Asset Class Definition Asset classes are securities with similar features and financial structure. These securities are also held to the same laws and regulations. The most common asset classes are stocks, bonds, and cash equivalents. List of Asset Classes The main asset classes include the following, however these are not the only asset classes. Equities Cash and Cash Equivalents Bonds or Fixed Income Investments Alternative Investments Commodities Gold Global Markets Real Estate (REITS) Global Fixed Income Why is It Important to Understand Asset Classes? Considering asset classes generally adhere to the same financial structure, rules, and regulations, they’re also likely…
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What Is an ETF? Exchange-traded funds are very similar to mutual funds, except that they trade throughout the day on stock exchanges as if they were stocks. This means you can actually pay more or less than the value of the underlying holdings in the fund. What Is the Difference Between an ETF and a Mutual Fund? While mutual funds track indexes, they are actively managed by an investor buying or selling assets within the fund. ETFs are mostly passive and aren’t managed, and they track a specific market index, like the S&P 500, to try and match their performance.…
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Blue Chip Meaning A blue chip is a high-quality, relatively low-risk investment; it usually refers to stocks of large, well-established companies that have performed well over a long period of time. The term is originally from poker, where the blue chips are the most valuable. What Is a Blue Chip Company? Blue chip companies are well-established, financially stable, and less risky to invest in. They are seen by investors as reliable and profitable as these companies perform well not only in good financial situations, but also in bad ones. Examples of blue chip companies are AT&T Inc., Bank of America,…
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Large Cap Definition Large cap is the name of companies with market capitalization of the stocks with market values greater than $10 billion. Examples of large-cap companies include, J.P. Morgan, IBM, and Johnson & Johnson. What Are Large-Cap Stocks? Large-cap stocks are shares that trade for corporations with a market cap of over $10 billion. Additionally, large-cap stocks represent most of the U.S. equity market. Therefore, theses stocks are often viewed as core investments to include in a portfolio. Large Cap vs Small Cap Defining a company with the terms, ‘large-cap’ or ‘small-cap,’ refers to how much value they have…
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What Is Market Cap? Market capitalization (Market Cap) refers to the value of all outstanding shares of a company's stock at the total dollar market value. Market cap is one way to look at the relative size of a company. Market Capitalization Formula The market cap is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. For example, a company that has 20 million shares that are selling at $100 each would have a market cap of $2 billion. Is Market Cap the Same as Equity Value? Although market cap…
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Index Fund Definition An index fund is a type of mutual fund with a portfolio designated to match or track the components of a market index. How To Invest in Index Funds Firstly, it is important to know that investing in index funds, or “indexing,” is a form of passive fund management. Consequently, this means that instead of choosing securities to invest in and strategize their buy and sell periods, you want to create a portfolio that mimic the securities of a particular index - this is the either the entire stock market, such as the S&P 500, or a…
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What Is an Executor? An executor, also called an executor of estate or executor of will, manages your estate after death. It is often a temporary and relatively short-term position, but can be time-intensive. It is referred to as “personal representative” in some states. What Does the Executor of a Will Do? An executor of a will has authority from the probate court to manage the affairs of a deceased person’s estate. In other words, an executor is the fiduciary in charge of your probate estate. The executor’s role includes determining what property you owned, taking control of your assets,…
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Trustee Definition A trustee is a person or a company that manages the trust assets for the benefit of a third party or beneficiary, according to the terms of the trust document. Furthermore, a trustee manages and executes decisions for the beneficiary’s benefit and best interest. When creating a trust, it is important to consider possible questions that can help guide you through the creation process. Is a Trustee the Same as a Beneficiary? Although both are included as part of your overall estate plan, beneficiaries and trustees play different roles. The beneficiary is the individual who may receive the…
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What is a 401(k) Retirement Plan? A 401(k) is an employer-sponsored retirement plan that allows employees to defer a portion of their wages to individual accounts. Generally, contributions to the plan are made on a pre-tax basis. However, some employer-sponsored plans allow for after-tax, or Roth 401(K) deferrals. Employers may also match their employees’ 401(K) deferrals up to a certain amount. Annual contributions are typically limited up to a maximum amount allowed by the IRS. What Should I Do With My Old 401(k)? When deciding what to do with an old 401(k), there are typically four options, each with pros…
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Volatility Definition Volatility is the amount and frequency with which an investment fluctuates in value. A volatile market gives traders opportunities to make money quickly, but also leaves room to lose money quickly as well. Planning Strategies for a Volatile Market Market volatility can bring about fear and loss for investors, but it can also provide some unique planning opportunities. One potential action to consider in volatile times might be capital tax-loss harvesting, a technique that enables investors to sell securities that have lost value in order to offset realized capital gains and maintain their desired exposures. Another strategy to…
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