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what are some differences between a bill of exchange and a check | a check always involves a bank while a bill of exchange can involve anyone including a bank checks are payable on demand while a bill of exchange can specify that payment is due on demand or at a specified future date bills of exchange generally do not pay interest making them in essence post dated checks they may accrue interest if not paid by a certain date but that rate must be specified on the instrument unlike a check a bill of exchange is a written document outlining a debtor s indebtedness to a creditor who are the parties to a bill of exchange a bill of exchange transaction can involve up to three parties the drawee is the party that pays the sum specified by the bill of exchange the payee is the one who receives that sum the drawer is the party that obliges the drawee to pay the payee the drawer and the payee are the same entity unless the drawer transfers the bill of exchange to a third party payee | |
what are the different types of bills of exchange | a bill of exchange issued by a bank is referred to as a bank draft the issuing bank guarantees payment on the transaction a bill of exchange issued by individuals is referred to as a trade draft if the funds are to be paid immediately or on demand the bill of exchange is known as a sight draft in international trade a sight draft allows an exporter to hold title to the exported goods until the importer takes delivery and immediately pays for them however if the funds are to be paid at a set date in the future it is known as a time draft which gives the importer a short amount of time to pay the exporter for the goods after receiving them | |
what s the difference between a bill of exchange and a promissory note | the difference between a promissory note and a bill of exchange is that the latter is transferable and can bind one party to pay a third party that was not involved in its creation banknotes are common forms of promissory notes a bill of exchange is issued by the creditor and orders a debtor to pay a particular amount within a given period of time the promissory note on the other hand is issued by the debtor and is a promise to pay a particular amount of money in a given period the bottom linebills of exchange help facilitate the process of international trade by stipulating payment from one party to another at a specified date they function similarly to a check and though not a contract can be used to fulfill the terms of a contract | |
what is a bill of lading | a bill of lading bl or bol is a legal document that s issued by a transportation company to a shipper it details the type quantity and destination of the goods being carried a bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination this document must accompany the shipped products no matter the form of transportation it must be signed by an authorized representative from the carrier shipper and receiver jiaqi zhou investopediaunderstanding bills of ladingthe bill of lading is a legally binding document that provides the carrier and the shipper with all the necessary details to accurately process a shipment 2 it has three main functions say a logistics company intends to transport gasoline from a plant in texas the shipper to a gas station in arizona the recipient by way of a heavy truck a plant representative and the driver sign the bill of lading after loading the gas on the truck the truck driver requests that the station clerk also sign the document when the carrier delivers the fuel to the gas station in arizona every business should have internal controls in place to prevent theft one key component of internal control is the segregation of duties which prevents one employee from having too much control within a business no two internal control systems are the same but most follow a standard set of core philosophies that have become standard management practices implementing internal controls can help streamline operations and prevent fraud a bill of lading is one of several key documents that must be properly managed and reviewed to prevent asset theft types of bills of ladingsome of the most common types of bills of lading include choosing the appropriate bill of lading is essential doing so can either prevent delivery delays or help locate goods that get lost during transport bill of lading exampleassume that xyz fine dining receives shipments of fresh meat and fish five times a week the restaurant manager determines the type and the amount of meat and fish the restaurant needs to order they then fill out a purchase order po xyz s owner reviews and initials each po before it s emailed to the food vendor the vendor gathers the meat and fish and signs a bill of lading along with a representative from the overnight carrier the carrier delivers the food to the restaurant and the manager compares the information on the bill of lading to what was requested on the po the po and the bill of lading are sent to the owner if the information matches the owner reviews the documents and makes payment to the food vendor the owner doesn t pay the vendor without first reviewing the purchase order and the bill of lading this step ensures that xyz pays only for what it ordered and received the manager will ask the vendor about the exception if the two documents don t match when they compare them a third employee reconciles the bank statement and makes company deposits all these steps must be in place to prevent theft | |
why is a bill of lading important | a bill of lading is a legally binding document that provides the carrier and the shipper with all the necessary details to accurately process a shipment it can be used in litigation if the need should arise and all parties involved will make a committed effort to ensure the accuracy of the document a bill of lading essentially works as undisputed proof of shipment it allows for the segregation of duties that is a vital part of a firm s internal control structure to prevent theft | |
what is the purpose of a bill of lading | a bill of lading has three main purposes it s a document of title to the goods described in the bill of lading and it s a receipt for the shipped products finally it represents the agreed upon terms and conditions for the transportation and eventual release of the shipped goods | |
what s in a bill of lading | a bill of lading will typically include the names and addresses of the shipper consignor and the receiver consignee as well as the shipment date quantity exact weight value and freight classification it should include a complete description of the items including whether they re classified as hazardous as well as the type of packaging used any specific instructions for the carrier and any special order tracking numbers most bills of lading will include language that incorporates the york antwerp rules to help determine costs and liability for lost or damaged cargo 3the bottom linea bill of lading is a contract issued by a transport company to a shipper that spells out the quantity type and destination of the goods being shipped it serves as a receipt of the shipment and can help prevent the theft of goods being transported it s crucial to understand the types of bills of lading to ensure that the right ones are chosen your shipment will likely be delayed otherwise | |
what is binance coin bnb | binance coin is the cryptocurrency issued by the binance exchange and trades with the bnb symbol in may 2024 binance exchange was the second largest as verified by coinmarketcap cryptocurrency exchange in the world with a daily trading volume of 11 8 billion 1 binance coin bnb had a 24 hour trading volume of 1 45 billion 2on nov 21 2023 binance and its ceo changpeng zhao pleaded guilty to money laundering charges binance agreed to pay 4 3 billion to settle charges changpeng zhao stepped down as ceo and agreed to pay 50 million toward the settlement on april 30 2024 zhao was sentenced to four months in prison and fined 200 million for not complying with u s anti money laundering laws as of may 11 2024 binance is operational and remains a popular cryptocurrency exchange understanding binance coin bnb the binance blockchain is built using ethereum and uses bnb as its native token it was launched during an initial coin offering ico in july 2017 and has a strict maximum of 200 million bnb tokens 3 the ico offered 10 or 20 million bnb tokens to angel investors 40 or 80 million tokens to the founding team and the remaining 50 or 100 million to the various participants almost half the funds raised during the ico process were intended to be used for binance branding and marketing while around one third were used to build the binance platform and perform necessary upgrades to the binance ecosystem on may 11 2024 bnb was the fourth largest cryptocurrency by market capitalization behind only bitcoin ethereum and usd tether 1binance coin burningevery quarter binance uses one fifth of its profits to repurchase and permanently destroy or burn bnb held in its treasury binance has regularly performed these burning events the latest bnb burn as of may 2024 was on april 24 binance burned a total of 1 94 million bnb equivalent to 670 78 million it was binance s 27th quarterly bnb burn 4binance coin uses and supportbnb was created in 2017 as a utility token for discounted trading fees since then its uses have expanded to numerous applications on a wide range of platforms it is used to pay transaction fees on binance com binance dex and binance chain it can also be used for payments at places like monetha and htc to book travel accommodations at sites such as travelbybit trip io and travala com for entertainment purposes buy music game rewards to pay for online services bittorrent canva storm and even for financial purposes take out a loan at ethlend or make investments at moeda 5as of may 2024 the binance smart chain processed as many as 3 5 million daily transactions more than double ethereum s all time high however this is down from a record of more than 32 6 million daily transactions reached in december 2023 67one can also use bnb to invest in certain icos listed through binance s launchpad program new cryptocurrencies are listed on the binance exchange which provides a seamless marketplace for trading in a variety of established and new virtual tokens | |
is binance coin a good buy | it depends on your preferences risk tolerance outlook and investing goals it s best to speak with a financial advisor to learn if bnb is appropriate for your portfolio | |
what is a binance coin | binance s cryptocurrency bnb is used for on chain transactions it can also be used to purchase goods and services at participating vendors will binance coin reach 10 000 it s difficult to determine what any asset s price will be in the future there are too many factors that affect prices however it is possible that bnb will reach 10 000 however it is just as likely to fall to zero the bottom linebinance coin bnb is the native token for binance s blockchain it can be used like many other cryptocurrencies as a payment method for products and services globally the comments opinions and analyses expressed on investopedia are for informational purposes only read our warranty and liability disclaimer for more info | |
what is a binary option | binary options a financial derivative that allows people to make all or nothing wagers on events and asset price changes have surged in popularity in recent years but critics including u s regulators who have long cautioned against them warn that these trades are more akin to gambling than investing and carry a high risk of fraud and losses for unwary consumers these options depend on the outcome of a yes or no proposition hence the name binary traders receive a payout if the binary option expires in the money and lose if it expires out of the money in 2008 the u s securities and exchange commission sec approved listing binary options as tradable contracts on exchanges this move was followed by the chicago board options exchange and the north american derivatives exchange nadex offering standardized binary options to retail traders despite being available on regulated exchanges much of the trading in binary options in the u s goes through unregulated offshore platforms leading to many scams and frauds 12 binary options are banned in many places worldwide including australia canada europe the u k and elsewhere 3 | |
how a binary option works | binary options have an expiry date and time when that occurs the price of the underlying asset or event must be on the correct side of the strike price based on the trade taken for the trader to make a profit a binary option automatically exercises meaning the gain or loss of the trade is credited or debited to the trader s account when the option expires that means the buyer of a binary option will either receive a payout or lose their entire investment in the trade there is nothing between an example of a binary option could be as simple as whether abc s share price will be above 25 on april 22 2021 at 10 45 a m 4 let s say the client thinks the price will be trading above 25 on that date and time and is willing to stake 100 on the trade if abc shares trade above 25 at that date and time the trader receives a payout per the terms agreed for example if the payout is 70 the binary broker credits the trader s account with 70 if the price trades below 25 at that date and time the client is wrong and loses their 100 investment in the trade as a result many find binary options easier to understand than regular options hence their popularity because of their risks there are limits on how much you can trade for example about 2 500 on the nadex options exchange 5binary options vs vanilla optionsownership potential don t provide ownership of an underlying asset risk and payout fixed maximum payout and risk is limited to the option s investment regulation often trade on unregulated platforms potentially increasing fraud risk ownership potential offer potential ownership of the underlying assetrisk and payout fixed risk but profits vary with the underlying asset s price movement regulation trade on regulated u s exchanges adhering to u s market regulations a vanilla american option gives the holder the right to buy or sell an underlying asset at a specified price on or before the option s expiration date a european option is the same except traders can only exercise that right on the expiration date vanilla options or just options provide the buyer with potential ownership of the underlying asset when buying these options traders have preset risk but profits depend on how far the price of the underlying asset moves binary options differ because they don t provide the possibility of taking a position in the underlying asset they are pure speculation in this sense binary options typically specify a fixed maximum payout while the maximum risk is limited to the amount invested in the option the underlying asset could be prices and events some binary options can be closed before expiration although this typically reduces the payout received if the option is in the money binary options occasionally trade on platforms regulated by the sec and other agencies but most binary options trading occurs outside the u s and is not regulated by u s officials unregulated binary options brokers don t have to meet a particular standard or any therefore investors should be very wary of the potential for fraud conversely vanilla options trade on regulated u s exchanges and are subject to u s options market regulations 6 | |
when buying binary options here are the steps | you should be mindful of the potential risk of fraud when trading binary options it should be noted that many binary options platforms operate outside regulated financial markets this lack of regulation can lead to a higher risk of fraud since there s no oversight 11 when the fraud occurs you ll often be very much on your own you must conduct thorough research verify the broker s regulatory status and approach binary options trading with caution fully understanding the risks and the potential for fraud example of a binary optionone example entails that the binary option s entry price indicates the potential profit or loss with all options expiring worth 100 or 0 the assumption is that stock colgate palmolive cl is trading at 64 75 a binary option has a strike price of 65 and expires tomorrow at noon the trader can buy the option for 40 if the price of the stock finishes above 65 the option expires in the money and is worth 100 the trader makes 60 100 40 if the option expires and the price of the colgate is below 65 out of the money the trader loses the 40 they put into the option the potential profit and loss combined always equals 100 with a the binary option if the trader wanted to make a more significant investment they could change the number of options traded for example selecting three contracts in this case would up the risk to 120 and increase the profit potential to 180 | |
what s needed to open a binary options trading account | this typically involves choosing the broker submitting an application completing the know your customer forms funding the account and verifying your identity for the broker 4 | |
are binary options considered high risk | binary options are considered high risk because of their all or nothing payouts their short term speculative nature their volatility and the leverage involved in the product | |
