The economic upswing of 2021 continued as stocks continued to rise in February. The rise was fuelled by widespread anticipation of the release of more stimulus. The Federal Reserve has also been friendly during 2021 and is going to support the economy with asset purchases and low interest rates. Asset prices have seen some inflation and real estate prices have risen with Bitcoin holdings hitting an all time high of $58,000 in February. Rising interest rates did cast a shadow of doubt over the market but the S&P 500 managed to finish the month off with a small gain eventually. The vaccination program is also going on in full steam and that is also helping with pushing the markets up. March seems to be a good month to invest, especially if you are looking to book some short term gains. In this post, we will take a look at 5 stocks that will help you in case you have a short term vision for your investment. Let’s get started.
Here Are the 5 Best Stocks to Buy in March 2021 for Investors with Short Term Vision
Viatris Inc. (VTRS)
The first stock to buy in March with short term vision is Viatris Inc. It’s a healthcare company, manufactures and distributes various medicines for patients in the United States and internationally. Its portfolio comprises approximately 1,400 approved molecules across a range of therapeutic areas, including non-communicable and infectious diseases; complex generic and branded medicines; a portfolio of biosimilars; and various over-the-counter consumer products, as well as active pharmaceutical ingredients. The company is headquartered in Canonsburg, Pennsylvania.
United Natural Foods Inc. (UNFI)
United Natural Foods, Inc., together with its subsidiaries, distributes natural, organic, specialty, produce, and conventional grocery and non-food products in the United States and Canada. It is great stock to invest in March, especially with short term vision. It operates in two segments, Wholesale and Retail. United Natural Foods, Inc. was founded in 1976 and is headquartered in Providence, Rhode Island.
PC Connection Inc. (CNXN)
PC Connection, Inc., together with its subsidiaries, provides a range of information technology (IT) solutions. The company operates through three segments: Business Solutions, Enterprise Solutions, and Public Sector Solutions. It offers IT products, including computer systems, software and peripheral equipment, networking communications, and other products and accessories. Its past performances have made the stock a great choice to buy in March for investors looking to book short term profits. The company also provides services, such as design, configuration, and implementation of IT solutions. The company was founded in 1982 and is headquartered in Merrimack, New Hampshire.
CarGurus Inc. (CARG)
If you are looking to invest in the short term during the month of March, CarGurus, Inc. is a great stock to buy. It operates an online automotive marketplace connecting buyers and sellers of new and used cars in the United States and internationally. The company provides consumers an online automotive marketplace where they can search for new and used car listings from its dealers, as well as sell their car in the United States marketplace. Its marketplace connects dealers to a large audience of informed and engaged consumers. The company operates online marketplaces under the CarGurus brand in Canada and the United Kingdom; and the Autolist and PistonHeads online marketplaces as independent brands in the United States and the United Kingdom. CarGurus, Inc. was founded in 2005 and is headquartered in Cambridge, Massachusetts.
Pax Global Technology Limited (PAX)
PAX Global Technology Limited, an investment holding company, engages in the development and sale of electronic funds transfer point-of-sale products worldwide. Its E-payment terminal products include smart and traditional E-payment terminals, smart electronic cash register solutions, mobile E-payment terminals, and QR code E-payment terminals, as well as other accessories. The company also develops PAXSTORE, a cloud-based platform that allows users to create and manage their own independent white-label marketplace for software application distribution; and paxRhino, a key injection service. In addition, it provides payment solutions services, and maintenance and installation services. The company was founded in 2000 and is based in Wanchai, Hong Kong. If you are looking to invest in stocks with short term vision in March, look no further.
As things stand today, most new investors would most likely use an online investment platform to begin their foray into the world of investment. However, just like for every Uber, there’s a Lyft, the competition in the online investment platform/mobile app field is also quite strong. All investors have a lot of options to choose from. Two of the most popular platforms of that kind are Stash and Acorns. Stash vs Acorns is a battle that is being waged in the mind of just about every potential investor looking to invest through an online investment app. If you are an investor who is thinking about choosing between Stash and Acorns, you’ve come to the right place. In this post, we will take a quick look at the differences and similarities between Stash and Acorns and guide you towards the decision that works the best for you. Let’s get started.
Stash vs Acorns 2021: Important Things To Know
What is Acorns?
Acorns began with only automated investing for $1 per month. It went on to expand through acquisitions to support retirement accounts and recently launched a bank account. Acorns Core is available for $1 per month. Acorns Core + Acorns Later (retirement account) costs $2, and the whole suite of Acorns Core, Acorns Later, and Acorns Spend (checking account with a debit card) is $3 per month. If you are an investor who wants to keep all of your finances inside an app, Acorns is one of the best available options for you. While it’s not free, it does continue to be a low-cost and easily attainable alternative for investors.
Acorns provides a lot of fun and interesting ways to contribute and add to your account. You have the option to create automated recurring investments, round-up change from debit or credit purchases, and acquire bonus cash invested whenever you use partner brands to shop.
What is Stash
Stash Invest is a simple and good investment app where you can get started with just a few dollars. Stash also provides support for taxable brokerage accounts, retirement accounts, and custodial accounts so that you can open one for any major financial goal.
Stash charges $1 per month for taxable accounts up to $5,000 and 0.25% for larger accounts. For retirement accounts, Stash charges $2 per month for accounts with less than $5,000 and 0.25% for accounts with $5,000 or more. You can choose between a traditional and a Roth IRA.
You can invest in exchange-traded funds (ETFs) or fractional shares of stocks, and Stash never charges any trading or brokerage commissions or fees.
Stash is one of the best platforms for people who are learning how to invest. It provides great suggestions around building your ideal portfolio (similar to a Robo advisor). At the same time, you also get the option to choose any kind of supported investment. Acorns also supports recurring contributions and one-time deposits.
Stash vs. Acorns: Services & Features
Both Acorns and Stash share a fantastic feature, automated investing. This helps investors overcome the hurdle of their own selves.
Each app has the ability to invest automatically based on investment preferences that you set (your goals, your time frame, your tolerance for risk, etc.). Both the apps come armed with a set of basic tools for starting investors. You don’t really need a lot of money to get started with either of these apps. They also both work for individual taxable accounts and Roth and traditional IRA accounts. Both Stash and Acorns come with nudges and automation to make saving and investing easier.
Stash sets itself apart with its SRI (socially responsible investing) portfolios. Users can focus their investments on different themes based on their values. Stash also comes with more than 100 investment options that are paired with a banking capability that holds the money of the investors when it’s not invested.
The company primarily works through fractional shares, which allows for its low initial costs. This involves the app’s buying a full share and splitting it up into smaller shares. In case the ownership of a $100 share is split, you will be able to claim ownership of it for any price.
Acorns allows users to sweep the change from everyday purchases to their investing accounts. A similar feature called Found Money rebates you up to 10%. However, a lot of rebates are significantly lower, on purchases at select merchants — including Airbnb, Blue Apron and Lyft. You can then have that cash in your account within two-four months.
