Investing

Stock Lending: Pros and Cons

Stock lending, also known as securities lending, is a feature offered by some brokerage platforms that allows investors to lend their shares to other market participants, primarily short sellers. In return, investors receive interest payments, offering a way to generate passive income without having to sell their holdings. Think of it like renting out your stock to someone else for a period of time.However, while this might seem like an effortless way to earn extra income, it comes with its own set of complexities and risks that investors should carefully consider. How Stock Lending Works When an investor participates in…
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Annualized Return versus Cumulative Return Explained

When evaluating the performance of an investment, two common metrics often come into play: annualized return and cumulative return. Understanding the differences between these metrics is crucial for accurately interpreting your investment's growth over time and comparing it to other opportunities.What Is Cumulative Return?Cumulative return measures the total percentage change in the value of an investment over a specific period. It represents the overall growth of the investment without considering how long it took to achieve that growth.Formula:Cumulative Return = (Ending Value−Beginning Value) / Beginning ValueExample:If you invest $10,000 and its value grows to $15,000 after five years, the cumulative return is:$15,000−$10,000 =…
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The Differences Between Short-Term and Long-Term Capital Gains

Capital gains occur when you sell an asset for more than its purchase price. The distinction between short-term and long-term capital gains is important for tax purposes, as each is treated differently under U.S. tax law. Short-Term Capital GainsShort-Term Capital Gains are gains from the sale of assets held for one year (365 days) or less are considered short-term.These gains are taxed as ordinary income, meaning the tax rate depends on your marginal tax bracket which is the highest tax rate applicable to you.  Currently, ordinary income rates range from 10% to 37%. For the latest rates, see Latest Ordinary Income…
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Understanding Estimated Capital Gains Distributions

Understanding Estimated Capital Gains Distributions Capital gains distributions are a critical aspect of mutual fund and exchange-traded fund (ETF) investing. They represent the profits a fund makes when selling securities that have appreciated in value. While distributions are a normal part of investing, understanding them and their timing can help investors manage their tax liability and align their portfolios with their goals. How Are Capital Gains Distributions Generated? Capital gains distributions occur when a mutual fund or ETF sells investments within its portfolio for a profit. These gains are classified as either: Short-term capital gains: Generated from securities held for…
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Understanding MYGAs: Multi-Year Guaranteed Annuities

A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that provides a guaranteed interest rate for a specified number of years. Similar to a Certificate of Deposit (CD), MYGAs are offered by insurance companies and are designed to provide a safe, predictable return on investment over the annuity's term, which can range from two to ten years. MYGAs are particularly attractive for individuals looking for a low-risk option to preserve their principal while earning a steady interest rate.How Does a MYGA Work?When you purchase a MYGA, you agree to invest a lump sum with an insurance company. In…
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Guide to Market Volatility

It is easy to get caught up in the news cycles when market volatility hits and begin to question your portfolio. Here are some valuable tips for managing market volatility that are useful for investors of all levels:Stay Informed, But Don't OverreactMarket volatility is not generally caused by a single source but a combination of factors:Economic Data: Changes in unemployment rates, inflation, and GDP growth can influence market movements.Geopolitical Events: Political instability, elections, or conflicts can cause uncertainty and market swings.Monetary Policy: Central bank decisions on interest rates and monetary policy often impact investor sentiment.Investor Sentiment: Market psychology plays a…
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Understanding Tax Implications for Investment Accounts

Understanding the different types of retirement accounts and their respective tax statuses is fundamental for effective financial planning and tax planning. This article offers a comprehensive overview of the four primary tax categories for different accounts each having distinct implications for investment growth and withdrawals.The reason understanding these terms is important as they impact how contributions, distributions, and earnings are taxed as well as other important considerations regarding the account.The four primary account tax categories are:Taxable AccountsTax Deferred AccountsTax-Free AccountsAfter-Tax Accounts  Taxable Accounts Contributions = Not Deductible Tax Deferred Growth = Depends Withdrawal Taxation = Gains Withdrawal Flexibility = Most…
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How Bond Returns Work – Part 1

Investing in bonds can be a stable and reliable way to protect your wealth over time while earning enough along the way to offset inflation. However, the intricacies of bond returns, particularly how interest rate changes affect bond prices and the dynamics of bond funds, can be confusing for many investors. This article aims to demystify these concepts, providing a clear understanding of how bond returns work and what to expect when holding individual bonds or investing in bond funds. What is a Bond? At their core, bonds are debt securities issued by governments, municipalities, or corporations to raise capital…
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From Ballots to Portfolios: Unraveling the Relationship Between Elections and Markets

Presidential election years often bring a whirlwind of emotions and uncertainties, not only in the political landscape but also in the realm of financial markets. Investors are frequently caught in a conundrum, grappling with the dilemma of whether to alter their investment strategies amid the volatility that accompanies these pivotal periods. Historically, the relationship between presidential elections and market performance has been a topic of intense scrutiny and debate. While it's tempting to make knee-jerk reactions or adjust investment portfolios based on the political climate, it's crucial to approach this with a clear understanding and a long-term perspective. A Caution…
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The Crisis Chronicles: How Stocks Won the Battle of Nerves

The stock market is a dynamic entity, subject to the ebb and flow of various events and crises that span the globe. News headlines and banners from the largest news outlets to the smallest Youtuber discuss the events of the day and how to react to the latest news that is sure to change the markets. As a long-term investor, it is important to cut through the turmoil and emotional rollercoaster and look at the historic context of crisis events. From political upheavals to economic recessions, geopolitical tensions to natural disasters, the market has weathered an array of challenges since 1970…
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