what is binomial distribution | binomial distribution is a statistical distribution that summarizes the probability that a value will take one of two independent values under a given set of parameters or assumptions the underlying assumptions of binomial distribution are that there is only one outcome for each trial each trial has the same probability of success and each trial is mutually exclusive or independent of one another understanding binomial distributionto start the binomial in binomial distribution means two terms the number of successes and the number of attempts each is useless without the other binomial distribution is a common discrete distribution used in statistics as opposed to a continuous distribution such as normal distribution this is because binomial distribution only counts two states typically represented as 1 for a success or 0 for a failure given a number of trials in the data binomial distribution thus represents the probability for x successes in n trials given a success probability p for each trial binomial distribution summarizes the number of trials or observations when each trial has the same probability of attaining one particular value binomial distribution determines the probability of observing a specific number of successful outcomes in a specified number of trials binomial distribution is often used in social science statistics as a building block for models for dichotomous outcome variables such as whether a republican or democrat will win an upcoming election whether an individual will die within a specified period of time etc it also has applications in finance banking and insurance among other industries analyzing binomial distributiona binomial distribution s expected value or mean is calculated by multiplying the number of trials n by the probability of successes p or n p for example the expected value of the number of heads in 100 trials of heads or tails is 50 or 100 0 5 another common example of binomial distribution is estimating the chances of success for a free throw shooter in basketball where 1 a basket made and 0 a miss the binomial distribution function is calculated as | |
where | the mean of the binomial distribution is np and the variance of the binomial distribution is np 1 p when p 0 5 the distribution is symmetric around the mean such as when flipping a coin because the chances of getting heads or tails is 50 or 0 5 when p 0 5 the distribution curve is skewed to the left when p 0 5 the distribution curve is skewed to the right the binomial distribution is the sum of a series of multiple independent and identically distributed bernoulli trials in a bernoulli trial the experiment is said to be random and can only have two possible outcomes success or failure for instance flipping a coin is considered to be a bernoulli trial each trial can only take one of two values heads or tails each success has the same probability and the results of one trial do not influence the results of another bernoulli distribution is a special case of binomial distribution where the number of trials n 1 example of binomial distributionbinomial distribution is calculated by multiplying the probability of success raised to the power of the number of successes and the probability of failure raised to the power of the difference between the number of successes and the number of trials then multiply the product by the combination of the number of trials and successes for example assume that a casino created a new game in which participants can place bets on the number of heads or tails in a specified number of coin flips assume a participant wants to place a 10 bet that there will be exactly six heads in 20 coin flips the participant wants to calculate the probability of this occurring and therefore they use the calculation for binomial distribution the probability was calculated as 20 6 20 6 0 50 6 1 0 50 20 6 consequently the probability of exactly six heads occurring in 20 coin flips is 0 0369 or 3 7 the expected value was 10 heads in this case so the participant made a poor bet the graph below shows that the mean is 10 the expected value and the chances of getting six heads is on the left tail in red you can see that there is less of a chance of six heads occurring than seven eight nine 10 11 12 or 13 heads statcrunch binomial calculatorso how can this be used in finance one example let s say you re a bank a lender that wants to know within three decimal places the likelihood of a particular borrower defaulting what are the chances of so many borrowers defaulting that they would render the bank insolvent once you use the binomial distribution function to calculate that number you have a better idea of how to price insurance and ultimately how much money to lend out and keep in reserve | |
what is binomial distribution | binomial distribution is a statistical probability distribution that states the likelihood that a value will take one of two independent values under a given set of parameters or assumptions | |
how is binomial distribution used | this distribution pattern is used in statistics but has implications in finance and other fields banks may use it to estimate the likelihood of a particular borrower defaulting how much money to lend and the amount to keep in reserve it s also used in the insurance industry to determine policy pricing and assess risk | |
why is binomial distribution important | binomial distribution is used to figure the probability of a pass or fail outcome in a survey or experiment replicated numerous times there are only two potential outcomes for this type of distribution more broadly distribution is an important part of analyzing data sets to estimate all the potential outcomes of the data and how frequently they occur forecasting and understanding the success or failure of outcomes is essential to business development the bottom linethe binomial distribution is an important statistical distribution that describes binary outcomes such as the flip of a coin a yes no answer or an on off condition understanding its characteristics and functions is important for data analysis in various contexts that involve an outcome taking one of two independent values it has applications in social science finance banking insurance and other areas for instance it can be used to estimate whether a borrower will default on a loan whether an options contract will finish in the money or out of the money or whether a company will miss or beat earnings estimates | |
what is the binomial option pricing model | the binomial option pricing model is an options valuation method developed in 1979 1 the binomial option pricing model uses an iterative procedure allowing for the specification of nodes or points in time during the time span between the valuation date and the option s expiration date the model reduces possibilities of price changes and removes the possibility for arbitrage a simplified example of a binomial tree might look something like this basics of the binomial option pricing modelwith binomial option price models the assumptions are that there are two possible outcomes hence the binomial part of the model with a pricing model the two outcomes are a move up or a move down 2 the major advantage of a binomial option pricing model is that they re mathematically simple yet these models can become complex in a multi period model in contrast to the black scholes model which provides a numerical result based on inputs the binomial model allows for the calculation of the asset and the option for multiple periods along with the range of possible results for each period see below the advantage of this multi period view is that the user can visualize the change in asset price from period to period and evaluate the option based on decisions made at different points in time for a u s based option which can be exercised at any time before the expiration date the binomial model can provide insight as to when exercising the option may be advisable and when it should be held for longer periods by looking at the binomial tree of values a trader can determine in advance when a decision on an exercise may occur if the option has a positive value there is the possibility of exercise whereas if the option has a value less than zero it should be held for longer periods calculating price with the binomial modelthe basic method of calculating the binomial option model is to use the same probability each period for success and failure until the option expires however a trader can incorporate different probabilities for each period based on new information obtained as time passes a binomial tree is a useful tool when pricing american options and embedded options its simplicity is its advantage and disadvantage at the same time the tree is easy to model out mechanically but the problem lies in the possible values the underlying asset can take in one period of time in a binomial tree model the underlying asset can only be worth exactly one of two possible values which is not realistic as assets can be worth any number of values within any given range for example there may be a 50 50 chance that the underlying asset price can increase or decrease by 30 percent in one period for the second period however the probability that the underlying asset price will increase may grow to 70 30 for example if an investor is evaluating an oil well that investor is not sure what the value of that oil well is but there is a 50 50 chance that the price will go up if oil prices go up in period 1 making the oil well more valuable and the market fundamentals now point to continued increases in oil prices the probability of further appreciation in price may now be 70 percent the binomial model allows for this flexibility the black scholes model does not real world example of binomial option pricing modela simplified example of a binomial tree has only one step assume there is a stock that is priced at 100 per share in one month the price of this stock will go up by 10 or go down by 10 creating this situation next assume there is a call option available on this stock that expires in one month and has a strike price of 100 in the up state this call option is worth 10 and in the down state it is worth 0 the binomial model can calculate what the price of the call option should be today for simplification purposes assume that an investor purchases a one half share of stock and writes or sells one call option the total investment today is the price of half a share less the price of the option and the possible payoffs at the end of the month are the portfolio payoff is equal no matter how the stock price moves given this outcome assuming no arbitrage opportunities an investor should earn the risk free rate over the course of the month the cost today must be equal to the payoff discounted at the risk free rate for one month the equation to solve is thus assuming the risk free rate is 3 per year and t equals 0 0833 one divided by 12 then the price of the call option today is 5 11 the binomial option pricing model presents two advantages for option sellers over the black scholes model the first is its simplicity which allows for fewer errors in the commercial application the second is its iterative operation which adjusts prices in a timely manner so as to reduce the opportunity for buyers to execute arbitrage strategies for example since it provides a stream of valuations for a derivative for each node in a span of time it is useful for valuing derivatives such as american options which can be executed anytime between the purchase date and expiration date it is also much simpler than other pricing models such as the black scholes model | |
what is bioremediation | bioremediation is a branch of biotechnology that employs the use of living organisms in the removal of contaminants pollutants and toxins from soil water and other environments these organisms can include microbes and bacteria bioremediation can be used to clean up contaminated groundwater or environmental problems such as oil spills | |
how bioremediation works | bioremediation relies on stimulating the growth of certain microbes that utilize contaminants including oil solvents and pesticides for sources of food and energy these microbes convert contaminants into small amounts of water as well as harmless gases such as carbon dioxide bioremediation requires a combination of the right temperature nutrients and foods the absence of these elements can prolong the cleanup of contaminants conditions that are unfavorable for bioremediation can be improved by adding amendments to the environment such as molasses vegetable oil or simple air these amendments optimize conditions for microbes to flourish accelerating the completion of the bioremediation process bioremediation can be done in situ at the site of the contamination or ex situ at a location away from the site ex situ bioremediation may be necessary if the climate is too cold to sustain microbe activity or if the soil is too dense for nutrients to distribute evenly ex situ bioremediation can require excavation and cleaning of the soil above ground and this can add significant costs to the process the bioremediation process can take anywhere from several months to several years to complete depending on variables such as the size of the contaminated area the concentration of contaminants temperature soil density and whether bioremediation will occur in situ or ex situ advantages of bioremediationbioremediation offers numerous advantages over other cleanup methods it minimizes damage to ecosystems by relying solely on natural processes bioremediation often takes place underground where amendments and microbes can be pumped to clean up contaminants in groundwater and soil bioremediation doesn t disrupt nearby communities as much as other cleanup methodologies as a result the bioremediation process creates relatively few harmful byproducts mainly because contaminants and pollutants are converted into water and harmless gases like carbon dioxide it s cheaper than most cleanup methods because it doesn t require substantial equipment or labor example of bioremediationthe exxon valdez oil tanker ran aground off the coast of alaska in 1989 and ended up spilling approximately 11 million gallons of oil bioremediation was gaining traction as a viable option for oil cleanups at around this time the epa and exxon mobil corporation xom both began testing compounds initial tests regarding the effectiveness of bioremediation looked promising 1more than 100 000 pounds of fertilizer were applied over more than 2 000 applications to the affected areas between 1989 and 1990 the cleanup was considered complete by mid 1992 and the fertilizer had degraded nearly all the oil compounds 2 | |
what are the types of bioremediation | there are three types of bioremediation in general | |
is composting a form of bioremediation | in a sense yes composting can be seen as a form of bioremediation known as biodegradation that converts food waste into potable soil this reduces the burden on landfills | |
what is mycoremediation | mycoremediation is a form of bioremediation that relies on fungi rather than bacteria or other microbes to decontaminate affected areas 4the bottom linebioremediation effectively heals the environment when it s been contaminated by pollutants and toxins it uses living organisms such as microbes and bacteria it s a branch of biotechnology that can be vitally important to saving affected areas the process can take several months to several years to complete depending on conditions but it requires relatively few harmful byproducts and can be less expensive than other cleanup processes | |
what is bird in hand | the bird in hand is a theory that says investors prefer dividends from stock investing to potential capital gains because of the inherent uncertainty associated with capital gains based on the adage a bird in the hand is worth two in the bush the bird in hand theory states that investors prefer the certainty of dividend payments to the possibility of substantially higher future capital gains understanding bird in handmyron gordon and john lintner developed the bird in hand theory as a counterpoint to the modigliani miller dividend irrelevance theory the dividend irrelevance theory maintains that investors are indifferent to whether their returns from holding stock arise from dividends or capital gains under the bird in hand theory stocks with high dividend payouts are sought by investors and consequently command a higher market price investors who subscribe to the bird in hand theory believe that dividends are more certain than capital gains bird in hand vs capital gains investinginvesting in capital gains is mainly predicated on conjecture an investor may gain an advantage in capital gains by conducting extensive company market and macroeconomic research however ultimately the performance of a stock hinges on a host of factors that are out of the investor s control for this reason capital gains investing represents the two in the bush side of the adage investors chase capital gains because there is a possibility that those gains may be large but it is equally possible that capital gains may be nonexistent or worse negative broad stock market indices such as the dow jones industrial average djia and the standard poor s s p 500 have averaged annual returns of up to 10 over the long term finding dividends that high is difficult even stocks in notoriously high dividend industries such as utilities and telecommunications tend to top out at 5 however if a company has been paying a dividend yield of for example 5 for many years receiving that return in a given year is more likely than earning 10 in capital gains during years such as 2001 and 2008 the broad stock market indices posted big losses despite trending upward over the long term in similar years dividend income is more reliable and secure hence these more stable years are associated with the bird in hand theory disadvantages of the bird in handlegendary investor warren buffett once opined that where investing is concerned what is comfortable is rarely profitable dividend investing at 5 per year provides near guaranteed returns and security however over the long term the pure dividend investor earns far less money than the pure capital gains investor moreover during some years such as the late 1970s dividend income while secure and comfortable has been insufficient even to keep pace with inflation example of bird in handas a dividend paying stock coca cola ko would be a stock that fits in with a bird in hand theory based investing strategy according to coca cola the company began paying regular quarterly dividends starting in the 1920s further the company has increased these payments every year since 1964 1 | |