Stash vs. Acorns: Online & Mobile Experience
Acorns and Stash offer both a mobile application and a desktop version. This allows you to monitor your account via your phone or your desktop at home. Both apps are available for iPhones and Android devices. They also allow you to check your balance, schedule deposits and withdrawals and view the performance of your investments. Users can also adjust the mix of their investments. Now that we have covered the similarities, let’s look at the differences.
Stash’s app comes with a lot of educational materials and investment information. It also has a nice banking option. Users can also buy fractional shares of stocks on the app. It also has a very strong budgeting platform on top of the buying and selling platform.
Acorns’ mobile app invests your money by linking your mobile application to your bank account. There is no limit to the number of credit cards and bank accounts you can link. Acorns automatically rounds up or rounds the transaction to the next increment. After that, it’s deposited into your investment account. You can also set daily, weekly, or monthly schedules for all of your deposits.
Stash vs. Acorns: Fees
Stash comes with three tiers. The Stash Beginner program costs $1 a month. Stash Beginner comes with features such as banking with the Stock-Back card, investing, budgeting and personalized advice. The Stash Growth plan costs $3 per month and includes everything that Stash Beginner does, plus a Roth or traditional IRA capability. Stash+ is the third tier plan and investors need to pay $9 per month to avail its services. Stash+ has all of Stash Growth’s features while also providing custodial investment accounts for kids and an exclusive monthly report on market insights.
Acorns also comes with three types of accounts. The Acorns Lite account costs $1 per month. For that fee, Acorns will open an investment account for your spare change that you’ll invest whenever your qualifying purchases can be rounded up to the nearest dollar. You also have the option to earn some bonus investments through more than 350 Found Money partners.
The Acorns Personal account costs $3 per month. With that, you get an investment account, a retirement account, a debit card with access to more than 55,000 fee-free ATMs. You also get bonus investments (up to 10%).
The Acorns Family account costs $5 per month. In this program, you can get additional accounts for your children. You also get personal investment, retirement and checking accounts. This type of account also allows you to add multiple children at no extra cost and offers family financial advice, exclusive bonus investments, automatic recurring investments and added flexibility with the funds in your accounts. When you take the Acorns Family account, you also get the added benefit of potential tax savings as your children grow older.
Stash vs Acorns: Who should use it?
Stash is quite good for first-time investors, providing a lot of help and guidance. For beginner investors struggling to find a place to start, Stash provides information on how to select suitable investments, manage your portfolio and offers insight on good trading tactics.
Stash is also great for people looking for a more hands on investing experience. Unlike most robo advisors which tend to have a hands off experience, Stash allows users to make direct trading and investing decisions.
Stash is also great for people interested in Socially Responsible Investing (SRI) as it gives investing options that make it appealing to people who want to invest based on their values like environmental concerns.
Acorns is one of the best services available in the microsavings category. It’s a great place to start for people who have a small amount of savings or are in need of any kind of nudge to invest without having an impact on their existing lifestyle. Acorns also provides a checking account, retirement accounts, and custodial accounts. This has improved its appeal by a lot over the years.
Stash vs Acorns: Conclusion
In the majority of ways, Acorns ends up triumphant in the Stash vs Acorns battle. While it shares its base features as Stash, it does come with better portfolio management. While both Stash and Acorns offer low cost funds, Acorns’ offerings are a little cheaper. However, if you are a Stash user, you do get to select your thematic interests from a wider pool of ETFs. You also get access to individual stocks. Overall, investors can expect to pay less with Acorns than Stash, and while that difference might not seem very stark on the surface, it really builds up over the long term.
Acorns provides some incredible value for the price that it charges. Its features and pricing can give some of the larger robo-advisors a run for novice investors looking to get in the game. Acorns’ ace of spades is its simplistic approach which comes with basic but real investment advice and planning. Hence, it is definitely wonderful for investors who are just starting up.
TD Ameritrade and E*TRADE are two of the most famous and widely used investment brokerages in the market today. Investment brokerages help consumers with online trading and investment. TD Ameritrade vs E*TRADE is a battle for supremacy among the top investment brokerages. In case you were looking for the right investment brokerage for yourself, you must’ve come across these two names. If you are a little confused about which among the two to choose, this post is going to help you fix that. In this post, we will discuss the fees, services, online experiences, mobile features and other benefits offered by these popular investment brokerages. Let’s get started.
TD Ameritrade vs. E*TRADE 2021: Important Things to Know
What is TD Ameritrade?
Ranging from its Web Platform for all investing levels, to its think-or-swim platform for serious traders, TD Ameritrade offers a wide range of options through its robo advisor, making it an attractive option for both investing professionals and novices.
TD Ameritrade has a $0 account minimum, and as of October 2019 it offers free stock, ETF, and per-leg options trading commissions in the U.S. For options trades there is a $0.65 per contract fee. One of the country’s highest rated investment brokerages, TD Ameritrade comes with many mobile apps designed for investors, such as its famous thinkorswim app. With this app, users can trade a wide variety of investments, including stocks, options, foreign currencies and futures. TD Ameritrade also comes with some extremely customizable features. Users can generate charts, monitor trends and simulate more complex trading options. This is carried out based on the user’s risk tolerance, goals and overall investing strategy. TD Ameritrade also offers a vast base of educational tools and resources so that users can become more well versed with the world of investing.
What is E*TRADE?
E*TRADE is another highly popular investment brokerage that has a wonderfully streamlined and easy to use day trading app. Investors also have the option to trade stocks and ETFs. Future and option trading is also available. It’s very well priced (quite cheap actually) and the app comes with a built-in risk assessment tool that helps users gauge the potential risk factor associated with specific trade strategies.
TD Ameritrade vs. E*TRADE: Fees
E*TRADE and TD Ameritrade provide commission free trading for online equity, options, and ETF trades for U.S.-based customers. Both the investment brokerages come with per-contract options fees of $0.65, and $25 for broker-assisted trades, but mutual funds outside the no-fee list will cost $49.99 through Ameritrade versus E*TRADE’s $19.99.
Both brokers also generate interest on the difference between what you’re paid on your idle cash and what the brokerages earn on customer balances. Both brokers allow you to move your cash into a money market fund to get a higher interest rate. E*TRADE also comes with a stock loan program that allows you to share the revenue that it generates from lending the stocks held in your account to other traders or hedge funds (usually for short sales). Unfortunately, TD Ameritrade does no such thing and doesn’t share its revenues with its customers.
TD Ameritrade vs. E*TRADE: Trading Technology
E*TRADE’s order routing technology utilizes both spray and sequential routing, sending most orders to market makers. Over 95% of the S&P 500 Stocks orders enjoy price improvement. The router looks for a combination of execution speed and quality, and the company states it takes measures to get the best execution available in the market. The order routing report is updated quarterly on E*TRADE’s website.
TD Ameritrade’s order routing algorithm is focused on fast execution and price improvement. The company publishes price improvement statistics that demonstrate how a majority of the marketable orders get slightly more than 1½ cents per share ($0.015) in price improvement. TD Ameritrade also receives a small but significant payment for order flow but claims its order execution engine does not prioritize it. During the fourth quarter of 2019, TD Ameritrade received $0.0017 per share on average in payment for order flow.
