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how does gross sales affect business decisions | gross sales data can influence decisions related to pricing strategies marketing campaigns and inventory management by providing insights into sales performance the bottom linegross sales is a straightforward metric that reveals a company s total revenue from sales and serves as an initial gauge of business activity however it doesn t provide an overall view of a company s financial condition this is because gross sales doesn t account for returns allowances discounts and operating expenses while it helps to get a handle on the scale of a company s operations and gain deeper insights into profitability and financial health a broader range of financial indicators should be analyzed | |
what is gross spread | the gross spread is the compensation that the underwriters of an initial public offering ipo receive an ipo is the process of taking a private corporation public by issuing shares of stock gross spread is the difference between the underwriting price received by the issuing company and the actual price offered to the investing public in other words the gross spread is the financial institution s cut or profit from the ipo listing gross spread is also called gross underwriting spread spread or production understanding the gross spreadthe gross spread covers the cost of the underwriting firm for doing an ipo the majority of profits that the underwriting firm earns through the deal are often achieved through the gross spread a company may choose more than one underwriter since they might have a specific area of expertise a company looking to raise funds or capital from investors would hire an investment bank to be the underwriter for its ipo the investment bank s underwriters and the company determine how much money the ipo will raise and how much the bank will be paid for their services the company and the underwriters file a statement with the securities and exchange commission sec to register the ipo in turn the sec reviews the application and once it s determined that the necessary information has been provided a filing date for the ipo is established the investment bank buys the shares to fund the ipo and sells the shares to its distribution network at a higher price the difference between the purchase price and the sale price is the gross spread which is the underwriter s profit gross spread and underwriting costsfunds produced by the gross spread typically must cover several underwriting costs including the manager s fee as well as the underwriting fee which is earned by members of the underwriter syndicate the gross spread also covers the concession which is the price spread earned by the broker dealer selling the shares the manager is entitled to the entire gross spread each member of the underwriting syndicate gets a not necessarily equal share of the underwriting fee and the concession a broker dealer who is not a member of the underwriter syndicate but sells shares receives only a share of the concession the member of the underwriter syndicate that provides the shares to that broker dealer would retain the underwriting fee the gross spread also covers legal and accounting expenses as well as any registration fees proportionately the concession increases as the total gross spread rises meanwhile the management and underwriting fees decrease with the gross spread the effect of size on the division of fees is usually due to differential economies of scale the extent of investment banker work for example in writing the prospectus and preparing the roadshow is somewhat fixed while the amount of sales work is variable larger deals might not necessarily involve more work for the investment banker however a larger deal might involve much more of a sales effort requiring an increase in the proportion of the selling concession alternatively junior banks may join a syndicate even if they receive a smaller share of the fees in the form of a lower selling concession example of gross spreadlet s say as an example company abc receives 36 per share for its initial public offering if the underwriters turn around and sell the stock to the public at 38 per share the gross spread the difference between the underwriting price and the public offering price would be 2 per share the gross spread value can be influenced by variables such as the size of the issue risk and market price fluctuations or volatility the gross spread can be expressed as a ratio in the above example the difference between the price the investment bank paid the issuer and the public offering price is 2 per share as a result the gross spread ratio is approximately 5 3 or 2 38 per share the higher the gross spread ratio the bigger the slice of the ipo proceeds goes to the investment bank a gross spread ratio can vary between 3 7 depending on the size of the deal and the country of origin | |
what is gross working capital | gross working capital is the sum of a company s current assets assets that are convertible to cash within a year or less gross working capital less current liabilities is equal to net working capital or simply working capital a more useful measure for balance sheet analysis understanding gross working capitalgross working capital in practice is not useful it is just one half of a picture of a company s short term financial health and the ability to use short term resources efficiently the other half is current liabilities gross working capital or current assets less current liabilities equates to working capital when working capital is positive it means that current assets are greater than current liabilities the preferred way to express positive working capital is the ratio of current assets to current liabilities e g 1 0 if this ratio is less than 1 0 then a company may have trouble paying back its creditors in the short term negative working capital is when liabilities outstrip assets and indicate that a company may be in distress a company needs just the right amount of working capital to function optimally with too much working capital some current assets would be better put to use elsewhere with too little working capital a company may not be able to meet its day to day cash requirements managers aim for the correct balance through working capital management some methods in which a company can improve its working capital ratio include a reduction in time to collect receivables from customers extending payable time frames with suppliers a reduction on the reliance on short term debt and appropriately managing inventory levels gross working capital is used to gauge a company s liquidity as it helps assess a company s short term ability to meet debt obligations it is less of a gauge of solvency or the long term financial health of a company gross working calculationgross