what is bitcoin | bitcoin btc is a cryptocurrency a virtual currency designed to act as money and a form of payment outside the control of any one person group or entity this removes the need for trusted third party involvement e g a mint or bank in financial transactions it is rewarded to blockchain miners who verify transactions and can be purchased on several exchanges bitcoin was introduced to the public in 2009 by an anonymous developer or group of developers using the name satoshi nakamoto it has since become the most well known and largest cryptocurrency in the world its popularity has inspired the development of many other cryptocurrencies read on to learn more about the cryptocurrency that started it all the history behind it how to mine it buy it and what it can be used for investopedia julie bangunderstanding bitcoinin august 2008 the domain name bitcoin org was registered it was created by satoshi nakamoto and martti malmi who worked with the anonymous nakamoto to develop bitcoin 1in october 2008 nakamoto announced to the cryptography mailing list at metzdowd com i ve been working on a new electronic cash system that s fully peer to peer with no trusted third party the now famous white paper published on bitcoin org entitled bitcoin a peer to peer electronic cash system would become the magna carta for how bitcoin operates today 23on jan 3 2009 the first bitcoin block was mined called block 0 it is also known as the genesis block and contains the text the times 03 jan 2009 chancellor on brink of second bailout for banks perhaps proof that the block was mined on or after that date 4bitcoin rewards are halved every 210 000 blocks for example the block reward was 50 new bitcoins in 2009 on may 11 2020 the third halving occurred bringing the reward for each block down to 6 25 bitcoins the fourth halving occurred in april 2024 and lowered the reward to 3 125 bitcoins the next halving should happen in mid 2028 and reduce the reward to 1 5625 btc one bitcoin is divisible to eight decimal places 100 millionths of one bitcoin and this smallest unit is referred to as a satoshi on jan 8 2009 the first version of the bitcoin software was announced to the cryptography mailing list and on jan 9 2009 block 1 was mined and bitcoin mining began 5bitcoin s blockchain technologybitcoin as a form of digital currency isn t hard to understand for example if you own a bitcoin you can use your cryptocurrency wallet to send smaller portions of that bitcoin as payment for goods or services by contrast the way bitcoin actually works is very complex a blockchain is a distributed ledger a shared database of information that is chained together via cryptographic techniques distributed means that it is stored on many computers rather than on a centralized server as is typical of data storage a network of automated programs installed on these computers maintains the blockchain and performs the functions necessary for it to operate a block on a blockchain is a file that contains a block header transaction counter and the transactions recorded in the block the transaction counter lists how many transactions are in the block while the block header is made up of several elements as noted each block contains the hashed information of the previous block this creates a chain of encrypted blocks files that contain information from all previous blocks going back to the first block of the blockchain bitcoin uses the sha 256 hashing algorithm to encrypt hash the data stored in the blocks on the blockchain simply put transaction data stored in a block is encrypted into a 256 bit 64 digit hexadecimal number that number contains all the transaction data and information linked to the blocks before that block while the data in a block is encrypted and used in the next block the block is not inaccessible or non readable the hash is used in the next block then its hash is used in the next and so on but all blocks can be read this makes it so blocks cannot be changed without changing all other blocks and ensures anyone can audit the blockchain | |
how to mine bitcoin | a variety of hardware and software can be used to mine bitcoin when the bitcoin blockchain was first released it was possible to mine it competitively on a personal computer however as it became more popular more miners joined the network which lowered the chances of being the one to solve the hash you can still use your personal computer as a miner if it has newer hardware but the chances of solving a hash individually using a home computer are minuscule this is because you re competing with a network of miners that generate around 600 quintillion hashes as of may 15 2024 per second machines called application specific integrated circuits asics built specifically for mining can generate more than 400 trillion hashes per second in contrast a computer with the latest hardware hashes around 100 megahashes per second 100 million 6there are two hardware options available for bitcoin mining and several software options 1 you can use your existing computer and mining software compatible with bitcoin software and join a mining pool mining pools are groups of miners that combine their computational power to compete with large asic mining farms there are many mining programs to choose from and pools you can join two of the most well known programs are cgminer and bfgminer some of the most popular pools are foundry digital antpool f2pool viabtc and binance com 2 if you have the financial means you could purchase an asic miner you can generally find a new one for around 10 000 but used ones are also sold by miners as they upgrade their systems there are some significant costs such as electricity and cooling to consider if you purchase one or more asics keep in mind using one or two asics is still no guarantee of rewards as you re competing with businesses with large mining farms of tens if not hundreds of thousands of asics for example bitcoin mining firm cleanspark ordered 100 000 asics from bitmain in april 2024 7you can increase your chances of being rewarded bitcoins by joining a pool but rewards are significantly decreased because they are shared when choosing a pool it s important to make sure to find out how it pays out rewards what any fees might be and to read some mining pool reviews | |
how to buy bitcoin | if you don t want to mine bitcoin you can buy it using a cryptocurrency exchange most people will be unable to purchase an entire btc because of its price but you can buy portions of one btc on these exchanges in fiat currency such as u s dollars for example you can buy bitcoin on coinbase by creating and funding an account using your bank account credit card or debit card the following video explains more about buying bitcoin | |
how to use bitcoin | bitcoin was initially designed and released as a peer to peer payment method however its use cases are growing due to its increasing value competition from other blockchains and cryptocurrencies and developments on blockchains that process information for the bitcoin blockchain bitcoin is accepted as a means of payment for goods and services at many merchants retailers and stores brick and mortar stores that accept cryptocurrencies will generally display a sign that says bitcoin accepted here the transactions can be handled with the requisite hardware terminal or wallet address through qr codes and touchscreen apps an online business can easily accept bitcoin by adding this payment option to its other online payment options credit cards paypal etc to use your bitcoin you need to have a cryptocurrency wallet wallets are your blockchain interface and can hold the private keys to the bitcoins that you own these keys must be entered when you re conducting a transaction investors and speculators became interested in bitcoin as it grew in popularity between 2009 and 2017 cryptocurrency exchanges emerged that facilitated bitcoin sales and purchases prices began to rise and demand slowly grew until 2017 when its price broke 1 000 many people believed bitcoin prices would keep climbing and began buying bitcoin as long term investments traders began using cryptocurrency exchanges to make short term trades and the market took off 8after reaching a high of about 69 000 in november 2021 bitcoin s price crashed in 2022 in march 2022 it was as high as 47 454 but by november it was 15 731 it then recovered in 2023 seeing a price as high as 31 474 before dropping back below 30 000 in early 2024 bitcoin s price jumped into the mid 40 000s as expectations grew for bitcoin spot etfs approval by mid february 2024 after the etfs were approved bitcoin s price climbed to more than 50 000 9bitcoin prices tend to follow stock market trends because bitcoin is treated the same way that investors treat other investments however bitcoin price movements are greatly exaggerated and sometimes are prone to movements of thousands of dollars many bitcoin investors tend to trade the news as demonstrated by the fluctuations that occur whenever there is a significant news event bitcoin s all time high price is 73 794 reached on march 14 2024 risks of investing in bitcoinbitcoin had a price of 7 167 52 on dec 31 2019 and a year later it had appreciated more than 300 to 28 984 98 it continued to surge in the first half of 2021 trading at a record high of 69 000 in november 2021 it then fell over the next few months to hover around 40 000 10as a result of such price movements many people purchase bitcoin for its investment value rather than its ability to act as a medium of exchange however the lack of guaranteed value and its digital nature mean its purchase and use carry several inherent risks in fact many investor alerts issued by the securities and exchange commission sec the financial industry regulatory authority finra and the consumer financial protection bureau cfpb concern bitcoin investing here are some of the risks that you re exposed to when trading or investing in bitcoin regulating bitcoinas with any new technology it has been difficult to regulate bitcoin the u s administration seeks to impose regulations on bitcoin but at the same time walks a tightrope in trying not to throttle a growing and economically beneficial industry 14enforcement agencies in the u s continue to rely on existing securities commodities and tax laws but as of may 2024 no attempts from legislators have gained much attention from the country s law making bodies 1516the european commission put its long anticipated markets in crypto assets legislation into force in 2023 setting the stage for cryptocurrency regulations in the european union 17india banned several exchanges in december 2023 and continues to push back reviews of any legislation regarding bitcoin and other cryptocurrencies 18 | |
how long does it take to mine one bitcoin | it takes an average of 10 minutes for the mining network to validate a block and create the reward the bitcoin reward is 3 125 btc per block the block reward halves every four years so when the next halving occurs in mid 2028 the reward will be 1 5625 btc every 10 minutes | |
is bitcoin a good investment | bitcoin has a short investment history that is filled with very volatile prices whether it is a good investment depends on your financial profile investing portfolio risk tolerance and investing goals you should consider consulting with a financial professional before investing in cryptocurrency to ensure that it is right for your circumstances | |
how does bitcoin make money | miners on the bitcoin network can be rewarded by successfully opening blocks bitcoins are exchangeable for fiat currency via cryptocurrency exchanges investors and speculators can make money from trading bitcoins | |
how many bitcoins are left | the total number of bitcoins in existence was about 19 7 million on may 15 2024 at that time the number left to be mined was about 1 3 million 19the bottom linebitcoin was the first cryptocurrency introduced to the public and was intended to be used as a form of payment outside of legal tender since its introduction in 2009 bitcoin s popularity has surged and its blockchain uses have expanded though the process of generating bitcoin is complex investing in it is more straightforward investors and speculators can buy and sell bitcoin on crypto exchanges as with any investment particularly one as new and volatile as bitcoin investors should carefully consider if bitcoin is the right investment for them the comments opinions and analyses expressed on investopedia are for informational purposes only read our warranty and liability disclaimer for more info | |
what is bitcoin cash | bitcoin cash bch is a cryptocurrency that was created and launched to bring decentralization back to cryptocurrency it is the result of a 2017 bitcoin hard fork which occurs when an existing blockchain splits into two bitcoin cash allows a greater number of transactions in a single block than bitcoin and reduce fees and transaction times bitcoin cash is designed to be used as a cheap payment system much in the way bitcoin was designed to be originally transaction fees are generally lower and confirmation times are significantly less than bitcoin s generally within seconds learn more about bitcoin cash and how it differs from bitcoin history of bitcoin cashbitcoin s blockchain had scalability issues because it could not handle the increased number of transactions the confirmation time and fees for a transaction on bitcoin s blockchain surged this was mainly due to the 1mb block size limitation for bitcoin blocks transactions queued up waiting for confirmation because blocks could not handle the increased number of transactions the network was experiencing bitcoin cash was created in 2017 when developers disagreed on the route bitcoin should take to address emerging issues with the blockchain transaction fees continued to rise between 2009 and 2016 by june 2017 fees hit more than 5 before fluctuating and skyrocketing to over 54 in december bitcoin cash was created and is maintained by an active community of developers these developers saw bitcoin cash as a necessary alternative to bitcoin because in their view bitcoin had become more of an investment instrument than a payment system it was designed as a peer to peer payment system that removes regulatory authorities and other third parties from financial transactions but it had become something else 1bitcoin cash s blockchain is bitcoin cash node 2bitcoin cash vs bitcoinbitcoin cash increased the size of blocks to have a limit of 32 mb enabling more transactions to be processed per block bitcoin cash also differs from bitcoin in another respect as it does not incorporate segregated witness segwit another solution proposed to accommodate more transactions per block segwit removes witness signatures from certain areas to increase the number of transactions a block can store the average number of transactions per block on bitcoin at the time bitcoin cash was proposed was between 1 000 and 1 500 3yes bitcoin is available for trading | |
how to get bitcoin cash | bitcoin cash is available on cryptocurrency exchanges like binance coinbase kraken kucoin and many others because it is a bitcoin fork it is mined the same way it can be mined on personal computers with dedicated gpus but this approach has some caveats similar to bitcoin and other minable cryptocurrencies bitcoin cash mining is dominated by large mining firms and pools pools increase your chances of receiving a block reward although the rewards are shared with the pool depending on the pool s size and the work contributions of other members your shares could be pretty small you can also purchase a machine called an application specific integrated circuit asic miner that can mine bch these machines are much faster at mining than personal computers but they cost several thousand dollars new you can find used ones for much less but their speeds are generally lower and it s hard to tell what kind of condition they are in concerns about bitcoin cashbitcoin cash community believes that it must remain decentralized and affordable so it could be used as the best money in the world in the shorter term the project has focused on providing a fast reliable low fee network as well as establishing a professional mining node that listens to feedback and delivers measurable improvements 41contrary to its developer s goals bch appears to have increased in popularity with investors ranking 25 by 24 hour trading volume and 16 by market cap its price on may 15 2024 was 445 more than a 270 increase from its price of 188 one year before 5 while this might be good news for bch investors it might not be such a good development for a community that wanted a cryptocurrency to remain a payment method | |
is bitcoin cash worth having | it depends on your market outlook risk tolerance and investing preferences bitcoin cash experienced a significant increase in price through mid 2024 but that doesn t mean it will continue | |
is it ok to invest in bitcoin cash | it s important to remember that all cryptocurrencies experience volatility so you have to accept the risk of large losses along with the possibility of large gains it s best to speak to a financial advisor about your financial circumstances to see if bch is suitable for your portfolio | |
what is the downside to bitcoin cash | like many other forks or cryptocurrency projects bitcoin cash has a small network compared to bitcoin and some others which makes it more susceptible to attacks however this vulnerability is one all blockchains suffer from until they become economically unfeasible for attackers to target the bottom linebitcoin cash is an altcoin that forked from bitcoin in 2017 it was created to speed up transaction times and maintain a position as a payment method while not the most popular cryptocurrency it has outlived many market ups and downs the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info | |
what is bitcoin mining | bitcoin is a digital currency that requires a process called mining bitcoin mining is a network wide competition to generate a cryptographic solution that matches specific criteria when a correct solution is reached a reward in the form of bitcoin and fees for the work done is given to the miner s who reached the solution first this reward process continues until 21 million bitcoins are circulating once that number is reached the bitcoin reward is expected to cease and bitcoin miners will be rewarded through fees paid for the work done | |