Both companies offer backtesting capabilities. This is a great feature for investors looking to develop trading systems or test an idea before risking their hard earned cash.
E*TRADE vs. TD Ameritrade: Online & Mobile Experience
Both investment brokerages come with user-friendly web and mobile interfaces and proprietary apps. Users have the option to trade via mobile apps or online tools. Both the investment brokerages come with strong online resources available to teach beginners about using the platforms, research stocks and more.
E*TRADE comes with two mobile apps: E*TRADE Mobile App, which is designed for all E*TRADE customers to help simplify investing and trading via a mobile device. The Power E*TRADE app is available on both mobile and desktop devices that comes with much more detailed info about trading and investing.
Like E*TRADE, TD Ameritrade also comes with two mobile apps: TD Ameritrade Mobile App has all the essentials that customers need to manage their accounts from their mobile devices. This app can also sync with Apple’s smartwatches. The other TD Ameritrade app is the famous thinkorswim. It is available on mobile and desktop devices and provides a lot of trading tools that can be used by clients to make wiser investment decisions.
E*TRADE vs. TD Ameritrade: Who should use it?
TD Ameritrade is a turnkey financial product. It is very usual friendly and doesn’t charge any fees/commission for stock/ETF trading. On top of that, users don’t need to maintain any kind of account minimum or pay any base commissions in order to use TD Ameritrade. TD Ameritrade also comes with intuitive platforms to help investors, whether novice or not, research stocks, place trades and manage their portfolios. Another great feature of TD Ameritrade is the fact that you can bank with them as well.
E*TRADE can be used by beginner investors as well. However, they must be ready and willing to spend some time and effort learning the app properly. They can benefit from a vast array of educational resources. E*TRADE’s ease of use on its desktop and app is another salient feature of this popular investment brokerage.
It’s also a solid choice for options traders looking for some of the lowest commissions on the market. Options traders can also enjoy the support of E*TRADE Options Specialists. These specialists are easily available and can help you execute a trade you are struggling with. The brokerage’s service – particularly the mobile app and the OptionsHouse trading platform, are more specifically meant for active traders. While it can be used by everyone, only experienced, active traders can extract the most out of it. E*TRADE also sets itself apart by virtue of having a robust, user-friendly app and over 200 futures products available.
While TD Ameritrade and E*TRADE are both reputable and easy-to-use platforms where both new and seasoned investors can trade, they have a lot of other great features. . Both the investment brokerages don’t charge a single penny as brokerage and are known for their glowing customer reviews.
E*TRADE vs. TD Ameritrade: Security
E*TRADE and TD Ameritrade’s security systems are well up to the industry standards. Both the apps have biometric recognition options (both fingerprint and face). Both the brokerages are armed with protection measures against account losses due to unauthorized or fraudulent activity. Neither of these two brokerages have reported any significant data breach over the last few years.
E*TRADE comes with excess Securities Investor Protection Corporation (SIPC) insurance provided by London insurers. The aggregate limit of that insurance is $600 million.
TD Ameritrade’s excess SIPC insurance, also provided by London insurers, gives a protection of $149.5 million for each client when it comes to securities. There is a $2 million protection for cash as well.
E*TRADE vs. TD Ameritrade: Conclusion
Because TD Ameritrade comes with a fantastic collection of educational offerings, live events, and in-person help via a widespread network of branch offices, it is brilliant for beginners. On the other hand, E*TRADE is an excellent option for traders and investors with experience, especially because of the significant upgrade to its options analysis and trading capabilities.
A good credit score is a very important thing to have and you should always work towards building a good credit score. Building a good credit score takes a good amount of patience and discipline. Realistically speaking, you can’t “fast track” your process of building a good credit score but there are some ways you could accelerate the process and prevent your credit score from going down as well. In this post, we will discuss all of that, and more. Let’s get started.
How Long Does It Take to Get a Good Credit Score: Things to Know
In order to build your credit score, you need to start using credit. You can do that by using a credit card or pay your loan back. It takes at least six months of continuous credit activity in order to establish enough history for a FICO credit score. This score is used for making most lending decisions. FICO credit scores range from 300-850. A “good” credit score must be above 700.
When it comes to building your credit score, don’t expect to start with an unrealistically high number. While you can build up enough credit history in less than a year to generate a score, it takes years of smart credit use to get a good or excellent credit score.
While FICO scores take six months to generate, VantageScores can be generated quite faster. Your FICO credit score is the one to watch over the long term. However, to make sure you are on the right track when starting, your VantageScore is a great indicator of the impact of your actions on your credit history.
What constitutes a credit score?
When it comes to building a credit score, good credit history over a period of time is very important. Potential lenders check for good credit history over a period of time,, which is much of what FICO scores take into account:
- Payment history (35% of score): Have you made on-time payments consistently?
- Amounts owed (30% of score): How much debt do you have compared to how much available credit you have?
- Length of credit history (15% of score): On average, how long have your accounts been open?
- New credit (10% of score): Have you opened several new credit accounts in a short amount of time?
- Credit mix (10% of score): Do you have experience managing different types of credit and loan.
Try to make your payments on time and stay away from carrying a massive credit card balance. These things will make you less risky in the eyes of the lenders and improve your credit score. Such responsible behaviour carries more weight when demonstrated over time. You can’t have responsible credit behaviour for a week and expect to see a surge in your credit score. Be patient.
How to build a good credit score?
To build a good credit score, you need to get the credit you need to create a credit history for a score. Here’s how you can go about accomplishing that:
Open a Secured Credit Card Account
Secured cards are meant for people without credit history or ones who are rebuilding their diminished credit history.
You can open a secured card account in the scenario when you aren’t eligible for other cards because this type of credit card requires a deposit. The deposit serves as a collateral for the issuer in case you default on payments. This makes approval less risky. Secured card deposits are also refundable. If you manage your card well, your issuer will upgrade you to an unsecured card.
Credit card issuers report card balances and payment history to the credit bureaus every month. These factors affect the FICO credit scores a lot and if you use your card properly, you will be able to build your credit score faster.
Start using someone else’s card as an authorized user
While you might not be approved for regular credit card usage, you do have the option to become an authorized user on someone else’s account, such as your parents’ or spouse’s account. Authorized users that have a credit card can use it like a primary account holder. However, they won’t have any legal responsibility for the account. The account’s credit history shows up on the authorized user’s credit report so long as the card issuer reports authorized user data to a credit bureau. This gives a good boost to your credit score.
If you choose to do this, the account needs to be in good standing. The balance needs to be strong and on time payments should show up in your history.
Becoming an authorized user is just a way to jump-start credit score growth. However, this shouldn’t be viewed as a long term solution for building your credit score. Real credit score growth comes from building your credit history, and not just using someone else’s. Use this tool as merely a tool for kickstarting your credit score rebuilding.
Apply for a credit builder loan
When you acquire a credit builder loan, the lender deposits the amount you are approved for into a savings account. You have to repay the loan amount and interest over time.
Unlike a traditional loan, you won’t immediately get a large sum of money right away. What happens instead, the lender will give you the money with any interest earned from the savings account once the credit builder loan is repaid in full. This helps establish the payment history data for your report when the lenders report diligently to credit bureaus. Ensure that your lender does that before taking a credit builder loan.
