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what is a white label product | white label products are sold by retailers with their own branding and logo but the products themselves are manufactured by a third party white labeling occurs when the manufacturer of an item uses the branding requested by the purchaser or marketer instead of its own the end product appears as though it s been produced by the purchaser understanding a white label productwhite label products are manufactured by a third party not the company that sells them or necessarily even markets them the advantage is that a single company doesn t have to go through the entire process of creating and selling a product one firm can concentrate on producing the product another on marketing it and another can focus on selling it each according to its expertise and preference the major benefits of white label branding are that it saves companies time energy and money in terms of production and marketing costs another big advantage of private label brands is that the average transportation expenses might be lower than usual and the company would benefit from distributional economies of scale if a supermarket has an exclusive deal with a manufacturer the retailer could sell the product for less and still reap a bigger profit margin because of lower transportation costs businesses that use white label productswhite label products may technically appear in any industry or sector but large retailers have done quite well with them companies like whole foods and walmart have benefited by selling their own branded products that have been created by other manufacturers this strategy allows retailers to maintain control over branding packaging and pricing while offering consumers exclusive products that align with their brand identity private label branding isn t limited to the supermarket segment major electronics manufacturers of top tier mobile phones and computers often put their brand names on cheaper priced white label products to expand their offerings private label brands have become increasingly popular suggesting that consumers are becoming more sensitive to price and less loyal to their favorite traditional brands 1 the growth of private label brands is hurting national brands and the manufacturers market share in many countries beauty and cosmetics brands usually leverage white label products these brands can collaborate with manufacturers to customize skincare makeup and hair care products under their branding for instance skincare companies may white label anti aging serums or moisturizers tailoring formulations and packaging to appeal to their target demographics however the skincare company itself would not be responsible for manufacturing the product health and wellness companies often utilize white label products to offer a broad range of dietary supplements vitamins and herbal remedies under their own brand names by partnering with reputable manufacturers these companies can ensure the quality and efficacy of their products food and beverage brands often utilize white label products to offer a wide array of private label goods such as snacks beverages condiments and packaged foods by partnering with manufacturers these brands can maintain control over product quality as more stringent health code compliant production plants can generate the food items white label products don t always have to be tangible items service offerings have also adopted white labeling some banks use white label services like credit card processing when they don t have these services in house businesses that have no banking operations often extend branded credit cards to their customers and this is also a form of white labeling l l bean inc offers its consumers a branded mastercard and macy s m offers its customers a branded card theirs is provided by american express axp 23advantages and disadvantages of white label productsthe concept of white labeling comes with numerous considerations both positive and negative real world examplethe u s based warehouse club operator costco cost is one large retailer that s being creative with branding with its kirkland brand of private label products does this mean that costco makes all the kirkland products you see on the shelves not at all they simply contract with various producers that have agreed to put their products into the kirkland packaging 4a kirkland branded product often sits next to the national brand that makes the product on the shelf identical products different names and the national brand selling at a higher price costco sells saran wrap saran is a trade name owned by s c johnson son but costco also sells its own kirkland signature stretch tite plastic food wrap costco has further blurred the line between national brands and private labels by using premium offerings and co branding strategies with the likes of starbucks sbux quaker oats a subsidiary of pepsico inc pep and tyson foods inc tsn | |
what are white label products | white label products are manufactured by one company but branded and sold by another company as their own this arrangement allows businesses to offer new products without having to invest in the production process | |
where does the name white label come from | the term white label suggests a blank canvas that can easily be converted to a personalized label | |
what is a tangible product | a tangible product is something you can touch and see before you commit to buying it unlike an idea concept or service you can gauge its quality by examining it you generally can t assess the quality of an intangible product like a service until after it s completed | |
how do white label products differ from private label products | white label products are generic and sold to multiple retailers who rebrand them in contrast private label products are made exclusively for a specific retailer often with customized specifications and designs | |
what are the costs involved in white labeling products | the costs of white labeling products vary depending on the product type customization level and order quantities initial costs typically include product development fees sample costs and packaging design there are also production costs which can include manufacturing packaging and labeling expenses the bottom linea white label product bears the branding and logo of a retailer although it s manufactured by another party the manufacturer labels the product according to the retailer s wishes rather than using its own brand or logo these products are commonly labeled with the retailer s name although the retailer didn t manufacture them both consumer product executives and retail executives tend to believe that co branding between retailers and traditional national brands is a win win situation | |
what are white list states | white list states maintain a list of insurance companies that can use unauthorized insurers to provide specialized or supplemental coverage known as surplus lines insurance surplus lines insurance protects against a financial risk that is too high for a regular insurance company to take on surplus line insurance can be used by companies or purchased individually unlike normal insurance this insurance can be bought from an insurer not licensed in the insured s state however the surplus lines insurer requires a license in the state where it is based understanding white list statesessentially white list states are the group of u s states that permit admitted insurance companies to use non admitted insurers to provide specialized liability or property coverage in the policy this practice is commonly referred to as surplus line insurance surplus line insurance is coverage provided by a non admitted insurer in the event that this coverage is currently unavailable from insurers that are licensed by the state surplus line producers can provide coverage for risks that the licensed insurers will not accept because they do not meet their guidelines or the risk is too unusual or large each white list state may have a long list of eligible surplus line suppliers if a firm is categorized as a surplus line insurer then this does not mean that this firm cannot become licensed in that state rather it is because they typically choose to operate on a surplus line and unlicensed basis in certain states the fact that they are not licensed in a particular state means that they are not subject to that state s regulations as set forth by that state s department of insurance in the same manner as the licensed insurers which gives them more leeway in terms of rate and form regulation surplus linesthe surplus lines market is also referred to as the specialty non admitted or excess lines market surplus lines insurance protects against a financial risk that is too high for a regular insurance company to take on surplus lines insurance unlike regular insurance can be purchased from an insurer that is not licensed in the insured s state though the surplus lines insurer will still need to be licensed in the state where it is based an insurance agent must have a surplus lines license to sell a surplus lines policy also called excess lines insurance surplus lines insurance makes it possible to get insurance for entities with unique risks that most insurers don t cover or for those with claims histories that make them otherwise uninsurable examples of major surplus lines insurers include american international group aig nationwide mutual insurance w r berkley corp zurich insurance group markel corp chubb ironshore inc berkshire hathaway inc fairfax financial holdings cna financial corp xl group plc and lloyd s of london one type of surplus lines insurance that consumers might purchase is flood insurance lloyd s offers this insurance through the natural catastrophe insurance program which offers an alternative to the federal emergency management agency s fema flood insurance consumers who find fema s insurance too expensive might be able to get a more affordable policy through surplus lines insurance that being said surplus lines insurance is often more expensive than regular insurance because it protects against unusual or higher than usual risks that other insurers won t cover | |
what is a white paper | a white paper is an informational document issued by a company or not for profit organization to promote or highlight the features of a solution product or service that it offers or plans to offer white papers are also used as a method of presenting government policies and legislation and gauging public opinion purpose of a white paperwhite papers are sales and marketing documents used to entice or persuade potential customers to learn more about a particular product service technology or methodology white papers are commonly designed for business to business b2b marketing purposes between a manufacturer and a wholesaler or between a wholesaler and a retailer it can provide an in depth report or guide about a specific product or topic and is meant to educate its readers the facts presented in white papers are often backed by research and statistics from reliable sources and can include charts graphs tables and other ways of visualizing data a white paper can communicate an organization s philosophy or present research findings related to an industry types of white papersa startup large corporation or government agency will use white papers differently there are three main types of white papers backgrounders numbered lists and problem solution white papers backgrounders detail the technical features of a new product or service designed to simplify complicated technical information they are used to numbered lists highlight the key takeaways of a new product or service and are often formatted with headings and bullet points such as the following familiar format problem solution papers identify specific problems faced by potential customers and suggest a data driven argument about how a featured product or service provides a solution to | |
how to write a white paper | white papers differ from other marketing materials such as brochures brochures and traditional marketing materials might be flashy and obvious but a white paper is intended to provide persuasive and factual evidence that solves a problem or challenge white papers are commonly at least 2 500 words in length and written in an academic style a white paper should provide well researched information that is not found with a simple internet search and have a compelling narrative to keep the reader s attention the author of a white paper should | |
what is an example of a white paper | all of the documents listed below publicly available on microsoft s website focus on aspects of the company s suite of cloud services in contrast with brochures these white papers don t have a clear sales pitch instead they dive into relevant topics such as cloud security hybrid clouds and the economic benefits of adopting cloud computing | |
how have new industries used white papers | cryptocurrencies have also been known to publish white papers during initial coin offerings icos and frequently issued white papers to entice users and investors to their projects bitcoin famously launched a few months after the pseudonymous satoshi nakamoto issued its famous white paper online in october 2008 | |
why is it called a white paper | white papers may have developed from the use of blue papers in 19th century britain where a parliament report cover was blue when a topic for the government was less serious the blue cover was discarded and published with white covers these reports were called white papers in the united states the use of government white papers often means a background report or guidance on a specific issue the bottom linea white paper is an informational document issued by a company government agency or not for profit organization to promote the features of a solution product or service that it offers or plans to offer the facts presented in white papers are often backed by research and statistics from reliable sources and commonly written in one of three formats backgrounders numbered lists and problem solution papers | |
what is a white shoe firm | a white shoe firm is an old fashioned term for the most prestigious well established businesses and companies in elite professions the term originally was used only to refer to legal practices white shoe law firm was a common variation but now may be used to describe those in other fields such as investment banking and management consulting white shoe firms typically have a venerable history preferably but not necessarily a century or so in the business and a blue chip clientele acquired over generations they tend to be based on the east coast occupying sizable spaces at exclusive addresses and while leaders in their field often have a reputation for being traditional and conservative understanding a white shoe firmthe term white shoe firm is believed to have originated in reference to a preppy style of footwear white buck shoes specifically oxfords introduced around 1910 light colored buck oxfords became popular at princeton university generally considered the headquarters for the country s best dressed students and among other male fashionistas of the period rubber soled versions were adopted by tennis and golf players too the white buck or suede version of the oxford became the in shoe at yale university and other ivy league colleges during the 1950s and thanks to the power of advertising trickled down to other institutions the ivy buck for upper class comfort on campus a 1950s ad proclaimed 1 in between their popularity at prestigious schools their association with aristocratic sports and their white color always hard to keep clean especially in suede the white shoe came to connote the throwaway elegance of the elite and eventually the elite themselves old money types whose work wouldn t muddy or scuff their footwear so a white shoe firm is one that is full of such white shoe men and increasingly women the new york times columnist william safire could track it back in print to the mid 70s citing articles published in forbes and business week 2originally most white shoe law firms were based in new york city although other historic northeastern metropolises like boston or philadelphia were also acceptable locales and even a few southern cities like washington d c or charleston although the shoes themselves have long gone out of fashion the term is still used in reference to leading american companies such as jpmorgan chase co or goldman sachs in banking cravath swaine moore llp and shearman sterling in law ernst young in accounting and mckinsey company in management consulting it has even expanded to denote top tier firms in other countries 3negative connotations of a white shoe firmwhile it connotes a well established well regarded company the term white shoe firm once had negative connotations as well some people felt that white shoe firms were the exclusive preserve of the east coast wasp elite and no one else need apply the employees at these firms were as white as the shoes they wore on weekends at their country clubs many of which refused to admit jews catholics or people of color irwin m stelzer the director of the hudson institute s economic policy studies group and a columnist for the sunday times of london recalled how he and his partner in a fledgling economic consulting firm didn t even bother pursuing business among the white shoe firms when they started out in the 1960s because stelzer and his partner were jewish the white shoe firms were off limits he noted we identified them by adding up the roman numerals after partners names i ii iii etc adding to that partners with first and last names that were interchangeable and dividing by the total number of partners a high result meant we had no chance 4prejudice aside the term white shoe firm also sometimes serves as a passionate derogation of old fogeyism as safire wrote indicating an outfit where caution and conservatism prevail sometimes to a detrimental degree his business week reference used the phrase this way first boston had let its white shoe image and big name client list go to its head they simply vegetated 2white shoe firms todaytoday a white shoe firm can be almost any company that s been in business a long time and looms large both in literal size and as a leader in its field the term implies quality stability and longevity what blue chip companies are to stocks white shoe firms are to business some contemporary white shoe firms identified by market business news include 3accounting advisorylegalbankingbut not even blue chips are immune