working capital includes assets such as cash accounts receivable inventory short term investments and marketable securities unlike net working capital gross working capital omits liabilities and only focuses on what the company owns gross working capital is the sum of current assets including like other financial measurements gross working capital is most useful when tracked over time or compared against competing companies example of gross working capitalan examination of gross working capital versus current liabilities provides many insights into a company s operations the changes in the components of current assets and liabilities from period to period can lead to further financial analysis to assess the short run financial condition of a company sometimes there may be a surprise to an investor that a working capital ratio fell below 1 0 breaking down the components and following the money would explain why for example company abc reported gross working capital of 7 billion at the end of the fourth quarter of 2021 versus 7 23 billion in current liabilities for a working capital ratio of 0 97 the bulk of current liabilities is coming from the short term debt of 3 billion at the end of the third quarter of 2022 abc had paid off its entire 3 billion in debt without taking on more debt gross working capital stood at 7 8 billion and current liabilities stood at 5 billion resulting in a working capital ratio of 1 56 between the end of 2021 and september 2022 the company repaid its short term debt thereby reducing current liabilities and sending the working capital ratio comfortably above 1 0 on its march 31 2022 balance sheet microsoft reported 153 922 billion of total current assets this was comprised of cash cash equivalents short term investments accounts receivable inventories and other current assets the company reported total assets of 344 607 billion of total assets though all long term assets are excluded from gross working capital microsoft also reported 77 4 billion of total current liabilities while this amount would be subtracted from current assets to arrive at net working capital it is excluded from consideration for gross working capital therefore as of march 31 2022 microsoft carried 153 922 billion of gross working capital 1 | |
what is gross working capital | gross working capital is a company s net working capital before current liabilities have been deducted it is the value of the gross amount of current assets a company owns that can be used to satisfy its short term obligations | |
how do you calculate gross working capital | gross working capital is calculated in the same way as total current assets it is the sum of current assets including cash cash equivalents receivables to be collected within one year inventory also assumed to be sold within a year and other short term assets | |
what is the difference between gross working capital and net working capital | gross working capital reflects a company s working capital prior to subtracting a company s short term debt net working capital reflects a company s working capital after short term debt has been omitted gross working capital only includes current assets while net working capital reflects both current assets and current liabilities | |
what is a gross up | a gross up is an additional amount of money added to a payment to cover the income taxes that the recipient will owe on the payment the gross up is most often seen in executive compensation plans for example a company may agree to pay an executive s relocation expenses plus a gross up to offset the expected income taxes that will be owed on the salary payment | |
how a gross up works | grossing up a paycheck is essentially computing a paycheck but in reverse usually employees are initially paid a gross paycheck amount from which deductions are thus withheld such as taxes retirement contributions and social security and the employees are paid the remainder as net pay in a gross up situation the desired net pay is arranged in advance and the gross is sufficiently increased to ensure that the desired net pay is handed to the employee as a practice grossing up is most often done for one time payments such as reimbursements for relocation expenses or end of year bonuses depending on a company s calculation method an employee may still have an additional tax liability in truth grossing up is mostly a matter of semantics it merely restates an employee s salary as take home pay rather than gross pay before tax withholding some companies prefer the gross up method especially when compensating c level executives and other high paid employees the technique can partially conceal salary expenses during financial reporting example of gross upas an example consider a company offering an employee who has an income tax rate of 20 a net salary of 100 000 annually the formula for grossing up is as follows the employer must gross up the salary paid to the employee to 125 000 in order to account for the required 20 paid on income because 125 000 1 0 20 100 000 the gross up controversywith executive pay coming under increased scrutiny in light of the 2007 2008 financial crisis grossing up has grown as an increasingly popular way to pay executives companies can efficiently increase executive pay by 30 or more without it being apparent in their financial statements since those statements show only what employees net nonetheless several companies have made headlines for employing gross up tactics with egregious and controversial results in 2005 consulting firm towers perrin now wtw conducted a study revealing that 77 of companies when changing management grossed up severance packages for outgoing executives one such company was gillette purchased by procter gamble in 2005 gillette s departing chief executive officer ceo james kilts received 13 million in gross up payments in his severance package in addition with the rise of the gig economy working from home and entrepreneurship grossing up is hard to determine since the total income of the individual is unknown as it includes multiple streams of income in addition to the full time jobs | |
what does it mean to gross over | gross overs refer to the total amount earned before taxes are taken off | |
what is adjusted gross income | adjusted gross income agi is a measure of income used by the internal revenue service irs to asses a taxpayer s tax liability it equals your gross income minus tax deductions and adjustments to income | |
what is gross profit margin | gross profit margin is a financial metric that indicates how efficient a business is at managing its operations it is shown as a ratio that indicates the amount of a company s revenue after subtracting the cost of goods sold cogs which includes labor and materials the bottom linegross up refers to any additional money that an employer may pay an employee to offset any additional income taxes that the employee would owe the irs when receiving a cash benefit from the company such as relocation expenses or a bonus check gross up pay is calculated by dividing the employee s wages by the net percentage of taxes that would be due | |
