Buybacks have gotten a bad rap from both Republican and Democratic lawmakers this year. But the stock market would be trading at a much lower level without them.
Data compiled by Ned Davis Research shows the S&P 500 would be 19% lower without buybacks. The firm looked at the S&P 500's performance between the first quarter of 2011 and the first three months of 2019. Then they subtracted the amount of net monthly repurchases to arrive to that conclusion. The broad market is up more than 125% in that time while net buybacks have totaled about $3.5 trillion.
"Without focusing too much on numbers, we can say that the S&P 500 index would probably be lower today if not for buybacks versus other uses of cash," Ed Clissold, chief U.S. strategist at Ned Davis Research, wrote in a note last month.
Lawmakers on both sides are bashing buybacks and want to make it harder for companies to repurchase their own stock. They argue that buybacks inflate corporate executives' pay and share price at the expense of a company's workers.
In a Feb. 20 Medium post, Sen. Charles Schumer, D-NY, said companies should reinvest their capital differently.
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Every day people speculate wildly on stocks putting leveraged bets that a stock will be bought out, or surge in value. However, for every buyer there is a seller, for everyone who buys the leverage, there are people who sell the leverage. If you dream of a $1 stock flying to $100, this isn't for you, you should learn to be the one buying calls, not selling them. Be warned, however that if you are a buyer of call options that you will be taking on much greater risk, and you will be relying on the price of the stock moving up sometimes very significantly in order for you to make money. In addition, buying options require costs that are not redeemable, so even if the stock remains the same price you could still lose money buying options.
However, if you believe in buying for the long run, yet think things currently will stay the same, get worse, or better yet, get better, but by a limited amount, then a covered call strategy may in fact be right for you.
It is said that a call option is similar to putting a $100 nonrefundable down in hopes of reserving an item at a price lower than you believe it will be sold for. Now selling a call is instead selling that right to allow others to buy away your item that you own at a fixed price such as $1000. If for example there was a new car that wasn't even released yet, and the retail value was set at $20,000, and you believed there would be a lot of demand, you might pay 2000 to speculate at a set price of $22,000 that it would be worth more. The car would have to be worth $24,000 for you to break even, but if it was worth $26,000 you would double your money, where as someone who reserved it at $20,000 and paid the full $20,000 would tie up 10 times more money for the same gain. Now one can obviously see the excitement for owning a call option, but why would you sell an option?
Lets say you were actually the builder of that $20,000 car. You may have put $30,000 into it, you may have put $15,000 into it, it really doesn't matter, because you think that the car will be sold for around $20,000 which is what it would go for now. For some reason you think that this car actually will go up in value over time, however for the next month you do not. You would then sell the $20,000 option, and if you're right and the car stays under $22,000 then you collect that full $2000. If you're wrong and the car goes to $23,000, then you still collect $1000 as the contract is only worth $1000 but you sold it for $2,000. If the car goes to $26,000 you would owe $4000. Since you owned the car itself, you would pay the contract buyer the difference, or the car would be called in, and you would have to sell it at $22,000, and give the contract buyer the $4000 difference. If you still wanted the car, you would have to buy it back at $26,000. Even if the car went to $100,000 you would still gain $2,000 for the contract. Of course, you would miss out on a HUGE gain, but it is the price you pay for writing calls. The risk is both that you miss out on a bigger gain, and that you are still only offered limited protection from a loss.
One example is if instead the car could only be sold for $18,000. Although this normally would be a $2,000 loss, you would collect the $2,000 from the option call buyer and lose nothing. Now if the car attracted no buyers, it would be worthless, and you would only collect a lousy $2,000. Options work in a very similar way to the above example. Writing a covered call is merely selling a contract that entitles someone else to you potential gains, that you risk giving up for guaranteed income. You sell hope for a sure thing at the expense of giving up your own potential for large gains, while still maintaining the downside risk of the stock.
In a covered call trading system, the idea is to write covered calls over and over again every single month, collecting a premium. Ideally you would want to have the stock rise to the strike price and expire, and then you could perform a covered call the next month at a higher and higher strike price as your stock actually gained in value.
Now say you own 100 shares of a stock at $73 per share. Lets say you don't expect it to go up beyond 75 this month. So you sell a covered call at $75, receiving a fixed amount like $200. If the stock rises above 75, you will not be entitled to the gain, but you will receive the $200 for the stock going from $73 to $75 ($2 per share for 100 shares). The hope is that you can continuously collect these calls and that the stock never goes above whatever strike price you buy. You are essentially trading a stocks potential for steady income. Of course if your stock goes to zero, you lose everything but the $200. Its important to own stocks that will be around for a long time, and to know this, you must understand a stocks balance sheet and financial statements, and you still probably want to be willing to cut your losses short, selling both your call and your stock price. You still need to educate yourself in the risk of the less liquid option market as there is a big difference in the bid and ask price.
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2 steps to take to protect your money from a recession according to a financial expert and bestselling author
It's near impossible to recession-proof your money, says financial expert Ramit Sethi.
