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why are interest rates important to the housing market | first interest rates determine how much we will have to pay to borrow money to buy a property and they influence the value of real estate second low interest rates tend to increase demand for property driving up prices while high interest rates generally do the opposite | |
what is the credit debt ? | know the difference between how much you owe debt and how much you can borrow credit learn how to manage both to avoid financial trouble and understand how credit scores are calculated | |
do lenders all use the same credit score | most lenders use fico credit scores although some use a rival credit score called the vantage score the type of fico or vantage score can vary depending on the type of loan being applied for for example lenders use a specific score variation from one of the major score providers for credit cards vs a mortgage or home equity line of credit | |
what are the most important components of credit | the most important components of credit include history of on time payments types of credit owned amounts owed and credit utilization another thing that goes into a person s credit score is the length of credit history which means the age of the oldest account on file | |
is a credit card different from a line of credit | a credit card is a card based form of payment that has a revolving credit line it is different from a line of credit that is typically a standalone loan with a set loan amount that can be accessed as needed with a check once a check is written against a line of credit principal and interest is paid back in installments | |
what behaviors affect credit scores | credit scores can be positively or negatively affected by consumer behavior such as paying balances owed on or before the due date the percentage of utilization of credit lines and the number of credit accounts that are open | |
what things get reported to credit bureaus | lenders report the opening and maintenance of credit accounts to credit reporting companies each month that accounts are open account balances payment behavior and account status such as current overdue or in default are also reported | |
what is the student loans ? | learn all about student loans including where to get them how to get them and strategies to avoid massive loan debt by the time you graduate | |
what are the four types of federal student loans | the u s department of education currently offers direct subsidized loans direct unsubsidized loans direct plus loans and direct consolidation loans subsidized loans are solely for eligible undergraduate students who demonstrate financial need to help cover the costs of a higher education while unsubsidized loans are available for eligible undergraduate graduate and professional students though eligibility isn t based on financial need plus loans are made to graduate or professional students as well as parents of dependent undergraduate students for education expenses not covered by other financial aid a consolidation loan allows you to combine all of your eligible federal student loans into one loan with a sole loan servicer | |
should you pay off your student loans early | it depends on your financial circumstances since interest may accumulate on your student loans while you re in school depending on the type of loan it may make sense to begin making payments toward your debt before the actual due date kicks in 2 there are no penalties for making prepayments on either federal or private student loans so if you are able it can save you some money to start early | |
what happens if you don t pay off your student loan | the first day following a missed student loan payment your student loan becomes past due i e delinquent until you either repay the past due amount or make other arrangements with your creditor remaining delinquent for 90 days or more will result in your loan servicer reporting the delinquency to the three major national credit bureaus following a certain period of delinquency which varies based on the type of loan there is also a risk of the loan going into default 4 | |
what is the can student loans repayments come out of your retirement funds ? | per the employee retirement income security act of 1974 erisa most employer sponsored retirement plans such as a 401 k are protected from seizure by creditors in nearly all cases 5 however according to the debt collection improvement act of 1996 up to 15 of your social security payments can be garnished to repay your federal student loan s should you default fortunately the amount garnished cannot reduce your monthly benefit payment below 750 6 | |
what is the taxes ? | knowing the tax rules can help you plan your financial life and not pay more than necessary pretty much everyone pays some taxes whether they are federal state local income taxes sales taxes property taxes or capital gains | |
which states don t charge sales tax | just 5 states don t impose state sales taxes alaska delaware montana new hampshire and oregon however that doesn t keep them from charging income tax excise taxes or tourist taxes and it doesn t mean that cities or municipalities within those states can t change a local sales tax | |
how are taxes on stock options calculated | there are complicated rules for how stock option taxes are calculated sometimes depending on whether the options the employer granted are statutory stock options granted under an employee stock purchase plan or an incentive stock option iso plan or nonstatutory ones iso options affect alternative minimum tax and nonstatutory options have three possible tax events so get the help of a tax advisor to handle stock options issues | |
which tax documents should you never throw away | documents around property acquisition and improvements are especially important for capital gains tax when you sell your home so are documents needed by heirs to establish the cost basis of stocks they inherit | |
how can you avoid a tax hit when you sell your home | start by using the exclusion for 250 000 of capital gains 500 000 for married couples if the home was your primary residence for at least two of the last five years then look at all the expenditures you made that can reduce the amount of capital gains for example capital improvements settlement fees and closing costs | |