to economic downturns business disruption and internal pressures although white shoe u s firms in relatively stable professions such as law and management consulting have managed to thrive those in the finance industry have struggled to retain their independence in the face of sweeping changes and challenges the global financial crisis of 2008 claimed several white shoe firms in investment banking and financial services one prominent victim was lehman brothers founded in 1844 and the fourth largest investment bank in the u s at the time it was forced to file for bankruptcy due to its 600 billion in losses in mortgage related instruments lehman s problems were caused in part by its investments in funds run by bear stearns though younger than lehman it only dated back to 1923 it too was one of the leading investment banks in the country until its leveraging techniques and heavy involvement in collateralized debt obligations cdos led to massive losses bear stearns was broken up and sold off to jpmorgan chase itself the product of a merger between two white shoe firms chase manhattan corporation and j p morgan co yet another venerable brokerage firm merrill lynch was sold to bank of america in the wake of the financial crisis over the years a number of white shoe firms have been acquired by bigger rivals or have gone out of business for example for much of the 20th century the u s accounting profession spoke of the big eight firms that handled the books of fortune 500 companies today they refer to the big four closures and mergers have shrunk the ranks such as the union of price waterhouse founded 1894 with coopers lybrand with roots going back to 1854 to form pricewaterhousecoopers in 1998 white shoe firm faqsa silk stocking law firm is often based in a large city and itself is quite large like a company with hundreds of attorneys catering to a well to do or silk stocking clientele it often charges high fees it pays big salaries but also expects a lot of billable hours from staffers who are often graduates of top law schools it is similar to a white shoe law firm though not necessarily as old or established once the answer would have been to be a wasp white anglo saxon protestant male preferably one raised in the northeast with an ivy league education white shoe firms are considerably more diverse today and continue to work to be more so but as prestigious leaders in their industry they can demand the best from candidates so for entry level jobs good grades from a prestigious educational institution are important for higher level positions considerable related experience especially at a similarly sized firm is required and while connections alone won t get you in without credentials and experience knowing someone or someone who knows someone and can recommend you never hurts either although some may expect you to consider the prestige of working there as part of your compensation most white shoe firms do pay well top dollar in fact but they also demand a lot from employees expecting long hours and imposing tight deadlines | |
what is a white squire | a white squire is an investor or friendly company that buys a stake in a target company to prevent a hostile takeover this is similar to a white knight defense except the target firm does not have to give up its independence as it does with the white knight because the white squire only buys a partial share in the company | |
how a white squire works | a white squire is a friendly acquirer which does not require a controlling interest like a white knight does a white knight buys the entire company to fend off a hostile takeover a white squire buys part of the company their stake is just large enough to block the bidding company and gives the target company time to rethink its strategy the white squire may be given a seat on the board offered discounted shares or promised generous dividends as an incentive to do the deal once the unfriendly acquirer has withdrawn its bid the white squire will typically sell its shares to prevent it from switching allegiances in the future the deal may be structured so that the shares given to the white squire may not be tendered to the hostile bidder special considerationsbeyond dividends and discounted shares white squires can also get other benefits such as a seat on the board this is done to ensure the white squire sides with the target company and doesn t change their minds as part of this an agreement is usually inked requiring a white squire to vote in favor of the target company inviting a white squire aboard can help but later on can hurt the company as they now have partial control of the company thus companies may enforce a standstill agreement which prevents a white squire investor from raising their stake in the company example of a white squirean example of the white squire defense occurred when america movil owned by mexican billionaire carlos slim attempted to purchase dutch telecoms company kpn in 2013 an independent foundation entrusted with protecting kpn was able to block it in the past disney and cbs have used white squires to help avoid takeovers cbs previously had loews corp take a 25 stake in the company to prevent a takeover by ted turner however ultimately loews was not happy with cbs management and pressured the chair of cbs board to resign while a white squire is meant to be a positive presence for the targeted company they can push for change if they see their own issues other takeover defenses include poison pills greenmail the pac man defense creating staggered boards and supermajority rules | |
what is whitemail | whitemail is a defensive strategy that a takeover target can use to try to thwart a hostile takeover attempt whitemail involves the target firm issuing a large number of shares at below market prices which are then sold to a friendly third party this helps the target avoid the takeover by increasing the number of shares the acquirer must purchase in order to gain control thus increasing the price of the takeover it also dilutes the firm s shares plus since a friendly third party now owns and controls a large block of shares the aggregate number of friendly shareholders increases if the whitemail strategy is successful in discouraging the takeover then the company can either buy back the issued shares or leave them outstanding understanding whitemailthere are two main tactics employed to acquire a controlling interest in a company as a hostile takeover bid first the acquirer may make a tender offer to the company s shareholders a tender offer is a bid to buy a controlling share of the target s stock at a fixed price the price is usually set above the current market price to allow the sellers a premium as an added incentive to sell their shares this is a formal offer and may include specifications included by the acquirer such as an offer expiry window or other items paperwork must be filed with the securities and exchange commission sec and the acquirer must provide a summary of its plans for the target company to aid the target company s decision other common defense strategies to prevent a hostile takeover include a poison pill crown jewel defense white knight and a pac man defense many takeover defense strategies protect against tender offers so often the proxy fight is utilized the goal of a proxy fight is to replace board members who are not in favor of the takeover with new board members who would vote for the takeover this is done by convincing shareholders that a change in management is needed and that the board members who would be appointed by the would be acquirer are just what the doctor ordered whitemail is a strategy that can be used to fend off an unwanted takeover attempt by issuing shares at a below market price and selling them to a friendly third party these new shares undermine the tender offer by making it relatively more expensive for the acquirer to attempt this route at the same time the new friendly shareholder will be less likely to agree to a tender offer or to a proxy fight to install new board members whitemail is just one of several defensive strategies to avert a hostile takeover example of whitemailxyz corporation has 1 000 000 shares outstanding abc inc wants to acquire xyz corp and begins to buy up all of the shares they can in the public secondary market in an attempt to get to a controlling proportion of shares xyz corp gets wind of this and proceeds to institute a whitemail policy they issue 250 000 new shares at a significant discount to the current secondary market price and sell them all to def industries which is a company that xyz has a good relationship with the increase of outstanding shares from 1 000 000 to 1 250 000 increases the number of shares abc will need to purchase in order to gain a controlling interest plus the voting rights of all xyz shares are now diluted reducing abc s power to vote for board members who favor their takeover | |
what is a 51 hostile takeover | a 51 hostile takeover is when an acquiring company purchases 51 ownership of the target company through share purchases acquiring companies tend to do this quietly and over time to not alert the target company when any entity owns 51 of a firm it is the majority owner and can make all final decisions | |
what happens to your stock in a hostile takeover | the target company s shares usually see an increase in price during a hostile takeover in any takeover actually this is usually because the acquiring company pays a premium for the shares | |
are hostile takeovers legal | yes hostile takeovers are completely legal they are typically done through acquiring shares appealing to shareholders or removing the current management team while they are legal many legal issues may arise during the process which could ultimately prevent the takeover the bottom linethe corporate world can be a ruthless arena with companies vying for control market share and profits one of the best ways to grow a company is through acquisitions however many target companies do not want to be acquired | |
what is a whitewash resolution | a whitewash resolution is a condition placed by the target firm before it is acquired by another company in a whitewash resolution the company being acquired pledges financial assistance to the acquirer as long as it remains financially viable for at least 12 months the financial assistance must first be approved by the target company s shareholders if approved an auditor must then confirm the company s solvency before the firm s directors can proceed with the deal | |
how a whitewash resolution works | mergers and acquisitions m a are the combination of two or more companies into a single entity mergers tend to marry two similar companies together while acquisitions occur when one company usually a larger one buys another usually a smaller one the deals must be approved by shareholders and board members of each company some companies use acquisitions as a means of raising capital and draining the assets of the target companies only to leave them debt ridden and unable to pay their bills to avoid this some targets promise the acquirer financial assistance as part of the deal but it may come with a condition called a whitewash resolution this resolution is put forth by shareholders of the target to ensure it remains solvent and won t seek to discharge its liabilities once the acquisition is complete put simply the buyer promises the target s shareholders that the target will be solvent for at least a year in exchange for financial assistance an auditor then comes in to ensure this is financially possible if approved the target company can shift the responsibility to the acquiring company whitewash resolutions are commonly used by financially distressed companies that want to save themselves from insolvency by being purchased as such it acts like a rescue plan that allows the target company to remain financially viable for at least a year after it provides the acquirer with financing and before its shares are fully acquired whitewash resolutions are commonly used in conjunction with the companies act of 1985 this british law outlines how companies can be registered as well as their rights and responsibilities and the obligations of their board members directors and key personnel 1special considerationsthe term whitewash resolution is used in other parts of the world in corporate law in hong kong and singapore a whitewash resolution represents a waiver of the rights of certain independent shareholders of a company rather than financial assistance the whitewash resolution in this case is a waiver of rights for the independent shareholders to receive a mandatory takeover from shareholders of the other company an investor can appeal to an executive for a whitewash resolution or whitewash waiver if approved this waiver is subject to the approval of shareholders example of a whitewash resolutionhere s a hypothetical example to show how whitewash resolutions work suppose private company abc wishes to be purchased by company xyz company abc might provide financial assistance to company xyz to give it enough capital to purchase its shares before this can happen company abc s directors must pass a whitewash resolution the resolution would note that even after assisting the company will remain viable for at least a year in addition to remaining financially viable for the next 12 months company abc shareholders must approve the transaction | |
how does a whitewash resolution work | a whitewash resolution is commonly used by financially distressed companies that want to avoid becoming insolvent instead they seek out a buyer that ensures that promises its shareholders it will remain financially viable for at least 12 months after it gives the acquirer financing doing so allows the target to pay off its debts rather than having its assets and finances being exploited by the acquirer | |
what is the role of an auditor in a whitewash resolution | the auditor is brought into a whitewash resolution to ensure that the target firm will be able to remain solvent after it provides the acquirer with financing and before its shares are all purchased by the buyer | |
how do you define financial distress | financial distress is a condition wherein an individual or company isn t able to cover their financial obligations this means the entity is not generating enough revenue or income to pay its debts this condition can be the result of a drop in income changes in the economy higher costs bad budgeting and or overspending the bottom linecompany shareholders generally have to approve of any major changes to the business this includes any mergers or acquisitions that may occur financially distressed companies may seek out buyers to save themselves from going under in certain cases they may put in a whitewash resolution which promises the acquirer financing as long as it ensures the target will remain viable enough to pay off its debt before being acquired | |
what is a whole life annuity | a whole life annuity also known as a life annuity is a financial product sold by insurance companies it gives out monthly quarterly semi annual or annual payments to a person for as long as they live beginning at a stated age annuities are usually purchased by investors who want to secure an income stream during retirement | |
how a whole life annuity works | annuities can be structured to make payments for a fixed amount of time commonly 20 years or make payments for as long as the annuitant and their spouse is alive actuaries work with insurance companies to apply mathematical and statistical models to assess risk when determining policies and rates the accumulation period occurs as payments are being made by the buyer of the contract to the insurance company the annuitization phase occurs when the insurance company makes payments to the annuitant at the end of the term the value in the account would be turned into a stream of payments in what s called the annuitization phase special considerationsannuities can be structured generally as either fixed or variable fixed annuities provide regular periodic payments to the annuitant variable annuities allow the owner to receive greater future cash flows if investments within the annuity fund do well and smaller payments if its investments do poorly most variable annuities let you invest in a variety of assets mainly stock mutual funds this provides for a less stable cash flow than a fixed annuity but allows the annuitant to reap the benefits of strong returns from their fund s investments there are no irs contribution limits and any earnings are not taxed until withdrawn withdrawals of taxable amounts from an annuity are subject to ordinary income tax and if taken before age 59 may be subject to a 10 irs penalty 1agents or brokers selling annuities need to hold a state issued life insurance license and also a securities license in the case of variable annuities 2 these agents or brokers typically earn a commission based on the notional value of the annuity contract example of a whole life annuityassuming a 6 rate of return for all years a 100 000 lump sum investment over 20 years in a taxable account would be worth 222 508 at the end of the term a tax deferred variable annuity pre tax 0 25 annual annuity charge would be worth 305 053 at the term s end and a tax deferred variable annuity post tax assuming lump sum withdrawal 0 25 annual annuity charge would be worth 239 436 | |