"The market will go up, the market will go to down. Nobody knows. Nobody can tell you. It doesn't matter if they're on some TV show or anything. It's all bullsh--," Sethi, who recently released the second edition of his bestselling book " I Will Teach You To Be Rich," told Business Insider.
"A better question is, 'Can I have a diversified portfolio?' ... And do you have enough cash just in an emergency fund in case there was something bad that happened to you on a day-to-day living basis?" Sethi said.
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Regardless of the state of the markets, diversifying your investments across, and within, stocks and bonds and securing an emergency fund are two of the most important steps to take with your money, he said.
"That's the best thing you can do," he said. "What you shouldn't do is try to predict what's going to happen because you will almost always lose."
Sethi recommends keeping cash reserves equal to at least three months and, ideally, up to a year's worth of expenses to fall back on whenever it's needed.
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In times of economic crisis, some investors turn to gold as an investment hedge (a sort of financial insurance) to protect their investment portfolios. That makes a lot of sense today, given the current value of gold. While this value fluctuates (as with any investment), one thing is certain - as the oldest valuable commodity, the chances of gold ever being worthless are next to none. That is why investors have traditionally turned to precious metals in times of widespread financial woe. It still shines, and it will keep on shining.
Considering the current financial climate, one might consider if it is a good time to invest in gold. Even people who have very small or nonexistent investment portfolios are considering purchasing some gold. With the price of gold high and getting higher, wouldn't someone be crazy not to invest? Unfortunately, there is no straight answer to that question. For some people, now is absolutely the time to buy gold. For others, it is not a good time. So how do you know if it is a good time for you to buy gold?
Do you have a lot of consumer debt (credit card balances, car loans, or similar debt)? If so, you would be better off applying any extra money you have to your debt. Are you overly concerned with the short-term performance of your investment portfolio? If so, gold might not be the commodity for you. This is because gold does not generally have a good return.
How can that be? The gold prices are so high! If I had bought gold years ago, I could sell it for so much more now!
True, but all those years you would have kept gold in your portfolio, you would have been paying to keep it there. No matter how you hold your gold investment, it does cost something to keep it. If you keep your gold in exchange-traded funds (ticker symbol GLD), you pay a small fee to handle the price of storing the gold, and you pay your broker a fee on whatever you make on your gold. If you keep your gold in a safe-deposit box, you pay for the safe-deposit box and for the insurance you would need to protect your investment. The same goes for storing the gold in your home. The very thing that makes gold so attractive (the fact that it is tangible) is the thing that makes it so risky. If someone steals it, it is gone.
As a side note, the investment options mentioned above are the best way to own gold. It is not wise to invest in gold stocks - you are really investing in the company that mines the gold, so while you get partial ownership of that company's gold, you are still vulnerable to that company's business practices and financial pitfalls; Even buying gold coins, bullion, or bars is potentially risky. If you buy gold you want to make sure it is pure. Paying full price for a precious metal with fillers is a real possibility in a market that is flooded with questionable merchants pushing gold at every opportunity.
With so much to consider, one might be inclined to skip the current and gold rush. Not so fast. For some investors, now is a great time to buy gold. If you have some extra money for investing and know how gold will affect your portfolio, gold is a great addition that will round out your portfolio and reduce fluctuations. If you are comfortable enough to put some money away for the long term, gold might be the way to go. Additionally, if you have a reputable dealer and some place safe to store it, you could buy gold to store yourself. There is something to be said for having assets you can touch.
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Moms are chock full of advice, but when Renee Kwok talks to her daughter about money, her words may very well carry twice the weight.
Kwok is a certified financial planner and the CEO of TFC Financial, a $1 billion financial planning and asset management firm based in Boston.
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She tells her daughter to "work hard and save most of your money. The three-bucket philosophy endures today: spend a little, donate some — and save most." But, Kwok says, it's what you do with your savings that matters most.
1. Put your savings in a high-interest account
"You can't collect interest or grow your stacks of cash if they are sitting in an envelope in your desk drawer," Kwok tells her daughter.
A high-yield savings account or money-market account is often the best place to keep savings so it grows, but remains easily accessible. While you won't wreck your financial life by not storing savings in a high-interest account, your money will almost certainly lose value thanks to inflation.
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If you are new to the world of finance, one question you may want answered relates to what is amortization. In simple terms, amortization is the process of paying off a loan in the form of uniquely structured payments given on a periodic basis. An amortized loan is different than regular loans because of the way that the structure of the repayments are defined.
Perhaps the most common type of amortized loans that most people would come across are mortgages. In fact the terms "mortgage" and "amortization" come from the same Latin word "Mort". This root word can be transliterated as meaning to kill off, eliminate, or deaden, hence why it is used in relation to paying back a debt.
When planning to invest in real estate, it can be useful to check out what is APR and the information on a wide selection of mortgage broker's websites. It is likely that they will provide some information about amortized loans, and perhaps offer tools such as special online loan calculators that can be used to help understand the amortizing process in full.
Payments are typically calculated by a division of the principal with the number of agreed months that have been allocated for repayment. The interest is then added to the total. For each payment that is given, a percentage of the interest and the principal is eliminated.