is there a way to reduce your alternative minimum tax | alternative minimum tax amt is a system invented to make sure that higher income people with significant tax deductions didn t avoid paying federal income tax it uses a separate set of rules to calculate the tax owed after adding certain tax preference items back into adjusted gross income agi what you need to do is keep your agi as low as possible through maximizing salary deferrals and pre tax contributions to flexible spending plans and the like keeping tax efficient investments in taxable investment accounts and taking all the tax credits of which you qualify | |
what are the biggest tax filing mistakes | some of these are simple carelessness such as using the wrong line of the form or entering incorrect figures or names others are automatically taking the standard deduction missing write offs making math errors not telling the irs what to do with your refund and making payment mistakes | |
what is the financial literacy resource center ? | students have endless questions about money especially as the way we use money on a daily basis continues to change with this free resource hub from investopedia you can break down the jargon and teach financial literacy to the next generation | |
what is financial literacy | financial literacy is the ability to understand and effectively use various skills and concepts including personal financial management budgeting and investing a strong foundation of financial literacy especially one that starts at an early age can help support various life goals such as saving for education or retirement using debt responsibly and running a business | |
what is the financial literacy resource center | this section of investopedia is a free digital library for educators teachers and parents looking for materials to help them teach the next generation of investors linked in the table on this page are downloadable lesson plans worksheets and guidance that can be used to supplement classroom or at home learning for children in grades k 5 investopedia has also curated a collection of articles to help set teens grades 9 12 up for success as they start working and or pursue higher education | |
what topics are covered in this resource center | the k 5 lessons plans available to download from this library cover the fundamentals of personal finance and investing as appropriate for each age level these lesson plans have been reviewed by licensed educators and used by timberlakes elementary school in orlando florida the articles in this library for parents and teachers of teens grades 9 12 focus primarily on building and using credit investing digital money management e g using venmo or apple pay and real world applications of personal finance topics | |
what is the will there be more financial literacy topics covered in the future ? | yes investopedia is committed to making financial literacy accessible for everyone as more lesson plans and articles become available we will update this resource page follow us on social media investopedia and bookmark this webpage to stay looped into the latest | |
where else can i find financial education resources | in addition to our content library the investopedia stock simulator is an instructional tool for students or yourself to practice trading and investing in stocks in a safe simulated environment we also have a monthly newsletter for educators the classroom investor to give context to financial news new product developments and share additional free teaching resources | |
what is the retirement planning ? | learn how much you need to retire comfortably and how to prepare for the unexpected plan for everything from living expenses to healthcare to planning that trip you ve always wanted to take | |
what should i do in the 5 years before retirement | if you haven t been tracking all this already this is the time to calculate how much money you will need and how much income you can expect to have do the math figure out whether you re on track and decide what to do next everything from changing needs or retirement income to working a few more years | |
what is the best way to invest for retirement | start by understanding your investment options both the different types of retirement accounts and the various investment categories then start saving early track your net worth keep your cool and watch out for fees that sap your gains and unless you re really good at this don t go it alone | |
what are the stages of retirement | retirement isn t just one step called stop working at a job after the pre retirement stage and the big good bye expect to move through a honeymoon phase disenchantment the job of building a new identity and finally settling into a routine | |
where are the best places to retire | if you re thinking of relocating after you retire here are the best places in both the u s and abroad according to retirement researchers be sure to make extended visits to any new location you re considering before making the move especially if it involves living in another culture where people speak a different language | |
what is a good retirement income | one rule is that people generally need 80 of their current income in retirement will you have that much start by estimating your future expenses looking at how much you ll get from social security and reviewing your retirement savings accounts and any pensions plus other savings you may have | |
what are the worst mistakes you can make in planning for retirement | not thinking ahead can decimate your retirement among the bad steps quitting your job before checking on your retirement plan vesting status not saving or planning not maxing out employer matching funds investment mistakes poor tax planning and taking social security early | |
what is the personal finance ? | personal finance encompasses the whole universe of managing individual and family finances taking responsibility for your current and future financial situation and setting financial goals it also includes handling individual financial tasks and saving for emergencies | |
what is personal finance | personal finance is about meeting your financial goals and understanding all the routes to do this from saving and investing and keeping debt under control to buying a home to planning for retirement and coming up with a plan to accomplish these goals it s also the name of the industry that provides financial products to meet these goals | |
why is personal finance important | not getting control of your personal finances can leave you unprotected when a crisis comes along whether it s an illness an unexpected job loss or the death of the family breadwinner the pandemic that began in march 2020 showed all of these issues in sharp relief and showed the importance of planning for emergencies | |
