Investing

Currency Trading

Although the foreign exchange (also known as "forex" or "FX") is the largest financial market in the world, it is relatively unfamiliar terrain to retail traders. However the big slide in the U.S. dollar since early in 2002 has opened the eyes of many investors to the global currency markets. Until the popularization of internet trading a few years ago, FX was primarily the domain of large financial institutions, multinational corporations and secretive hedge funds. But times have changed, and i...
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Can I get in on an IPO?

IPO is an acronym for Initial Public Offering. This is the first sale of stock by a company to the public. Getting a piece of a hot IPO is very difficult, if not impossible. To understand why, it helps to know how an IPO is done, a process known as underwriting. When a company wants to go public, the first thing it does is hire an investment bank. Underwriting is the process of raising money by either debt or equity (in this case we are referring to equity). You can think of underwriters as mid...
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Understanding Capital Gains Tax Rates

The advantage of capital gains, as opposed to ordinary income, is that the basic maximum tax rate on capital gains for property held for more than one year is currently 15 percent. In contrast, the top four ordinary income tax rates are all higher than this, with the top rate for 2005 through 2010 at 35 percent. The IRS taxes short-term and long-term gains differently. The "holding period" is the amount of time you held some security before you sold it. A short-term gain or short-term loss is a...
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Employee Stock Purchase Plans

Many large companies offer Employee Stock Purchase Plans (ESPP) that let you buy your employer's stock at a discount. These plans are offered as an employment incentive, giving you an opportunity to share in the growth potential of your company's stock (and, by implication, work hard to keep the stock price soaring). Usually, you make contributions to a stock purchase fund for a certain period of time through payroll deductions. At designated points in the year, your employer then uses the accu...
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Lets Talk About Leverage

In finance, leverage refers to the ratio of debt to equity. The higher the proportion of debt, the more leverage. Leverage allows you to use a small amount of your own money to make an investment that you expect to increase in value. In that way, leverage can increase your buying power and give you control of potentially valuable assets. When you take a mortgage, you’re using leverage to pay for something you can’t buy with the cash you have on hand. (more…)
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What is the Efficient Market Hypothesis?

In finance, the efficient market hypothesis (EMH) asserts that financial markets are "efficient", or that the current price of a share reflects everything that is known about the company and its future earnings potential, and is, therefore, accurate in the sense that it reflects the collective beliefs of all investors about future prospects. (more…)
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How Taxes Affect Your Returns

Last week I discussed why costs matter when investing. By considering taxes as an additional expense, you'll be able to make informed decisions that, all else being equal, can help your portfolio's returns over the long run. Research by Vanguard's Investment Counseling & Research group shows that taxes on dividends and capital gains can be a significant drag on a fund's overall performance—in many cases, the largest single drag. And that's particularly true for stock funds. (more…)
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International Investing- Pros and Cons

With today's wars, ethnic strife and oil prices, you might think global investing would be mostly rough sailing these days. Not so, according to global-investment managers who can point to plenty of opportunities for solid growth in overseas markets: Part of the trick is to keep your eye on corporate performance -- and not let the noise of external factors drown out what's good there. (more…)
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