what is the bitcoin misery index bmi | the bitcoin misery index bmi is a measurement of bitcoin s price action it ranges from 0 to 100 and uses contrarian economic indicators in which opportunities move opposite of conventional indicators it incorporates several different market factors such as win ratios and volatility understanding the bitcoin misery index bmi the bmi was created in 2018 by tom lee a co founder of fundstrat global advisors the index incorporates the percentage of winning trades to total trades and volatility it shows a value of zero to 100 the index indicates misery when the value is below 27 which means that traders are not happy with the results of their trades as a contrarian index the closer the index is to zero the louder the signal to buy becomes it is a buy signal because traders believe prices may not go any lower and that profitable trades are on the horizon interest in bitcoin btc increased dramatically in 2016 with btc price rising 123 by year s end by 2017 investors were pouring into btc pushing the price to just under 20 000 in december investors who expected bitcoin prices to continue their meteoric rise after december 2017 were met instead by a decline of over 50 bitcoin s popularity continued to grow through 2018 2019 and 2020 in 2021 its price skyrocketed to 69 000 in november before plummeting to around 35 000 in january 2022 1as interest in bitcoin has risen so too have threats to its stability as a result several countries have banned or created substantial regulations targeting cryptocurrencies for example china banned cryptocurrency over concerns of financial stability money laundering and fraud 2cryptocurrency investors also have to deal with the possibility that their digital assets can be stolen if stored in hot wallets digital wallets that are actively connected to cryptocurrency exchanges via the internet several exchanges have been hacked such as mt gox which lost over 450 million and coincheck which lost over 500 million the uncertainty about regulatory and security has given rise to a new misery index the bmi fundstratgoals of the bitcoin misery indexaccording to fundstrat insight the bmi is a proxy for investor sentiments about bitcoin s price action it indicates whether traders and investors are feeling happy 100 67 neutral 66 28 or miserable 27 0 about prices 3cryptocurrency trading and investing expose you to several types of risk including transaction risk interest rate risk leverage risk counterparty risk and country risk unlike trading u s dollars or euros you have to contend with other risks created by assets based on a decentralized ledger without a central bank to act as a guarantor you may have little recourse or protection if something goes awry with a cryptocurrency the highly risky and speculative nature of bitcoin investing favors those who can quickly analyze shifts in prices and understand the impact of news announcements and place buy or sell trades accordingly indexes create a tendency in investors to self fulfill prophecies if as a group investors believe when an index hits a specific level it signals an opportunity to buy then they will wait until it hits that level to start buying while indexes are sometimes helpful as early warning indicators of market sentiment they are backward looking measures the bmi cannot predict whether hackers will attack a cryptocurrency exchange it won t be able to predict whether the securities and exchange commission sec will approve a new u s based exchange or bitcoin backed security it will only tell you what other investors and traders felt at any given moment in the past | |
what is the bitcoin 200 day moving average | the 200 day moving average is a gauge of an asset s long term performance for bitcoin it measures a 200 day moving average price did bitcoin lose value bitcoin is a volatile asset its value changes daily it reached a record price of 69 000 in late 2021 so it has dropped in value since then however it has increased in value over its lifetime many times over | |
how many bitcoins are left | as of february 2022 there are roughly 2 million bitcoins left to be mined investing in cryptocurrencies and other initial coin offerings icos is highly risky and speculative and this article is not a recommendation by investopedia or the writer to invest in cryptocurrencies or other icos since each individual s situation is unique a qualified professional should always be consulted before making any financial decisions investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein | |
what is a cryptocurrency wallet | a crypto wallet is an application that functions as a wallet for your cryptocurrency it is called a wallet because it is used similarly to a wallet you put cash and cards in instead of holding these physical items it stores the passkeys you use to sign for your cryptocurrency transactions and provides the interface that lets you access your crypto modern cryptocurrency wallets make the blockchain accessible to everyone when cryptocurrency was first introduced sending cryptocurrency was a manual task that required entering long keys today the software does most of it for you the first wallet was that of bitcoin s developer satoshi nakamoto the second wallet belonged to hal finney who corresponded with nakamoto and reportedly was the first to run the bitcoin client software wallet nakamoto sent him 10 bitcoins as a test and the cryptocurrency craze began 12investopedia nez riazunderstanding cryptocurrency walletscryptocurrency wallets are software applications on computers or mobile devices such as phones or tablets they use an internet connection to access the blockchain network for the cryptocurrency you re using cryptocurrencies are not stored anywhere they are bits of data in a database scattered all over it the wallet finds all of the bits associated with your public address and sums up the amount for you in the app s interface sending and receiving cryptocurrency is very easy using these applications you can send or receive cryptocurrency from your wallet using various methods typically you enter the recipient s wallet address choose an amount to send sign the transaction using your private key add an amount to pay the transaction fee and send it many wallets have integrated qr codes and near field scanner technology that allows you to scan a code select an amount enter your key select the transaction fee and click send receiving is even easier the sender enters your address and goes through the same routine you accept the payment and the transaction is done cryptocurrency wallet typesthere are two main types of wallets custodial and noncustodial custodial wallets also called online wallets are hosted by a third party that stores your keys for you this could be a company that provides enterprise level data security systems businesses use to preserve and secure data some cryptocurrency exchanges offer custodial wallets for their customers noncustodial wallets are wallets in which you take responsibility for securing your keys this is the type that most cryptocurrency wallets on devices are there are two subcategories of wallets hot and cold a hot wallet has a connection to the internet or to a device that has a connection and a cold wallet has no connection lastly there are three subcategories of wallets software hardware and paper each of these types is considered either a hot or cold wallet so you can have a noncustodial software hot wallet a noncustodial hardware cold or hot wallet or a custodial hardware cold wallet these are the most common types but you may also encounter other combinations some wallets may be best for storing and managing your cryptocurrency such as one of investopedia s best bitcoin wallets research all crypto wallet options before deciding which is best for you software wallets include applications for desktops and mobile devices these wallets are installed on a desktop or laptop computer and can access your cryptocurrency make transactions display your balance and much more some software wallets also include additional functionality such as exchange integration if you re using a wallet designed by a cryptocurrency exchange many mobile wallets can facilitate quick payments in physical stores through near field communication nfc or by scanning a qr code mobile wallets tend to be compatible with ios or android devices trezor electrum and mycelium are examples of wallets that you can use software wallets are generally hot wallets you use private keys to access your cryptocurrency it s important to control access to your private keys because anyone who has them can access your coins hardware wallets are the most popular type of wallet because you can store your private keys and remove them from your device these devices might resemble a usb drive and modern hardware wallets have several features you can make a cryptocurrency transaction on your computer or device by plugging in the hardware wallet most of them can sign cryptocurrency transactions automatically without requiring you to enter the key circumventing a hacker s ability to log your keypresses or record your screen these devices often cost between 100 to 200 ledger and trezor are both well known hardware wallets hardware wallets are generally considered cold wallets because they don t have an active connection until they are plugged in some new hardware wallets come with the ability to connect to your device through bluetooth use these with caution because bluetooth is a wireless signal that can be accessed by unwanted parties when it is turned on early crypto users would write or type their keys on paper which they called paper wallets these evolved to include the keys and qr codes so wallets on mobile devices could scan them however paper wallets are easily damaged or lost so many crypto owners do not use them anymore however there is nothing wrong with using a paper wallet if you take measures to store it properly in a safe or deposit box and check on it once in a while to ensure it hasn t deteriorated crypto wallet securitywallet safety is essential as cryptocurrencies are high value targets for hackers some safeguards include encrypting the wallet with a strong password using two factor authentication for exchanges and storing any large amounts you have offline there have been many cases of malware disguised as wallets so it is advisable to research carefully before deciding which one to use most modern wallets generate a twelve word mnemonic seed phrase an example phrase could be airport bedroom impression sample reception protection road shirt which seems random but is created and linked to your keys by your wallet you can use the phrase to restore the wallet if the device is lost or damaged these words should be carefully stored in a safe place because anyone who finds them will be able to access your cryptocurrency cryptocurrency exchanges have started offering custodial key storage for their users however you should use this service cautiously cryptocurrency exchanges are highly prized targets for cybercriminals additionally if the cryptocurrency exchange goes out of business there may be no guarantees that you ll get your cryptocurrency back for example coinbase a popular exchange announced in its quarterly report to the securities and exchange commission in may 2022 that 3general unsecured creditors are lower in priority on the list of creditors in a bankruptcy proceeding therefore if there are not enough assets to liquidate and meet financial requirements for higher priority creditors it is possible to lose your crypto assets if your custodial wallet company declares bankruptcy the best cryptocurrency key security measures involve removing your keys from your wallet placing them in a form of cold storage and securing them in a vault safe or deposit box the more steps it takes for you to access your cryptocurrency keys the harder it is for a criminal to access them this way you ensure you don t lose your keys it also ensures that someone you have entrusted with your keys doesn t lose them or deny you access to them | |
which crypto wallet is best | there are various wallets you can choose from with many options it s best to read as many reviews as possible to find one that fits your needs while ensuring your keys are secure | |
what is best security wallet for crypto | the safest crypto wallet has no connection on its own or to a device with internet access it also should not deny you access to your crypto because a custodian has financial issues many so called safe wallets have wireless connection technology that determined cybercriminals can access | |
what is a crypto wallet for beginners | crypto wallets store your private crypto keys and provide access to the blockchain or crypto related services the bottom linecryptocurrency wallets are an important part of your cryptocurrency toolbox various types are available so it s best to research and find the one that meets your needs and provides a high level of security to protect your digital assets the comments opinions and analyses expressed on investopedia are for informational purposes only read our warranty and liability disclaimer for more info | |
what is black money | black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes black money proceeds are usually received in cash from underground economic activity and as such are not taxed recipients of black money must hide it spend it only in the underground economy or attempt to give it the appearance of legitimacy through money laundering | |
how black money works | in its simplest form black money is money on which tax is not paid to the government suppose a store accepts cash for its merchandise and does not issue receipts to its customers that store is transacting in black money as it would not pay tax on the unrecorded sales as another example consider a property buyer who purchases land valued at 200 000 if the buyer only reports 50 000 on the books and pays 150 000 under the table then there is a black money transaction worth 150 000 the sellers in both examples have earned money from legal sources but evaded taxes the most common source of black money is the black market or underground economy activities in the black market may include selling prohibited drugs gunrunning terrorism and human trafficking black market activities also involve less severe offenses such as the sale of counterfeit goods stolen credit cards or pirated versions of copyrighted material the portion of a country s income tied to black money affects the economic growth of the country black money causes financial leakage as unreported income that is not taxed causes the government to lose revenue in addition these funds rarely enter the banking system as a result it can be more difficult for legitimate small businesses and entrepreneurs to obtain loans furthermore black money causes the financial health of a nation to be underestimated it is extremely difficult to estimate the amount of black money in any economy that is not surprising given that participants in the underground economy have strong incentives to conceal their activities these unreported earnings cannot be included in a country s gross national product gnp or gross domestic product gdp thus a nation s estimates of savings consumption and other macroeconomic variables would be misleading these inaccuracies adversely affect planning and policymaking criticism of black moneyin addition to some of the clearly immoral activities such as human trafficking that are pursued to obtain black money black money itself creates issues most notably higher amounts of black money in the economy often lead to increased corruption businesses that make substantial profits in the underground economy almost necessarily have to pay law enforcement to look the other way from time to time however that leads to a corrupt police force that may move from ignoring offenses to actively participating in crimes 1benefits of black moneyblack money produces the most benefits in societies with the most oppressive laws for example many ordinary market economic transactions were illegal in the soviet union people turned to the underground economy to alleviate shortages and obtain banned goods 2 in many other cases regimes imposed price controls that made goods unobtainable or sales taxes that made them unaffordable black money provided a way to decrease the damage black money can also help to reduce the impact of systematic racism historically governments banned certain races from holding land trading securities or otherwise exercising their natural rights to engage in commerce these bans pushed some victims of discrimination into less regulated areas where they were free to earn black money special considerationsmost black money holders attempt to convert the money into legal money also known as white money there are a number of ways to do that the penalties against money laundering are often severe so legitimate businesses must be careful to avoid accidentally participating in it money laundering can be perpetrated using the hawala system of transactions the hawala system is an informal and cheap method of transferring money from one region to another without any actual money movement and without the use of banks it operates on codes and contacts and no paperwork or disclosure is required if a money launderer in the u s decides to send 20 000 through a hawala dealer to a recipient in india the exchange rate agreed upon will be fixed at a significantly higher rate than the official rate tax havens can offer anonymity to money launderers due to the lax policies on funds deposited in their countries other outlets for black money include real estate jewelry cash bullion investments and cryptocurrencies | |
what is black money | black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes black money proceeds are usually received in cash from underground economic activity and as such are not taxed recipients of black money must hide it spend it only in the underground economy or attempt to give it the appearance of legitimacy through money laundering | |