what is gross value added gva | gross value added gva is an economic productivity metric that measures the contribution of a corporate subsidiary company or municipality to an economy producer sector or region gva provides a dollar value for the amount of goods and services that have been produced in a country minus the cost of all inputs and raw materials that are directly attributable to that production gva thus adjusts gross domestic product gdp by the impact of subsidies and taxes tariffs on products understanding gross value added gva gva is the output of the country less the intermediate consumption which is the difference between gross output and net output gva is important because it is used in the calculation of gdp a key indicator of the state of a nation s total economy it can also be used to see how much value is added or lost from a particular region state or province at the national level gva is sometimes favored as a measure of total economic output and growth over gdp or gross national product gnp gva is related to gdp through taxes on products and subsidies on products it adds back subsidies that governments grant to certain sectors of the economy and subtracts taxes imposed on others at the company level this metric is often calculated to represent the gva by a particular product service or corporate unit that the company currently produces or provides once the consumption of fixed capital and the effects of depreciation are subtracted the company knows how much net value a particular operation adds to its bottom line in other words the gva number reveals the contribution made by that particular product to the company s profit formula for gva gva gdp sp tp where sp subsidies on products tp taxes on products begin aligned text gva text gdp text sp text tp textbf where text sp text subsidies on products text tp text taxes on products end aligned gva gdp sp tpwhere sp subsidies on productstp taxes on products gross value added examplelet s consider a hypothetical example for the fictitious country investopedialand as a very simplified example of calculating gva consider the following data for our fictitious country using this data the gva can be calculated the first step is to calculate the gdp recall that gdp is computed as private consumption gross investment government investment government spending exports imports next we calculate the subsidies and taxes on products for simplicity s sake assume that all private consumption is consumption of products in that case subsidies and taxes are as follows with this the gva can be calculated as follows | |
how does gva differ from gdp | gross domestic product gdp measures the value of all of the total goods and services produced in a country gross value added gva is the value added to these products to enhance the various aspects of them gva takes the gdp and adds to the value of subsidies paid on those products and then subtracts out taxes paid on them | |
what is value added for companies | the term value added describes the economic value that a company grants to its products or services before offering them to customers value added helps explain why companies are able to sell their goods or services for more than they cost to produce | |
what is cash value added | cash value added cva measures a firm s profitability once the required return to investors has been met cash value added is a variation of the economic value added eva metric | |
what is gross yield | the gross yield of an investment is its profit before taxes and expenses are deducted gross yield is expressed in percentage terms it is calculated as the annual return on an investment before taxes and expenses divided by the current price of the investment | |
how gross yield works | gross yield is a measurement used for many investments including real estate fixed income and mutual funds but it is only one way to measure the return on an investment in the case of some investments such as rental property the difference between gross and net yields can be significant since the income can be substantially eroded by operating expenses such as maintenance expenditures insurance and property taxes mutual fund investors need to carefully watch the difference between the gross and net yields on their investments in order to be certain that fund management fees and brokerage fees or both are not taking a big bite out of their real returns 1types of yieldscommon types of yields include nominal yield current yield and yield to maturity ytm nominal yield is the coupon rate on a bond divided by its par value it is the interest rate that a bond issuer promises to pay bond purchasers the nominal rate is fixed and applies for the entire life of the bond it may also be called the nominal rate coupon yield or coupon rate the current yield of a bond equals its annual earnings or dividends divided by its current market price the current yield represents the return an investor would expect if the owner purchased the bond and held it for one full year yield to maturity ytm is slightly more complex this is the total return that a bond is anticipated to earn if it is held until it matures ytm is a long term bond s yield expressed as an annual rate it can be thought of as the internal rate of return irr of a bond if the investor holds the bond until maturity and receives all payments as scheduled yield to maturity is also called the book yield or redemption yield mutual fund yieldsmutual fund yields are reported in two ways dividend yield and sec yield dividend yields are expressed as an annual percentage of a fund s portfolio income also based on the net income received after the fund s associated expenses have been paid the sec yield is based on the yields reported by particular companies as required by the securities and exchange commission sec this is based on an assumption that all of the associated securities are held until maturity 2 | |
what is a ground lease | a ground lease is an agreement in which a tenant is permitted to develop a piece of property during the lease period after which the land and all improvements are turned over to the property owner | |