It is important not to confuse an amortized with an interest only loan. They differ in so much that the latter would involve payments that are given going towards the interest that is due and not the principal, though there can be the option of choosing to make principal payments. For this reason, the money given each month is typically less with an interest only plan.
Because of the way they are structured, with an amortized loan it usually takes around half the life of the loan for the interest and principal payments to balance out. Over time the money being paid towards the principal begins to outweigh the interest, therefore depleting the balance at a faster pace.
Depending upon the lender chosen, there may be the option of paying an extra amount each month which is used specifically to bring down the principal balance. As the interest charged directly relates to the principal, by lowering this amount the interest will also come down. Making extra payments on a regular basis can reduce the term of a loan.
Hopefully you are now a lot clearer about the answer to the question what is amortization. It is important that you understand the language used by lenders if you are to choose a product that best suits your personal circumstances.
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A woman who studied 600 millionaires says the same traits helped them get rich and there are 2 key ways anyone can develop them
Millionaires are often cut from the same cloth — they're disciplined, have focus, are resilient, and practice perseverance.
These are all qualities that help them build wealth, according to Sarah Stanley Fallaw, co-author of " The Next Millionaire Next Door: Enduring Strategies for Building Wealth" and the director of research for the Affluent Market Institute. But these traits aren't necessarily innate — there are two ways anyone can develop them.
The first way, according to Stanley Fallaw, is to understand where you are today.
"If you know that you're prone to make emotional decisions, it's first being aware of that and kind of taking stock of that and asking yourself, okay, when is it that I'm making decisions that are really not in my best interest?" she said in an Afford Anything podcast with writer Paula Pant.
Once you've built awareness, you should then build new behaviors around typical behaviors, Stanley Fallaw said. She referenced Charles Duhigg's book, " The Power of Habit," for an understanding of building new behaviors around things you don't often give thought to.
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Hedge funds in general seem to be having a much better year this year. Interestingly, the first quarter looked somewhat similar to what we have seen in the last few years in terms of sector and factor favorites.
By some accounts, the hedge fund industry had its best first quarter since the Global Financial Crisis. The Eurekahedge Hedge Fund Index was up 1.06% for March and 4.36% for the first quarter, making it the best first quarter since the financial crisis. The HFRI FWI index was up 5.9% for the first quarter, beating Eurekahedge.
Markets and hedge funds are going strong
In their monthly "CIO Hedge Funds" report, UBS analysts Karim Cherif and Georg Weidlich said other than macro/ trading hedge funds, most posted positive returns for the first quarter.
They also noted other positive signs in the market which have been great for hedge funds.
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Gold is an object that never loses its value, no matter what era, what generation, what country you reside in. Gold is still as valuable today as it was centuries ago, when it was used as a royal give away. Investment in gold has always been a good way to earn back high profits. All you have to do is buy gold bullions or gold jewelry and later have them sold off when rates go up.
This is one of the best ways to earn a good profit. If however, you want to make a bigger investment in gold, then its time you step into gold shares investment market. This step however, is pretty much complicated and you cannot proceed with it effectively, if you do not have experienced financial advisors or investment houses to help you out.
Here are a few guidelines to help you invest in gold shares.
First and foremost, get a financial advisor, because it's a critical step for understanding the gold share investment market. Remember, we are not dealing with simple gold bars, we are dealing with gold shares, so you have to understand the pros and cons. When it comes to shares, you know you have to actually make a mark in a huge financial hub, therefore a financial broker should be your foremost priority.
If you're a novice, then you should consider approaching the Gold Exchange Traded Fund for investing in gold shares. ETF is an organization that allows investment in gold bullions, and giving out shares to respective members. This means that you can take out gold bullions anytime you want to move away from the shares. While you are there, you are investing in its shares, without possessing it physically.
If you have a considerable amount of cash, then you can invest in a company that deals with gold mines. However, you will have to be prepared facing loss along with the company if it faces a dwindling market. There are also scammers out there who claim to be running gold mines and lure people to invest in them. Be sure you avoid such unknown entities.
If gold mine companies are not for you then you can take on gold mutual fund shares. When you get into mutual funds, you actually get into an organized and reliable way of investing. In mutual funds, you actually invest in the entire gold market, and are sure to receive benefits from somewhere or the other, instead of depending on any one company. In this way you could ensure good profit, rather than facing loss for a company's downfall.
As with all financial and investment matters, you should be aware and informed of all procedures and must always get legal assistance.
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For now, there’s no cause for panic. The strong U.S. economy and low unemployment means most consumers are able to stay current on debt payments — new foreclosures and bankruptcies fell to the lowest level in at least 15 years in 2018. Yet the uptick in card losses is unmistakable. Credit-reporting company Experian Plc said some of the blame goes to banks offering credit to riskier borrowers, and the Federal Reserve has noted a spike in late payments by the elderly.
“We do see card delinquencies a little higher and a slight uptick in the most recent couple of quarters,” Matt Komos, TransUnion’s vice president of research and consulting, said in an interview, adding that he doubts the trend is a harbinger of bad news for banks. “Delinquencies, while moving upward, are probably hitting a more normal level for the amount of credit that’s out there.
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