Try to make your non-credit bills count towards your credit history
It’s very likely that you are paying monthly bills and securities regularly. If you pay all those things timely, your credit score should also improve. Ask your landlord to report your rent to the credit bureaus. You can also use rent credit reporting services, such as RentTrack and PayYourRent. These firms will process your rent payments and send it to the credit bureaus in case your landlord isn’t signed up. It’s not a free service though.
However, all credit bureaus might not consider rent payment towards your credit score.
How to build and maintain a good credit score
Positive changes to your credit report information will boost your credit score. Like everything else in life, it’s a lot easier to damage your credit score than build it. These are some steps you can take in order to avoid that.
Buy things you can afford
Just because you have a credit card, doesn’t mean you should start buying stuff recklessly. If you are looking to build your credit score, use your card for small purchases that fit your budget. Also remember to clear your credit card bill every month.
Pay more than the minimum due in case you are carrying a balance
The goal is to keep your credit utilization ratio as low as possible. The more you pay each month, the better it is for you.
Pay your bills on time
Since payment history has the most impact on your credit score, pay on time. Late payments can impact your credit score massively.
Don’t apply for numerous credit cards
When you apply for a new credit card or loan, the lending bank always checks your credit. This is considered to be a hard inquiry. Hard inquiries will cause your credit score to dip temporarily. While it does bounce back with positive behaviour. However, if you are already starting from scratch, even a slight dip of 5-10 points can be significant. Credit bureaus also follow the number of times you apply for credit cards and it reflects in your credit. Multiple hard inquiries on your credit report are considered to be a sign that you are desperately seeking credit and are a potential risk for lenders.
Don’t close card accounts
When you are new to credit and building a score from nothing, time is your friend. Even if you eventually have a card that you stop using, don’t close the account as long as there is no annual maintenance fee. The length of your credit history has a major impact on your FICO score. The longer your card accounts run, your credit score will benefit from this.
Track your credit report closely
You can get a free copy of your credit report from all the major credit bureaus every year. Check your report thoroughly and watch out for inaccuracies and signs of fraud. In case you see any problems, report them immediately.
So that was a brief look into the steps you can take to build your credit score. Hopefully, you have a better idea of the concept now and you can start working towards building a better credit score today.
Tax attorneys can provide critical help to you when you need it the most. However, most people associate the term “attorney” with serious crimes and high level court cases. However, the term “tax attorney” simply points to the fact that you aren’t just dealing with numbers, you are also going up against the law. It’s true that tax attorneys can handle things that accountants can’t. However, you don’t necessarily have to be embroiled in an ugly court case before taking the help of a tax attorney. In fact, both accountants and attorneys can do a lot to help you deal with past problematic events and help you come up with a properly plotted course in the future. Let’s find out more about tax attorneys and how they can be useful for you.
Tax Attorney: All You Need to Know
Who is a tax attorney?
A tax attorney is a lawyer who specializes in the field of tax law. A tax attorney is great for managing all technical and legal issues associated with your tax situation. While you can avail an attorney’s services after having a problem, you can also consult one in advance to keep problems from rising in the first place.
What are the requirements for becoming a tax attorney?
Tax attorneys need to have a Juris Doctor degree. It is also referred to as a “J.D.” Tax attorneys must also be members of the state bar for practising. However, these are just the minimum requirements. An advanced training in tax law is also important for tax attorneys. Most tax attorneys also tend to possess a master of laws degree in taxation, referred to as an “LL.M.”
Some tax attorneys also have accounting backgrounds. However, they might not have extensive experience when it comes to filling out tax returns. Their expertise is focused on the legal implications of tax situations. In case you are encountering a complicated accounting problem which has some legal issues as well, seek out an attorney who’s also a certified public accountant (CPA) or enrolled agent (EA) so you can cover both bases. However, a tax attorney who is an accomplished accountant is probably going to charge you quite steeply.
When do you need a tax attorney?
If You Have Legal Issues
In case you are planning to sue the IRS/being investigated by the IRS/seeking an independent review of your case before the U.S. Tax Court, you’ll need to avail the services of a knowledgeable, experienced lawyer. You’ll need someone who knows the machinations of a courtroom well. Some non-attorneys can also represent clients in court. However, you will be better off if a tax attorney is representing you in court. In case you’ve committed a tax fraud, go and get yourself an attorney. Even knowingly claiming deductions or credits to which you weren’t actually entitled is considered as tax fraud.
Your relationship with your attorney and anything you say to or confide in them is typically privileged. As per the general attorney-client privilege, tax attorneys aren’t obligated to divulge any private information to the court. This isn’t applicable to accountants in every case.
If You Have a Taxable Estate
The Internal Revenue Service (IRS) regulates a lot of things and all of them aren’t necessarily related to personal tax returns. Estates need to file returns with the IRS as well.
Your estate is taxable in tax year 2020 if its total value crosses $11.58 million. In the 2021 tax year, this amount was pushed up to $11.7 million. That high exclusion amount usually means that most people will not need to worry about estate tax planning. However, their heirs might have to shell out a staggering 40% of the balance over the applicable threshold if the estate does exceed these levels.
The Tax Cuts and Jobs Act (TCJA) doubled the estate tax exemption in 2018. However, like many aspects of the TCJA that apply to personal taxes, the estate tax will most likely go back to its pre-TCJA status after tax year 2025. A tax attorney is also extremely helpful for people to come up with strategies for estate planning that will help estate owners stay under the exemption threshold and reduce their tax liability.
If You’re Starting a Business
Before you can start a business, you will need to answer a lot of complex and convoluted legal questions. A lot of those questions have tax implications. Some of the questions that you might encounter are “What type of business entity should you set up?”, “Do you want to incorporate it?”, “Can you function as a sole proprietor?”
Regardless of the kind of business setup, you will always have some kind of tax ramifications. Tax attorneys can help you understand the structure and tax treatment of your company, including quite a few non tax issues that might have slipped your mind.
If you engage in international business, your contracts, tax treatments and various other legal matters will be even more complicated. In such a scenario, it is not recommended to move forward without a tax attorney.
What should you ask a tax attorney?
Before you hire a tax attorney, you must thoroughly vet and question the attorney in question. Here are some of the questions that can be asked::
- Are they admitted to the state bar?
- What area of tax law do they specialize in?
- How much does the attorney charge?
- If the attorney can’t personally help you or it doesn’t seem like a good fit, do they know of another tax attorney who might be more familiar with your type of problem?
What are some more cost effective alternatives to a tax attorney?
Most low income taxpayers will not be able to afford a high charging tax attorney. However, they can take advantage of the tax clinics that provide free or low-cost legal assistance. These clinics are funded in part by grants from the Taxpayer Advocate Service, which is an independent organization within the IRS. People working at the tax clinics are not employed by the IRS/Federal Government. However, these volunteers can help you with taxes and other similar issues. If you are looking for a list of low income tax clinics in your state, you can find it on the Taxpayer Advocate Service website, along with the languages served at each clinic. While there are income limits, the exact income ceiling is fully dependent on your family’s size. As per the rules in 2020, a single person qualifies for free assistance with resolving any tax disputes as long as he/she earns $31,900 or less every year.