how a ground lease works | a ground lease indicates that improvements will be owned by the property owner unless an exception is created and stipulates that all relevant taxes incurred during the lease period will be paid by the tenant because a ground lease allows the landlord to assume all improvements once the lease term expires the landlord may sell the property at a higher rate ground leases are also often called land leases as landlords lease out the land only although they are used primarily in commercial space ground leases differ greatly from other types of commercial leases like those found in shopping complexes and office buildings these other leases typically don t assign the lessee to take on responsibility for the unit instead these tenants are charged rent in order to operate their businesses a ground lease involves leasing land for a long term period typically for 50 to 99 years to a tenant who constructs a building on the property 1tenants generally assume responsibility for all financial aspects of a ground lease including rent taxes construction insurance and financing a 99 year lease is generally the longest possible lease term for a piece of real estate property it used to be the longest possible under common law however 99 year leases continue to be common but are no longer the longest possible under the law the ground lease defines who owns the land and who owns the building and improvements on the property many landlords use ground leases as a way to retain ownership of their property for planning reasons to avoid any capital gains and to generate income and revenue tenants generally assume responsibility for any and all expenses this includes construction repairs renovations improvements taxes insurance and any financing costs associated with the property example of a ground leaseground leases are often used by franchises and big box stores as well as other commercial entities the corporate headquarters will normally purchase the land and allow the tenant developer to construct and use the facility there s a good chance that a mcdonald s starbucks or dunkin donuts near you are bound by a ground lease many of macy s stores are ground leased macy s owns the buildings but still pays rent on the ground the building is on as of jan 28 2023 macy s reported long term lease liabilities of 3 billion this leased real estate includes small format stores distribution centers office space and full line stores 23some of the fundamentals of any ground lease should include subordinated vs unsubordinated ground leasesground lease tenants often finance improvements by taking on debt in a subordinated ground lease the landlord agrees to a lower priority of claims on the property in case the tenant defaults on the loan for improvements in other words a subordinated ground lease landlord essentially allows for the property deed to act as collateral in the case of tenant default on any improvement related loan for this type of ground lease the landlord may negotiate higher rent payments in return for the risk taken on in case of tenant default this may also benefit the landlord because constructing a building on their land increases the value of their property in contrast an unsubordinated ground lease lets the landlord retain the top priority of claims on the property in case the tenant defaults on the loan for improvements because the lender may not take ownership of the land if the loan goes unpaid loan professionals may be hesitant to extend a mortgage for improvements although the landlord retains ownership of the property they typically have to charge the tenant a lower amount of rent advantages and disadvantages of a ground leasea ground lease can benefit both the tenant and the landlord the ground lease lets a tenant build on property in a prime location they could not themselves purchase for this reason large chain stores such as whole foods and starbucks often utilize ground leases in their corporate expansion plans a ground lease also does not require the tenant to have a down payment for securing the land as purchasing the property would require therefore less equity is involved in acquiring a ground lease which frees up cash for other purposes and improves the yield on utilizing the land 1any rent paid on a ground lease may be deductible for state and federal income taxes meaning a reduction in the tenant s overall tax burden the landowner gains a steady stream of income from the tenant while retaining ownership of the property a ground lease typically contains an escalation clause that guarantees increases in rent and eviction rights that provide protection in case of default on rent or other expenses there are also tax savings for a landlord who uses ground leases if they sell a property to a tenant outright they will realize a gain on the sale by executing this type of lease they avoid having to report any gains but there may be some tax implications on the rent they receive depending on the provisions put into the ground lease a landlord may also be able to retain some control over the property including its use and how it is developed this means the landlord can approve or deny any changes to the land because landlords may require approval before any changes are made the tenant may encounter roadblocks in the use or development of the property as a result there may be more restrictions and less flexibility for the tenant costs associated with the ground lease process may be higher than if the tenant were to purchase a property outright rents taxes improvements permitting as well as any wait times for landlord approval can all be costly landlords who don t put in the proper provisions and clauses in their leases stand to lose control of tenants whose properties undergo development this is why it s always important for both parties to have their leases reviewed before signing depending on where the property is located using a ground lease may have higher tax implications for a landlord although they may not realize a gain from a sale rent is considered income so rent is taxed at the ordinary rate which may increase the tax burden | |
what are the disadvantages of a ground lease | some of the disadvantages of ground leases include the possibility of property loss loss of higher income due to market changes if rent increases aren t built into the agreement and tax drawbacks such as depreciation and other expenses that can t offset income | |
is a ground lease a good investment | it can be a ground lease lets a tenant build on property in a prime location they could not themselves purchase they can invest their money in improving the property on the other hand a tenant may face restrictions on what they can do with the property | |
what happens when a ground lease expires | unless you or your landlord takes specific steps to end the agreement under the lease it will simply continue on exactly the same terms you do not need to do anything unless you receive a notice from your landlord the bottom linea ground lease is an agreement in which a tenant can develop property during the lease period after which it is turned over to the property owner ground leases commonly take place between commercial landlords who typically lease land for 50 years to 99 years to tenants who construct buildings on the property 1tenants who otherwise can t afford to buy land can build property with a ground lease while landlords get a steady income and retain control over the use and development of their property | |