how black money works | in its simplest form black money is money on which tax is not paid to the government suppose a store accepts cash for its merchandise and does not issue receipts to its customers that store is transacting in black money as it would not pay tax on the unrecorded sales as another example consider a property buyer who purchases land valued at 200 000 if the buyer only reports 50 000 on the books and pays 150 000 under the table then there is a black money transaction worth 150 000 the sellers in both examples have earned money from legal sources but evaded taxes the most common source of black money is the black market or underground economy activities in the black market may include selling prohibited drugs gunrunning terrorism and human trafficking black market activities also involve less severe offenses such as the sale of counterfeit goods stolen credit cards or pirated versions of copyrighted material the portion of a country s income tied to black money affects the economic growth of the country black money causes financial leakage as unreported income that is not taxed causes the government to lose revenue in addition these funds rarely enter the banking system as a result it can be more difficult for legitimate small businesses and entrepreneurs to obtain loans furthermore black money causes the financial health of a nation to be underestimated it is extremely difficult to estimate the amount of black money in any economy that is not surprising given that participants in the underground economy have strong incentives to conceal their activities these unreported earnings cannot be included in a country s gross national product gnp or gross domestic product gdp thus a nation s estimates of savings consumption and other macroeconomic variables would be misleading these inaccuracies adversely affect planning and policymaking criticism of black moneyin addition to some of the clearly immoral activities such as human trafficking that are pursued to obtain black money black money itself creates issues most notably higher amounts of black money in the economy often lead to increased corruption businesses that make substantial profits in the underground economy almost necessarily have to pay law enforcement to look the other way from time to time however that leads to a corrupt police force that may move from ignoring offenses to actively participating in crimes 1benefits of black moneyblack money produces the most benefits in societies with the most oppressive laws for example many ordinary market economic transactions were illegal in the soviet union people turned to the underground economy to alleviate shortages and obtain banned goods 2 in many other cases regimes imposed price controls that made goods unobtainable or sales taxes that made them unaffordable black money provided a way to decrease the damage black money can also help to reduce the impact of systematic racism historically governments banned certain races from holding land trading securities or otherwise exercising their natural rights to engage in commerce these bans pushed some victims of discrimination into less regulated areas where they were free to earn black money special considerationsmost black money holders attempt to convert the money into legal money also known as white money there are a number of ways to do that the penalties against money laundering are often severe so legitimate businesses must be careful to avoid accidentally participating in it money laundering can be perpetrated using the hawala system of transactions the hawala system is an informal and cheap method of transferring money from one region to another without any actual money movement and without the use of banks it operates on codes and contacts and no paperwork or disclosure is required if a money launderer in the u s decides to send 20 000 through a hawala dealer to a recipient in india the exchange rate agreed upon will be fixed at a significantly higher rate than the official rate tax havens can offer anonymity to money launderers due to the lax policies on funds deposited in their countries other outlets for black money include real estate jewelry cash bullion investments and cryptocurrencies | |
what is black friday | black friday refers to the day after the u s thanksgiving holiday celebrated on the fourth thursday in november it has become a day of special shopping deals and discounts and is said to mark the beginning of the holiday shopping season the sales figures from black friday are often considered a sign of the overall economic health of the country and a way for economists to measure the confidence of the average american when it comes to their discretionary spending lower black friday sales figures are sometimes taken as a harbinger of slower economic growth understanding black fridayit s common for retailers to offer special promotions online and in store on black friday many open their doors during the pre dawn hours on black friday to attract customers or even keep their operations going well into the night on thanksgiving it s also become increasingly common for retailers to offer black friday deals well in advance of the actual day really avid bargain hunters have been known to camp out overnight on thanksgiving to secure a place in line at a favorite store the most fanatical might skip thanksgiving dinner altogether and head to whatever stores are open the promotions usually continue through sunday and both brick and mortar stores and online retailers see a spike in sales black friday also refers to a famous stock market crash that took place on sept 24 1869 on that day after a period of rampant speculation the price of gold plummeted and stocks followed suit 1black friday and retail spendingretailers may spend an entire year planning their black friday sales they use the day as an opportunity to unload overstock inventory and offer doorbusters and discounts on seasonal items such as holiday decorations and typical holiday gifts the doorbusters often include big ticket items like tvs smart devices and other electronics luring customers in the hope that once inside they will also purchase higher margin goods black friday advertisements are often so highly anticipated that retailers go to great lengths to ensure they don t leak out publicly beforehand competition among consumers for limited supplies of the hottest trending items has sometimes led to violence and injuries in the absence of adequate security for example on black friday in 1983 customers engaged in scuffles fistfights and stampedes in stores across the u s to buy cabbage patch kids dolls that year s must have toy which was also believed to be in short supply 2 appallingly a worker at one big box store was trampled to death on black friday in 2008 as throngs of shoppers pushed their way into the store the moment the doors opened 3the surprising origins of black fridaythe concept of retailers throwing post turkey day sales started long before the name black friday was coined in an effort to kick off the holiday shopping season and attract hordes of shoppers stores have promoted major deals the day after thanksgiving for decades banking on the fact that many businesses gave their employees that friday off so why the name some say the day is called black friday as an homage to the term black referring to profitability which stems from the old bookkeeping practice of recording profits in black ink and losses in red ink the idea is that retail businesses can sell enough on this single friday and the ensuing weekend to put themselves in the black for the year however long before it started appearing in advertisements and commercials the term was actually used by overworked philadelphia police officers in the 1950s crowds of shoppers and visitors flooded the city of brotherly love the day after thanksgiving not only did philadelphia stores tout major sales and the unveiling of holiday decorations on this special day but the city also hosted the army navy football game on saturday of the same weekend as a result traffic cops were required to work 12 hour shifts to deal with the throngs of drivers and pedestrians and they were not allowed to take the day off over time the annoyed officers using a descriptive that s no longer acceptable started to refer to this dreaded workday as black friday the term spread to store salespeople who used black friday to describe the long lines and general chaos they had to deal with on that day it remained philadelphia slang for a few decades as well as spreading to a few nearby cities such as trenton n j finally in the mid 1990s celebrating the positive connotation of black ink black friday swept the nation and started to appear in print and tv ad campaigns across the united states 4the evolution of black fridaysomewhere along the way black friday made the giant leap from congested streets and crowded stores to fevered shoppers fighting over parking spaces and tussling over the latest must have toy when did black friday become the frenzied over the top shopping event it is today that would be in the 2000s when black friday was officially designated the biggest shopping day of the year until then that title had gone to the saturday before christmas yet as more retailers started promoting can t miss post thanksgiving sales and the black friday discounts grew deeper and deeper american consumers could no longer resist the pull of this big shopping day in 2011 walmart announced that instead of opening its doors on friday morning it would start sales on thanksgiving evening that started a frenzy among other big box retailers who quickly followed suit today black friday is a longer event essentially a black weekend 5according to the national retail federation nrf 196 7 million consumers in the u s shopped during the 2022 five day holiday weekend between thanksgiving day and the following monday that year up nearly 17 million from 2021 clocking in at the highest figure since nrf first started tracking this data in 2017 the average amount consumers spent on holiday items during the 2022 weekend was 325 44 compared to 301 27 in 2021 of that total 229 21 went toward gifts according to the nrf a number that highlights the fact that people now see it as an opportunity to load up on items they want for themselves not just to check off their gift lists 6black friday vs cyber mondayfor online retailers a similar tradition has arisen on the monday following thanksgiving cyber monday the idea is that consumers return to work after the thanksgiving holiday weekend ready to start shopping and on their employer s time online retailers often herald their promotions well in advance of the actual day in order to compete against the black friday offerings at brick and mortar stores cyber monday has proved to be a hit with shoppers but in terms of overall online sales it is surpassed by black friday about 87 2 million customers shopped online on black friday 2022 while the number for cyber monday was 77 million according to the nrf 6also part of thanksgiving holiday weekend shopping is small business saturday which was created to encourage consumers to patronize their local small businesses the economic significance of black fridaysome investors and stock analysts look at black friday numbers as a way to gauge the overall health of the entire retail industry others scoff at the notion that black friday has any real fourth quarter predictability for the stock markets as a whole instead they suggest that it only causes very short term gains or losses however in general the stock market can be affected by people having extra days off for thanksgiving or christmas it tends to see increased trading activity and higher returns the day before a holiday or a long weekend a phenomenon known as the holiday effect or the weekend effect many traders look to capitalize on these seasonal bumps | |
when is black friday in 2023 | black friday always occurs the day after thanksgiving in 2023 black friday takes place on nov 24 | |
why is black friday important to economists | some economists consider black friday to be a good gauge of consumer confidence and consumers likely discretionary spending going forward | |
when did cyber monday start | cyber monday the monday following the thanksgiving weekend was launched in 2005 by shop org an online arm of the national retail federation the bottom lineblack friday the day after thanksgiving has long been viewed as the start of the holiday shopping season consumers seek out big discounts offered by retailers while economists use overall sales figures as a measure of consumer confidence and the health of the economy | |
what is a black market | a black market is an economic activity that takes place outside government sanctioned channels illegal market transactions usually occur under the table to let participants avoid government price controls or taxes the goods and services offered in a black market can be illegal meaning their purchase and sale are prohibited by law or they can be legal but transacted to avoid taxes illegal markets are also known as illegal markets shadow markets or underground markets impacts of black market activitiestraditionally underground market activity was conducted in cash one of its defining aspects this was done in order to avoid creating any paper trail with the rise of the internet many underground market transactions are now done online such as on the dark web and often conducted with digital currencies because of this nature illegal markets can take a toll on an economy since they are shadow markets where economic activity is not recorded and taxes are not paid it is often assumed that a country s gross domestic product gdp is not its actual gdp because it does not take into account all the business activity conducted in underground markets the underground market s many drawbacks include the risk of fraud the possibility of violence and being saddled with counterfeit goods or adulterated products which is especially dangerous in the case of medications types of black marketan underground market is often a place for the exchange of illicit dangerous or counterfeit goods they are venues where highly controlled substances or products such as drugs and firearms are illegally traded human trafficking is a very large illegal market human trafficking moves people into forced labor prostitution child armies and the market for human organs in 2021 it is estimated that there are 40 million people trapped in modern enslavement worldwide one in four of them are children almost three quarters 71 are women and girls from a 2014 international labor organization ilo report human trafficking earns profits of 150 billion a year and there are no published numbers more updated about this aspect 12counterfeit goods also form a major part of black market activity despite strong laws designed to punish those who sell fake goods including in the us there remains a large black market for these goods the sale of counterfeit goods not only reduces the profits made by legitimate manufacturers but it also undermines confidence in the market as a whole other underground markets include illegal gambling the illegal wildlife trade and illegal mining fishing and logging in the financial context the biggest underground market exists for currencies in nations with strict currency controls while most people may shun an underground market because they consider it sleazy there may be rare occasions when they have no choice but to turn to this necessary evil as for currency illegal markets they exist primarily in nations that apart from currency controls have weak economic fundamentals such as a high inflation rate and low currency reserves and a fixed exchange rate where the domestic currency is pegged at an unrealistically high level to the u s dollar or other currency as a result the currency underground market is flourishing in nations like argentina iran and venezuela the necessity of black marketssometimes an underground market is the only choice for procuring goods in certain situations for certain people for example suppose you are on vacation with your family in an exotic location and run out of formula for your baby if there is nothing available in local stores and the only way to acquire baby formula is through an underground market transaction few people would hesitate to make the purchase paying a premium over the face value of a ticket to see a concert or sporting event is also an example of an illegal market transaction in a number of developing nations life saving medicines are in short supply and often the only alternative is to procure them through the underground market underground market transactions provide no recourse to the buyer in case the product is defective and a buyer in an underground market can suffer penalties and jail times just as easily as a seller can while critics may carp that this only serves to perpetuate the illegal and unethical practice of profiteering from someone else s misfortune participating in the underground market is a relatively easy decision to make when someone s life is at stake example of an underground marketone of the most recent examples of an underground market using modern technology was that of the silk road market this was a digital market that used bitcoin for money laundering and illegal drug transactions and weapons sales 3the market began in 2011 and closed in 2013 when it was stopped by the fbi the man behind the market was a 29 year old computer science engineer named ross ulbricht silk road sold a variety of illegal goods and made 1 billion in sales 3it connected 4 000 drug dealers to 100 000 buyers an individual could purchase almost anything heroin rocket launchers falsified documents and even murders for hire were discussed it was known as the amazon of the dark web 43it led to a global search for ulbricht he was finally captured the illegal market shut down and he is now serving life in prison | |
what is a simple definition of the black market | a black market is any market where the exchange of goods and services takes place in order to facilitate the transaction of illegal goods or to avoid government oversight and taxes or both | |
how does the black market work | there are a variety of illegal markets and all of them work in different ways a black market can be a physical market where two individuals meet to exchange illegal goods for example a drug transaction on a street corner a black market can also exist online such as on the dark web where individuals communicate to exchange goods and payments are made in digital currencies | |
what is an example of a black market | an example of an illegal or black market would be the human trafficking market that engages in the capture of people throughout the world and their sale into various areas such as forced labor and prostitution | |
is the black market illegal | all black markets are illegal | |
why is it called the black market | there are various theories as to why it is called the black market these include the association of the word black with shadows and darkness with the markets that continued to sell slaves after abolition and the association of the color black with anarchist groups | |
how big is the black market | the nature of the black market make measuring its size very difficult and estimates vary a lot it has been estimated that the black market constitutes much as 36 percent of the gross domestic product gdp of developing nations and 13 percent of developed countries gdp 5the bottom linea black market a market that exists outside of government sanctioned channels black markets trade in illegal goods and services legal goods and services to avoid taxes or both examples of black markets include the sale of illegal drugs weapons human trafficking and the illegal wildlife trade black markets can have a negative impact on the economy because the activity is not reported and taxes are not collected on the transactions black markets do provide some benefits such as creating jobs for those who may not be able to find employment in traditional markets and allowing access to medicine and healthcare to those individuals that might not have had access otherwise | |