A voided check is a term used to describe a check that has the word “void” written across it. It’s a self descriptive term and it means that the check in question can’t be accepted as a valid mode of payment. However, the information on the check can be utilized to extract the information needed to conduct electronic payments. In this post, we will take a quick look into the world of voided checks so that you can get a better idea of the concept. Let’s get started.
Voided Check: What is it and how can you use it?
How does a Voided Check work?
A voided check’s main use is providing banking information. This helps others set up an electronic link with your bank account. A voided check is demanded because it features many details about your bank account printed on it. Some of the information that it contains include:
- Where you bank (or which credit union you use)
- Your bank account number
- A code that identifies your bank (called a routing number)
When do you need a Voided Check?
The numbers that can be found at the bottom of the check contain all the information needed to withdraw/deposit funds. Here are some scenarios where you might be required to use a voided check:
- Direct deposit: If your salary is transferred electronically, you need to provide your account information in order for the money to come to the right place. A voided check helps the employer get this information in a simple and accurate way.
- Setting up payments: In case you want to stop the system of writing checks for covering expenses such as rent, mortgage, and insurance, you will need to provide a voided check in order to start automatic electronic payments. Based on how you set things up, funds can be automatically deducted from your account every month. You can also choose to set up each payment by yourself.
- Mistakes: In case you are writing a check to make some payment and you make a mistake (wrong payee or amount, for example), void or destroy it. That check can’t be used for anything else and a half filled check is a dangerous thing to keep around. After you void the check, mark it in your check register so that you are aware of where the check went.
What are the requirements for a Voided Check?
Voiding a check is quite simple. All you need to do is take a check and write “VOID” across it. Make sure it’s written in large letters and not small ones. Make sure that the letters are large and well spaced that are tall and wide enough to cover the whole face of the check without obscuring the banking information at the bottom. Don’t write using a pencil or a pen with a light coloured ink. Use a dark ink pen or a permanent marker. When you write VOID on a check, nobody else should be able to erase it. You don’t have to sign the check for it to be voided.
If you don’t have a check to void in your possession, there are several other options:
- Ask your bank for a counter check. This can be printed by a bank on demand. You will have to pay a small fee for getting a counter check.
- Also check to find out if pre printed deposit slip for a checking or savings account is acceptable
- Enquire if a letter from your bank can be accepted.
When you give a voided check, the recipient copies your banking information from it and enters it into their systems. The voided check is then put through a shredder and the information can’t be accessed by anyone. In most cases, just a copy of your voided check will be enough, you won’t necessarily need to provide the original version.
What are some alternatives to a Voided Check?
You don’t have to always provide a voided check in order to set up electronic payments. The two main reasons why companies ask for printed documentsPresumably, companies ask for a printed document because:
- It reduces the chances of error.
- It reduces the chances of fraud.
However, these days, a lot of customers tend to provide their account details online without any issue, that has led to decline in the prevalence of voided checks. For example, online banks also allow you to type the details yourself and link your external accounts. Billers, such as utility companies, also accept payments by echeck when customers input their checking account information. A few businesses might even accept payments across the phone. This allows buyers to share their information in a verbal manner.
So that was a brief look in the world of voided checks. Hopefully you have a better idea of what they are and where you can use them.
If you are offered both 403(b) and 401(k) by your employer, you can choose to contribute to both the plans so that you can boost your retirement savings. However, there are certain limits placed on the combined total of the salary reduction contributions that can be made in a financial year. This contribution limit for 2021 is set at $19,500. If you are above 50 years old, you can make a catch up contribution up to $6,500. So if you were wondering what to choose between 403(b) and 401(k), this post will help you make the decision. Let’s get started.
403(b) vs 401(k): All You Need to Know
What’s the Difference between 403(b) and 401(k)?
If you are not self employed, your primary retirement account will most likely be a 401(k) or a 403(b). While these plans are similar in some ways, there are some distinct differences as well, especially if you’re moving from an employer that offers one to an employer that offers the other. Let’s find out some more details.
How does a 403(b) work?
Generally, nonprofits, including schools, hospitals, and religious groups, offer their employees 403(b) retirement accounts instead of 401(k) accounts. A 403(b) account can’t be offered by a for-profit firm. Similar to a 401(k), the 403(b) also lets employees make deposits that are tax deferred. The contribution limit is the same as a 401(k), as well as the withdrawal rules. However, a small and specific subset of employees can enjoy this feature—if you have 15 years of service and your company is considered a “qualified organization,” you may be eligible to contribute an extra $3,000 to a 403(b). This option doesn’t exist in the case of a 401(k). Another manner in which a 401(k) and a 403(b) differ is the choice of investment. While most 401(k) plans come with different mutual funds as their investing choices, 401(k) plans have the option to offer other choices. 403(b) plans can only offer mutual funds and annuities. Technically, 403(b)s are more limited on investing options than 401(k)s but in practice, there’s not much difference.
A 403(b) account is also known for charging higher fees than a 401(k). However, a recent slew of 403(b) plans have started coming with lower fees.
How does a 401(k) work?
A 401(k) is a retirement plan that allows employees of for-profit companies to save for retirement. A long time ago, many companies provided pensions, which were ongoing retirement payments guaranteed by an employer. After the Congress passed the Revenue Act of 1978, Section 401(k) of the tax code was born. Within two years of the IRS issuing proposed regulations sanctioning using employee salary reductions as retirement plan contributions, more than half of all the largest companies started offering 401(k). Over the years, the total amount of money invested in 401(k) has crossed $6 trillion.
A 401(k) is a qualified plan. A qualified plan also gives some tax benefits to the company for contributing money to the account on your behalf. You can also choose to contribute a portion of your paycheck to the plan before the IRS comes in and levies some taxes on the fund.
With qualified plans, you can contribute up to $19,500 in 2020 and 2021. You can’t withdraw money out of most 401(k) plans until you reach age 59 ½ or meet certain IRS conditions, and you have to begin taking withdrawals by age 72, or 70 ½ if you reached that age before January 1, 2020. Roth 401(k) plans have different rules.
401(k)s and other company-sponsored retirement plans also limit the investment choices you have. Unlike an IRA, which allows you to choose between a gamut of investing products, the average 401(k) plan in 2016 came with only 27 options. The high fees also tend to eat into your balance. Depending on your plan’s quality, you might be forced to have less than ideal options as it pertains to fees.
403(b) vs. 401(k): Which is Better?
For the majority of employees engaged in the current workforce, the type of plan doesn’t really matter. However, the 403(b) might be able to offer some benefits to non profits.
Instead of evaluating a 403(b) versus a 401(k), you must analyse and evaluate the investment options contained within the plan. Generally, the larger the company, the lower the plan fees. This is because more people participate in it, lowering the cost. If you work for a small company, you should seek lower cost index funds as an investment option instead of investing in highly expensive actively managed funds.