what is a whole life annuity due | a whole life annuity due is a financial product sold by insurance companies that requires annuity payments at the beginning of each monthly quarterly or annual period as opposed to at the end of the period this is a type of annuity that will provide the holder with payments during the distribution period for as long as they live after the annuitant passes on the insurance company retains any funds remaining annuities are usually purchased by investors who want to secure some type of income stream during retirement the accumulation phase occurs as payments are being made by the buyer of the contract to the insurance company the liquidation phase occurs when the insurance company makes payments to the annuitant understanding whole life annuity dueannuities are financial products that are often purchased as part of a retirement plan to ensure income during the retirement years investors make payments into the annuity and then upon annuitization the annuitant will receive regular payments annuities can be structured to make payments for a fixed length of time commonly 20 years or make payments for as long as the annuitant and their spouse is alive actuaries work with insurance companies to apply mathematical and statistical models to assess risk when determining policies and rates an annuity due requires payments made at the beginning as opposed to the end of each annuity period annuity due payments received by an individual legally represent an asset meanwhile the individual paying the annuity due has a legal debt liability requiring periodic payments income payments from an annuity are taxed as ordinary income unless the annuity is kept in a roth ira periodic or lump sumsthe major decision for annuity investors is whether to take periodic or lump sum payments this is when the time value of money comes into play this means the money in your hands today is worth more than money sometime later or conversely money received at some future date is worth less than money in your pocket today thus if you receive a 100 000 lump sum payout today you ll want to compare that with receiving a stream of payments over many years which is worth more depends on a number of factors such as the implied interest rate or discount rate of the payments the risk and return of investing the lump sum and your need for immediate cash lump sum payments open you to risk if the money is invested aggressively you could earn outsized returns beyond what the periodic payments could provide or you could lose it all if the markets or your investments sour you might also be forced or tempted to spend all of a lump sum leaving you with nothing it s the reason many people opt for periodic payments when given the chance in addition there are tax consequences tied to each method | |
what is whole life cost | whole life cost is the total expense of owning an asset over its entire life from purchase to disposal as determined by financial analysis it is also known as the life cycle cost the lifetime cost cradle to grave or womb to tomb whole life cost includes purchase and installation design and building costs operating costs maintenance associated financing costs depreciation and disposal costs whole life cost also takes into account certain costs that are usually overlooked such as those related to environmental and social impact factors in the example of constructing a nuclear power station it is possible to calculate the environmental impact of making the concrete containment and the water required for copper refinement in addition to other components whereas a number of options may be portrayed as good for the environment a whole life cost analysis allows a determination of whether or not one solution carries a lower or higher environmental cost than another understanding whole life cost analysiswhole life cost analysis is often applied when evaluating different options when investing in new assets and for analyses that attempt to minimize whole life cost over the lifetime of an asset it may also be used to decide between two different projects or to make acquisition decisions | |
when comparing investment decisions a financial analyst must look at all potential future costs not just acquisition expenses typically the focus is on the up front capital costs of creation or acquisition and many organizations fail to take into account the longer term costs of an asset without considering whole life costs it s possible that an asset s return will likely be overestimated while an asset may have low development costs its purchase may lead to high maintenance or customer service costs in the future | while most short term costs and even depreciation can be readily measured or estimated long term costs are more difficult to estimate in addition factors such as environmental or social impact cannot be easily quantified nevertheless whole life costing may provide a more accurate picture of the true cost of an asset than most other methods the value of determining whole life cost can be demonstrated when considering the purchase of a large piece of equipment for a factory consider for example a machine that attaches nylon flock to foam rubber pads used in the construction of painting tools beyond the initial cost of purchasing and installing the flocking machine it will have any number of components requiring periodic maintenance and replacement such a machine may also present environmental hazards when cleaned or require complex disassembly in order to be disposed of the whole life cost analysis of this equipment purchase will be critical in estimating the long term financial benefit of its purchase and use | |
what is whole life insurance | whole life insurance provides coverage throughout the life of the insured person in addition to paying a tax free death benefit whole life insurance also contains a savings component in which cash value may accumulate interest accrues on a tax deferred basis 1whole life insurance policies are one of several types of permanent life insurance meaning they cover you for your entire life universal life indexed universal life and variable universal life are others you can choose a whole life insurance policy that works for you from one of these best life insurance companies | |
how whole life insurance works | whole life insurance guarantees payment of a death benefit to beneficiaries in exchange for level regularly due premium payments the policy includes a savings portion called the cash value alongside the death benefit in the savings component interest may accumulate on a tax deferred basis 1 growing cash value is an essential component of whole life insurance to build cash value a policyholder can often remit payments greater than the scheduled premium to purchase extra coverage known as paid up additions or pua policy dividends can also be reinvested into the cash value and earn interest over time the dividends and interest earned on the policy s cash value will provide a positive return to investors growing larger than the total amount of premiums paid into the policy the cash value offers a living benefit to the policyholder meaning the policyholder can access it while the insured is still alive to access cash reserves the policyholder requests a withdrawal of funds or a loan withdrawals are tax free up to the value of the total premiums paid 1interest is charged on policy loans with rates varying per insurer but the rates are generally lower than you d get with a personal loan or home equity loan however withdrawals and unpaid loans also reduce the cash value of the policy depending on the policy type and the size of its remaining cash value a withdrawal could chip away at the death benefit or even wipe it out entirely whole life insurance is different from term life insurance which only provides coverage for a certain number of years rather than a lifetime term life does not have a cash savings component and only pays out a death benefit whole life insurance cash valuea cash value life insurance policy is similar to a retirement savings account in that it allows investments to accumulate tax deferred interest part of each premium payment goes toward the policy s cash value which can be withdrawn or borrowed against later in life the cash value of a life insurance policy grows quickly when the insured is young but because more of the premium is needed to cover the cost of insurance as the insured ages the cash value grows more slowly as they get older due to the higher risks associated with age the insured can access their policy s cash value by borrowing against it the cash value or by withdrawing money in a partial cash surrender surrenders will reduce the final death benefit of your policy you can also use the cash value to cover your monthly premium payments instead of paying out of pocket or you can surrender the whole policy to receive the entire available cash value minus any surrender fees however the policy will be terminated and the death benefit will no longer be available to your beneficiaries some companies in the u k and australia offer insurance bonds with their policies which provide some tax advantages whole life death benefitthe dollar amount of the death benefit is typically specified in the policy contract but it can be changed in some instances some policies are eligible for dividend payments and the policyholder may elect to use the dividends to buy paid up additions to the policy which will increase the amount paid at the time of death death proceeds are non taxable to the beneficiary 1the death benefit can also be affected by certain policy provisions or events as mentioned before unpaid policy loans including accrued interest reduce the death benefit dollar for dollar alternatively many insurers offer voluntary riders for a fee that secure or guarantee coverage including the stated death benefit two of the most common such riders are the accidental death benefit and waiver of premium riders which protect the death benefit if the insured becomes disabled or critically or terminally ill and is unable to remit premiums due beneficiaries may also have decisions to make about how the death benefit is paid the default option is to receive a lump sum payment but some policies also allow beneficiaries to choose to get the death benefit in installments or to convert it to an annuity an annuity may pay out for a set amount of time until the death benefit is exhausted or it could pay out for the life of the beneficiary the death benefit continues to earn interest until it is paid and that interest may be taxable 1as is the case with any kind of permanent policy it s important to thoroughly research all insurers being considered to ensure they re among the best whole life insurance companies currently operating uses of whole life insuranceas with any kind of life insurance a whole life insurance policy gives individuals and their families financial security against the loss of a breadwinner for families that rely on the income of a single person a whole life policy can provide financial security against the sudden loss of an income provider but unlike term life whole life can also be used as an investment once the cash value has grown big enough you may be able to withdraw or borrow from it to pay for large purchases such as a home some people also use whole life cash value to supplement their income in retirement when markets are low whole life insurance is also useful for businesses as a contingency plan for the loss of a key employee or partner if a key employee passes away a whole life policy can provide a financial offset to the loss of their skills or expertise if the deceased is part owner of the company a whole life policy can provide the remaining owners with enough capital to buy out the deceased partner s share of the business types of whole life insurancethere are several main types of whole life insurance categorized based on how premiums are paid whole life insurance policies are further distinguished as participating and non participating plans with a non participating policy any excess of premiums over payouts becomes profit for the insurer however the insurer also assumes the risk of losing money with a participating policy any excess of premiums is redistributed to the insured as a dividend this dividend can then be used to make payments or increase one s policy coverage limits however dividends are not guaranteed and often vary each year as they are primarily based on the company s financial performance whole life insurance vs term life insurancewhole life insurance is similar to term life insurance in that both types of policies offer a payout upon the death of the insured however there are important differences while whole life insurance offers a guaranteed death benefit for the entire lifetime of the insured a term policy only pays out if the insured dies within a certain time frame usually 10 20 or 30 years there are other considerations as well in order to provide greater benefits a whole life policy requires significantly higher premiums than a term policy with the same coverage limit whole life premiums are typically fixed throughout the policy duration while term rates increase at each renewal as the insured grows older advantages and disadvantages of whole life insurancelifetime coveragecash value you can use for loans withdrawals or premium paymentsguaranteed death benefit amountpredictable premium paymentstax free loansmore expensive than term lifecash value may grow slower than with other policiesno flexibility to adjust the premiumlimited ability to adjust the death benefitadvantages explaineddisadvantages explained | |
how much does whole life insurance cost | on average whole life insurance policies are significantly more expensive than term life insurance investopedia research using quotacy found that the average monthly premium for a 500 000 whole life insurance policy ranges from 247 for a 30 year old female to 887 for a 60 year male in contrast monthly premiums for term life insurance range from 25 for a 30 year old female to 241 for a 55 year old male for the same amount of coverage | |
what is the difference between universal and whole life insurance | universal life insurance and whole life insurance are types of permanent life insurance that offer guaranteed death benefits for the life of the insured however a universal life policy allows the policyholder to adjust the death benefit as well as the premiums higher death benefits require higher premiums whole life insurance on the other hand does not allow for changes to the death benefit or premiums which are set upon issue | |
how much is whole life insurance | the cost of whole life insurance varies based on several factors such as age occupation and health history older applicants typically have higher rates than younger applicants people with a stellar health history normally receive better rates than those with a history of health challenges the face amount of coverage also determines how much a policyholder will pay the higher the face amount the higher the premium also certain companies have higher rates than others independent of the applicant and their risk profile it s also worth noting that for the same amount of coverage whole life insurance is far more expensive than term life insurance | |
what is modified whole life insurance | modified whole life insurance is permanent life insurance in which premiums increase after a specific period policyowners pay lower premiums than they would for a level premium policy during the first few years and higher premiums in the later years traditional whole life insurance premiums in contrast remain the same throughout the life of the policy the bottom linewhole life insurance generally has a level premium and death benefit and provides a guaranteed benefit upon the death of the insured regardless of when they die part of the premiums you pay for a whole life policy go to a savings component known as the cash value those funds are invested with a guaranteed return and after they ve grown big enough you can borrow from or withdraw from the cash value tax free this and the fact that whole life covers you until death as long as you pay your premiums offer clear advantages over term life insurance which only pays out if the death occurs within a specific time frame however whole life insurance also has significantly higher costs | |
what is a whole loan | a whole loan is a single loan issued to a borrower lenders of whole loans often sell them in the secondary market to institutional portfolio managers and agencies such as freddie mac and fannie mae lenders sell their whole loans to reduce their risk rather than keeping a loan on their books for 15 or 30 years by selling the whole loan to an institutional buyer the lender can almost immediately recoup the principal understanding whole loanswhole loans are issued by lenders to borrowers for multiple purposes a lender may issue a personal loan or a mortgage loan to a borrower with specified terms determined by the credit issuer following the underwriting process generally whole loans are held on a lender s balance sheet and the lender is responsible for servicing the loan selling whole loans in the secondary market allows a lender to generate cash that it can use to make more whole loans which generate more cash from closing costs paid by borrowers | |
how do lenders use a whole loan | many lenders choose to package and sell their whole loans in the secondary market which allows for active trading and market liquidity various buyers are available for different types of loans in the secondary market the mortgage market has one of the most well established whole loan secondary markets with agencies like fannie mae serving as whole loan buyers 1 whole loans are often packaged and sold in the secondary market through a process called securitization they may also be individually traded through institutional loan trading groups the whole loan secondary market is a type of fourth market that is used by institutional portfolio managers and facilitated by institutional dealers lenders work with institutional dealers to list their loans on the secondary market lenders can sell personal corporate and mortgage loans loan portfolio managers are active buyers within the whole loan secondary market lenders also have the option to package and sell loans in a securitization deal this type of deal is supported by an investment bank that manages the packaging structuring and sales process of a securitization portfolio lenders will typically package loans with similar characteristics in a securitization portfolio with various tranches that are rated for investors residential and commercial mortgage loans have a well established secondary market through agency buyers freddie mac and fannie mae which typically buy securitized loan portfolios from mortgage lenders freddie mac and fannie mae have specific requirements for the types of loans they buy in the secondary market which influences the underwriting of mortgage loans for lenders example of selling a whole loansuppose lender xyz sells a whole loan to freddie mac xyz no longer earns interest on the loan but it gains cash from freddie mac to make additional loans when xyz closes on those additional loans it earns money from origination fees points and other closing costs paid by borrowers xyz also reduces its default risk when selling the whole loan to freddie mac it has essentially sold the loan to a new lender who services the loan and the loan is removed from xyz s balance sheet | |
what are examples of whole loans | whole loans are any loan made from one lender to one borrower one of the most recognizable examples is a mortgage loan | |