what was black monday | black monday occurred on oct 19 1987 when the dow jones industrial average djia lost almost 22 in a single day the event marked the beginning of a global stock market decline and black monday became one of the most notorious days in financial history by the end of the month most of the major exchanges had dropped more than 20 1economists have attributed the crash to a combination of geopolitical events and the advent of computerized program trading that accelerated the selloff causes of black mondaythe cause of the massive stock market drop cannot be attributed to any single news event since no major news event was released the weekend preceding the crash however several events coalesced to create an atmosphere of panic among investors aftermath of black mondayfollowing the crash the federal reserve slashed interest rates by half a percentage point hoping to free up capital and encourage more lending it also injected billions of dollars into the economy through quantitative easing regulators introduced new protective mechanisms to prevent flash crashes due to program trading circuit breakers were introduced to leading stock markets to automatically shut down trading in the event of unusual price movements circuit breakers can halt all trading on an exchange if a certain index in the u s the s p 500 experiences an unusual drop there are also circuit breakers for individual stocks halting trading in that security only this is intended to prevent traders from panic selling during momentary drops as of 2022 the circuit breakers are set at the levels of 7 13 and 20 a 7 drop from the close of the previous trading day is considered a level 1 decline resulting in a 15 minute trading halt a 13 decline is level 2 and also results in a 15 minute halt a 20 drop ends trading for that day can it happen again since black monday a number of protective mechanisms have been built into the market to prevent panic selling such as trading curbs and circuit breakers however high frequency trading hft algorithms driven by supercomputers move massive volumes in just milliseconds which increases volatility the 2010 flash crash was the result of hft gone awry sending the stock market down 10 in a matter of minutes 2 this led to the installation of tighter price bands but the stock market has experienced several volatile moments since 2010 amid the 2020 global crisis markets lost similar amounts in the month of march as jobless rates reached their highest levels since the great depression before recovering over the summer of that year lessons from black monday and other market crashesa market crash of any duration is temporary many of the steepest market rallies have occurred immediately following a sudden crash the steep market declines in august 2015 and january 2016 were both roughly 10 drops but the market fully recovered and rallied to new or near new highs in the following months a well conceived long term investment strategy based on personal investment objectives should provide the confidence for investors to remain steadfast while everyone else is panicking investors who lack a strategy tend to let their emotions guide their decision making knowing that market crashes are only temporary these times should be considered an opportunity to buy stocks or funds market crashes are inevitable savvy investors have a shopping list prepared for stocks or funds that would be more attractive at lower prices and buy while others are selling over the long term market crashes such as black monday are a small blip in the performance of a well structured portfolio short term market events are impossible to predict and they are soon forgotten long term investors are better served by tuning out the noise of the media and the herd and focusing on their long term objectives other black mondayswhile the term black monday is most commonly applied to the stock market crash of 1987 it can also be applied to any other sudden one day drop in prices on the first day of the week the first black monday was on oct 28 1929 just after the beginning of the crash that ultimately resulted in the great depression on that day stocks fell by 12 8 the crash was attributed to low wages increasing debt and an excess of large bank loans that could not be liquidated the term can also describe the flash crash on august 24 2015 when the djia fell by 1 089 points just after the market opened the drop which followed another sharp decline the previous friday was attributed to economic worries about china the market partially rebounded and closed 533 points below the open the term is less commonly applied to the crash of march 9 2020 when the djia fell nearly 8 due to the uncertainty surrounding the covid 19 pandemic the following thursday the market crashed again by 10 | |
what caused black monday 1929 | black monday often refers to oct 28 1929 when stocks fell by 12 82 a few days earlier on black thursday stocks had already experienced a decline of 11 this precipitated the stock market crash of 1929 other causes of the crash were low wages increasing debt a struggling agricultural sector and an excess of large bank loans that could not be liquidated 3did people lose money on black monday yes black monday caused about 500 billion in losses when the dow jones industrial index fell 508 points in percentage terms it is the biggest ever one day stock market loss | |
why is it called black monday | black monday refers not only to the events on oct 19 1987 but also to a number of specific mondays when sudden severe and turbulent events have occurred from military battles to massacres and stock market crashes the term seems to have been coined by u s representative john bell williams on the floor of congress in washington d c on monday 17 may 1954 this was the date of the supreme court s decision in brown v board of education in which the court ruled that u s state laws establishing racial segregation in public schools were unconstitutional in opposition to the decision white citizens councils were formally organized throughout the south to preserve segregation and defend segregated schools the bottom lineblack monday refers to the catastrophic worldwide stock market crash on oct 19 1987 when the djia fell 508 points or 22 6 in a single day it remains the largest one day decline ever other major stock markets saw similarly huge declines stock markets quickly recovered a majority of their black monday losses in just two trading sessions the djia gained back 288 points or 57 of the total black monday losses in less than two years us stock markets had surpassed their pre crash highs 4since then the u s securities and exchange commission has built a number of protective mechanisms to avoid market panics such as trading curbs and circuit breakers | |
the black scholes model is one of the most important concepts in modern financial theory also known as the black scholes merton bsm model this mathematical equation estimates the theoretical value of derivatives based on other investment instruments taking the impact of time and other risk factors into account it was developed in 1973 and is still regarded as one of the best ways to price an options contract | history of the black scholes modeldeveloped in 1973 by fischer black robert merton and myron scholes the black scholes model was the first widely used mathematical method to calculate the theoretical value of an option contract it uses current stock prices expected dividends the option s strike price expected interest rates time to expiration and expected volatility the initial equation was introduced in black and scholes 1973 paper the pricing of options and corporate liabilities published in the journal of political economy robert c merton helped edit the paper he published his own article in the bell journal of economics and management science later that year theory of rational option pricing he expanded the mathematical understanding and applications of the model and coined the term black scholes theory of options pricing 12scholes and merton were awarded the nobel memorial prize in economic sciences in 1997 for their work in finding a new method to determine the value of derivatives black had passed away two years earlier so he could not be a recipient because nobel prizes are not given posthumously the nobel committee acknowledged his role in the black scholes model however 3 | |
how the black scholes model works | black scholes posits that instruments such as stock shares or futures contracts will have a lognormal distribution of prices following a random walk with constant drift and volatility the equation uses this assumption and factors in other important variables to derive the price of a european style call option the black scholes equation requires six variables volatility the price of the underlying asset the strike price of the option the time until the expiration of the option the risk free interest rate and the type of option whether it s call or put it s theoretically possible for options sellers to set rational prices with these variables for the options that they re selling the model predicts that the price of heavily traded assets follows a geometric brownian motion with constant drift and volatility it incorporates the constant price variation of the stock the time value of money the option s strike price and the time to the option s expiry when it s applied to a stock option the black scholes model is often contrasted against the binomial model or a monte carlo simulation the black scholes model makes certain assumptions the original black scholes model didn t consider the effects of dividends paid during the life of the option but the model is frequently adapted to account for dividends by determining the ex dividend date value of the underlying stock the model is also modified by many option selling market makers to account for the effect of options that can be exercised before expiration firms will alternatively use a binomial or trinomial model or the bjerksund stensland model for the pricing of the more commonly traded american style options the black scholes model formulathe mathematics involved in the formula are complicated and can be intimidating but you don t have to know or even understand the math to use black scholes modeling in your strategies options traders have access to a variety of online options calculators and many trading platforms boast robust options analysis tools that include indicators and spreadsheets that perform the calculations and output the options pricing values the black scholes call option formula is calculated by multiplying the stock price by the cumulative standard normal probability distribution function the net present value npv of the strike price multiplied by the cumulative standard normal distribution is then subtracted from the resulting value of the previous calculation | |
a black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences black swan events are characterized by their extreme rarity severe impact and the widespread insistence that they were obvious in hindsight | one frequently cited example of a black swan event was the housing market crash of 2008 which led to the great recession other examples include the covid 19 pandemic the terrorist attacks of sept 11 and the hyperinflation crisis in zimbabwe investopedia michela buttignolunderstanding a black swanthe term was popularized by nassim nicholas taleb a finance professor writer and former wall street trader taleb wrote about the idea of a black swan event in a 2007 book prior to the events of the 2008 financial crisis taleb argued that because black swan events are impossible to predict due to their extreme rarity yet have catastrophic consequences it is important for people to always assume a black swan event is a possibility whatever it may be and to try to plan accordingly 1 some believe that diversification may offer some protection when a black swan event does occur taleb later used the 2008 financial crisis and the idea of black swan events to argue that if a broken system is allowed to fail it actually strengthens it against the catastrophe of future black swan events he also argued that conversely a system that is propped up and insulated from risk ultimately becomes more vulnerable to catastrophic loss in the face of rare unpredictable events 1taleb describes a black swan as an event that for extremely rare events taleb argues that the standard tools of probability and prediction such as the normal distribution do not apply since they depend on large population and past sample sizes that are never available for rare events by definition extrapolating using statistics based on observations of past events is not helpful for predicting black swans and might even make us more vulnerable to them the last key aspect of a black swan is that as a historically important event observers are keen to explain it after the fact and speculate as to how it could have been predicted such retrospective speculation however does not actually help to predict future black swans as these can be anything from a credit crisis to a war black swans and the housing market crashone of the most oft cited examples of a black swan event was the housing market crash of 2008 it occurred shortly after the 2007 publication of the black swan and it ticked all of the boxes in taleb s description prior to the crash it was impossible to calculate the probability that the housing market was in a bubble despite the serious economic consequences after the bubble popped many experts produced post facto rationalizations to explain why the collapse had been inevitable yet only a handful of economists and asset managers had seen it coming other examples of black swan eventsa black swan is any event that seems highly unlikely before it happens but in retrospect seems to have been nearly inevitable this definition is inherently subjective but these are some examples that are often cited as black swan events | |
what is a black swan event in the stock market | a black swan event in the stock market is often a market crash that exceeds six standard deviations making it exceedingly rare from a probabilistic standpoint some have argued that stock prices are fat tailed and that such events are in reality more frequent than the statistics would let on | |
why do they call it a black swan event | a black swan is considered to be rare since most swans are white in fact the story goes that black swans were thought once to not at all exist until finally one was discovered the lesson is that what we think are very rare events may be more common than previously thought | |
what is a grey swan event | a grey swan event is an outlier that is more probable than a black swan as a result people can better prepare for and hedge against a grey swan than a black swan the bottom linea black swan event is a consequential occurrence that is almost impossible to predict yet after the fact seems to have been inevitable such events can prove highly disruptive to the stock market where investors spend millions trying to predict unpredictable events | |
what is the gramm leach bliley act of 1999 glba | the gramm leach bliley act of 1999 glba was a bi partisan regulation under president bill clinton passed by congress on november 12 1999 the glba was an attempt to update and modernize the financial industry the glba is most well known as the repeal of the glass steagall act of 1933 which stated that commercial banks were not allowed to offer financial services like investments and insurance related services as part of normal operations 1understanding the gramm leach bliley act of 1999 glba due to the remarkable losses incurred as a result of 1929 s black tuesday and thursday the glass steagall act was originally created to protect bank depositors from additional exposure to risk associated with stock market volatility 2 as a result for many years commercial banks were not legally allowed to act as brokers 3 since many regulations have been instituted since the 1930s to protect bank depositors glba was created to allow these financial industry participants to offer more services glba was passed on the heels of commercial bank citicorp merger with the insurance firm travelers group this led to the formation of the conglomerate citigroup which offered not only commercial banking and insurance services but also lines of business related to securities its brands at this stage included citibank smith barney primerica and travelers 4 citicorp merger was a violation of the then existing glass steagall act as well as the bank holding company act of 1956 the act is also known as the gramm leach bliley financial services modernization act to allow the merger to take place the u s federal reserve gave citigroup a temporary waiver in september 1998 a precursor to congress s passage of glba 5 moving forward other similar mergers would be fully legal repealing glass steagall also removed the ban of simultaneous service by any officer director or employee of a securities firm as an officer director or employee of any member bank 6the gramm leach bliley act and consumer privacythe gramm leach bliley act also required financial institutions offering consumers loan services financial or investment advice and or insurance to fully explain their information sharing practices to their customers firms must allow their customers the option to opt out if they do not want their sensitive information shared 7while many consider critical information such as bank balances and account numbers to be confidential in reality this data is consistently bought and sold by banks credit card companies and others gramm leach bliley required limited privacy protections against such personal data sales along with pretexting obtaining personal information through false pretenses | |
what is a grandfather clause | a grandfather clause also called a legacy clause is an exemption that allows persons or entities to continue with activities or operations that were approved before the implementation of new rules regulations or laws such allowances can be permanent temporary or instituted with limits 1 | |