If your company matches your deposits, you will be better off participating in the plan up to the maximum amount they’ll match. Once you do that, you should open an IRA in case the plan’s fees are very high. You can also choose to do this in case you want to diversify your investments to options that are not available in either 403(b) or 401(k).
So that was a brief look into the world of 401(k) and 403(b). Hopefully, it will be easier for you to make a choice between the two after you’ve read this post.
We’ve all heard of the NBA Bubble, the Bubble Boy from Seinfeld but what is the new “bubble” in the bond market? You might have heard about it in the media or through online financial articles! However, learning what the bond bubble means can actually bring changes to your investment portfolio – so this might be something you want to check out.
Bond Bubble: Everything You Need To Know
What Is a Bond Bubble?
- There was ongoing talk of a “bond bubble” in an article written by noted finance professor Jeremy Siegel of the Wharton School at the University of Pennsylvania. He called it “The Great American Bond Bubble”. This was an environment where bonds were considered as artificially high, although actual returns didn’t seem to support this.
- Now to understand this let’s see how a bubble is created. It happens when an asset, such as a bond or stock, trades far above its actual worth for an extended period of time. The inflated prices are regularly fueled by investor greed and the ubiquitous belief that no matter how high prices might be now, someone else is likely to pay an even higher price in the near future – gets us into trouble. Eventually, bubbles end. The cost of the asset will decline to something more like a realistic value which could lead to heavy losses for those investors who were late to the party.
- It would be best to explain further using the past as an example. Bubbles have indeed existed throughout the history of mankind. Let’s think of bubbles in the cost or pricing of other assets throughout history like the Dutch tulip bulb mania incident. The Dutch tulip bulb mania occurred during the 1630s and but other examples followed like the shares of the South Sea Company in Great Britain in 1720, railroad stocks in the United States of America in the 1840s, the U.S. stock market run-up in the 1902s, and Japanese stocks and real estate market in the 1980s.
- But if we were to draw the curtains of the past and look at more recent events, it happened right in front of our faces during the famous American bubbles in technology stocks in 2000 and 2001 and in real estate in the mid-2000s. Each of these bubbles came crashing down with a force in the price of each asset question, and—for larger bubbles such as those in Japan in the 80s and in the United States in the past decade—an extended period of economic weakness.
Identify and Learn When It’s Really a Bond Bubble (Mistakes Have Happened)
- The financial media mainstream is booming and lots of people have lots of benefits to yell “Bubble!” and relish the media attention that it brings. But it’s a good habit to always question what you hear, and the financial news about the existence of a bond bubble in 2018 is a really great example. During March of 2018, word began spreading that the rising, or bull market in bond prices, was about to come to a sudden standstill. At the time, bond yields had risen to just shy of 3 percent in the early half of the year, and in some peoples’ minds, a burst was about to happen at any point.
- Just 2 months later, in May 2018, the bond prices that were considered a “bubble” were still intact, at least with respect to the corporate bonds that were the main focal point of this talk. But the particular cost level for corporate bonds that was being called a bond bubble had been intact and in place since 1981. Meanwhile, the risk-free 10-year treasury bond had shot up by 172 basis points after July 2016.
- Comparing this with another 2 months down the line, in July 2018, publicly-quoted financial experts continued to preach that the bull market of increasing prices was starting to weaken, again referring mostly to corporate bonds, and implied that a bubble occurred and that it was about to burst.
If the Bubble Is Real, Will It Burst?
Investors should give careful consideration to the two factors that are listed below. Despite the knowledge that it’s almost certain that Treasury yields will be higher in the future than they are today, you still need to consider the following:
First, look at the increase in yields—if it occurs—the probability is to occur over an extended period of time. It most likely won’t happen in short, explosive movements such as the bursting of the dot.com bubble.
Secondly, look at the history of Japan’s bond market. It can provide some pause for the many pundits who have a negative outlook on the U.S. Treasuries. A closer inspection in Japanese history shows a similar story to what occurred in the United States several years ago: A financial crisis brought about by a crash in the property market, was then linked to an extended period of slow growth and a central bank policy featuring near-zero interest rates and subsequent quantitative easing. The 10-year bond yield dropped below 2 percent. Japan felt these events in the 1990s. The drop in Japan’s 10-year below 2 percent occurred in late 1997 and it hasn’t re-established this level for more than a brief interval since then.
According to one article “Bonds: Born to Be Mild” on the commentary website SeekingAlpha, AllianceBernstein the fixed-income chief Douglas J. Peebles stated: “Increased bond buying by insurance companies and private-sector defined-benefit plans could also temper the pace at which bond yields rise.”
What this means is that higher yield would drive renewed demand for bonds, moderating the impact of any sell-off. Even if the U.S. bond market eventually collapses as many are predicting, it is not likely if the post-crisis experience in Japan, which has been very similar to ours thus far, is any indication. In essence, the indication is that rates can remain low much longer than investors are expecting.
What Factors Contribute to a Bond Market Bubble?
The financial media has continued to predict the U.S. bond market as the next great asset bubble since the year 2013. The idea behind this forecasting is relatively simple: The yields on the U.S. Treasurys dipped so low in 2010 or so that there was little room for further decline. We should also remember that prices and yields move in opposite directions.
A key reason behind such low yields was the policy of the ultra-low short-term interest rates the Federal Reserve enacted to promote growth. Whenever the economy recovers and employment increases to more normalized levels, the Fed starts to raise interest rates. When this happens, the artificial downward pressure on Treasury yields is non existent and the yields climb back up as prices fall.
It could be said that Treasury bonds are most definitely in a bubble—not necessarily because of any investor mania as was the case in past bubbles, but because Treasury yields are larger than they would be without the Fed’s intervention to keep rates low.
Why Is the Bond Bubble More Important Than Previous Bubbles?
Fixed income’s traditional position within asset allocation is considered as a “safe investment“. In fact, we have entered one of those rare times in history where the risk/reward analysis on bonds could conceivably be more dangerous than equities, this is because the historically low coupon points towards historically unprecedented volatility and downside price risk.
In other words, capital loss risk to bonds is the maximum when starting yields are lowest. Considering that yields are at an all-time historical low, many historical benchmarks for capital losses in bonds are unrealistically conservative. What lies beyond us could easily be far worse than in the past. For example, according to Welton Investment Corporation, the deepest (-15.3%) and longest (8+ years) Aaa corporate bond drawdown occurred between 1954-1963 because of a tiny 1.8% increase in interest rates – this would be considered just a hiccup by today’s volatile standards. The reason is that the starting yield in 1954 was an equally tiny 2.85%.
What this means is that the drawdown severity and duration aren’t calculated only by the magnitude of the interest rate rise. It’s calculated by the relationship of the interest rate increase compared to the starting yield. Today’s record low yields imply a historically high risk of capital loss. For example, Welton also analyzed what could happen to Aaa corporate bonds under varying interest rate increase scenarios:
A 6% increase spread over 5 years would result in a 36.2% drawdown and a 6.4% annual loss.
A 4% increase in just 1 year would lead to a whopping 34.8% drawdown and a 34.8% annual loss.
Even a modest increase spread over many years could result in zero return (or worse) for more than a decade.
