Equities & Stocks
What Is Equity Funds
Equity fund or stock fund is a mutual fund that invests at equity. If the mutual fund arrange investors’ money into various share or stock, it called actively managed. On the other hand, if the manager just use index share like S&P 500, it is called passively managed. The manager build a portfolio that contain some benefit stock. We cannot select the stock that we want to invests. The mutual fund also put 4-5 % investor money at fixed income securities to anticipate if a mutual holder withdrawn his or her money immediately.
Equity is the most popular mutual fund because it might give you high return. Off course, you will side with high risk too. It because the stock price is very volatile and it is difficult to predict it.The risk in investing mutual fund is very high. You can loss your money moreover the economic condition is not good.
There are various equity mutual fund such as:
1. Income fund which is oriented with high dividend yield company shares.
2. Growth fund which is invested at Growth company shares. Unlike income fund, this mutual fund orientation is for long term or capital gain. Therefore the growth has higher risk than income mutual fund.
3. Value fund. The manager invests at value stocks
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How To Become Rich With The Stock Market
If you are a hedge fund manager or a portfolio manager, you quite possibly know how to become rich with the stock market. If you are an individual investor, even an experienced one, you may luck the skills or sometimes the luck to anticipate future market returns. However, designing an investment strategy is a matter of getting acquainted with the sources of investment performance rather than a matter of luck.
Investment performance is typically coming from five sources:
a) Treasury-Bill (T-Bill) yield: this is the short term risk-free rate of interest, typically 1-6 months.
b) Inflation-indexed government bond yield: this is the long-term inflation-risk-free rate of interest. These inflation-indexed bonds typically offer a premium return over T-Bills Read the rest of this entry »
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Tips Compute The Weighted Average Cost of Capital With Preferred Stock
In financial decision making, a firm finances its assets by either debt or equity. The weighted average cost of capital (WACC) measures the average riskiness of a firm’s assets by calculating the weight of debt and equity to any given situation. In effect, by calculating a weighted average, a firm can estimate the capital discount of debt and equity in dollar terms. This means that for each dollar it finances, it can derive the optimal capital structure for a certain percentage of cost of debt and cost of equity that, in return, will provide a return on investment (ROI) to the shareholders.
The risk undertaken in financing is reflected on different required rates on return that represent different classes of assets. For instance, if a firm has only common stocks, the required return on equity (ROE) is the cost of capital used in the calculations of WACC. As different classes of assets differ in the level of risk undertaken, the WACC is adjusted to reflect the total riskiness of the project. In other words, the WACC is the minimum return that the firm expects given its existing capital structure so that its shareholders are satisfied for owning its assets and undertaking the risk of ownership.
When a firm has also preferred stocks along with common equity, their weight has to be included in the calculation of the WACC, but they are not tax-adjusted.
WACC Calculation with preferred stocks
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How to Fully Understand Stocks Market
Stocks represent ownership in companies.
((you own stock=you own a little peice of the company))
Stock Markets= place where stocks are bought and sold
New York Stock Exchange <– Actual Building
Nasdaq <– Computer Network
Etrade <– Website
If you buy stock you get an electronic confirmation of the trade. ((This is Very IMPORTANT to keep safe))
Basic Economics Knowledge will make or break you!!
Supply & Demand
Whats Available ((Supply))/Willing To Pay ((Demand))
What does plummeting mean? <– something that weighs down or oppresses ((NOT GOOD))
Now understanding the stock market tables:
52 Week High
highest price that stock has reached in the recent 52 week period
52 Week Low
lowest price that stock has reached in the recent 52 week period
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Equity Compensation and Tax Withholding
Certain forms of equity compensation provided to employees require tax withholding. Many types can be offered to non-employees, such as board members or consultants, as well as to employees.
Withholding for employees is required when you are issued vested stock or when previously unvested stock vests. Withholding is also required when you exercise a non-qualified stock option like an Incentive Stock Option (ISO).
The problem you face when acquiring equity compensation that requires withholding, is that the IRS wants that withholding in cash, even though you are not being compensated in cash. Some companies attempt to help employees in this situation by offering a cash bonus or appreciation right along with your equity compensation. The problem here is that the IRS is going to look at the cash bonus or appreciate right as income, and tax it accordingly, as well. Tax experts refer to this situation as grossing up the payment.
Most companies expect you to pay the withholding on any equity compensation and to pay them the cash to give to the IRS. You might have to write a check, make a withdrawal from savings, or even take out a loan against the value of the equity compensation.
