The Net Investment Income Tax is a final tax issue.
The tax applies to married taxpayers with incomes over $250,000 and single taxpayers with incomes over $200,000.
Taxpayers who receive investment income are subject to a 3.8% tax rate.
The tax plan should guide your investors so that they won't sell investment activities so that you can achieve maximum after stocks that have gone down in value, because they tax returns for an acceptable level of risk.
The fact that capital gains are not taxed until they are actually held by people is a mistake, as it allows you to defer tax payments on them as well as control the timing of them.
Capital gains from investments that are likely to produce the largest tax code have higher risk than those that sell these stocks.
Up to a rent income, investors can deduct investment losses.
Investments against other forms of income should not be chosen solely on the basis of tax con point.
You have to strike a balance of tax benefits and investment.
Special tax incentives are offered by the federal government to encourage people to save for retirement.
The plans that are employer sponsored include profit-sharing plans, thrift and savings plans, and 401(k) plans.
Employees can defer paying taxes on funds they save and invest until they withdraw them during retirement with these plans.
Individuals who are self-employed can set up their own tax-sheltered retirement programs.
Other savings plans with tax advantages aren't tied to the employer.
Although the law limits the tax benefits of IRAs for high-income taxpayers, almost anyone can set up one.
Contributions to the plan as well as investment earnings generated on those contributions are not taxed until the participant withdraws funds during retirement in a traditional IRA.
Contributions are taxed up front, but subsequent investment earnings and withdrawals are tax-free.
These plans offer an attractive way to accumulate funds for retirement and reduce taxes for most investors.
As they move through different stages of life, investors tend to follow different investment philosophies.
When investors are young and conservative, they tend to be more aggressive.
Growth-oriented invest ments that stress capital gains are preferred by most young investors in their twenties and thirties.
As investors approach middle age, family demands and responsibilities such as educational expenses and retirement contributions become more important.
A less aggressive posture is what the portfolio often shifts to.
MyFinanceLab preferred stocks, convertibles, and mutual funds are all widely used.
Current income is the main concern of perspective boxes.
Short video clips of professional investment are of paramount importance.
People place less importance on growing their portfolio.
Instead, they advisors who share their structure to generate regular cash flow with relatively low exposure to practical insights about the risk.
This text contains low-risk material.
The rewards of a lifetime of saving and investing are at this stage.
Common stocks and other equity related securities are highly responsive to the economy.
GDP, industrial production, personal disposable income, and the unemployment rate are some of the economic variables that are reflected in the business cycle.
An expanding business cycle is reflected in a strong economy.
When business is good and profits are up, stock prices tend to rise, which is a leading indicator of the business cycle.
Strong markets tend to favor growth-oriented and speculative stocks.
When economic activity is declining, stock values fall several months before.
Stock prices reflect investors' beliefs about the future prospects of companies, which is why stocks tend to move ahead of changes in the business cycle.
When investors think that business conditions will get worse, stock prices will fall.
The same thing happens when investors think the economy will do better.
Bond funds and preferred stocks are sensitive to interest rates because they are highly sensitive to the business cycle.
Bond prices and interest rates move in opposite directions.
Lehman Brothers committed by prominent borrowed money on a short-term basis, just before it issued a massive financial fraud report.
The allegations were shocking for 7 to 10 days.
Lehman's balance sheet was spectacular because the loan was recorded as bankruptcies of large corporations.
The transaction made it appear that fraud would follow the financial charges against the executives.
Lehman Brothers had more cash and less debt than the people charged with financial fraud did.
More than 13 years after the passage of the Sarbanes-Oxley Act, Hank Greenberg of American International, and David Glenn of Freddie Mac, prevent this kind of corporate fraud.
The use of corporate accounting to report detect until it is too late is the primary weapon of fraudulent significant risk that remains difficult to anticipate or CEOs.
Finance highlight boxes don't have a good record of predicting turns in the economy and important problems in the cial markets.
The best advice we can give is regarding investments.
When the market has already risen from its bottom and when investors dump their stocks, they will probably perform worse than investors who fail in the application.
Explain the elements of an investment policy statement.
A checking account is very liquid.
There is no assurance that you will be able to quickly sell stocks or bonds without having to cut the price to attract a buyer, which is why they are less liquid.
Even if you are willing to accept a very low price, real estate can take weeks or months to sell.
When unforeseen life events such as illness and unemployment require individuals to draw on their savings to meet their daily expenses, planning for and providing for adequate liquidity is an important part of an investment plan.
Most savings and investment programs include short-term investments.
With near-zero interest rates in recent years, the income provided by these investments has been quite low.
Their primary function is to provide a pool of reserves for emergencies or to accumulate funds for a specific purpose.
Financial planners often suggest that you hold cash reserves equivalent to three to six months of your salary, and typically this type of emergency fund would be invested in safe, liquid, short-term investments.
Some people choose to hold short-term investments because they don't want to take the risk of long-term investments.
There are times when low-risk investments perform better than stocks and bonds.
Just as you would long-term investments, you should evaluate short-term investments in terms of their risk and return just as you would long-term investments.
The attempt was to assure the number of bank runs.
Many of a bank's depositors attempt ance programs in a bank run.
The amount of insured time was increased in 2008 because of the Federal Deposit Insurance withdrawing money from their accounts.
The bank has a small amount of deposits from $100,000 to $250,000.
Greece, Poland, and other countries with deposits in a vault can cause a bank to run out of cash quickly and fail.
They increased their limits on insured deposits.
Thousands of banks failed in Greece in the 1930s because of this.