does anything change for me if my loan is sold | mortgages are often bought and sold in the event that your loan is sold you ll receive notification that your loan is owned by a new company and may have to set up a new payment portal the terms of your loan will not change | |
why do lenders sell whole loans | while closing whole loans generates fast cash sometimes a lender would rather originate loans as opposed to servicing them by selling them to another company the original lender secures funds it can use to originate more loans the bottom linemost loans are considered whole loans but they may quickly be sold to larger companies and bundled into securities for borrowers the terms are the same for lenders whole loans represent a longer period of work for their profit | |
what is wholesale banking | wholesale banking refers to banking services sold to large clients such as other banks other financial institutions government agencies large corporations and real estate developers it is the opposite of retail banking which focuses on individual clients and small businesses wholesale banking services include currency conversion working capital financing large trade transactions mergers and acquisitions consultancy and underwriting among other services investopedia laura porterunderstanding wholesale bankingin its essence wholesale banking is the financial practice of lending and borrowing between two large institutions the types of services are provided by investment banks that often also offer retail banking this means that an individual looking for wholesale banking wouldn t have to go to a special institution and could instead engage the same bank in which he conducts his personal retail banking the services that are considered wholesale are reserved only for government agencies pension funds corporations with strong financials and other institutional customers of a similar nature it is for entities that require more service than an individual or a small business and one that needs it on a large scale because of the large scale the prices offered for these services are typically lower than what is offered to an individual wholesale banking also refers to the borrowing and lending between institutional banks this type of lending occurs on the interbank market and often involves extremely large sums of money wholesale banking vs retail bankingwholesale and retail banking are distinct sectors within the banking industry catering to different customer segments and needs wholesale banking focuses on institutional clients such as corporations governments large businesses financial institutions and high net worth individuals retail banking focuses on individual customers and small businesses wholesale banking handles large scale financial transactions while retail banking handles small to medium sized transactions including everyday banking activities wholesale banks tend to offer a range of sophisticated financial products and services while retail banks provide standardized banking products and services to individual customers very broadly speaking wholesale banking focuses on building long term strategic relationships with corporate clients on the other hand retail banking emphasizes customer service and building relationships with individual customers retail banking focuses on smaller more standardized transactions with lower risk profiles as such retail banking may be seen as having lower risk as the client base often have less assets or resources despite their differences many banks operate in both sectors providing a diverse range of financial services to cater to a wide range of clients needs many financial institutions offer both retail and wholesale banking for example wells fargo u s bank bank of america and many other large banks supports both industries advantages and disadvantages of wholesale bankingwholesale banking provides a number of benefits not only to financial institutions but also to the customers they serve at the institutional level wholesale banking may also come with a few possible drawbacks the following is a list of some of the drawbacks of wholesale banking a 2023 evaluation of the wholesale banking sector by pwc led to the consulting firm stating the upcoming challenge of the industry is balancing the growing complexities of daily operations within the wholesale banking industry with a focus on the extended time horizons of an enterprise wide transformation 1example of wholesale bankingthe easiest way to conceptualize wholesale banking is to think of it as a discount superstore like costco that deals in such large amounts that it can offer special prices or reduced fees on a per dollar basis it becomes advantageous for large organizations or institutions with a high amount of assets or business transactions to engage in wholesale banking services rather than retail banking services for example there are many occasions when a business with multiple locations needs a wholesale banking solution for cash management technology companies with satellite offices are a prime candidate for these services let s say that a saas software as a service company has 10 sales offices distributed around the united states and each of its 50 sales team members has access to a corporate credit card the owners of the saas company also require that each sales office keeps 1 million in cash reserves totaling 10 million across the business it s easy to see that a company with this profile is too large for standard retail banking instead the business owners can engage a bank and request a corporate facility that keeps all the company s financial accounts wholesale banking services act like a facility that offers discounts if a business meets minimum cash reserve requirements and minimum monthly transaction requirements both of which the saas company will hit it is thus beneficial for the business to engage in a corporate facility that consolidates all its financial accounts and reduces its fees rather than keeping 10 retail checking accounts and 50 retail credit cards open | |
what services does wholesale banking offer | wholesale banking offers a range of services including corporate banking investment banking treasury management trade finance risk management and capital market solutions | |
how can companies choose the right wholesale bank | companies should consider factors such as the bank s expertise reputation global reach services offered industry knowledge and relationship building capabilities when choosing a wholesale bank | |
how does wholesale banking contribute to economic growth | wholesale banking supports economic growth by providing capital for large scale projects facilitating mergers and acquisitions enabling trade finance and offering financial expertise and advisory services to businesses and institutions | |
what are the career opportunities in wholesale banking | wholesale banking offers diverse career opportunities including roles in corporate banking investment banking risk management treasury services capital markets relationship management and financial advisory the bottom linethe wholesale banking sector provides specialized financial services to institutional clients such as corporations governments and large businesses it encompasses areas such as corporate banking investment banking treasury services risk management and capital market solutions wholesale banks offer tailored products supporting the complex financial needs of their clients compared to retail banking which may prioritize individual customer daily transactions | |
what is wholesale energy | wholesale energy is a term referring to the bulk purchase and sale of energy products primarily electricity but also steam and natural gas in the wholesale market by energy producers and energy retailers other participants in the wholesale energy market include financial intermediaries energy traders and large consumers wholesale energy markets developed following the deregulation and restructuring of utilities and electricity markets around the world in the 1990s breaking down wholesale energythe concept of wholesale trading relates to the business of selling goods in large quantities and at low prices typically to be sold by retailers at a profit in general it is the sale of goods to anyone other than a standard consumer in the wholesale energy market the term generally relates to purchasing and selling large quantities of electricity between utility companies but other smaller independent renewable energy producers are also entering the wholesale energy market in the wholesale energy market there are independent system operators that coordinate control and monitor its operation the deregulation of electricity markets and the development of wholesale energy markets have provided end user benefits such as enhanced reliability efficient grid dispatch and better price transparency however detractors of the wholesale energy concept maintain that it may actually lead to higher prices for retail consumers and can cause artificial shortages such as the california energy crisis of 2000 2001 due to market manipulation wholesale renewable energyas the energy market becomes increasingly deregulated it has become possible but not easy for retail energy consumers to enter the wholesale energy market and sell electricity produced from renewable sources like solar or wind back to the electric utility companies there is still a lot of work to do in order for this to be efficient and fair for example updating outmoded grid systems to make it easier for customers to sell back power to their power providers could yield fairer rates for customers according to the north carolina clean energy technology center 40 states and the district of columbia allow for some kind of net metering 1 in other words households that generate electricity through residential solar projects can receive checks from the power companies for excess energy sent to the grid many states offer tax incentives to homeowners who take steps to make their homes more sustainable and energy efficient these are early steps that allow retail customers to participate in the wholesale energy market the long term aim is a more efficient and lower cost model that benefits consumers and producers alike | |
what is wholesale insurance | wholesale insurance refers to coverage for employer groups that are too small to qualify for true group coverage a wholesale insurance policy is also known as franchise insurance it covers an entire group though individual policies are written for each person that is to be insured these kinds of policies are offered by nonadmitted carriers or insurance companies that aren t approved by the state s insurance department understanding wholesale insurancewholesale insurance is sold to groups that may not be large enough to get typical group coverage they are essentially provided by companies with fewer than 10 employees plans come with individual contracts but generally contain the same provisions for all members of the group some companies allow employees to purchase a policy while others pay premiums as part of the employee benefits package wholesale insurance is normally offered by nonadmitted carriers these providers are also known as surplus line or excess line carriers these companies don t necessarily have to follow regulations outlined for insurance companies by the state as such policies offered by nonadmitted carriers can be risky because they may not guarantee claims if the insurer becomes insolvent wholesale insurance may be risky because carriers may not guarantee claims if they become insolvent products for small businesses offered through wholesale insurance vary and generally include the following insurance wholesalers rarely have direct contact with insured parties except when it comes to employee benefit and health plans because nonadmitted carriers don t operate under state insurance laws they have more pricing flexibility to ensure against unusual circumstances such as catastrophic events while there is a certain risk that comes with some nonadmitted carriers the fact that they operate outside of state insurance laws shouldn t be a red flag of financial instability state licensing filing and reporting requirements are simply different for these carriers larger nonadmitted carriers are usually well capitalized subsidiaries of major financial services companies special considerationswholesale insurance brokers often possess specialized expertise in a particular line of coverage or in a line of coverage that is unusual and or have greater access to or influence with certain insurance markets which is especially valuable when dealing with a difficult to place risk wholesale insurance agents place business brought to them by retail agents unlike a retail broker wholesale brokers have a direct working relationship with the insurer whereas the retail agent who produced the business does not the same broker can function as a retailer or wholesaler depending on the specific situation there are two types of wholesale brokers managing general agents and surplus lines brokers the latter work with retail agents and insurers to obtain coverage for the insured unlike a managing general agent a surplus lines broker does not have binding authority from the insurer wholesale insurance vs retail insurancewholesale insurance coverage is unlike the retail insurance market most individuals are used to the retail insurance market where they buy auto home and life insurance policies in this market are normally underwritten by carriers who are admitted or companies that are licensed in the state in which the policy is sold admitted carriers are regulated by the state and broker agents are also held to regulatory standards by the state as well | |
what is wholesale money | wholesale money refers to the large sums of money lent by financial institutions in the money markets this wholesale banking encompasses the market for tradable securities such as treasury bills commercial paper bankers acceptances foreign or brokered deposits certificates of deposit bills of exchange repo agreements federal funds and short lived mortgage and asset backed securities understanding wholesale moneywholesale money is a way for large corporations and financial institutions to obtain working capital and other types of short term financing and it is critical to the proper functioning of the u s and global financial systems wholesale funding can be quick to arrange but dangerous to rely on as banks discovered during the global financial crisis when the wholesale funding market collapsed excessive use of short term wholesale funding instead of retail deposits and repurchase agreements left banks exposed to liquidity risk when liquidity mattered most an example of this occurred after the collapse of lehman brothers during the 2008 financial crisis a bank run ensued and investors took out their wholesale funds wachovia is reported to have lost approximately 1 or approximately 5 billion of its funds the bank was directed by fdic to negotiate with citigroup and wells fargo for a takeover instead of filing for bankruptcy over a weekend it was sold to wells fargo for approximately 15 billion a defining moment of the subprime crisis happened in 2007 when northern rock a british bank that had relied on wholesale markets for most of its finance was no longer able to fund its lending activities and had to ask the bank of england for emergency funding indications of wholesale money marketswholesale money markets are therefore a good leading indicator of stress in the financial system and paint a truer picture of the cost of borrowing than central banks official interest rates today the ois discounted overnight rate has become a key measure of credit risk within the banking sector using short term benchmark rates such as the federal funds rate the demand for high quality liquid assets hqla in the global financial markets suggests that wholesale money markets are a long way from being repaired even as global systemically important banks g sibs comply with new basel iii capital and liquidity measures such as the liquidity coverage ratio and the net stable funding ratio in the u s new money market regulations came into force in 2016 but the federal reserve will have to provide stability to the lending markets through its reverse repurchase rrp facility for some time this is because rising interest rates increase banks reliance upon wholesale funding by reducing retail deposits this in turn increases systemic risk | |
what is a wholesale price index wpi | a wholesale price index wpi measures change in the overall price of goods before they are sold at retail this includes the prices charged by manufacturers and often outside the u s wholesalers usually expressed in terms of the percentage change from the prior month or a year earlier the wpi is an inflation indicator in the u s the wpi has been reported as the producer price index ppi since 1978 1 | |
how a wholesale price index wpi works | wholesale price indexes are reported monthly to track the overall rate of change in producer and wholesale prices the index is set at 100 for its base period and calculated based on subsequent price changes for the aggregate output of goods 2to illustrate assume january 2021 is the base period if the aggregate price level rose 9 7 over the next year the wpi for january 2022 will be at 109 7 a wpi typically takes into account commodity prices but the products included vary from country to country they are also subject to change as needed to better reflect the current economy some small countries only compare the prices of 100 to 200 products while larger ones tend to include thousands of products in their wpis 3the wholesale price index vs the producer price indexin the u s wholesale price index reporting dates back to 1902 in 1978 the bls renamed the wpi the producer price index ppi in part because the index never measured price change in the wholesale market focusing consistently on the prices charged by producers 1at that time the bls shifted to a methodology dividing goods based on their stage of production that focus which minimizes double counting persists in the current ppi methodology aggregating prices into final demand and intermediate demand indexes depending on whether the price is that of a finished product or an intermediate good 4 | |