what is the group of 3 | group of 3 refers to a ten year free trade agreement between mexico colombia and venezuela that began in 1995 and lasted until 2005 the pact covered numerous issues including intellectual property rights public sector investments and the easing of trade restrictions 1venezuela under the leadership of hugo chavez opted to not continue in the group of 3 when the original agreement came up for renewal in 2006 venezuela instead joined mercosur another free trade area that predated the group of 3 when venezuela left colombia and mexico agreed to continue as free trade partners for roughly nine more years 1understanding group of 3 g3 the group of 3 was among several free trade agreements that the government of mexico entered into the largest of which was the north american free trade agreement nafta mexico was the largest and most influential group of 3 partner the pact was part of the mexican government s agenda to extend free trade throughout much of central america including peru bolivia and ecuador 2notable modifications to the agreement included a decree to boost free trade in additional industries in december 2004 and a change that mexico and colombia implemented in august 2011 to reduce tariffs on a range of additional products 1mexico and colombia ended their two way alliance when each entered the pacific alliance with chile and peru in 2014 the goal of this agreement was to boost trade between all four countries and strengthen economic ties to asia as each country borders the pacific ocean 3legacy of the group of 3the group of 3 did not last for long and venezuela arguably never became a very strong participant in the pact however the group of 3 succeeded in boosting trade between mexico and colombia the group of 3 did aid the region s energy and utility sectors one of the group of 3 s first projects was to link both power grids and gas pipelines from mexico to colombia and venezuela in october 2007 a gas pipeline opened between colombia and western venezuela providing the opportunity for gas to flow to areas where it was not previously accessible 4from mexico s perspective the group of 3 became part of a strategy to open its trade policies in an effort to significantly boost exports the group of 3 offered mexico a way to leverage labor markets throughout the region to produce finished goods that could then be sold into the united states and canada via nafta the group of 3 did help to strengthen mexico s position as central america s most important trading partner although other trade agreements arguably helped mexico far more the group of 3 weakened partly due to other regional trade agreements as well as bilateral agreements between countries in central america and the u s conversely colombia and venezuela seemed to have hoped that the group of 3 would provide an eventual entry for them to join nafta this never occurred | |
what is the group of seven g 7 | the group of seven g 7 is an intergovernmental organization made up of the world s largest developed economies france germany italy japan the united states the united kingdom and canada government leaders of these countries meet periodically to address international economic and monetary issues with each member taking over the presidency on a rotating basis the g 7 was for a while known as the group of eight g 8 until 2014 when former member russia was removed after annexing the region of crimea illegally from ukraine the european union eu is sometimes considered to be a de facto eighth member of the g 7 since it holds all the rights and responsibilities of full members except to chair or host meetings | |
how the group of seven g 7 works | the major purpose of the g 7 is to discuss and sometimes act in concert to help resolve global problems with a special focus on economic issues since its inception in the early 1970s the group has discussed financial crises monetary systems and major world crises such as oil shortages the g 7 has also launched initiatives to fund issues and relieve crises where it sees an opportunity for joint action those efforts include several aimed at debt relief for developing nations in 1996 working with the world bank the g 7 launched an initiative for the 42 heavily indebted poor countries hipc along with a multilateral debt relief initiative mdri a 2005 pledge to cancel the international development association debt of countries that have gone through the mdri program the amount of money the g 7 provided in 1997 to help build the containment of the reactor meltdown at chernobyl in 1999 the group also decided to get more directly involved in managing the international monetary system by creating the financial stability forum fsb the fsb is made up of major national financial authorities such as finance ministers central bankers and international financial bodies history of the group of seven g 7 the origins of the group date back to the early 1970s when leaders of the u s u k france west germany and japan met informally in paris to discuss the then recession and oil crisis that in turn inspired french president val ry giscard d estaing to invite the leaders of those countries plus italy to rambouillet in 1975 for further discussions on global oil this time with the country s leaders joining the finance ministers an attendance roster that has endured the next year canada was invited to join the group the host of the g7 summit also known as the presidency rotates annually among member countries in the following order france united states united kingdom germany japan italy and canada the g 7 has responded as the global economy has evolved including when the soviet union pledged to create an economy with freer markets and held its first direct presidential election in 1991 following a 1994 g 7 meeting in naples president boris yeltsin held meetings with g 7 member countries in what became known as the p 8 political 8 in 1998 after urging from leaders including u s president bill clinton russia was added to the g 7 as a full member creating a formal group of eight or g 8 the g 8 ended up being short lived in 2014 russia was suspended from the group after the annexation of crimea and tensions in ukraine as of 2021 russia has not been invited back to the g 7 the group of seven g 7 vs the group of 20 g 20 as developing nations began to represent a larger part of the global economy the absence of a forum about international financial matters that included those emerging economies became more glaring in response the group of 20 g 20 was created in 1999 comprising all the members of the g 7 plus 12 additional countries and the eu as the economies and trade activity of markets such as china brazil india mexico and south africa all g 20 members surge many observers now see the g 20 as usurping much of the role and eminence once held by the g 7 2021 g7 summitfrom june 11 to june 13 2021 the g7 met in cornwall england according to statements released from the group many of the discussions at the 2021 summit focused on two distinct issues the ongoing coronavirus pandemic and the climate crisis the g7 committed to distributing 1 billion vaccine doses over the next 12 months in response to the climate crisis the group committed to the following actions achieving net zero carbon emissions by 2050 limiting the increase in global temperatures to 1 5 degrees increasing and improving climate finance and conserving at least 30 of our land and oceans by 2030 | |