how a grandfather clause works | generally speaking a grandfather clause only exempts people or entities engaged in specified activities before new rules were put in place all other parties entering the market post implementation are required to abide by the new rules 1as a result grandfather clauses effectively place two sets of rules or regulations on otherwise similar businesses or circumstances which can create unfair competitive advantages for exempted parties in these situations grandfather clauses may only be granted for a set period of time thereby encouraging the party with an exemption to work toward compliance with the new rules before the grace period elapses history of the grandfather clausethe origin of the term grandfather clause refers to statutes put in place after the civil war by seven southern states in an attempt to block african americans from voting the statutes enumerated new voting requirements such as literacy tests property ownership and poll taxes however white voters whose grandfathers had the right to vote before the end of the civil war were exempt from the new requirements under the legacy clause as african americans had no voting rights until the enactment of the 15th amendment to the constitution in 1870 they did not qualify for the exemption 2the statute was deemed to be unconstitutional by the supreme court in 1915 because it violated equal voting rights but the use of the term indicating rights prior to rule changes carries on 3 the term has expanded beyond its roots in racial exclusion to refer mainly to legal exclusions granted on the basis of a current business practice being grandfathered in the year lyndon b johnson introduced the voting rights act which enabled congress to end discriminatory voting practices such as the grandfather clause 4types of grandfather clausesdepending on specific circumstances grandfather clauses can be implemented in perpetuity for a specified amount of time or with specific limitations in situations where this clause creates a competitive advantage for the exempted party exemptions are usually granted for a specified period to allow existing businesses to make the changes necessary to get up to speed and comply with new rules and regulations clauses with specific limitations may also be put in place to prevent unfair competition such as prohibitions on the expansion remodeling or retooling of an existing facility this keeps a manufacturing plant for example from avoiding upgrades to current environmental standards while still continuing to increase production examples of grandfather clausesone of the most common uses of grandfather clauses is found in changing zoning laws for example in a situation where a change in zoning law from commercial to residential prohibits new retail establishments the existing stores are typically granted grandfather clauses allowing them to stay in business if they abide by specified limitations a common limitation is the sale of a business which can void the grandfather clause 5grandfather clauses are also common in the electricity industry in many countries new regulations on carbon emissions are being applied to proposed generation plants while grandfather clauses for specified time frames have been granted to existing coal powered facilities in part the clauses are being put in place to allow coal powered plants time to integrate emission controls and to allow workers and communities dependent on coal mining enough time to transition away from the industry 1 | |
what is a grandfather clause | a grandfather clause exempts people businesses and other entities from adhering to new legal rules or laws governing their behavior | |
how long does a grandfather clause last | the length of time the clause is in force can either be unlimited or for a specified amount of time it also can end when a specified set of circumstances has been achieved | |
what is the origin of the term grandfather clause | the term grandfather clause was coined to describe laws put in place in the south after the u s civil war to prevent african americans from voting new laws governing who could and could not vote were implemented that required literacy tests owning property and the payment of poll taxes however anyone whose grandfather had had the right to vote was exempt from these new laws hence the name as slaves were considered property and thus could not vote it ensured that all african americans would be subject to the new voting restrictions while most white americans would not the bottom linethough born in the infamy of racism the term grandfather clause has survived the years and come to be viewed as benign and untethered to its origins it describes a legal clause that provides an exemption to adhering to a new law or standard it is most often used to prevent unfair advantage and is frequently limited in duration for example allowing older businesses to get up to speed and comply with new regulations while amortizing the costs of doing so it can also be limited by circumstance such as when an area is rezoned from commercial to residential but existing businesses are allowed to stay in operation so long as that operation is continuous sometimes it exists in perpetuity | |
what is a small business grant | a small business grant is an award usually financial given by one entity typically a company foundation or government to a company to facilitate a goal or incentivize performance grants are essentially gifts that usually do not have to be paid back small business grants are targeted to a variety of purposes from starting a company or helping it run more efficiently to aiding its expansion grants are not simply free money however the funds must be used in accordance with the terms of the grant and if they are not they will have to be paid back possibly with interest bipoc and lgbtqia small business owners can now apply for a chance to win 250 000 in advertising and consulting services from good impressions | |
how small business grants work | grants are tailored to a specific purpose and the application process is generally rigorous and time consuming the federal government delineates what it terms the grant lifecycle which has three phases 1non federal grants of course may vary in how closely they are scrutinized and monitored but the process remains largely the same types of grants for small businessesthere are at least five different general types of small business grants available from myriad grantors within these five categories are opportunities too numerous to elucidate in one article and the categories can sometimes overlap the most comprehensive source for federal business grants is the government website grants gov which maintains a database of thousands of available business grants 2 grantwatch is on online database of over 27 000 grants including more than 1 000 small business grants 3 it has a free membership or you can pay for a subscription lasting a week 18 a month 45 a quarter 90 or a year 199 which provides added benefits such as keyword search and full grant info 4here are some grant examples that will help you understand what kind of help is available and where to look for it the u s small business administration sba a federal agency is a principal source of limited small business grants for certain defined purposes these include the u s department of agriculture also has grants for rural small businesses federal small business grants cannot be used for starting or expanding a business 10as noted above the sba provides grant money through step and its small business development centers that eventually funds small business support and development on the state or regional scale in addition the u s department of commerce has two programs that fund a variety of grants distributed statewide or region wide they are there are also states and regions that offer small business government grants here are just two examples from new york and texas corporations may offer grants as a way to burnish their image since philanthropy usually plays well to the public corporations are usually concerned about projecting a positive image to the public and philanthropy is one way to do that this can take the form of grants to worthy causes often nonprofit ones but it can also take the form of small business grants here are but a few of what is out there all grants are targeted to a specific goal but some are aimed solely at a defined group it could be the lgbtq community veterans or as with doordash above and the sogal foundation below see start up grants for small businesses restaurant owners doordash and self identified black women and nonbinary people sogal here are a couple of other examples as mentioned above federal small business grants cannot be used for starting a business fortunately plenty of other entities are more than happy to help out in that regard here are just three | |
is a grant a loan | no it is not a loan must eventually be repaid usually with interest while a grant does not need to be repaid | |
is a grant a form of income | yes it is which means that it is considered taxable at both the federal and state level unless the law dictates otherwise can you pay yourself with grant money this really depends on the grantor s terms for the use of the grant but it is possible if those terms allow it | |
does a grant have to be paid back | no it does not unless the grantee fails to satisfy all the obligations of the grant the bottom linesmall businesses are an important component of the american economy which is undoubtedly why there is such a plethora of support for them in the form of grant money that support can come from the government federal state or regional corporations private companies nonprofit foundations and other entities it usually must be used for targeted goals and is often aimed at specific communities so don t by shy about it if you and your small business are in need go out and find the grant that s designed for you | |
what is a grant deed | a grant deed also known as a special or limited warranty deed is a legal document used to transfer real estate between a previous owner the grantor and a new owner the grantee a grant deed warrants that a grant deed must be in writing and include the names of the grantor and the grantee a legal description of the property being transferred i e lot number tract number city county and state words of conveyance for example grant bargain sell and convey and the grantor s signature 2uses and content of a grant deeda deed is a legal document that when executed and delivered conveys title to or an interest in real estate from a seller to a buyer there are a variety of deeds including quitclaim deeds general warranty deeds and grant deeds each type of deed offers different levels of protection and risks to buyers and sellers a grant deed includes two warranties that the grantor received title and that the property was unencumbered by the grantor it does not contain any information to pay legal costs if a title claim needs to be defended it also does not provide any warranties to claims made before the title was acquired by the grantor this type of deed offers less protection to buyers than a general warranty deed a deed in which the grantor fully warrants good clear title to the property however a grant deed offers more protection to buyers than a quitclaim deed which has no express or implied covenants or warranties grant deeds are often used to transfer real estate in conjunction with tax and foreclosure sales grant deeds are seen as a middle ground between quitclaim deeds and general warranty deeds as grant deeds provide a level of protection between the two there are several types of grant deeds depending on who transfers property to whom for example an interspousal transfer grant deed is used to transfer real estate from one spouse to another often during a divorce all deeds must contain the names of the grantor and the grantee the date an overview of the property being transferred and the signature of the grantor a majority of deeds will require the stamp of a notary as well as the signatures of witnesses in addition to the above a grant deed will contain a statement of the warranties included the overall content and format of a grant deed will depend on the law of the state where the property is located real estate investing considerationsreal estate including real property is often described as an asset class along with stocks bonds cash and alternative investments such as private equity and venture capital real property consists of land and any property attached directly to it such as buildings ponds canals roads and machinery and can entail the right to use control and dispose of the land as an investment real estate is unique in that its location significantly impacts prices for example residential real estate values are affected by local factors such as the area s employment rate economy crime rates transportation facilities quality of schools and other municipal services along with property taxes in commercial real estate which is often more valuable per square foot than residential real estate these factors are also pertinent although less so commercial rental real estate is more heavily regulated than residential real estate with specific regulations existing between countries states and even cities and counties zoning regulations can add further complexity to commercial real estate investments along with the risk of tenant turnover those interested can invest directly in real estate where grant deeds might come into play or indirectly by buying shares in real estate investment trusts reits or mortgage backed securities mbs other types of deedsthere are other variations of a deed including but not limited to | |
is a grant deed the same as a mortgage | grant deeds are not the same as a mortgage grant deeds and other types of deeds are used to transfer real estate ownership from a seller to a buyer on the other hand a mortgage is a conditional transfer or pledge of real estate as security collateral for the payment of a debt | |
what is the difference between a grant deed and a quitclaim deed | grant deeds and quitclaim deeds are used to transfer property between sellers and buyers however grant deeds offer more protection to buyers than quitclaim deeds a grant deed grantor warrants that the property was not encumbered during the time they held title except as noted in the deed conversely a quitclaim deed carries no covenants or warranties and only conveys the interest if any that the grantor may have when the deed is delivered if the grantor has no interest in the property then the grantee acquires nothing by virtue of a quitclaim deed | |
what is the strongest type of deed | for real estate buyers a general warranty deed provides greater protection than any other type of deed while it s the best deed for the grantee it gives the grantor the most liability the grantor is generally bound by several covenants including the bottom linea deed is a written document that conveys title to or an interest in real estate when executed and delivered grant deeds fall in the middle of the spectrum in terms of buyer protections they offer more protection than quitclaim deeds but less than general warranty deeds a deed determines the grantor s obligations and the degree of protection that the grantee receives as such it s essential to understand the type of deed used in a real estate transaction whether you re the buyer or the seller similarly real estate laws vary by state consult with a qualified real estate attorney broker or agent if you have questions | |
what are federal grants in aid | a federal grant is financial aid awarded to fund a specific project or program recipients include state local and municipal governments as well as individuals federal grants in aid are funded with money from income tax revenues these grants are not loans therefore no repayment is required but funds must be spent according to the federal government s guidelines for that particular grant understanding federal grants in aida federal grant in aid allows the government to publicly fund a project and still operate independently from the state the funds come with standards and requirements entities that offer grants might divide the resources up across one or more periods annually furthermore they might divide the funds among potential recipients this can make the pursuit of such grant funding a competitive effort among applicants the amount the u s government awards annually in federal assistance agreements consisting mostly of grants 1grants in aid can be awarded to university faculty members to pursue a particular line of research however there are restrictions on how the money can be used for example permitted use of the funds might be to pay undergraduate students to assist with the research and a non permitted use might be the payment of university utility bills the recipient will also have to meet certain requirements to qualify for the aid for example an individual recipient might be required to meet certain citizenship and or residency requirements types of federal grantsfederal grants can take on a variety of forms and have different requirements for instance a university might make a federal grant in aid to support a program that lowers the tuition rate to make it more affordable for military veterans and their spouses a university might also make this type of funding available to support conferences that have a particular subject matter or area of study at its core in the case of research efforts that receive a grant in aid it may be stipulated that the funding is not intended to cover all expenses for the project furthermore the grant may be given with the intent of encouraging and attracting other more substantial funding to the project this makes the federal grant in aid a sort of seed funding that lends some credibility to the endeavor foundations and professional associations might offer federal grants as a form of financial assistance to graduate students who are developing a thesis focused on specific topics that are relevant to the organization parts of a state government such as its legislative body might procure and earmark federal grants to support nonprofit organizations that provide aid to its constituents the money however is often stipulated as a supplemental rather than primary source of funding | |