what is wholesale trade | wholesale trade is an economic indicator that measures the value in u s dollars of all merchant wholesalers sales and inventories wholesale trade is one component of business sales and inventories only those firms that sell to governments institutions and other businesses are considered part of wholesale trade understanding wholesale tradeaccording to the bureau of labor statistics bls the wholesale trade sector includes the sale of merchandise that is outputted from manufacturing agriculture mining publishing and some other information industries wholesaling is considered to be an intermediate step in the overall distribution of merchandise and goods a wholesaler sells or organizes the transaction for the resale of goods to other wholesalers or retailers they might also arrange the sale or purchase of raw materials supplies for production or durable consumer goods typically wholesalers operate from a warehouse or office facility and sell goods to other businesses such transactions are rarely done through walk in business as the operation is not established nor advertised for that type of activity traditionally wholesalers do not market their services to the general public they conduct business with vendors or retailers who are part of the overall supply and sales chain while wholesale trade is separate from consumer sales transactions wholesalers are part of the channel that feeds consumer trade the relationships between wholesalers and their customers may be long standing with new orders and follow ups coming in as those retailers and vendors need more merchandise the united states census bureau furnishes monthly and annual wholesale trade reports | |
how wholesale trade data is used | wholesale trade data gives investors a closer look at the consumer economy as wholesalers sales and inventory numbers can be a leading indicator of consumer trends by looking at the ratio of sales to inventories investors can see whether or not production may grow or slow in the future for example if inventories are growing more slowly than sales producers will have to make more product so that no shortages occur alternatively if sales growth is slower than inventory growth there will be an excess of supply and production should slow in the coming months because manufacturing is such a large part of gross domestic product gdp the wholesale trade data can be a valuable tool for keeping a finger on the pulse of the economy equity markets are positively affected by an increase in production as corporate profits tend to increase the bond markets on the other hand prefer moderate growth so as to stem inflation | |
what is wholesaling | wholesaling is the act of buying a large number of goods directly from a manufacturer and then selling them to retailers wholesalers buy in bulk at a discounted price and sell to a retailer for a higher price which is how wholesalers make their profit retailers then repackage these goods into smaller quantities and sell them to consumers at an even higher price due to the large quantities purchased from the manufacturer at a discounted price the wholesaler can also pass on this discount to retailers the retailer sells at a price that reflects the overall cost of doing business understanding wholesalingmost wholesalers do not manufacture the goods they sell but rather buy them from the source and concentrate on the business of sales and delivery to retailers they are known as the intermediary in the supply chain it is more cost effective for a wholesaler to buy in bulk from a manufacturer and receive a discount than it would be to buy items individually the wholesaler will then sell to a retailer at a higher price than it paid for the goods but is still able to provide a similar discount to the retailer as they received when the retailer buys in bulk for example walmart will purchase its products from wholesalers in bulk they may buy thousands of bottles of hand moisturizer it will receive a discount on buying such a large volume than if it were to just buy a few walmart then stocks its shelves with moisturizers and continuously restocks from its large inventory when the shelves are empty a wholesaler may specialize in a single product or product category or may offer a variety of goods it can be anything from milk to electricity some wholesalers also broker deals between other wholesalers and retail businesses that require a variety of goods or components of goods that can be more efficiently obtained from a single source a wholesaler should not be confused with an official distributor for a brand s product line the wholesaler does not generally offer product support may not be connected directly to the company from which it purchases products and may even have limited familiarity with the products moreover unlike distributors many wholesalers sell competing products | |
where wholesaling fits into the supply chain | wholesaling is one step in the supply chain which also includes suppliers of raw materials manufacturers of finished goods and retailers to end users retailers purchase goods from wholesalers and then sell them at a high enough price to cover their costs and generate profits supply chain management scm was developed in the 1980s to address the need to maximize efficiency in the business processes involved in moving goods from the original suppliers to end users wholesaling in banking and financein banking the term wholesaling refers to financial services provided to large institutional clients such as real estate developers pension funds and large corporate clients rather than individual retail customers in the financial services industry a wholesaler can also be a sponsor of a mutual fund or act as an underwriter in a new issue an asset management company that creates and manages mutual funds employs a mutual fund wholesaler also known as a mutual fund representative to sell the product to resellers typically the wholesaler is a salesperson in this case the wholesaler distributes access to mutual funds to companies that wish to make them available to investors for example a company that has a 401 k plan may meet with wholesalers before choosing the asset management company such as fidelity investments or the vanguard group that will offer its products to the company s employees mutual fund wholesalers are compensated from the fees of the mutual funds they sell | |
is wholesaling products profitable | there are many factors to consider when determining if a business can be profitable and managing it in a way to make it profitable generally wholesaling can be a profitable business because you are buying items in bulk at a discount because you are buying these items at a discount you can sell them to retailers for more than you purchased them for and the demand will be there the process of buying in bulk at a discount is the key component that can make a wholesaling business profitable | |
is costco a retailer or a wholesaler | costco just like walmart is a retailer costco sells goods to consumers for final consumption costco is not a middleman business that buys items in bulk to sell to retailers it is the retailer that sells items in bulk that consumers purchase | |
where can you buy in bulk to resell | there are a variety of ways to buy in bulk to resell the primary way to do so is to get in touch with the manufacturers of the goods you are trying to sell this information is available online you can try websites such as wholesale central salehoo and doba the bottom linewholesalers are considered to be the middlemen in the retail supply chain they buy goods in bulk directly from manufacturers by buying in bulk they can obtain the goods at a discount they then sell these items to retailers passing on a portion of the discount as well retailers then sell to consumers who purchase the goods for consumption | |
what is a wholly owned subsidiary | a wholly owned subsidiary is a company whose common stock is 100 owned by another company a company may become a wholly owned subsidiary through an acquisition a majority owned subsidiary is a company whose common stock is 51 to 99 owned by a parent company the parent company may opt for majority ownership rather than an outright purchase in order to lower the costs and risks involved in the venture the majority owned company might then be called an affiliate associate or associate company investopedia paige mclaughlinunderstanding a wholly owned subsidiaryhaving a wholly owned subsidiary may help the parent company maintain operations in diverse geographic areas and markets or related industries these factors help the parent hedge against changes in the market or geopolitical and trade practices because the parent company owns all the shares of a wholly owned subsidiary there are no minority shareholders the subsidiary operates with the permission of the parent company which may or may not have direct input into the subsidiary s operations and management this may make it an unconsolidated subsidiary despite being owned by another entity a wholly owned subsidiary may maintain its own management structure clients and corporate culture nevertheless when a company is acquired its employees worry about layoffs or restructuring that happens often as one of the potential benefits to both companies is the opportunity to cut costs by consolidating certain departments although subsidiaries are separate entities they may share some executives or board members with their parent company accounting for a wholly owned subsidiaryfrom an accounting standpoint a wholly owned subsidiary remains a separate company so it keeps its own financial records and bank accounts and tracks its own assets and liabilities any transactions between the parent company and the subsidiary must be recorded both generally accepted accounting principles gaap and the international financial reporting standards ifrs require companies to report the financial data of their subsidiaries if the parent company is public this information can be found in the parent company s consolidated financial statement 1advantages and disadvantages of a wholly owned subsidiarya parent company has operational and strategic control over its wholly owned subsidiaries how it exercises that control has a great deal to do with the success or failure of the partnership | |
when a company hires its own staff to manage the subsidiary forming common operating procedures is generally less complicated than leaving the established leadership in place | a parent company that acquires a subsidiary overseas or in an industry that s new to it might take a less heavy handed approach leaving current management in place the parent company is likely to apply its own data access and security directives for the subsidiary to lessen the risk of losing intellectual property to other companies using compatible financial systems sharing administrative services and creating similar marketing programs help reduce costs for both companies a parent company also directs how its wholly owned subsidiary s assets are invested acquiring a wholly owned subsidiary may force the parent company to pay a high price for the subsidiary s assets especially if other companies are bidding on the same business there can be a difficult transition period as well establishing relationships with vendors and local clients takes time which may hinder the operations of both companies cultural differences can become an issue when hiring staff for an overseas subsidiary finally the parent company assumes all the risk of owning a subsidiary that risk may increase when local laws differ significantly from the laws in the parent company s country there are tax advantages for wholly owned subsidiaries that may be lost if the parent company simply absorbs the assets of an acquired company | |
when a parent company acquires a subsidiary by buying up that company s stock the acquisition is a qualified stock purchase for tax purposes moreover any losses by the subsidiary can be used to offset the profits of the parent company resulting in a lower tax liability | sometimes a subsidiary can do things that the parent company cannot do on its own for example a non profit entity can create a for profit subsidiary in order to raise revenue while the subsidiary would be subject to federal income taxes the parent company would remain exempt tax exempt organizations can have for profit subsidiaries parent companies can use losses from one subsidiary to offset taxes on profits from another the parent company inherits the acquired company s clients and goodwill which would be hard to recreate from scratch running a subsidiary can be difficult if the acquired company has a different management culture acquiring another company can be expensive especially if other companies are competing for it risks may be higher if the subsidiary is located in a different jurisdiction subsidiary vs wholly owned subsidiarya subsidiary is a company whose stock is more than 50 owned by a parent company or a holding company that gives the parent company a controlling interest in the subsidiary s operations management and profits however the subsidiary still has financial obligations to its minority shareholders a wholly owned subsidiary is 100 owned by the parent company with no minority shareholders examples of wholly owned subsidiariesvolkswagen group is an example of a wholly owned subsidiary system the parent company wholly owns the automotive brands audi bentley porsche and lamborghini as well as volkswagen 2in addition marvel and lucasfilm are now wholly owned subsidiaries of the walt disney company 3 | |
what is the difference between a holding company and a parent company | a holding company exists only as a legal entity to hold stock in other companies a parent company has its own operations for example berkshire hathaway is a holding company whose business is acquiring shares of other companies pepsi is a parent company whose core business is producing pepsi soft drinks but it owns several subsidiaries including sodastream gatorade and aquafina 4 | |
how are wholly owned subsidiaries accounted for | wholly owned subsidiaries maintain separate accounts from their parent companies but their finances are usually reported together if a public company has wholly owned subsidiaries the financial data for the subsidiaries will be reported alongside those of the parent on the company s consolidated balance sheets | |
what are the tax benefits of a subsidiary | a company with multiple subsidiaries can use the losses of one subsidiary to offset the profits of another thereby reducing its overall tax bill moreover non profit entities can establish for profit subsidiaries without endangering their tax exempt status the bottom lineacquiring a wholly owned subsidiary can be a relatively cost efficient way for a company to expand its product line or its geographic reach it may acquire a competitor thus expanding its own market share or invest in a part of its own supply chain making its production process more efficient the difficulty comes after the deal is done combining some operations is efficient replacing some management may be necessary but these changes must be made while avoiding disruption at the subsidiary as much as possible | |
what is whoops | whoops is a negative slang word used at one time in history for the former washington public power supply system wppss formed in the 1950s to ensure consistent electrical power for the pacific northwest wppss did not succeed on many fronts hence its nickname of whoops understanding whoopswhoops or wppss financed the construction of five nuclear power plants by issuing billions of dollars in municipal bonds in the 1970s and 1980s in 1983 because of extremely poor project management construction on some plants was canceled and completion of the remaining plants seemed unlikely consequently the take or pay arrangements that had been backing the municipal bonds were ruled void by the washington state supreme court as a result in 1983 the wppss had the largest municipal debt default in history early history of whoopsnuclear power became popular in the 1960s when it was perceived as clean and inexpensive wppss or whoops saw this as an opportunity to meet the growing demand for power in its region it scheduled five nuclear power plants financed by a public bond issuance to be repaid with proceeds from the plants the bonds were issued but sales did not meet expectations 1the packwood lake dam its first project ran seven months over the scheduled completion date this was the beginning of wppss s public works problems the construction problems at the plant included cost overruns and poor project management contractors leveraged government inefficiency and overcharged and under delivered this caused safety inspectors to demand more stringent rules which were implemented mid construction by the nuclear regulatory commission nrc as a result much of the project had to be scrapped then redesigned and rebuilt high costs and big troubleat the beginning of the 1980s only one of the five wppss plants was close to complete and to add insult to injury by then nuclear power was found not to be as cheap and beneficial as claimed and public opinion turned against it some cities in the region even boycotted nuclear power before the facilities were up and running cost overruns continued to where more than 24 billion would have been required to complete the work but the low power sales could not cover the deficits construction halted on all but the near completed second plant the first plant again had to be redesigned the washington public power supply system was forced to default on 2 25 billion in municipal bonds the second plant finally became operational in 1984 but it too little too late for investors 2 on christmas eve 1988 a 753 million settlement was reached while some of the system s approximately 75 000 bondholders received 0 40 on every dollar they had invested other bondholders received as little as 0 10 for every dollar they had invested 3special considerationsthe wpps changed into energy northwest in 1999 and the moniker of whoops is now antiquated 4 | |
what is a wide basis | a wide basis is a condition found in futures markets whereby the local cash spot price of a commodity is relatively far from its futures price it is the opposite of a narrow basis in which the spot price and futures prices are very close together it is normal for there to be some difference between spot prices and futures prices due to factors such as transportation and holding costs interest rates and uncertain weather this is known as the basis however wide this gap typically converges as the expiration date of the futures contract approaches understanding wide basisultimately a wide basis indicates a mismatch between supply and demand if short term supply is relatively low due to factors such as unusually poor weather local cash prices may rise relative to futures prices if on the other hand short term supply is relatively high such as in the case of an unusually large harvest then local cash prices might fall relative to futures prices either of these situations would give rise to a wide basis where basis is simply the local cash price minus the futures contract price this gap should gradually disappear as the futures contracts near their expiration date because otherwise investors could simply exploit an arbitrage opportunity between the local cash prices and the futures prices | |