These losses may not look nasty by equity market standards, but it’s important to keep in mind that the money parked in top quality bonds is considered “low or no risk”. That is clearly no longer what’s happening and it has serious implications for traditional asset allocation models.
Some can debate that if you hold the bonds to maturity then price risk is only a temporary problem, but that’s a dangerous half-truth. Today’s investors frequently hold their bonds in diversified pools of mutual funds and ETFs, giving up any ability to ride out the downturn and hold a particular bond to maturity. The losses can become permanent. Funds in top quality bonds are no longer ‘low or no risk’ – traditional asset allocation models are unprotected.
Bond Bubble Limitations
Considering the unfavorable risk/reward ratio, as an investor, what should you do? To answer that, we must look at many factors including your investment goals, time horizon, specific portfolio composition (duration, quality, etc.) and how much interest rates actually rise.
What we do know is over time, investors will demand greater returns to accept the risk that comes with lending their money. As nations grow increasingly in debt, how many more short-term fiscal manipulations can be taken into consideration to keep interest rates artificially low? Most people don’t know but we do that a turn of the tide in interest rates is merely a question of when – not if.
The bubble could continue for years before turning, but that doesn’t change the mathematical reality that it’s clearly a bubble — risk to reward analysis doesn’t make a lot of economic sense. For example, do you think you could lend to the government of the U.S for 5 years for an 88 basis point return? No one should risk substantial downside losses for a maximum potential upside gain close to zero (or worse) net of inflation.
What Does Longer-term Data Show For the Rarity of Major Sell-Offs?
Looking at the past shows that the downside in Treasuries has been relatively limited. According to data compiled by an individual called Aswath Damodaran at New York University’s Stern School of Business says that the 30-year bond has suffered a negative return in only 15 calendar years since the year 1928.
In general, the losses were relatively limited. Keep in mind, however, that yields were increasing in the past than they have been recently so it took much more of a price decline to offset the yield in the past than it would today.
While the previous statistic isn’t an indicator of future results, it does help illustrate the rarity of a large collapse in the bond market. If the bond market does in fact fall upon hard times, a more likely result is that we’ll see consecutive years of sub-par performance, similar to what occurred in the 1950s.
What About Non-Treasury Segments of the Market?
We’ve spoken a lot about treasuries in this article but they aren’t the only market segment said to be in a bubble. As noted, similar claims have been discussed about corporate and high yield bonds, which are valued based on their yield spread compared to Treasuries.
Not only have these spreads drastically reduced to historically low levels in response to investors’ growing appetite for risk, but the extremely low yields on Treasuries help us conclude that the absolute yields in these sectors have decreased close to all-time lows. In all cases, the reason for the “bubble” concerns is the same: Cash flowed into these asset classes amid investors’ ongoing thirst for yield that happens to shoot up prices to unreasonably high levels.
Does this indicate bubble conditions? Not necessarily. While it most definitely indicates that the future returns of these asset classes are likely to be less robust in coming years, the odds of a major sell-off in any type of calendar year is relatively low if history is any indication.
High yield bonds resulted in negative returns in only four years since 1980, as gauged by the JP Morgan High Yield Index. Even though one of these downturns was huge—a 27 percent drop during the 2008 financial crisis—the others were relatively modest: -6 percent in 1990, -2 percent in 1994, and -6 percent in 2000.
The Barclays Aggregate U.S. Bond Index uses Treasuries, corporates, and other investment-grade U.S. bonds. It has helped gain ground in 32 of a period of the past 38 years. The one down year was 1994 when it dropped by 2.92 percent.
Although they can be frightening at the time, these downturns have historically been seen as manageable for long-term investors. It usually isn’t long before the markets rebound and players are able to recover their losses.
Final Verdict For The Bond Market Bubble
The wisest choice In almost every situation when it comes to investing is to stay the course as long as your investments continue to meet your risk tolerance and long-term goals. If you keep on pursuing in bonds for diversification, stability, or to boost your portfolio’s income, they can keep going on to serve this role even if the market encounters some turbulence.
A wiser plan of action might be to temper your return expectations after a strong run of years. Instead of expecting a continuation of the stellar returns the market experienced during other intervals, you as a player would be wise to plan for much more modest results going forward.
Of course, the only exception to this would be someone who is in or near retirement or who needs to use the money within a one- to two-year period. It doesn’t pay to take the undue risk no matter what situations are in the broader market when a player in the market needs to use the money soon.
Please keep in mind that the information on this site is provided for information purposes only, and should not be construed as investment advice. These tips and opinions are not given to represent a recommendation to buy or sell securities. Make sure that you consult an investment and tax professional before you choose to invest.
If you are interested in making a career in private equity or want to invest some money in it, reading some of the best private equity books will be very helpful for you. In this post, we will take a look at some of the best private equity books for you to read. Let’s get started.
The Best Private Equity Books for You
Investment Banks, Hedge Funds, and Private Equity – David Stowell
This kicks off our list of the best private equity books. This private equity book is a package that covers the finance industry’s top tiers. The author does a great job of explaining how investment banking, hedge funds, and private equity dominate the market, along with the investor’s investments and money-making. Strategies to bounce back from the 2009 recession are also covered in the book. He continues by projecting the powers of these sectors and their overall influence on the market.
Leveraged Buyouts: A Practical Guide to Investment Banking and Private Equity – Paul Pignataro
This book provides a detailed look into the domain of leveraged buyouts. The private equity industry has witnessed dramatic growth in the last two decades. Investing in them requires good investing knowledge. That is why Paul Pignataro has created Leveraged Buyouts + Website: A Practical Guide to Investment Banking and Private Equity. Engaging and informative, this book skillfully shows how to identify a private company, takes you through the analysis behind bringing such an investment to profitability. It earns a rightful place on our best private equity books to read.
Songs of Profit, Songs of Loss: Private Equity, Wealth, and Inequality – Daniel Scott Souleles
American capitalism has been pretty much shaped through private equity investors since the 80s. This great book on private equity covers topics ranging from outsourcing to excessive debt taking. It also talks about how private equity investment helped normalize once-taboo business strategies while growing into an over $3 trillion industry that controls so many companies and employees.
The Masters of Private Equity and Venture Capital – Robert Finkel
This comes in next on our list of the best books on private equity. It is all about putting across the content appropriately. This book involves a lot of learning, which is a very vital part of private equity. Besides the learning and knowledge, the author has researched a lot with the help of private equity experts and has filled this book with colorful stories of success and failures on subjects that interest high-value investors. This book is full of experiences as the author has penned down interviews of private equity experts. It provides great insight into the world of private equities.
Private Capital Volume I – Funds – Prof Eli Talmor, Prof Florin Vasvari
One of the best private equity books for you to read, it deals with the growth of private capital. Over the years, it has flourished at an astounding pace. This has led to an unprecedented increase in the capital allocation by institutional investors and family offices around the world. It has also ballooned into the expansion of other types of assets such as infrastructure, real estate and private credit, and has led to its rebranding a private capital.