should i be managing my finances differently since covid 19 | what the pandemic showed is that people are a lot more secure if they have an emergency fund have learned to budget and have created a financial plan one with a plan b and plan c those who haven t done these things should get busy doing them it and the war in ukraine are both wake up calls that stock market crashes can happen abruptly in a crisis and that everyone needs a crisis investment plan | |
how much liability insurance do i need for my car | for starters you need to buy at least the minimum amount for your state the two types of liability coverage for an auto accident are bodily injury liability for injury to other people and property damage liability for property damage bodily injury liability specifies both a per person liability and a total liability per accident for any damage outside of that you will need to pay personally unless you have an umbrella insurance policy to make up the difference | |
do you need a smartphone to handle your money today | it s certainly looking that way even warren buffett had to switch to one in 2020 banking is increasingly done online budgeting apps are more convenient to use with a phone than a desktop or laptop and it s easier to check on your investments and at work and elsewhere two factor authentication pretty much requires having a phone so goes getting an uber or lyft | |
how do i wire money to someone | if you need to move large amounts of money a wire transfer either bank to bank or via an agent such as western union is the safest way to go expect to pay a fee and review the fine print before you agree to the transfer it may take a few hours or days depending on the details note that a wire transfer is different from an automated clearing house ach transfer those are used to pay bills or move money between linked accounts | |
what is the government policy ? | governments can have an enormous impact on the economy learn how the government affects taxes trade markets interest rates and more through policy regulation and legislation | |
how does the government control inflation | the most common way governments control inflation is by raising or lowering interest rates put simply high interest rates counter inflation by reducing the money supply and low interest rates promote inflation by increasing the money supply in the u s the federal reserve indirectly controls interest rates through the federal funds rate the interest rate banks charge each other for loans made overnight | |
what is the difference between communism and socialism | communism and socialism both advocate for a more equitable distribution of wealth than that achieved under capitalism but they differ in their means and the extremity of their vision a basic premise of communism is that a communist order is achieved through a revolution in which the working class proletariat overthrows the ruling class bourgeoisie socialism insists on working within existing systems to implement reform communism also advocates the dissolution of all private property so that all property is owned by the state which distributes resources evenly between citizens under socialism the means of accumulating wealth industry and commerce are collectively owned and managed by the government but property like homes and personal possessions can remain privately owned | |
how much does the u s spend on healthcare | according to centers for medicare medicaid services u s healthcare spending is expected to reach 6 2 trillion or 20 of gdp by 2028 in 2020 spending per person was 12 530 the highest of any developed country norway which ranked second in terms of healthcare costs spent 6 748 per person almost half of u s expenditures | |
what is the difference between monetary policy and fiscal policy | monetary policy refers to the actions taken by a central bank to achieve economic goals like low unemployment and stable prices monetary policy is often executed through the increase or decrease of the money supply fiscal policy refers to the government s tax and spending plans fiscal policy is administered by the legislative and executive branches of government | |
what is the monetary policy ? | monetary policy describes the ways in which the central banks change the money supply in order to accomplish certain economic objectives in the u s this is done by the federal reserve | |
what is monetary policy | monetary policy is how central banks influence the economy by raising or lowering the money supply this is in contrast to fiscal policy which is how the government uses its taxes and spending to affect the economy | |
what are the tools of monetary policy | monetary policy has a few main tools reserve requirements discount rates open market operations omo and quantitative easing qe | |
how does monetary policy affect markets | monetary policy affects markets in many ways however two main ones include boosting or dampening the economy as a whole and raising or lowering bond yields first as expansionary monetary policy can boost the economy as a whole investments more sensitive to the business cycle will usually benefit and vice versa with contractionary policy secondly monetary policy s effect on interest rates causes yields to rise and fall which changes the relative value of existing interest bearing investments | |
what is the difference between expansionary monetary policy and contractionary monetary policy | expansionary monetary policy is when a central bank increases the money supply which fights recessions and increases economic growth contractionary economic policy pulls money out of the economy in order to fight inflation | |
what is the economics ? | economics is a social science concerned with the production distribution and consumption of goods and services it s comprised of broader macroeconomics and consumer centric microeconomics | |
why is economics important | as a field of study economics allows us to better understand economic systems and the human decision making behind them due to the existence of resource scarcity economics is important because it deals with the study of how societies use distribute scarce resources and how these processes can be accomplished more efficiently for some economists the ultimate goal of economic science is to improve the quality of life for people in their everyday lives as better economic conditions means greater access to necessities like food housing and safe drinking water 1 | |