when the basis shrinks from a negative number like 1 to a less negative number like 0 50 this change is known as a strengthening basis on the other hand when the basis shrinks from a larger positive number to a smaller positive number this is known as a weakening basis | generally speaking a narrow basis is consistent with a very liquid and efficient marketplace whereas a wide basis is associated with a relatively illiquid and inefficient one nonetheless some variation between local cash prices and futures prices is normal and expected real world example of a wide basissuppose you are a commodities futures trader interested in the oil market you note that the local cash price for crude oil is 40 71 whereas the price of crude oil futures maturing in two months is 40 93 in this scenario you note that the basis between these two prices is relatively small at only 0 22 spot price of 40 71 minus futures price of 40 93 this narrow basis makes sense considering that the contract is heavily traded and there are only two months until the expiration of the contract looking farther into the future however you begin to find some contracts with a wide basis the same contract for delivery in nine months for example has a futures price of 42 41 this relatively wide spread of 1 70 could be due to many different factors for instance traders might be expecting the price of oil to rise as a result of decreased supply or increased economic activity no matter the reason the basis will almost certainly diminish as the contract date approaches | |
what is a wide economic moat | a wide economic moat is a type of sustainable competitive advantage possessed by a business that makes it difficult for rivals to wear down its market share the term economic moat was made popular by the investor warren buffett and is derived from the water filled moats that surrounded medieval castles the wider the moat the more difficult it would be for an invader to reach the castle a wide economic moat can be caused by several factors that might make it difficult for other businesses to steal market share these factors may include high barriers to industry entry or the business with the moat might own patents on several products that are essential to providing their particular product or service understanding a wide economic moatthe term economic moat popularized by warren buffett refers to a business ability to maintain competitive advantages over its competitors in order to protect its long term profits and market share from competing firms just like a medieval castle the moat serves to protect those inside the fortress and their riches from outsiders businesses that possess at least one factor of porter s 5 forces model would possess a wide economic moat for example a business that holds an exclusive patent for the creation of a miracle drug would effectively keep potential competitors out of its business having few or no competitors would allow the company to continually generate high levels of profit a company that exists in a business where the start up costs are prohibitive for small entrants would also have a wide moat there are several ways in which a company creates an economic moat that allows it to have a significant advantage over its competitors sources of economic moatsa company that is able to maintain low operating expenses in relation to its sales compared to its peers has cost advantages and it can undercut its competition by lowering prices and keeping rivals at bay consider wal mart stores inc which has an immense volume of sales and negotiates low prices with its suppliers resulting in low cost products in its stores that are hard to replicate by its competitors intangible assets refer to the patents brands and licenses that allow a company to protect its production process and charge premium prices while brands are typically derived from superior product offerings and marketing patents are obtained as a result of companies filings with governments to protect know how for a specific period of time typically 20 years pharmaceutical companies earn high profits due to patented drugs after spending billions on research and development efficient scale arises when a particular market is best served by a limited number of companies giving them near monopoly statuses utility firms are examples of companies with an efficient scale that is necessary to serve electricity and water to their customers in a single geographic area building a second utility company in the same area would be too costly and inefficient switching costs are another type of economic moat which makes it very time consuming and expensive for consumers to switch products or brands autodesk inc offers various software solutions for engineers and designers that are very difficult to learn once an autodesk customer starts using its software he is unlikely to switch allowing autodesk to charge premium prices for its products the network effect can further fortify a company s economic moat by making its products more valuable the more people use them an example of a network effect is online marketplaces such as amazon and ebay which are widely popular among consumers because of the large number of people buying and selling various products through their platforms | |
what are wide ranging days | wide ranging days describe the price range of a stock on a particularly volatile day of trading wide ranging days occur when the high and low prices of a stock are much further apart than they are on a typical day some technical analysts identify these days by using the volatility ratio understanding wide ranging dayswide ranging days have a true range that is larger than the surrounding days and wide ranging days usually predict a trend reversal extreme wide ranging days signal major trend reversals while less extreme wide ranging days signal minor reversals the average true range atr provides a way to compare the trading range between multiple days by looking at the difference between the current low minus the close of the previous period the absolute true range for a given period is the greater of the high for the period minus the low for the period the high for the period minus the close for the previous period or the close for the previous period minus the low for the current period the average true range is usually a 14 day exponential moving average ema of the true range although different trades may use different periods an exponential moving average is a type of moving average that places a greater weight and significance on the most recent data points this is also referred to as the exponentially weighted moving average after a sharp down trend a wide ranging day with a strong close close near the high of the day is a signal that the trend will reverse meanwhile after a strong advance a wide ranging day with a weak close close near the low of the day signals a downside reversal special considerationsthe volatility ratio can be used to identify wide ranging days using a technical indicator in essence this automates the process of finding wide ranging days and makes it possible for traders to easily screen for opportunities rather than simply looking at charts the volatility ratio is calculated by dividing the true range for a given day by the exponential moving average of the true range over a period which is usually 14 days in general wide ranging days occur when the volatility ratio exceeds a reading of 2 0 over a 14 day period traders may use volatility ratios in their stock charts when looking for potential reversal opportunities wide ranging days occur when the price range of a particular stock greatly exceeds the volatility of a normal trading day oftentimes these days are measured with the average true range and analysis is automated using the volatility ratio wide ranging days usually predict trend reversals although traders should confirm reversals using other technical indicators and chart patterns investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is wide variety | the wide variety strategy is a merchandising strategy that relies on an impressive range of goods to draw customers into the store the old fashioned five and dime store is a classic example of a wide variety strategy in modern times the controlled chaos of a dollar store may best illustrate the concept understanding wide varietygenerally a wide variety strategy is best suited to a boutique or small store rather than a big box store the sheer range of goods is meant to impress a deep assortment of each category of product is not needed to pull it off a variety store may offer miscellaneous food and beverages personal hygiene products small home and garden tools office supplies holiday decorations electronics garden plants toys pet supplies remaindered books recorded media sewing supplies motor oil and home decor the retailer who uses a wide variety strategy doesn t have the floor space to stock many different sizes and brands of a specific product but it usually has what the customer is looking for a convenience store for example may offer a wide variety of products but won t stock half a dozen brands of it in multiple sizes in recent years even pharmacy chains like cvs and walgreen s have turned to the wide variety strategy stocking general merchandise well beyond medical necessities the disadvantages of wide varietycarrying a wide variety of products limits the space available for a deep assortment of products there is a risk that consumers will go to a specialized retailer with a better selection of a specific type of product some businesses such as supermarkets manage to offer both wide variety and deep assortment the sheer range of goods is meant to impress a deep assortment is not needed to pull it off a wide variety business can also rely on convenience personal service and a more enjoyable shopping experience to make it a preferred destination for its customers wide variety vs deep assortmentretailers face a trade off when determining whether to pursue a wide variety or a deep assortment merchandising scheme trying to do both requires a great deal of space and these days that means competing with big box retailers retailers with smaller spaces can go with a deep assortment if they choose to specialize in a certain product or products that they can offer in a range of colors sizes styles and brands the deep assortment strategy may be most appropriate for serving a clearly defined demographic for instance a retailer can cater to new parents with a deep assortment of baby clothes toys and bedding all of those things can be found at a nearby big box store like costco and walmart but many shoppers may prefer the baby boutique | |
what is a widely held fixed investment trust whfit | a widely held fixed investment trust whfit is a type of unit investment trust uit with at least one interest held by a third party investors who purchase shares of the trust receive any regular payments of interest or dividends earned on the equities or bonds held in trust understanding widely held fixed investment trustswidely held fixed investment trusts must have at least one third party interest holder or middleman otherwise they function the same way as any other unit investment trust offering shares in a fixed portfolio of assets to prospective investors because the investors who fund the initial purchase of the assets in the portfolio typically participate as trust interest holders widely held fixed investment trusts fall under the category of grantor s trusts trust interest holders receive dividend or interest payments derived from the underlying assets in the portfolio based upon the proportion of shares they hold the presence of middlemen in the trust means investors may hold either direct interest in the trust or indirect interest if a middleman such as a broker holds the shares in another investor s name whfits are classified as pass through investments for income tax purposes 1 the parties involved in the creation and maintenance of a whfit include other types of investment companiesthe u s securities and exchange commission sec considers unit investment trusts one of three types of investment companies along with mutual funds and closed end funds like mutual funds widely held fixed investment trusts offer investors an opportunity to purchase shares in a diversified portfolio of underlying assets at a lower cost and with less hassle than it would take to build the portfolio independently unlike mutual funds widely held fixed investment trusts offer a static portfolio of assets they also specify a termination date on which the trust will sell the underlying assets and distribute the proceeds to investors the u s internal revenue service irs generally treats widely held investment trusts as flow through entities for tax purposes because of this the trust itself does not pay taxes on its earnings instead individuals who invest in the trust receive a form 1099 detailing their annual earnings and must pay taxes on those amounts as they would any other earned income 123widely held mortgage trustsone common variety of widely held fixed investment trust the widely held mortgage trust offers portfolios consisting of mortgage assets in these cases the trust typically purchases a pool of mortgages or other similar debt instruments tied to real estate investors earn returns based upon the interest collected on the underlying mortgages the three major federal mortgage lenders freddie mac fannie mae and ginnie mae all periodically issue widely held mortgage trusts related to this is a real estate mortgage investment conduit remic which is a special purpose vehicle that is used to pool mortgage loans and issue mortgage backed securities mbs real estate mortgage investment conduits hold commercial and residential mortgages in trust and issue interests in these mortgages to investors the differences between uits and mutual fundsmutual funds are open ended funds meaning that the portfolio manager can buy and sell securities in the portfolio the investment objective of each mutual fund is to outperform a particular benchmark and the portfolio manager trades securities to meet that objective a stock mutual fund for example may have an objective to outperform the standard poor s 500 index of large cap stocks many investors prefer to use mutual funds for stock investing so that the portfolio can be traded if an investor is interested in buying and holding a portfolio of bonds and earning interest that individual may purchase a uit or closed end fund with a fixed portfolio a uit for example pays the interest income on the bonds and holds the portfolio until a specific end date when the bonds are sold and the principal amount is returned to the owners a bond investor can own a diversified portfolio of bonds in a uit rather than manage interest payments and bond redemptions in a personal brokerage account | |
what is a widow and orphan stock | widow and orphan stock refers to an equity investment that often pays a high dividend and is moreover generally considered low risk these tend to be large mature stalwart companies in non cyclical business sectors understanding widow and orphan stockswidow and orphan stocks usually are found in non cyclical sectors such as utilities and consumer staples which tend to hold up better during economic downturns for example many investors had considered at t prior to its government break up in 1984 a widow and orphan stock meaning they found it to be of lower risk and suitable for even some of the most vulnerable members of society widow and orphan stocks generally provide low but steady returns cushioned partly by their dividends or monopoly like positions in comparison growth stocks with high price earnings multiples that do not pay dividends are the opposite of widow and orphan stocks historically dividends were considered best for widows and orphans i e those without the knowledge or guts to take the big risks and make momentum plays special considerationsmost investors think of regulated utilities as widow and orphan stocks because many of these investments tend to trade in fairly narrow average true ranges and also have lower peak to trough volatility over a full market cycle compared with the average stock what s more the majority of them often pay steady dividends backed by meaningful cash flows as a result some have coverages ratios that are comparatively high this is partly because of their fairly steady earnings driven by customer demand that changes little even when the economy is weak the downside is that regulated utilities cannot charge customers a premium during periods of peak demand as the government controls the prices they charge all rate increases must be approved partly as a result earnings tend to rise slowly over time but not as fast as those of highly successful companies in non regulated cyclical industries for this reason younger investors and those seeking higher returns tend to shy away from widow and orphan stocks although they appeal to investors seeking steady returns pros and cons of widow and orphan stocksfew investors use the term widow and orphan stock today and tend to call many of the equities in this category low volatility investments to qualify these stocks typically need to have a beta meaningfully below 1 some investment managers specialize in these types of stocks and build up a track record of beating a low volatility market index by selecting equities with potential for a higher dividend growth rate as well as price appreciation sometimes there are fairly short time frames in which fairly safe stocks in seemingly safe sectors add to market volatility rather than evening out returns when this happens widow and orphan stocks can underperform cyclical stocks also of note widow and orphan stocks cannot avoid specific risk such as a consumer staples company facing a significant lawsuit or a utility company facing a plant fire that knocks out capacity for an extended time period moreover it s hard to tell when corporate executives using creative accounting to cook the books a technique management teams sometimes use to fraudulently achieve profit goals companies made headlines for cooking the books far more frequently in the late 1990s but the point is fraud tends only to be revealed over time and no sector is immune | |