In the event of a bank failure, the Dodd-Frank Wall Street Reform and Consumer money of depositors would be returned to him or her under the Act of 1933.
There would be fewer bank failures due to this.
More than 9,000 institutions failed in 1929, but in 1934 only 9 non-interest-bearing accounts failed.
The deposit insurance limit is 1933.
There are two ways in which short-term investments earn interest.
You can easily find the interest rate on the account.
If you buy the security at a price below its face value, and the difference between what you pay to acquire the asset and what you receive when it matures, is the interest the investment will earn, then you are following this rule.
T-bills are issued on a discount basis.
Short-term investments are not very risky.
The US Federal Reserve has kept short-term interest rates at historically low levels.
Short-term invest ments have almost no nonpayment.
Major corporations, large banks, and the U.S. Treasury are some of the institutions that issue short-term investments.
Deposits in banks, savings and loans, and credit unions can be insured by the government for up to $250,000 per account.
Exposure to capital loss is low because the value of short-term investments does not change much in response to changing interest rates.
The major advan tages of short-term investments are their low risk and high liquidity.
Most are available from local financial institutions and can be easily converted to cash.
As rates move up, investors can easily capture higher returns because the returns on most short-term investments usually vary with inflation and market interest rates.
When interest rates go down, returns go down as well.
Although a decline in market rates has undesirable effects on most short-term investments, their relatively low return is their biggest disadvantage.
The returns on short-term investments will be less than the returns on long-term investments because these securities are so low in risk.
Individual investors can invest in a variety of short-term investments.
Some deposit-type accounts allow investors to place money, earn a relatively low rate of interest, and conveniently withdraw funds at their discretion.
The popular deposit-type accounts are described in Part A of Table 1.3 sum.
The federal government issues short-term investments.
Many of the instruments have basic features summarized in Part B. Nongovernment instruments are included in the final group of short-term investments.
The investments are summarized in Part C of Table 1.3.
Individual investors use short-term investments for both savings and investment.
Depending on per deposit is what it is used for.
Up to $250,000 deposit account had check-writing privileges.
Varies check, invest, and borrow in other ways.
Excess balances are swept into short-term investments and borrowed to meet shortages.
After a year of low denominations, you can earn an interest rate that varies with the inflation rate, and you don't have to pay state and local taxes.
It is sold at a dis risk free count and exempt from local and state income taxes.
Treasury amounts and maturi issues are tailored to the needs of the inves.
A paper but time draft drawn on higher than a customer's U.S. Treasury account makes the trade a tradable instrument.
An investment's return is not important for this purpose.
Passbook savings accounts and NOW accounts are examples of short-term investments that fulfill investors' short-term savings needs.
If for no other reason than to be able to act on unforeseen investment opportunities, most investors will hold at least a part of their portfolio in highly liquid securities.
Some investors devote all or most of their portfolios to such securities.
Before deciding where to invest the money, investors use short-term securities as a place to "park" funds.
If you sell stock but don't have a long-term investment alternative, you can put the proceeds in a money fund until you find one.
If you think interest rates will go up, you could sell some bonds and use the proceeds to buy T-bills.
The securities offering the highest returns--like money market deposit accounts, CDs, commercial paper, banker's acceptances, and money funds--are generally preferred for this warehousing function.
To decide which securities are appropriate for a particular situation, you need to take into account such characteristics as availability, safety, and rate of return.
The investments we have discussed do not always satisfy the basic demand.
The most liquid account is a NOW account.
You can write as many checks as you want.
A certificate of deposit is not liquid because of the interest penalty.
The key characteristics of the short-term invest ments are described in Table 1.3.
Money market mutual funds rate only a B+ on liquidity because withdrawals must be made in a minimum amount of $250 to $500.
A withdrawal can be for any amount in NOW accounts.
The rates on short-term investments tend to be low.
The rates on NOW and passbook savings accounts are the lowest, and the rates on I bonds are the highest.
Rates on all of these instruments were barely above zero in 2015, as the economy continued its slow recovery.
A one-year CD gave investors a return of 0.7%.
If an investment scores lower on availability, safety, or liquidity, it will offer a higher rate.
Key features and differences of the following deposit accounts should be described.
Define, compare, and contrast short-term investments.
A career in finance requires you to understand the environment in which you work.
The principles presented throughout this text will provide an initial foundation in investments essential to pursuing one of the many rewarding career paths within the field of finance.
You will find a wide variety of job opportunities if you are well prepared and enthusiastic about a career in finance.
There are two professional certifications that can be obtained by people who want to work in the investments field.
The requirements and focus of each certification are somewhat different, but they can help advance your career.
The exam had a pass rate of 66%.
You must have three years of professional work experience in financial planning and agree to abide by a code of ethics in order to earn the CFP(r) from MyFinanceLab.
The focus of the program is more appropriate for people who want to work as financial analysts on Wall Street.
It takes hundreds of hours of study to pass the three Level 1 exams and the Level 2 exams, which take six hours each.
The pass rate on these exams is usually less than 50%.
There are examples of the exam questions on MyFinanceLab.
You need a degree in any field to register for the exam.
You must have four years of investment experience and adhere to the Code of Ethics and Professional Conduct.
Portfolio manager is the most common job held by people with this certification, but they also work as consultants, financial analysts inside corporations, traders, risk managers, and more.
If you are well trained in investments, there are many career opportunities open to you.
Commercial banking, corporate finance, financial planning, insurance, investment banking, and investment management are some of the industries with investments-oriented career opportunities.
Review flashcards and saved quizzes
Getting your flashcards
You're all caught up!
Looks like there aren't any notifications for you to check up on. Come back when you see a red dot on the bell!