what is the who is the father of economics ? | the 18th century scottish philosopher and economist adam smith is widely considered to be the father of contemporary economics smith s book an inquiry into the nature and causes of the wealth of nations is often cited as both his most notable contribution to the field of economics and one of the most influential books ever written some of his most famous ideas include the concept of gross domestic product gdp and the invisible hand behind the free market economy | |
what are macroeconomics and microeconomics | macroeconomics and microeconomics are the two primary branches of economics macroeconomics focuses on the big picture side of economics specifically the decisions made by countries and governments that affect an economy as a whole microeconomics meanwhile is the study of smaller scale decisions made by people and businesses that affect individual markets despite their differences both branches are interdependent of each other and share many overlapping issues | |
what are the four basic concepts of economics | there are four economics concepts that are key to understanding economic decision making scarcity supply and demand incentives and costs and benefits scarcity refers to the fact that valued resources are limited in quantity supply and demand meanwhile is the relationship between the price of a good or service and the consumer interest in purchasing it which for example can incentivize producers to increase the supply of goods when demand rises and consumers to limit their consumption of certain goods when supplies are scarce lastly cost and benefit is the dynamic between how much a good or service costs to produce purchase versus the benefit acquired from doing so | |
what is the markets news ? | learn how global markets work how they are interrelated and how individual companies and sectors can influence their movements | |
what is the accumulated distribution ? | accumulated distribution is a term related to exchange traded funds etfs trading meaning that the etf in question reinvests any income and dividend payments back into the fund | |
what is the accumulation funds ? | accumulation funds automatically reinvest any profits or gains in the hope of making more profits or gains rather than paying them out to investors | |
what is the acquisition ? | when one company decides to take over another one it is referred to as an acquisition the acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over | |
what is the active fund managers ? | active fund managers implement the strategy of an investment fund and manage the trading activities it the human element of fund or wealth management | |
what is the adr ? | an american depositary receipt or adr for short is a way in which us investors can trade shares of non us companies without using their local exchanges | |
what is the aggregate demand ? | aggregate demand is the total demand for final goods and services in a market sector or economy aggregate demand shows how current price levels relate to a nation s real gross domestic product gdp | |
what is the aggregate supply ? | aggregate supply is the total value of goods or services in a market sector or economy aggregate supply is used to show the amount of goods that can be produced at different price levels in a given time period usually one year | |
what is the alerts ? | ig alerts also known as trading alerts allow you to set specific criteria and be notified immediately once that criteria has been met there are three main types economic announcements price alerts and indicator alerts | |
what is the alpha ? | alpha is the measurement of an investment portfolio s performance against a certain benchmark usually a stock market index in other words it s the degree to which a trader has managed to beat the market over a period of time the alpha can be positive or negative depending on its proximity to the market | |
what is the amortisation ? | amortisation is the process of spreading the repayment of a loan or the cost of an intangible asset over a specific timeframe this is usually a set number of months or years depending on the conditions set by banks or copyright agencies amortisation will often incur interest payments set at the discretion of the lender | |
what is the annual general meeting agm ? | an annual general meeting agm is a yearly gathering between the shareholders of a company and its board of directors generally this is the only time that the directors and shareholders will meet throughout the year so it is a chance for the directors to present the company s annual report | |
what is the annualised return ? | an annualised return is the average amount earned by an investment each year over a certain period of time if the annual return was compounded compounding means investment returns from one year to the next are dependent on each other | |
what is the arbitrage ? | arbitrage in trading is the practice of simultaneously buying and selling an asset to take advantage of a difference in price the asset will usually be sold in a different market different form or with a different financial product depending on how the discrepancy in the price occurs | |
what is the asset class ? | an asset class is a category of financial instrument these can be physical assets or financial assets the instruments are grouped into asset classes based on whether they show similar characteristics behave in the same way on the market or are governed by the same laws and regulations | |
what is the asset ? | an asset is an economic resource which can be owned or controlled to return a profit or a future benefit in financial trading the term asset relates to what is being exchanged on markets such as stocks bonds currencies or commodities | |
what is the at the money atm ? | at the money atm is a term used to describe an options contract with a strike price that is identical to the underlying market price at the money options see a lot of trading activity because they are so close to becoming profitable | |
what is the auction market ? | an auction market is an environment that facilitates competition between buyers and sellers in an auction market buyers indicate the maximum price that they are willing to pay for an asset while sellers express the lowest price that they would be comfortable accepting | |
what is the authorised participant ap ? | an authorised participant ap is a recognised body that has a relationship with an etf provider to create or redeem exchange traded funds etfs most aps are market makers or large investment houses | |
what is the automated trading ? | automated trading also known as algorithmic trading is the use of algorithms for making trade orders | |