what is a widow maker | in the world of financial markets a widow maker is an investment that results in large potentially devastating losses it can also refer to a trade that results in a loss for virtually everyone who tries it in colloquial usage a widow maker refers to anything with the potential to kill someone quickly the phrase has historically been used in forestry and medicine understanding a widow makertraders apply the term widow maker to financial investments that cause catastrophic losses or are risky enough to do so the use of the term in forestry refers to loose limbs lodged overhead that are at risk of suddenly falling and killing someone in medicine the term refers to a blocked artery likely to cause a patient s death by a heart attack excessive risk often plays a critical role in widow maker trades as a general rule investments likely to offer high returns also hold the potential for bigger losses many investors make decisions about their investments based upon the amount of risk they are willing to take on to achieve a certain level of return this is known as the risk reward ratio some widow maker trades though make perfect sense from a rational perspective meaning they don t appear to be that risky but in the end the market confounds consensus expectations and even defies historical patterns real world examplesshorting japanese government bonds jgbs is perhaps the most well known widow maker trade of all traders have shorted jgbs over the past two decades as japanese government debt spiraled ever higher usually this trade would make sense but the japanese central bank has repeatedly pushed interest rates to unprecedented lows even below zero and this drove jgb prices to record highs making widows of many traders over the years 1another famous example of a widow maker trade occurred in natural gas futures which professional traders have long considered widow makers because of their price volatility in 2006 the hedge fund amaranth advisors made a massive leveraged trade on natural gas futures trying to repeat its success on a similar speculative trade made a year earlier 2amaranth was a 9 5 billion hedge fund when it was forced to close due to its massive losses in the natural gas market 3the energy desk at amaranth sought higher than average rewards by taking on a risky trade in a market prone to unpredictable and swift price changes adding leverage increased that risk further instead of enjoying a replay of their previous money making trade amaranth lost 6 billion as the bottom fell out of the natural gas market this massive loss forced the hedge fund to liquidate its assets 2the futures spread in the energy market known as the widow maker discussed above in the amaranth example is the spread between march natural gas futures contracts and april natural gas futures contracts march marks the low point of natural gas contracts because the contract is more actively traded in winter when natural gas is needed for heating march is usually the last month when utility companies are moving natural gas out of storage april is the first month when utility companies start moving natural gas back into storage when the spread is wide it indicates there is a high demand need for natural gas when the spread is low it indicates there is little demand need for natural gas in december 2021 gas futures dropped to their lowest point in three months and the widow maker trade hit a 20 month low which indicated that natural gas stockpiles were ample if investors were on the wrong side of the trade misjudging the spread due to a miscalculation in supply and demand their investments would have witnessed losses 4 | |
what is a widow maker stock | a widow maker stock is a stock that has high risk and high returns the stock would have the potential of causing a large loss to an investor typically a widow maker would not refer to a specific stock but rather a type of trade that could result in a loss | |
why is natural gas called the widow maker | natural gas is called a widow maker because investors seek to take advantage of the spread between march natural gas futures contracts when trading hits a low due to the end of winter and april natural gas futures contracts when utilities resupply natural gas storage depending on the demand need for natural gas throughout winter if investors are on the wrong side of the trade misjudging the spread their investments can be wiped out the volatility of the spread causes it to be a widow maker trade | |
what is the japanese interest rate | the japanese interest rate is currently 0 10 1 | |
what is a widow s allowance | a widow s allowance also known as a widower s allowance or spousal allowance is money or personal property that a spouse and or children receive after their loved one s death to meet their immediate needs a state statute or probate court determines the amount of the allowance which is set aside to protect the surviving partner and family of a deceased person from financial hardship during the administration of the deceased s estate1 the relevant jurisdiction may have an established limit dictating the length of time during which these benefits can be disbursed determining the allowance amountthe amount of the allowance is either fixed by state statute2 or determined by court on the basis of the deceased person s estate the amount decided by the court is typically proportional to the size of the estate the allowance is likely to be higher if the deceased person was wealthy and left behind a large estate than if the size of the estate is modest the amount of this allowance may also be impacted by the age and dependency status of any children the couple may have2 a widow s allowance aka spousal allowance is time limited unlike a recurring survivor s benefits eligibility | |
what a surviving spouse and or children are eligible to receive is based on what a court decides or what is stated in a state statute the requirements differ from social security which determines eligibility based on a loved one s work history | there is a timeline that a surviving spouse and or children must follow a ticking clock that limits when the allowance may be claimed there also may be a fee to file a claim for a spousal allowance as well as a fee for each asset listed on the claim form this varies from state to state valuing each asset is part of the process and only certain property may be counted real property homes land etc is not eligible for a spousal allowance but personal property vehicles bank accounts etc is the allowance varies state by state and has changed over the years for example the spousal allowance in north carolina is 60 000 as of january 1 2019 for eligible children the allowance is 10 000 if their loved one dies on or after march 1 2024 it was previously 5 000 2check with a local attorney to confirm | |
how is a widow s allowance different from a widow s pension | whereas a widow s allowance widower s allowance or spousal allowance is time limited2 a widow s pension is a recurring survivor s benefit that a surviving spouse may be entitled to receive as a beneficiary of a pension plan retirement account social security3 or a va survivors pension4 the criteria for qualifying for these benefits will vary and will usually be spelled out in the written documentation and policies dictated in the program terms and guidelines likewise the formula for determining the amount of these allowance payments will also be dictated by the program can i claim both retirement and survivor s benefits yes however do note that a spousal allowance is not a survivor s benefit a a widow s allowance widower s allowance or spousal allowance is intended to fill a short term gap whereas a survivor s benefit as determined by social security supports a surviving family member long term claiming retirement is both different and compatible with claiming survivor s benefits you can do both | |
how is a widow s allowance different from a will | a widow s allowance is determined by court or state statute whereas a will is determined by an individual s own preferences as stated in a legal document though the actual benefits that is what a spouse receives when a loved one dies may be similar the difference is how the benefits are determined who decided them and when the bottom linea widow s allowance is a benefit of money and or property distributed to a surviving spouse and or children when a loved one dies unlike a will or social security benefits it is determined by a state statute or by a court it is designed to support a family in the short term during a difficult time | |
what is a widow s exemption | a widow s exemption refers to a reduction of tax burdens on a taxpayer following the death of a spouse state laws vary but generally allow for a reduction in taxes for a surviving spouse for a certain period which often comes in the form of a reduction in property taxes this can help survivors and their dependents financially after a death that may cause internal economic turmoil in a household on a federal level widows and widowers receive tax relief from estate and inheritance windfalls understanding widow s exemptionswidow s exemption refers to a tax deduction available to a recently widowed spouse this type of benefit is available to a surviving spouse regardless of gender state tax relief varies from state to state but most commonly involves a reduction in property tax for the surviving spouse the most common form of a state widow s exemption refers to the type offered in florida the state allows for a 500 deduction in the tax basis on which property taxes are based this is not a 500 tax credit it means that the taxable value of a property is reduced by 500 for a surviving spouse this benefit is available in perpetuity but is waived if the surviving spouse remarries 1federal tax benefits for a surviving spouse take a broader range of forms a recently widowed taxpayer may be allowed to take advantage of the benefits of filing a joint return for up to two years following their spouse s death 2the surviving spouse is also eligible for a stepped up basis on any property they inherit this means that the cost basis for that property a significant factor in determining taxes when the property is sold is adjusted to the date of the spouse s death 3 if the surviving spouse can prove that a property was the couple s primary residence the first 250 000 of profit in selling the home is considered tax free by the irs 4these are just a few of the major forms of tax relief available to a widowed spouse other smaller benefits involve inherited individual retirement accounts iras and life insurance policies 5irs s policy on same sex marriagethe defense of marriage act doma prevented same sex couples with marriages recognized in their states but not the federal government from receiving benefits like those received by widows and widowers because at the time of doma same sex married couples were not recognized by the federal government when section 3 of doma was struck down in june 2013 same sex couples marriages were recognized as legal by the federal government and in turn the internal revenue service 6since the repeal of section 3 the u s department of the treasury and the irs ruled that same sex couples who are legally wed will receive and be able to take advantage of tax benefits for married couples however the key is that couples must be legally married not simply long term partners for widows and widowers to take advantage of key tax benefits for surviving spouses any couple lgbt or not in a long term partnership but not a marriage cannot benefit from the tax breaks and benefits offered to legally married couples even couples in registered domestic partnerships civil unions or similar formalized relationships recognized by their state still will not be recognized for tax purposes by the internal revenue service special considerationsanother major tax issue for surviving family members has become a topic of political debate in recent years the federal estate tax applies to families when a wealthy individual passes away and leaves a significant estate to their survivors 7 the estate tax has traditionally allowed an exempt amount and has undergone revisions by congress several times in recent years the estate and gift tax exemption was raised to approximately 11 5 million in 2020 8 however this is not strictly a widow s exemption as all assets passed to a spouse are by law exempt from federal taxation an estate s exemption and subsequent taxation apply to assets passed on to non spouse family members 9 | |
do i qualify for tax benefits if my live in partner dies | if you are legally married to your partner then you will qualify for tax benefits as a surviving spouse if you are only living together even if recognized by the state you will not qualify | |
what is a widow s exemption on taxes | a widow s exemption is a tax deduction offered after your spouse dies | |
what benefits from the irs do i get if i am a widow | if your spouse dies besides being eligible for benefits from the social security administration you may qualify for a widow s tax exemption in the form of a deduction and you may be eligible to file joint taxes for two years following a spouse s death 10 | |
do i have to pay taxes on social security survivor s benefits | yes if you receive any form of survivor benefits from the social security administration they will be taxed as income | |
what is the wilcoxon test | the wilcoxon test which can refer to either the rank sum test or the signed rank test version is a nonparametric statistical test that compares two paired groups the tests essentially calculate the difference between sets of pairs and analyze these differences to establish if they are statistically significantly different from one another understanding the wilcoxon testthe rank sum and signed rank tests were both proposed by american statistician frank wilcoxon in a groundbreaking research paper published in 1945 1 the tests laid the foundation for hypothesis testing of nonparametric statistics which are used for population data that can be ranked but do not have numerical values such as customer satisfaction or music reviews nonparametric distributions do not have parameters and cannot be defined by an equation as parametric distributions can the types of questions that the wilcoxon test can help answer include things like these models assume that the data comes from two matched or dependent populations following the same person or stock through time or place the data is also assumed to be continuous as opposed to discrete because it is a nonparametric test it does not require a particular probability distribution of the dependent variable in the analysis types of the wilcoxon testcalculating a wilcoxon test statisticthe steps for arriving at a wilcoxon signed rank test statistic w are as follows in practice this test is performed using statistical analysis software or a spreadsheet | |
what is a wild card option | a wild card option is a type of option that is embedded in certain treasury securities it permits the seller of a treasury bond to postpone delivery of its underlying asset until after regular trading hours this option benefits the seller because it allows them to benefit from a few hours extra time in which to secure a favorable price before settling their futures contract | |
how wild card options work | u s treasury bond futures contracts have been traded on the chicago board of trade cbot commodity exchange since 1977 1 under the rules of the cbot trading in the treasury futures market is terminated at 2 00 pm but traders that have sold treasury futures are not required to settle their contracts until 8 00 pm 2the amount that the short seller must pay in order to compensate the holder of the futures contract known as the contract s invoice price is set as of 2 00 pm because of the wild card option however treasury futures sellers have the option of waiting for up to six hours during which time they might benefit from favorable price movements during after hours trading | |
when exercising the wild card option the seller of the treasury futures contract would wait to see whether the spot price declines below the invoice price during after hours trading if it does then the seller could exercise their wild card option and make their delivery based on the low spot price decreasing the overall cost of their short position | example of a wild card optiontreasury bond futures contracts are among the most actively traded investment securities in the world to illustrate how a wild card option works in practice consider the case of abc capital a hypothetical investment firm that has taken a short position in the treasury market by selling treasury bond futures contracts as the seller of the treasury bonds abc capital is obligated to deliver a specified quantity of treasury bonds to the buyer at a predetermined time once the settlement date is reached however abc capital can opt to use the wild card option embedded in its futures contract on the settlement date abc capital can therefore wait for up to 6 hours following the end of the trading day before announcing its intention to deliver the bonds during those 6 hours the market price of bonds during after hours trading might sink giving abc capital the chance to purchase bonds at a more favorable price before rendering them to the buyer this in turn would lower the cost of abc capital s short position thereby increasing their profit or reducing their loss | |
what is a wild card option | a wild card option is a type of option that is embedded in certain treasury securities it permits the seller of a treasury bond to postpone delivery of its underlying asset until after regular trading hours this option benefits the seller because it allows them to benefit from a few hours extra time in which to secure a favorable price before settling their futures contract | |
how wild card options work | u s treasury bond futures contracts have been traded on the chicago board of trade cbot commodity exchange since 1977 1 under the rules of the cbot trading in the treasury futures market is terminated at 2 00 pm but traders that have sold treasury futures are not required to settle their contracts until 8 00 pm 2the amount that the short seller must pay in order to compensate the holder of the futures contract known as the contract s invoice price is set as of 2 00 pm because of the wild card option however treasury futures sellers have the option of waiting for up to six hours during which time they might benefit from favorable price movements during after hours trading | |
