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October 16, 2017

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A futures contract is an agreement to buy a specif A futures contract is an agreement to buy a specific investment at an agreed-upon price on an agreed-upon future date. Unlike an option—which gives the buyer a choice of whether or not to actually use the option—a futures contract is an obligation. If you enter into a futures contract, you have to hold up your end of the deal. For example, suppose you enter into a futures contract to buy one ounce of gold in three months for $1,500. And suppose that when you enter into the contract gold is trading at $1,400 per ounce. After you enter the contract, the price of gold will rise or fall from day to day. If the price of gold is higher than $1,500 when the futures contract expires, then you’ve earned a profit. If the price of gold is lower than $1,500 when it expires, then you’ve suffered a loss. Some futures contracts are made with what’s called “physical delivery,” in which case you would actually receive that ounce of gold at the end of the three months. But often the two sides of the trade instead settle up with cash—in which case you would receive or pay a cash amount equal to your gain (or loss) on the contract at the end of the three months. Like options, you can buy futures contracts on a range of underlying investments, including: ✅ Commodities, such as wheat or corn ✅ Precious metals, such as gold or silver ✅ Stock market indexes ✅ Currencies ✅ Bonds Two of futures main uses are for: ➡️ Hedging: If you’re a farmer and you know that in six months you’re going to need to sell several tons of corn, then you may buy corn futures today. That way you’re protected if the price of corn takes a sudden plunge. ➡️ Speculating: If you just want to make a bet on whether corn will rise or fall in price, then you’re said to be speculating in the market. 👉 Fun fact: did you know that there have been futures traded on snow and rainfall amounts, box office ticket sales, and even election results? 🧐 Click our link in bio to learn more!
According to a recent article by @cbsnews, "The Na According to a recent article by @cbsnews, "The Nasdaq is already in a bear market, down 31% from its peak of 16,057.44 on November 19. The Dow Jones Industrial Average is more than 16% below its most recent peak. The most recent bear market for the S&P 500 ran from February 19, 2020 through March 23, 2020." If you're not sure what a "bear market" means, a bear market is a period when stocks are generally falling—or, more specifically, a time when major stock indexes have fallen at least 20% (a fall of less than that would be called a “correction” but not a bear market). Bear markets tend to correspond with: ➡️ A shrinking, or “contracting,” economy ➡️ Rising unemployment ➡️ Falling corporate profits ➡️ Deflation or unstable inflation ➡️ And experts can also be “bearish” on a particular stock or asset class. Conversely, a "bull market" is when stocks are generally rising. Bull markets tend to correspond with: ➡️ A growing, or “expanding,” economy ➡️ Falling or stable unemployment ➡️ Rising corporate profits ➡️ Stable or modestly rising inflation ➡️ Sometimes, you might also hear that an expert is “bullish” on the market or “bullish” on some particular stock. That just means that person thinks the market or that particular stock is likely to go up. What are your thoughts on the current market? Share with us below! And click the link in our bio to learn more about what a bear market means for you in the future. 🧐
Active and index investing are two different ways Active and index investing are two different ways of choosing individual investments. 👉 With active investing, investors try to pick and choose only the best investments to buy—like the stocks that they think will rise the most in value. 👉 With index investing, investors build a portfolio that’s designed to match the performance of an index, like the S&P 500. Investors might choose between active and index investing when they’re investing in: ✅ Stocks ✅ Bonds ✅ Some types of alternatives, like commodities Most mutual funds can be categorized as either active funds or index funds. Most exchange-traded funds, or ETFs, follow index investing, but some follow active management. Although either approach can help you build a diversified portfolio, there are some key trade-offs that investors typically face with the two investing styles. 👍 Active Investing Pros: • Possibility of amazing returns • Can use with any asset class • Chance for more control and customization ‼️ AI Cons: • Typically more expensive • Chance of terrible returns • Often performs worse than indexing on average • Often less tax efficient 👍 Index Investing Pros: • Lower cost • Often performs better than active management on average • Can be more tax efficient ‼️ II Cons: • Never do better than the market • Can’t use with all investment types (like hedge funds) • If the market goes down, you go down with it ➡️ Which do *you* prefer? Active or Index Investing? Share below! And click our link in bio to learn more, including some more ways to choose which is right for you!
This includes $9 trillion in mortgages, more than This includes $9 trillion in mortgages, more than $1.5 trillion in student loans, and $1.2 trillion in auto loans. The struggle is real. 😬
Collateral is something that a borrower pledges to Collateral is something that a borrower pledges to a lender to secure certain types of loans. If the borrower doesn’t repay, the lender gets the collateral. The purpose of collateral is to reduce the lender’s financial risk. If you can’t make your car loan payments, your lender can repossess your car and sell it. That means that whether or not you make your payments the lender can feel pretty confident it will get its money back. That’s why loans backed by collateral often: ✅ Have lower interest rates ✅ Are for larger amounts The loan type usually dictates the collateral required. Secured loans are often made against: ➡️ Houses ➡️ Cars ➡️ Business assets, such as real estate or machinery ➡️ Securities, such as stocks and bonds The collateral generally must be worth at least as much as the amount of the loan. The basic rule of thumb is that what you put up must be easy to sell and hold its value for at least the amount of time it will take you to pay back the loan. Some banks even let you use future paychecks for very short-term loans (like a couple of weeks). While homes are frequently put up as collateral, some assets used to secure loans are a bit more bizarre: such as designer handbags, horses, wine, rubber, cheese, and even soccer players have been used. Did you know that during the Renaissance, a suit of armor could be considered valid collateral? Click the link in our bio to learn more!
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