Posts

While the concept of “bag holding” isn’t exactly new, the term has been frequently used by today’s retail investors. Let’s learn more about what exactly bag holding is and how to avoid becoming one. Definition and Example of a Bag Holder A bag holder in investing is someone who holds a stock as its value declines. The term originates from the concept of being “left holding the bag,” meaning left responsible for something because others have abandoned responsibility....

Bank-owned properties can be attractive options for homebuyers and real estate investors because they often sell at discounts. There are some trade-offs you might make, however, when buying a bank-owned home as a primary residence or as an investment property. Let’s learn more about what a bank-owned property is, and the pros and cons of buying one. Definition and Example of Bank-Owned Property A bank-owned property is a property that’s gone through the foreclosure process and is now under the ownership of the bank....

Alternate name: Cash-method taxpayer For example, let’s say that a cash-basis taxpayer is a sole proprietor with a service business. Once the taxpayer completes a service for a client, the taxpayer invoices the client and is paid within 60 days. As a cash-basis taxpayer, this taxpayer would not report income for tax purposes when the taxpayer has earned the income (when they complete a service and invoice for it). Rather, they report the income when they have actually received payment for the service....

Financial clearinghouses take on a variety of responsibilities, including: Finalizing or “clearing” tradesSettling trading accountsOverseeing the delivery of assets to the purchaserReporting trading dataCollecting margin paymentsActing as third parties for options and futures contracts In the U.S. two main clearinghouses take on this responsibility—the New York Stock Exchange (NYSE) and the Nasdaq. The NYSE acts as a clearinghouse by facilitating trades of financial entities such as bonds, mutual funds, stocks, derivatives, and exchange-traded funds (ETFs)....

Copays Amounts Can Vary Copay amounts depend on your plan and may vary for different types of services, such as visits to a general practitioner, specialist examinations, lab tests, and prescriptions. A copay might be higher for a specialist visit than for your primary doctor. Services such as annual physicals or wellness exams may not require a copay. Copays are often a key factor in choosing a health insurance plan because they can help you plan for your medical costs....

You can access your credit report for free through AnnualCreditReport.com or companies such as Credit Karma that offer credit monitoring services. Once you have access to your report, you can click on and scroll through the various sections of your credit report. How Does a Credit Report Work? Creditors such as lenders and credit card companies report your information to the credit bureaus, which use this financial data to create your credit report....

Alternate names: Deposit expansion multiplier, simple deposit multiplier For example, if a bank has $100 million in demand deposits and a reserve requirement of 5%, it must keep $5 million in its reserve, but can lend the other $95 million (or 95%) out in the form of loans and credit. This is called fractional banking, and it’s a tool used to help expand the economy, in part, by offering consumers money they can borrow to make purchases....

A financial custodian may be needed for a variety of reasons. For example, if you will be spending time overseas for work, you may wish to work with a financial custodian to keep your financial affairs in order while you are out of the country. Other situations that may call for a financial custodian include a minor who has various assets that should be managed by someone other than a parent or a senior with financial assets who needs help managing them....

Often, this equity counts toward your down payment and closing costs when you get a mortgage for the property. You may still need to add funds to reach the minimum down payment requirement for your mortgage, or to avoid paying for private mortgage insurance (PMI). For example, let’s say your grandmother wants to sell her house and rent an apartment. The house is paid off and has a market value of $300,000....

Greenshoe options are commonplace in IPOs in the U.S. today, and, as you’ll learn, you can easily find examples of them being used. Keep reading to learn more about greenshoe options and how they work. Definition and Example of a Greenshoe Option in an IPO A greenshoe option is a provision in an underwriting agreement that gives underwriters the right to sell more shares than initially agreed on. Greenshoe options, also known as “over-allotment options,” are included in nearly every initial public offering (IPO) in the United States....

The following are not considered housing units by the Census Bureau: Dormitories, bunkhouses, and barracksQuarters in predominantly transient motels and hotels, unless they’re occupied by an individual or family who considers the unit to be their place of residenceQuarters in institutions, general hospitals, and military installations, unless they’re occupied by staff members or resident employees who have separate living arrangements Types of Housing Units As mentioned, most residential units are considered housing units if they’re separate living quarters....

Like all reverse mortgages, the purpose of a jumbo reverse mortgage is to borrow from your home equity and gain access to cash when you’re older. You’ll still be responsible for paying property taxes and home insurance premiums, but instead of having a monthly mortgage payment, you’ll receive payments from the lender. Alternate definition: A jumbo reverse mortgage is a private reverse mortgage that does not have a cap or loan limit....

With this arrangement, the merchant bank would get partial ownership in the company seeking funding. At the same time, merchant banks can assist with offering business loans and other types of fundraising options. Merchant banks usually also play a key role in helping wealthy individuals and companies make strategic financial decisions. Their advisory role might include helping a U.S. company decide whether to merge with or acquire an international company or whether to sell off some of their assets....

A parallel shift in the yield curve happens when the interest rates on all fixed-income maturities increase or decrease by the same number of basis points. Such a change would shift the yield curve parallel to its present place on the graph without changing its slope. Suppose that one-year, five-year, eight-year, ten-year, 15-year, 20-year, and 30-year bonds all were to increase by 1.5% or 150 basis points over their previous levels....

Property dividends aren’t as common as cash dividends. Learn more about how they work here. Definition and Example of a Property Dividend A property dividend is a type of dividend made up of an asset instead of cash. Companies can choose to pay investors with an asset, such as a product, by calculating what the market value of that product is. They then determine how much product they must send the investor to equate to the value of the dividend....

The trend today is for the title company and/or escrow officer to issue the deposit receipt. It is generally issued after the buyer’s earnest money deposit has been deposited into the title or escrow company’s bank account. It will often contain the following information: The name of the title companyThe address of title companyThe name of title company’s bankThe title company’s bank account numberThe receipt numberThe escrow numberThe property addressThe date of depositThe name of the person who received the receiptThe amount of the depositName(s) of the payor, who is usually the buyerA copy of the original check...

You may hear that a recession occurs when the GDP growth rate is negative for two consecutive quarters or more, but a recession can quietly begin before quarterly gross domestic product reports are out. That’s why the National Bureau of Economic Research (NBER) measures four factors using monthly data to determine whether a recession happened. When these economic indicators decline, so will GDP. The NBER uses the expertise of its committee to determine whether the country is in a recession....

Definition of a Share Draft If you open a checking account at a not-for-profit credit union rather than a bank, you’ll probably come across the term “share draft account.” Because you are a member of the credit union, you are a partial owner or shareholder of it. The “share” in share draft account reflects that ownership. Shares are federally insured by the National Credit Union Share Insurance Fund, administered by the National Credit Union Administration (NUCA), up to $250,000....

Thomas Barwick / Getty Images Government bodies might borrow for massive infrastructure improvements requiring hundreds of millions of dollars. A company might borrow to purchase equipment or build sophisticated facilities for large-scale manufacturing. Businesses use these loans to buy other companies, and they also obtain syndicated loans to refinance existing debts. Lenders include large financial institutions, such as banks and finance companies, as well as institutional investors who want to earn interest by participating in syndicates....

Trailing stops can be set up to work automatically with most brokers and trading systems or can be manually monitored and changed by the trader. How a Trailing Stop Loss Works A trailing stop-loss order is initially placed in the same manner as a regular stop-loss order. For example, a trailing stop for a long trade (selling an asset you have) would be a sell order and would be placed at a price below the trade entry point....