when exercising the wild card option the seller of the treasury futures contract would wait to see whether the spot price declines below the invoice price during after hours trading if it does then the seller could exercise their wild card option and make their delivery based on the low spot price decreasing the overall cost of their short position | example of a wild card optiontreasury bond futures contracts are among the most actively traded investment securities in the world to illustrate how a wild card option works in practice consider the case of abc capital a hypothetical investment firm that has taken a short position in the treasury market by selling treasury bond futures contracts as the seller of the treasury bonds abc capital is obligated to deliver a specified quantity of treasury bonds to the buyer at a predetermined time once the settlement date is reached however abc capital can opt to use the wild card option embedded in its futures contract on the settlement date abc capital can therefore wait for up to 6 hours following the end of the trading day before announcing its intention to deliver the bonds during those 6 hours the market price of bonds during after hours trading might sink giving abc capital the chance to purchase bonds at a more favorable price before rendering them to the buyer this in turn would lower the cost of abc capital s short position thereby increasing their profit or reducing their loss | |
what is wildcat banking | wildcat banking refers to the banking industry in parts of the united states from 1837 to 1865 when banks were established in remote and inaccessible locations during this period banks were chartered by state law without any federal oversight less stringent regulations on the banking industry at the time led to this period also being referred to as the free banking era understanding wildcat bankingwildcat banks were not fully free of regulation they were only free of federal regulation wildcat banks were chartered under applicable state laws and regulated on the state level banking regulations therefore varied from one state to the next during the free banking era the free banking era came to an end with the passage of the national bank act of 1863 which implemented federal regulations governing banks established the united states national banking system and encouraged the development of a national currency backed by the holdings of the u s treasury and issued by the office of the comptroller of the currency origins of the term wildcat banking the term wildcat banking supposedly had its genesis in the 1830s in michigan where bankers were believed to have set up banks in areas so remote that wildcats roamed there others say the term originated with an early bank that issued currency bearing an image of a wildcat as early as 1812 wildcat was used to refer to an impetuous or foolhardy speculator by 1838 the term was applied to any business venture considered unsound or perilous the term wildcat then when applied to a bank came to mean an unstable bank at risk of failure and it s for this reason that wildcat banks have been portrayed as such in westerns for example some westerns portray wildcat bankers as leaving their vaults open for depositors to see barrels of cash therein however the barrels are actually full of nails flour or other similarly worthless items with a layer of cash on top to fool depositors currency issued by wildcat banksregardless of the origins of the term wildcat banks issued their own currency until the national bank act of 1863 forbade this practice these bank locations were sometimes the only places where the bank s notes could be redeemed thereby creating a formidable obstacle for their redemption by note holders and providing an unfair advantage to unscrupulous bankers traditionally the currency issued by wildcat bankers has been viewed as worthless and the securities used to back wildcat currencies have historically been questionable while some wildcat banks used specie to back their issued currencies others used bonds or mortgages different currencies issued by different banks traded at different discounts as compared to their face values published lists were used to distinguish legitimate bills from forgeries and to help bankers and currency traders appraise wildcat currencies before the federal reserve system was established in 1913 banks issued notes to extend loans to their customers an individual could take his or her own banknotes or bills of exchange to the issuing bank and trade them in for a discount of the cash value borrowers would obtain bank notes backed by government bonds or species such a note gave its holder a claim on assets held by the bank which during the free banking era were required to be backed by state bonds in many states | |
what is wildcat drilling | wildcat drilling a form of high risk exploratory drilling is the process of drilling for oil or natural gas in unproven or fully exploited areas that either have no concrete historic production records or have been completely exhausted as a site for oil and gas output this higher degree of uncertainty necessitates that the drilling crews be appropriately skilled experienced and aware of what various well parameters are telling them about the formations they drill the most successful energy companies are the ones with a very high rate of drilling success irrespective of whether the wells are drilled in known areas of production understanding wildcat drillingexploration and production are the first stages of energy production which include searching and extracting oil and gas an e p company finds and extracts the raw materials used in the energy business the term wildcat drilling probably has its origins in the fact that drilling activity in the first half of the 20th century was often undertaken in remote geographical areas because of their remoteness and distance from populated areas some of these locations may have been or appeared to be infested with wildcats or other untamed creatures in the american west presently with global energy companies have scoured much of the earth s surface for oil and gas including deep oceans few areas remain unexplored for their energy potential because wildcat drillers look for otherwise undesirable claims they are able to obtain those claims for far less than otherwise at the same time this type of exploratory drilling will tend to result in far more misses than hits making it expensive to operate without successes wildcat drilling amounts to only a small proportion of the drilling activity of large energy companies for small energy companies wildcat drilling can be a make or break proposition investors in such companies can reap significant rewards if such drilling results in locating large energy reservoirs conversely wildcat drilling that repeatedly results in dry holes can lead to adverse stock performance or even bankruptcy for small cap energy companies special considerationsanother aspect of wildcat drilling involves small producers exploring for oil in fields that have already been fully exploited by larger oil companies these fields can have sizable pockets of oil reserves that are uneconomic for larger producers due to economies of scale but are still worthwhile for smaller more agile wildcat drillers a 2008 massachusetts institute of technology study estimated that even with high oil prices about two thirds of the oil in known oil fields is being left in the ground they say this is because existing technologies that could extract far more oil as much as about 75 percent of the oil in some oil fields are not being widely used by large oil companies 1 this leaves an important market segment open to smaller wildcat oil drillers wildcat drillers have little impact on the market price of oil but provide an essential role that allows for greater oil and gas output than would be possible without their participation | |
what is wildcatting | wildcatting informally refers to a practice instituted by the securities and exchange commission sec that calls for the review of an entire industry whenever critical problems are found within one or two companies in that industry understanding wildcattingthe sec may investigate any number of critical issues with a particular firm including accounting irregularities executive compensation and the use of derivative transactions and parlay this investigation into an investigation of other firms within the same industry 2 this term is derived from the oil industry where companies drill test wells for oil in unexplored or wild areas the intent of this practice as it pertains to the securities industry is to probe industries or practices about which the sec has concerns even if there is no clear indication of wrongdoing under this initiative the sec has conducted investigations on many industries including the oil cable tv and video game industries this policy emerged after the sarbanes oxley act of 2002 which provided greater transparency for investors 1 | |
what is wilder s dmi adx indicator | wilder s dmi adx consists of three indicators that measure a trend s strength and direction three lines compose the direction movement index dmi adx black line di green line and di red line the average directional index adx line shows the strength of the trend the higher the adx value the stronger the trend the color of the lines can be altered but black green and red are the default in most software the plus direction indicator di and minus direction indicator di show the current price direction when the di is above di the current price momentum is up when the di is above di the current price momentum is down the formula for wilder s dmi adx is | |
how to calculate wilder s dmi adx | the indicator has multiple components here s how the components are calculated | |
what does wilder s dmi adx tell you | wilder s dmi developed by j welles wilder in 1978 shows the strength of a trend either up or down according to wilder a trend is present when the adx is above 25 dmi values range between zero and 100 if di is above di an adx reading of 25 or higher indicates a strong uptrend if di is above di an adx reading of 25 or higher indicates a strong downtrend the adx may stay above 25 even when the trend reverses since adx is non directional this shows the reversal is as strong as the prior trend traders may find readings other than 25 are better suited to indicate a strong trend in certain markets for example a trader might find that an adx reading of 20 provides an earlier indication that the price of a security is trending conservative traders may want to wait for readings of 30 or above before employing trend following strategies trading with wilder s dmithere are a number of ways the dmi can be used to trade in addition to the general guidelines discussed above traders could enter a long position when the di line crosses above the di line and set a stop loss order under the current day s low or below a recent swing low when the di line crosses above the di line traders could place a short position with a stop above the high of the current day or above a recent swing high traders could use a trailing stop if the trade moves in their favor to help lock in profits irrespective of whether the trader takes a long or short position the adx should be over 25 when the crossover occurs to confirm the trend s strength when the adx is below 20 traders could use trading strategies that exploit range bound or choppier conditions the di and di line move away from each other when price volatility increases and converge toward each other when volatility decreases short term traders could enter trades when the two lines move apart to take advantage of increasing volatility swing traders might accumulate into a position when the lines contact in anticipation of a breakout traders should use wilder s dmi in conjunction with other technical indicators and price action to increases the probability of making profitable trades example of how to use wilder s dmi adx indicatorthe following chart shows shopify inc shop with both trending periods and less trending periods di and di crossover multiple times potential trade signals but there is not always a strong trend present adx above 25 when those crossovers occur if the di is already above the di when the adx moves above 25 or 20 30 that could trigger a long trade these are marked with up arrows if the di is above the di when the adx moves above 25 that could trigger a short trade these are marked with down arrows contraction periods are also marked when the di and di lines become squished together these are contractions in volatility which are often followed by periods of larger trending movement where the lines separate again breakouts from these contractions blue boxes may present trading opportunities the indicator is susceptible to creating multiple false signals meaning the price doesn t end up moving in the same direction as the crossover dictates therefore the indicator is best used in conjunction with other forms of analysis or with additional filters applied to the signals generated wilder s dmi vs aroonthe two indicators both have crossover signals but they are calculated in different ways and are measuring different things dmi is measuring up and down movement by smoothing price fluctuations the aroon indicator is measuring the time or periods since a high or low within the look back period limitations of using wilder s dmi adx the indicator is looking at past data it may lack predictive value in forecasting future price moves the indicator lags and will therefore tend to indicate trend changes after the price has already reversed course this could lead to some trade signals occurring too late to be of use this can also occur with the adx reading a reading of 20 or 25 or 30 doesn t mean that trend will persist many trends will fizzle out after reaching such a reading the indicator can t predict a trend will continue only that the security trended recently if using the indicator for signals there will be whipsaws whipsaws occur when the indicators criss cross back and forth resulting in multiple trade signals that produce losing trades | |
what is a will | a will also called a last will and testament is a legally enforceable declaration of how a person wants his or her property and assets distributed after death a will can serve other purposes for example a person can recommend a guardian to care for surviving minor children or state preferences for their funeral understanding a willa will is an important component of estate planning it ensures that a person s wishes are carried out makes it easier for heirs and prevents family squabbles if an individual dies without a will the distribution of the person s property is left up to the state government and may even end up becoming state property the format of a will varies but most follow a fairly uniform layout the document usually begins with a statement that the writer is of legal age and is making the will freely and without duress it attests to the writer s mental soundness at the time the will was made this section establishes the writer s identity and includes an explicit statement that this document rescinds any previous will in the will the writer names an executor who oversees the liquidation and distribution of the decedent s assets according to the terms of the will the executor must also pay off any outstanding debts and taxes on the estate an executor may be an attorney or financial expert or anyone the writer of the will trusts to act responsibly the executor may be entitled to receive a reasonable fee for services rendered fee guidelines are mandated by the state after naming an executor and guardian for any minor children the will should discuss insurance policies that have a named beneficiary wills do not supplant agreements related to life insurance proceeds retirement assets or transfer on death investment accounts this section may also itemize joint bank accounts and property that is co owned with other individuals make sure that the named beneficiaries in all of your financial and insurance accounts match the names in your will if they are different the beneficiary designation in your accounts will override the intentions expressed in your will the bequest section of the will specifies beneficiaries for all the deceased person s property or assets except for insurance policies and joint accounts already covered in a preceding section it s crucial that all beneficiaries are named clear and reasonable instructions are important for preventing possible legal challenges that could delay probate and create significant legal expenses a will may also include instructions about the writer s funeral and burial wishes if the decedent has made prior arrangements for a burial plot or funeral expenses those should be stated in this section state requirements for willsmost states require that a will be witnessed by two individuals and signed by the writer at the end of the document holographic wills may be used in some states after death the will is submitted to the probate court of the county or city in which the individual resided the probate process can be fairly quick or protracted depending on the complexity of the estate and whether there are legal challenges to the will a clear and complete will can make the process as quick and smooth as possible | |
do i need a lawyer to make a will | you can make a will without a lawyer using a standard low cost will form available from websites such as legalzoom and quicken willmaker trust or even from a stationery shop you may find this adequate if you have an uncomplicated financial situation and straightforward family circumstances such as a single child if you have substantial assets such as a home bank and investment accounts life insurance and property of value it s worth it to prepare your will with the advice of an attorney the attorney will ask the right questions about your assets and your intentions and will know the state process that come into play when a will is recorded | |
how many americans don t hava a will | two thirds of americans don t have a will even though more than half say they know it s important to have one the covid pandemic seems to have been a wake up call for some americans who suffered a severe bout of covid are 66 more likely to have a will than people who didn t according to a 2022 study by caring com |
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