Posts for October 2007→
What is a “stock”?
(This post is a part of the series Basics of Finance and Investing.)
Unlike a debt type security such as a money market or a bond, a stock is an equity or ownership type security, which entitles its buyer one share in the ownership of the issuing corporation. Because the risk of investing in a stock is significant (you may lose your entire invested asset if the corporation faces bankruptcy), stocks are examples of a variable income type security.
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Market tanks on “Black Monday” anniversary
Wall Street saw a brutal sell-off today, with the major market indexes – Dow Jones, S&P 500 and NASDAQ – dropping respectively 2.64% (367 points), 2.56% (39 points) and 2.65% (74 points). The slide reflects, among other things, a continued concern about credit and housing issues, rising oil prices, falling dollar value, and uncertainly on Fed’s next move.
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What determines the “real” interest rate?
(This post is a part of the series on Basics of Finance and Investing.)
An interest rate is the monthly rate you pay as a borrower, or receive as a creditor/lender. If you save money in bank, or invest in a money market, you are indirectly lending money to a borrowing corporation (or the government). If the interest rate goes up, the borrower must pay you more, which makes them unhappy but you happy (your bank balance soars). The mood swings the other way when interest rate goes down.
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Social security – will it be there when I retire?
Kathleen Casey-Kirschling signed up
yesterday for social security benefit as the first baby boomer in America. Kathleen was born on January 1, 1946, at the stroke of midnight, which makes her officially the first in a long line of baby boomers entitled for this benefit after retirement. There are 80 million other boomers behind her. But, first a little recap.
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Rich gets richer, poor gets poorer
A recent Wall Street Journal report shows that the top 1% of the wealthiest people in America collared 21.2% of the entire nation’s income in 2005, a sharp rise from 19% the year before (also above the previous high of 20.8% in 2000). By contrast, the bottom 50% of the earners managed only 12.8% of all income, a drop from 13.4% in 2004 (and from 13% in 2000).
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“Real” and “nominal” interest rates
(This post is a part of the series on Basics of Finance and Investing.)
You have bought a 1-year CD for $10,000 at 5% interest rate. After one year you collect $10,500 – a gain of $500. What is your real gain? This depends on what $10,000 can buy one year later, compared to what it does now.
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Inflation and retirement
No matter how often they have been talked about, some threats are so creepy they are worth telling again. Inflation is dangerous not only because it damages your retirement savings, it works so quietly that you may not even notice, until after retiring when you begin to dip into your nest egg.
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Ads to target your brain chemistry
Technology, with its considerable might, is increasingly invading human psychology to understand how and why we respond to financial cues the way we do. Rarely does anything churn our emotions as much as the myriad decisions we face every day about spending/saving/investing our money.
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What is a “bond”?
(This post is a part of the series on Basics of Finance and Investing.)
Like money market, a bond market is a debt instrument issued by both the US government and corporations to borrow fund from public. But there are two differences: a bond market has longer term maturity, and bond returns are not always fixed (and so it is not totally correct to categorize them as fixed-income securities).
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