ability to offer payment terms to their clients with confidence – knowing that they can get money sooner if their business requires it. Additionally, factoring transactions are based on the credit strength of the invoice backing them. This allows small companies, who sell to large credit worthy businesses, to leverage their roster of clients to get financing.
Factoring is ideal for small and midsized companies whose biggest problem is that they can’t afford to wait 30 to 60 days to get paid.