what is the group of seven g 7 | the group of seven g 7 is an intergovernmental organization made up of the world s largest developed economies france germany italy japan the united states the united kingdom and canada government leaders of these countries meet periodically to address international economic and monetary issues with each member taking over the presidency on a rotating basis the g 7 was for a while known as the group of eight g 8 until 2014 when former member russia was removed after annexing the region of crimea illegally from ukraine the european union eu is sometimes considered to be a de facto eighth member of the g 7 since it holds all the rights and responsibilities of full members except to chair or host meetings | |
how the group of seven g 7 works | the major purpose of the g 7 is to discuss and sometimes act in concert to help resolve global problems with a special focus on economic issues since its inception in the early 1970s the group has discussed financial crises monetary systems and major world crises such as oil shortages the g 7 has also launched initiatives to fund issues and relieve crises where it sees an opportunity for joint action those efforts include several aimed at debt relief for developing nations in 1996 working with the world bank the g 7 launched an initiative for the 42 heavily indebted poor countries hipc along with a multilateral debt relief initiative mdri a 2005 pledge to cancel the international development association debt of countries that have gone through the mdri program the amount of money the g 7 provided in 1997 to help build the containment of the reactor meltdown at chernobyl in 1999 the group also decided to get more directly involved in managing the international monetary system by creating the financial stability forum fsb the fsb is made up of major national financial authorities such as finance ministers central bankers and international financial bodies history of the group of seven g 7 the origins of the group date back to the early 1970s when leaders of the u s u k france west germany and japan met informally in paris to discuss the then recession and oil crisis that in turn inspired french president val ry giscard d estaing to invite the leaders of those countries plus italy to rambouillet in 1975 for further discussions on global oil this time with the country s leaders joining the finance ministers an attendance roster that has endured the next year canada was invited to join the group the host of the g7 summit also known as the presidency rotates annually among member countries in the following order france united states united kingdom germany japan italy and canada the g 7 has responded as the global economy has evolved including when the soviet union pledged to create an economy with freer markets and held its first direct presidential election in 1991 following a 1994 g 7 meeting in naples president boris yeltsin held meetings with g 7 member countries in what became known as the p 8 political 8 in 1998 after urging from leaders including u s president bill clinton russia was added to the g 7 as a full member creating a formal group of eight or g 8 the g 8 ended up being short lived in 2014 russia was suspended from the group after the annexation of crimea and tensions in ukraine as of 2021 russia has not been invited back to the g 7 the group of seven g 7 vs the group of 20 g 20 as developing nations began to represent a larger part of the global economy the absence of a forum about international financial matters that included those emerging economies became more glaring in response the group of 20 g 20 was created in 1999 comprising all the members of the g 7 plus 12 additional countries and the eu as the economies and trade activity of markets such as china brazil india mexico and south africa all g 20 members surge many observers now see the g 20 as usurping much of the role and eminence once held by the g 7 2021 g7 summitfrom june 11 to june 13 2021 the g7 met in cornwall england according to statements released from the group many of the discussions at the 2021 summit focused on two distinct issues the ongoing coronavirus pandemic and the climate crisis the g7 committed to distributing 1 billion vaccine doses over the next 12 months in response to the climate crisis the group committed to the following actions achieving net zero carbon emissions by 2050 limiting the increase in global temperatures to 1 5 degrees increasing and improving climate finance and conserving at least 30 of our land and oceans by 2030 | |
what is the group of ten g10 | the group of ten g10 is one of five group of groups not to be confused with the groups of 7 8 20 or 24 each of these consists of a group with similar economic interests the g10 consists of eleven industrialized nations that meet on an annual basis or more frequently as necessary to consult each other debate and cooperate on international financial matters the member countries are belgium canada france germany italy japan the netherlands sweden switzerland the united kingdom and the united states with switzerland playing a minor role understanding group of ten g10 the g10 was established when the 10 wealthiest international monetary fund imf member countries agreed to participate in the gab general agreements to borrow 1g10 historythe gab was formed in 1962 when the governments of eight imf members belgium canada france italy japan the netherlands the united kingdom and the united states and the central banks of germany and sweden agreed to make resources available to the imf these resources were for drawings by both imf participants and under some circumstances non participants 1the gab was reached as a supplementary borrowing agreement to backstop the imf if it did not have sufficient resources to support a member country 2 the official language in the gab states that these countries stand ready to make loans to the fund up to specified amounts when supplementary resources are needed to