what is the averaging down ? | averaging down is when a market participant buys more of a stock they already own after the price has declined in doing so they will reduce the average price at which they purchased the stock and could stand to realise a greater profit if the market value recovers above the new average price | |
what is the bank of england boe ? | the bank of england boe is the central bank for the united kingdom sometimes known as the old lady of threadneedle street the bank says its mission is to promote the good of the people of the united kingdom by maintaining monetary and financial stability | |
what is the base currency ? | in trading the term base currency has two main definitions the first currency quoted in a forex pair or the accounting currency used by banks and other businesses | |
what is the base rate ? | a base rate is the interest rate that a central bank such as the bank of england or federal reserve will charge commercial banks for loans the base rate is also known as the bank rate or the base interest rate | |
what is the basis point ? | a basis point is a unit of measurement used to quantify the change between two percentages it can also be referred to as bp which is pronounced bip or beep a basis point is equal to one hundredth of one percent or 0 01 | |
what is the bear market ? | when the market is on a sustained downward trajectory with little optimism from traders to bring about a rally it is referred to as a bear market | |
what is the bearish ? | being bearish in trading means you believe that a market asset or financial instrument is going to experience a downward trajectory being bearish is the opposite of being bullish which means that you think the market is heading upwards | |
what is the bid ? | in trading and investing the bid is the amount a party is willing to pay in order to buy a financial instrument | |
what is the blue chip stocks ? | blue chip stocks are the shares of companies that are reputable financially stable and long established within their sector over time the companies that are considered blue chip tend to change so the exact definition of what is required for blue chip status can be vague however a company that is considered blue chip will tend to be at or near the very top of its sector feature on a recognised index and have a well known brand | |
what is the boe ? | the boe is a popular shortening of the bank of england the central bank of the united kingdom | |
what is the bollinger bands ? | bollinger bands are a popular form of technical price indicator they are made up of an upper and lower band set either side of a simple moving average sma each band is plotted two standard deviations away from the sma of the market and they are capable of highlighting areas of support and resistance | |
what is the bond trading ? | bond trading is one way of making profit from fluctuations in the value of corporate or government bonds many view it as an essential part of a diversified trading portfolio alongside stocks and cash | |
what is the bonds ? | bonds are a form of financial investment that involve lending money to an institution for a fixed period of time they usually come in two varieties corporate bonds and government bonds depending on the type of institution you are lending to | |
what is the book value ? | while book value reflects what a business is worth according to its financials its books market value is the worth of a company according to financial markets also known as its market capitalisation the calculation for market value is the current market price per share multiplied by the total number of outstanding shares | |
what is the book to market ? | the book to market ratio assesses a company s value by comparing its book value to its market value the book value is the value of a company on paper according to its common shareholder equity while the market value of a company is determined by its market capitalisation | |
what is the bottom line ? | the bottom line is a term used to describe a company s net income or earnings per share eps if it s referring to net income it is the total profit made minus any outgoings and if it s referring to eps it is the bottom line figure divided by the number of outstanding shares in the company | |
what is the brent crude ? | brent crude also referred to as brent blend is one of three major oil benchmarks used by those trading oil contracts futures and derivatives the other two major benchmarks are west texas intermediate wti and dubai oman though there are many smaller oil varieties traded as well | |
what is the brexit ? | brexit is a contraction of british exit and it is the word used to define the uk s departure from the eu the initial referendum took place in june 2016 with 51 9 voting to leave and 48 1 voting to remain | |
what is the broker ? | a broker is an independent person or a company that organises and executes financial transactions on behalf of another party they can do this across a number of different asset classes including stocks forex real estate and insurance a broker will normally charge a commission for the order to be executed | |
what is the bull ? | bulls are speculators who believe that a market instrument or sector is going on an upward trajectory this belief puts them at odds with bears who take a pessimistic view on a market s direction | |
what is the bull market ? | when a market instrument or sector is on an upward trend it is generally referred to as a bull market | |
what is the bullish ? | bullish traders believe based on their analysis that a market will experience an upward price movement being bullish involves buying an underlying market in order to profit by selling the market in the future once the price has risen | |
what is the buy ? | buying a financial instrument means taking ownership of it from someone else whether it is a commodity stock or another asset | |
what is the cable ? | cable in forex is the nickname of the gbp usd currency pair it represents the british pound against the us dollar and it is one of the most popular pairs on the currency market | |
what is the call option ? | a call option is a contract that gives the buyer the right but not the obligation to buy a specific asset at a specific price on a specific date of expiry the value of a call option appreciates if the asset s market price increases | |
what is the capital expenditure ? | capital expenditure or capex is the term used for the money spent by businesses on physical assets it s an important part of understanding a company s accounts |