Private Equity as an Asset Class – Guy Fraser-Sampson
This great book on private equity is often unfairly reviled, and much misunderstood, private equity differs from all other asset classes in various important respects, not least the way in which its fund mechanisms operate, and the way in which its returns are recorded and analysed. Sadly, high level asset allocation decisions are frequently made on the basis of prejudice and misinformation, rather than a proper appreciation of the facts.
Lessons from Private Equity Any Company Can Use – Orit Gadiesh and Hugh Macarthur
This occupies the next spot in our best private equity books list. The author has covered many different private equity firms, and the five disciplines they need to have and retain in order to make the equity perform better than the traditional registered public equity. The reason why private equity firms perform better than the others has been a mystery for people who are not a part of the deals and the industry in total. This book does a great job of elaborating and justifying that.
King of Capital – The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone – David Carey and John E. Morris.
The next best private equity book covers a number of untold stories of tiny firms that started as nothing more than gamblers in the private equity market. They went on to convert themselves into big corporations that are a safety gate for investors who want to take a minimal risk with their investments. The book narrates the story of one such firm, Blackstone, a major corporation that had its existence challenged by the global market and the impact of Wall Street competition.
Private Equity Operational Due Diligence: Tools to Evaluate Liquidity, Valuation, and Documentation – Jason A. Scharfman
A rare book that covers not just the two industries competing for investments, it also covers and gives the investors technical tools to analyze documentation, operations expenses and risks involved, links to laws and regulations references along with living case study examples. It’s a combination of comparison, techniques, and case studies, which is rare and unique in its form. All of these traits make it one of the best private equity books for you to read.
Private Equity and Venture Capital in Europe: Markets, Techniques, and Deals – Stefano Caselli, Giulia Negri
Global financial markets have started resembling each other a lot more than they did before. However, a lot of peculiar aspects qualify different markets with different levels of development. Private equity investors have the opportunity to take advantage of such variations. This great private equity book is structured to provide a taxonomy of the business. Private Equity and Venture Capital in Europe, Second Edition, introduces private equity and venture capital markets while presenting new information about the core of private equity: secondary markets, private debt, PPP within private equity, crowdfunding, venture philanthropy, impact investing, and more.
Private Equity Fund Investments: New Insights on Alignment of Interests, Governance, Returns and Forecasting – Cyril Demaria
This concludes our list of the best private equity books for you to read. It presents new, advanced, evidence-based guidance on investing in private equity funds: first by assessing the investor’s environment and motivations, then by looking into the risks, returns and the overall fund performance. This great book also provides great pragmatic solutions to the illiquidity problem.
So those were some of the best private equity books for you to read. These are highly recommended for anyone interested in the field. So pick one up today.
The capital market line (CML) is the tangent line that extends from the point of the risk-free asset to the feasible region for risky assets. The tangency point (denoted as M) is representative of the market portfolio. It is called so because all rational investors (minimum variance criterion) must hold their weights in the market portfolio in the same proportion as their risky assets. Let’s find out more about the Capital Market Line.
Capital Market Line (CML): All You Need to Know
What’s the history of the Capital Market Line?
Harry Markowitz and James Tobin are generally considered as the pioneers of mean variance analysis. In 1952, Markowitz identified the efficient frontier of optimal portfolios. In 1958, James Tobin included the risk-free rate to modern portfolio theory. The Capital Asset Pricing Model (CAPM) was developed by William Sharpe during the 60s. Harry Markowitz, William Sharpe and Merton Miller were awarded the Nobel Prize for Economics in 1990 for their work in this field.
What Is the Capital Market Line (CML)?
The capital market line (CML) is a representative of portfolios that have an ideal and optimal combination of risk with return. Capital asset pricing model (CAPM), is used to demonstrate the risk vs return trade off within efficient portfolios. It is a theoretical concept that represents all the portfolios that optimally combine the risk-free rate of return and the market portfolio of risky assets. Under CAPM, all investors get to choose a specific position on the capital market line, in equilibrium, by borrowing or lending at the risk-free rate. This is done in order to maximize the returns for the given risk level.
Portfolios that fall on the capital market line (CML) tend to perform the best (at least in theory) because of the optimized risk/return relationship. The capital allocation line (CAL) makes up the allotment of risk-free assets and risky portfolios for an investor. The CML is nothing but a special case of the CAL where the market portfolio takes the place of the risk portfolio. The CML’s slope is also known as the Sharpe ratio of the market portfolio. Investors should buy the assets if the Sharpe ratio is above the CML and vice versa.
What makes CML different?
CML includes risk free investments and that makes it distinctly different from the slightly more popular efficient frontier.
What is a tangency portfolio?
A tangency portfolio is the most efficient type of portfolio and it is found at the interception point of CML and the efficient frontier.
What is the Capital asset pricing model (CAPM)?
The CAPM is the line that performs the task of connecting the risk-free rate of return with the tangency point on the efficient frontier of optimal portfolios that offer the highest expected return for a defined level of risk, or the lowest risk for a given level of expected return. This line usually contains portfolios that provide a great trade off between expected returns and risk.
The market portfolio can be found at the tangency point of the risky assets. Under the assumptions of mean-variance analysis – that investors seek to maximize their expected return for a given amount of variance risk, and that there is a risk-free rate of return – all investors will select portfolios that lie on the CML.
What is Tobin’s Separation Theorem?
Tobin’s Separation Theorem states that you can separate the problem into first finding that optimal combination of risky securities and then deciding whether to lend or borrow, depending on your attitude toward risk. It then showed that if there’s only one portfolio plus borrowing and lending, it’s got to be the market. Less risk averse investors will prefer portfolios higher up on the CML, with a higher expected return, but more variance. By borrowing funds at the risk-free rate, they can also invest more than 100% of their investable funds in the risky market portfolio, increasing both the expected return and the risk beyond that offered by the market portfolio.
What are the differences between the Capital Market Line and the Security Market Line?
The CML is often confused with the Security Market Line (SML). However, this is something every investor should avoid. The SML is nothing but a derivative of the CML. While the CML shows the rates of return for a specific portfolio, the SML does the job of showing the expected returns of individual assets, along with the market’s risk and return at a given time. And while the measure of risk in the CML is the standard deviation of returns (total risk), the risk measure in the SML is systematic risk, or beta. Fairly priced securities are plotted on both the CML and the SML. Securities that plot above the CML or the SML generate returns that are too high for the given risk and tend to be underpriced. Securities that plot below CML or the SML generate returns that are extremely low for the risk associated with them and end up being overpriced.
E(Rp) = Rf + σp ((Rm – Rf) / σm)
E(Rp) = Expected return of a portfolio
Rf = Risk free rate of return
σp = Standard deviation of a portfolio
σm = Standard deviation of market
Rm = Market rate of return
Let’s take this example: Find out the expected return of a portfolio if the market standard deviation is 23% and risk free rate is 4%. The market return is 12% and the standard deviation of portfolio is 5%.
E(Rp) = Rf + σp ((Rm – Rf) / σm)
= 4 + 5 ((12 – 4) / 23
= 4 + 5*0.35
= 4 + 1.75
So that was a brief look into what Capital Market Line (CML) is. Hopefully, you have a better idea of the concept and you will be able to use it to analyse your potential investments better. Happy Investing!