what is a grantee | a grantee is the recipient of a grant scholarship or some other asset such as real estate property in contrast a grantor is a person or entity that conveys ownership of an asset to another person or entity the grantee identifying the grantee and grantor is especially important in legal documents as specific duties responsibilities benefits and limitations are assigned to each understanding granteesa grantee is the recipient of something granted or given the term can be used in different contexts and across different industries and institutions in real estate the grantee takes title to the purchased property in academia a grantee is the recipient of a scholarship or grant in the investment industry a grantee can be the recipient of stock options the grantor and grantee are named in legal documents such as deeds which transfer from one party to another the interests or rights to an asset however what exactly is being transferred can differ depending on the type of legal document for example in real estate a quitclaim deed provides no warranty regarding the status of the property s title to the grantee this type of deed can render the grantee powerless should there be title defects whereby no interest in the property is transferred to the grantee these types of deeds are uncommon between parties with no existing relationship special warranty deeds assure the grantee that the grantor owns the asset such as real estate property and had no issues with the title during their ownership the special warranty deed does not provide any guarantees about the title before the grantor s ownership general warranty deeds include warranties and covenants offering grantees the most protection with this deed the grantee receives a warranty that the title is without title defects such as encumbrances it is not limited to issues that arose during the seller s ownership special considerationsa county grantor grantee index provides a record of real estate transfers showing who released ownership of a property and who took ownership the index also shows the property s legal description its location and the type of document used to transfer ownership e g quitclaim deed trust deed or tax lien typically the index is maintained by the county recorder grantee examplethe parties in a debt lien are also known as grantors and grantees the most common of these include mechanic s liens tax liens and judgment liens in a financed automobile arrangement the car s owner grantor transfers their interest in the vehicle to the lender grantee the grantee has an interest in the asset until the loan is satisfied by the grantor if the grantor breaches the contract the grantee may take possession of the asset | |
what is a grantor | a grantor is an individual or other entity that creates a trust their assets are placed into the trust a grantor may also function as the trustee and may be referred to as the settlor trustmaker or trustor a grantor can also refer to the seller or writer of either call or put options contracts who collects the premiums for which the options are sold they re sold through exchanges to option holders who are responsible for payment of the premiums grantors as trust creatorsthe grantor is the person who creates a trust the beneficiaries are the persons identified in the trust documents to receive the assets it holds the assets in the trust are supplied by the grantor the associated property and funds are transitioned into the ownership of the trust the grantor may function as the trustee managing the property the trust contains but this is not required and it s not possible with some types of trusts the trust is referred to as a grantor trust if the grantor is the trustee non grantor trusts are still funded by the grantor but control of the assets is relinquished this allows the trust to function as a separate tax entity from the grantor trusts are designed to hold money investments or property for various purposes types of trusts include testamentary trusts living inter vivos trusts revocable trusts and irrevocable trusts they re created and protect assets in different ways trusts can facilitate a smooth and speedy transfer of assets upon the grantor s death they can eliminate probate costs minimize estate taxes and ensure that the settlor s assets are used in the way intended a trust can allow a parent to make sure their child doesn t squander away an inheritance trusts also let the settlor decide what should happen to the assets in the event of future mental disability or incapacity provided that they have full mental capabilities at the time they re setting the terms 1grantors as options sellersa grantor is also synonymous with option writer a grantor in this context creates contracts for selling options for an underlying interest or asset a grantor may have sold a call option or assumed a short position in a call option the grantor has to sell the underlying stock at the strike price if the call option is exercised conversely the grantor is said to be long and must purchase the underlying stock at the strike price if they sell a put option serving as an option writer is relatively risky especially in a naked position when the writer doesn t have possession of the asset involved in the contract options are contracts that provide the buyer and seller with the right but not the obligation to purchase or sell a particular asset at a specified price on a particular date this is referred to as the strike price these contracts are supported by the presence of the underlying asset which may be composed of a particular stock an exchange traded fund etf or other applicable financial products 2the options writer or grantor has no authority as to whether the option will be exercised before the contract expires in cases where a grantor anticipates a loss based on the position they can choose to participate in a secondary deal with another party designed to offset the risk associated with the obligation | |
what is an irrevocable trust | an irrevocable trust requires the grantor to step aside after the trust is formed and funded with property and assets the grantor cannot act as trustee and cannot reclaim the property funded into the trust they can t change any of its terms including its named beneficiaries as the name implies the trust cannot be revoked for any reason but these restrictions come with some significant advantages particularly for the wealthy the property in the trust isn t subject to estate taxes upon the death of the grantor because the grantor has given up ownership of those assets they no longer contribute to the value of their estate these trusts also provide protection from creditors 3 | |
how can a trust stop someone from squandering an inheritance | a trust that can safeguard an inheritance is referred to as a spendthrift trust it contains provisions that prevent a potentially spendthrift beneficiary from taking their entire inheritance at once and wasting all the money or assets the trust apportions bequests in smaller increments typically over a period of years the beneficiary doesn t have a great deal of money to spend or waste at any particular time these trusts can also offer some protection from creditors 4 | |
what s the difference between a call option and a put option | options are contracts a call option gives a buyer a contractual right to buy a security at a specific strike price a put option is effectively the flip side giving the buyer of a security the right to sell it again at its strike price a grantor in the context of investments writes or creates these options 5the bottom linethere are two types of grantors one funds a trust as part of an estate plan and may or may not retain the reins to and ownership of the assets placed into it the other type of grantor works in an investment capacity they write call or put options contracts and collect premiums when the options are sold both roles demand a high level of integrity but their inherent duties are vastly different | |
what are grantor trust rules | grantor trust rules are guidelines contained in the internal revenue code irc that outline certain tax implications of a grantor trust these rules provide that the individual who creates a grantor trust is recognized as the owner of the assets and property held within the trust for income and estate tax purposes understanding grantor trust rulestrusts are established for various reasons they re designed as separate legal entities as part of estate planning to protect the grantor s or originator s assets and the income generated from those assets so that the beneficiaries can receive them a grantor trust is one in which the grantor or owner retains the power to control or direct the income or assets within the trust 1grantor trusts were originally used as tax shelters by wealthy people the tax rates for trusts graduated at the same rate as income tax rates the income was taxed at the personal income tax rates as more and more income was earned in the trust the grantor reaped the benefits shielding money that was taxed as if it were a personal account and not a separate legal entity grantors could also change the trust and remove the money whenever they choose grantor trust rules were established by the irs to thwart the misuse of trusts the income generated from trusts now graduates to a higher tax bracket more quickly than the individual marginal income tax rates any trust income over 14 450 in 2023 or 15 200 in 2024 would be taxed at the highest tax rate of 37 23the trust income wouldn t be taxed at the highest rate of 37 until it earned 578 125 in 2023 or 609 350 in 2024 if it was taxed at the individual tax rate it doesn t take this much income earned in a trust to be thrust into a higher tax bracket 45a grantor trust isn t the type of tax shelter for wealthy people that it once was before the irs made changes but these trusts are still used they have characteristics that might be beneficial to the grantor depending on their income and family situations benefits of grantor trust rulesgrantor trusts have several characteristics that allow the owners to use the trusts for their specific tax and income purposes the income the trust generates is taxed at the grantor s income tax rate rather than to the trust itself but grantor trust rules do offer individuals a certain degree of tax protection because tax rates are generally more favorable at the individual level than they are for trusts grantors can also change the beneficiaries of their trusts along with the investments and assets held within them they can direct a trustee to make alterations as well trustees are individuals or financial companies that hold and manage assets for the benefit of a trust and its beneficiaries grantors can also undo their trusts as long as they re deemed mentally competent at the time the decision is made this distinction makes a grantor trust a revocable living trust that can be changed and or canceled at any time by the owner originator or grantor the grantor is also free to relinquish control of the trust making it an irrevocable trust this type of trust can t be amended or canceled without the permission and agreement of all the beneficiaries of the trust the trust itself will pay taxes on the income it generates in this case and it would require its own tax identification number tin special considerationstrusts are established for various purposes including storing the owner s assets in a separate legal entity trust owners should therefore be aware of the risks that the trust could be triggered into a grantor trust but the internal revenue service irs defines some exceptions to avoid triggering the grantor trust status a trust is exempted if it has only a single beneficiary who is paid principal and income from the trust or if it has multiple beneficiaries who receive the principal and income by their shareholding in the trust 1 | |
how grantor trust rules apply to different trusts | grantor trust rules also outline certain conditions under which an irrevocable trust can receive some of the same treatments by the irs as a revocable trust these situations sometimes lead to the creation of what are known as intentionally defective grantor trusts 6a grantor is responsible for paying taxes on the income the trust generates in this case but trust assets aren t included in the owner s personal estate but such assets would apply to a grantor s estate if the individual runs a revocable trust because they would effectively still own property held by the trust 6the property is transferred out of the grantor s estate and into a trust with an irrevocable trust which would then effectively own that property individuals often do this to ensure that the property is passed down to family members at the time of death a gift tax may be levied on the grantor based on the property s value at the time it s transferred into the trust in this case but no estate tax would be due upon the grantor s death grantor trust rules also state that a trust becomes a grantor trust if the creator of the trust has a reversionary interest greater than 5 of trust assets at the time the transfer of assets to the trust is made 7a grantor trust agreement dictates how its assets are managed and transferred after the grantor s death ultimately state law determines if a trust is revocable or irrevocable as well as the implications of each 1 | |
what are some examples of grantor trust rules | some of the grantor trust rules outlined by the irs include | |
what is a tax shelter | a tax shelter is an arrangement that holds assets or money in such a way as to reduce or avoid taxation on their value they re not necessarily illegal but they can be some employer sponsored retirement plans are considered to be tax shelters as are financial accounts held and maintained in other countries grantor trusts once served as a form of legal tax shelter as well 11can a grantor act as trustee of their grantor trust in some cases yes the trust must be revocable because the law allows this type of trust to be changed or undone after formation the grantor trustee would typically name a successor trustee to take over at the time of their death or in the event of incapacitation that prevents them from managing the trust themselves 12the bottom linethe grantor of a personal trust is typically its creator the grantor transfers their assets money and property into the ownership of the trust except in the case of a grantor trust the creator grantor is still considered the owner for income and estate tax purposes and can dissolve orchange the trust s terms in the case of a revocable trust several intricate rules apply however which is why rules have been established in the internal revenue code to govern these tax implications always consult with an attorney to help you decide whether the option of a grantor trust is right for your estate plan | |
what is a granular portfolio | a granular portfolio is an investment portfolio that is well diversified across a wide variety of assets typically with a significant number of holdings because this type of portfolio contains a large number of positions in different asset classes and or sectors it is considered to have a lower overall risk profile conversely portfolios that have low granularity have fewer positions or contain highly correlated assets they are less diversified and have a higher overall risk profile | |
how a granular portfolio works | a granular portfolio can refer to a credit currency equity bond or mixed asset class portfolio highly granular portfolios sometimes referred to as infinitely granular diversify most of the unsystematic risk individual security risk out of the portfolio so that it is exposed to systemic risk only which investors can t minimize through diversification advantages of a granular portfoliowhile the primary advantage to an investor is the reduction of risk other advantages of a granular portfolio include the ability to customize a portfolio and to diversify across many asset classes having investments across many sectors and asset classes helps to reduce a portfolio s overall risk for example if healthcare stocks are underperforming a granular portfolio with exposure to other sectors such as technology financials and consumer goods helps to offset those positions bonds can be added to a granular portfolio to provide income when stocks go through range bound periods because granular portfolios include many holdings they can easily be adjusted to meet the financial objectives of many different investors for instance an investor might have their asset allocations split between equities bonds and cash when the investor is young 90 of the portfolio may be invested in equities with 5 in bonds and 5 in cash as the investor approaches retirement they can easily adjust the portfolio to have more conservative allocations a granular portfolio gives investors the flexibility to diversify across multiple asset classes as they see fit for example if precious metal commodities such as gold and silver are trending higher an investor could add some futures contracts to his portfolio to gain exposure to the move disadvantages of a granular portfolioalthough there are fewer disadvantages to a granular portfolio they can be significant particularly during times of marketplace instability or downturns the diversified structure of a granular portfolio means that a large gain in a single investment has a minimal impact on overall returns for instance a stock in an investor s portfolio may increase by 75 but that holding only accounts for a slight gain if it represents 5 of the portfolio s value in a stable economic environment a granular portfolio takes advantage of uncorrelated asset classes and sectors offsetting each other to help reduce risk these correlations may break down in a financial crisis to actually increase risk for example during the global financial crisis between 2008 and 2009 price moves in equities and commodities became strongly correlated while bonds and equities became uncorrelated investors who hold a granular portfolio should continually monitor changing correlations between asset classes to ensure they don t overexpose themselves understanding this relationship between market correlation and volatility can help investors manage portfolio risk | |
what is a graphics processing unit gpu | a graphics processing unit gpu is a chip or electronic circuit capable of rendering graphics for display on an electronic device the gpu was introduced to the wider market in 1999 and is best known for its use in providing the smooth graphics that consumers expect in modern videos and games |
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