forestall or cope with an impairment of the international monetary system switzerland signed the gab in 1964 though not a member of the imf at the time switzerland joined the imf in 1992 thereby strengthening the agreement it was at a g10 forum in 1971 where members worked to create the smithsonian agreement following the collapse of the bretton woods system which replaced the fixed exchange rate system with a floating exchange rate one 1g10 functions and critiquesthe finance ministers and central bank governors from each of those countries gather in connection with annual meetings of the international monetary fund and the world bank to discuss financial and monetary policies that impact member countries trade and the global economy according to the imf the gab is only activated when nab participants reject a proposal to activate the new arrangements to borrow nab agreement a credit arrangement between the imf and its 38 member countries allowing for the borrowing of supplemental resources 2also according to the imf the potential amount of credit available under the gab totals 17 5 billion sdr with an additional 1 5 billion sdr available under an arrangement with saudi arabia g10 governors usually meet every second month at the bank for international settlements bis the bis is an international finance organization owned and operated by 63 member central banks that together comprise over 95 of the world s gdp its mission according to its website is to serve central banks in their pursuit of monetary and financial stability foster cooperation among the banks and serve as the central bank for them 3the bis european commission imf and organization for economic cooperation and development oced are all official observers the g10 has been criticized for its lack of responsiveness to the needs of developing countries g10 meetings are politically charged events that often make headlines in the international press for the protests that follow them | |
what is group of 11 | the group of 11 g 11 is a group of developing countries created to ease members debt burdens to direct their resources to economic development the g 11 came into existence on sept 20 2006 and was initially conceived by king abdullah of jordan the group is mainly made up of lower middle income countries 1the g11 member countries are croatia ecuador el salvador georgia honduras indonesia jordan morocco pakistan paraguay and sri lanka originally tunisia was part of the original 11 but was replaced by el salvador by 2007 12understanding group of 11 g11 the group of 11 g 11 member countries believe that their debt hinders their development in that it consumes much of their export earnings and fiscal revenues they believe it is in the interest of more developed countries that their debt is written off and or converted into assistance for economic development projects 3in addition tariffs imposed by the g 7 and other developed countries also hamper the growth of national income and the improvement of living standards which often pursue development via export led growth the group therefore also seeks to work with member countries of the group of seven g 7 for increased market access lower tariffs and investment g 11 members believe that the international donor community can help accelerate global peace and security by helping those countries achieve sustained economic growth 2 | |
what is the group of 20 g 20 | the group of 20 also called the g 20 is a group of finance ministers and central bank governors from 19 of the world s largest economies including those of many developing nations along with the european union formed in 1999 the g 20 promotes global economic growth international trade and regulation of financial markets 1because the g 20 is a forum not a legislative body its agreements and decisions have no legal impact but they do influence countries policies and global cooperation together the economies of the g 20 countries represent more than 80 of the gross world product gwp 75 of world trade and 60 of the world population 1 after its inaugural leaders summit in 2008 the leaders of the g 20 announced that the group would replace the g 8 as the main economic council of nations 2policy focus of the group of 20 g 20 the agenda and activities of the g 20 are established by its rotating presidencies in cooperation with the membership initially the group s discussion had a focus on the sustainability of sovereign debt and global financial stability those themes have continued as frequent topics at the g 20 s summits along with discussions about global economic growth international trade and the regulation of financial markets under the current indonesian presidency the g 20 is focused on three interconnected pillars of action global health architecture digital transformation and sustainable energy transition 3 the 2021 summit was held in rome on oct 30 and 31 some of the topics at that summit included supporting small and medium sized enterprises smes and women owned businesses the role of the private sector in the fight against climate change and sustainable development 4previously the 2019 g 20 osaka summit focused on the global economy trade and investment innovation the environment and energy employment women s empowerment development and wellness 5 in 2018 argentina proposed a focus on the future of work infrastructure for development and a sustainable food future that meeting also included talks on the regulation of cryptocurrencies and the u s china trade war 6the year the group of 20 g 20 was formed 1the group of 20 g 20 vs the group of seven g 7 the g 20 s ranks include all members of the group of seven g 7 a forum of the european union and the seven countries with the world s largest developed economies france germany italy japan the united states the united kingdom and canada formed in 1975 the g 7 meets annually on international issues including economic and monetary matters 7apart from being older than the g 20 the g 7 has sometimes been described as a more political body because all of its meetings have long included not only finance ministers but chief ministers including presidents and prime ministers however the g 20 since the global financial crisis of 2008 has increasingly held summits that include political leaders as well as finance ministers and bank governors and where the g 7 exclusively comprises developed countries many of the additional 12 nations that make up the g 20 are drawn from those with developing economies indeed having a forum at which developed and emerging nations could confer was part of the impetus for creating the g 20 russia and the group of 20 g 20 in 2014 the g 7 and g 20 took different approaches to russia s membership after the country made military incursions into ukraine and eventually annexed the ukrainian territory of crimea g 7 which russia had formally joined in 1998 to create the g 8 suspended the country s membership in the group russia subsequently decided to formally leave the g 8 in 2017 8though australia host of the 2014 g 20 summit in brisbane proposed to ban russia from the summit over its role russia has remained a member of the larger group in part because of strong support from brazil india and china who together with russia are collectively known as the bric nations the debate over russia s membership in the g 20 was renewed in march 2022 following its invasion of ukraine while attending g7 and nato summits in brussels on march 24 president biden called for russia s expulsion from the group but russian officials insisted vladimir putin would attend the g 20 summit scheduled to take place in indonesia in november membership of the group of 20 g 20 along with the members of the g 7 12 other nations currently comprise the g 20 argentina australia brazil china india indonesia mexico russia saudi arabia south africa south korea and turkey 1in addition the g 20 invites guest countries to attend their events spain is invited permanently as is the current chair of the association of southeast asian nations asean two african countries the chair of the african union and a representative of the new partnership for africa s development and at least one country invited by the presidency usually from its own region 9international organizations such as the international monetary fund the world bank the united nations the financial stability board and the world trade organization also attend the summits 9the work of ensuring the continuity of the g 20 is handled by a troika represented by the country that holds the presidency its predecessor and its successor the current troika countries include italy indonesia and india the g 20 has been criticized for lack of transparency encouraging trade agreements that strengthen large corporations being slow to combat climate change and failing to address social inequality and global threats to democracy criticism of the group of 20 g 20 since its inception some of the g 20 s operations have drawn controversy concerns include transparency and accountability with critics calling attention to the absence of a formal charter for the group and the fact that some of the most important g 20 meetings are held behind closed doors some of the group s policy prescriptions have also been unpopular especially with liberal groups protests at the group s summits have among other criticisms accused the g 20 of encouraging trade agreements that strengthen large corporations of being delinquent in combating climate change and in failing to address social inequality and global threats to democracy 10the g 20 s membership policies have come under fire too critics say the group is overly restrictive and its practice of adding guests such as those from african countries is little more than a token effort to make the g 20 reflective of the world s economic diversity former u s president barack obama noted the challenge of determining who can join such a powerful group everybody wants the smallest possible group that includes them so if they re the 21st largest nation in the world they want the g 21 and think it s highly unfair if they have been cut out 11 | |
what is the group of 30 g 30 | the group of 30 generally abbreviated to g 30 is a private nonprofit international body composed of academic economists company chiefs and representatives of national regional and central banks g 30 members meet twice a year to discuss and better understand financial and economic issues in the private and public sectors worldwide understanding the group of 30 g 30 the g 30 claims its mission is to deepen understanding of global economic and financial issues and to explore the international repercussions of decisions taken in the public and private sectors 1it sets out to achieve this by meeting twice yearly in various locations even virtually topics that often come up include foreign exchange capital markets central banks and macroeconomic issues such as global production and labor 2the events hosted by the g 30 are invitation only meaning that regular members of the public are not able to attend them however the group has made it possible to download its publications and research for free from its website 23often the g 30 reports generate little interest from the public due to their technical nature that said some of its findings have had a significant impact including a paper it released on derivatives 4at the time many people were skeptical of derivatives citing a lack of understanding and the complexity of financial securities such as forwards futures options swaps and other similar market contracts that derive their value from an underlying asset aside from meeting twice a year the g 30 also organizes study groups and seminars based on topics of mutual interest to its membership areas of recent focus are said to include financial reform lessons from the financial crisis the credit market and stability and growth 52history of the group of 30 g 30 the g 30 was founded in 1978 by geoffrey bell under the directive and initial funding from the rockefeller foundation before the existence of the g 30 similar aims in understanding economic issues and crises were sought by an organization called the bellagio group 63the bellagio group formed by austrian economist fritz machlup first met in the early 1960s to address international currency issues and the balance of payments bop crisis facing the united states 7the g 30 s first chair was johannes witteveen the former managing director of the international monetary fund imf as of 2023 the current chair of the g 30 is mark carney former governor of the bank of england 89qualifications for the group of 30 g 30 the international body s present and alumni members list reads like a who s who of international finance members come from worldwide and are known for holding leadership positions in the public and private sectors the majority of participants formerly held senior positions in central banking while many still do current members include paul krugman economist and opinion writer for the new york times jean claude trichet a former president of the european central bank ecb mark carney governor of the bank of england boe and william dudley a senior research scholar for economic policy studies at princeton university who until 2018 was the president of the federal reserve bank of new york 9 | |
what is the group of 10 economics | the group of 10 in economics is a group of 10 nations which later became 11 nations that participate in the general arrangements to borrow gab gab allows for a supplementary borrowing arrangement to be enacted if the imf s resources are below a member s needs the 11 members of the group are belgium canada france germany italy japan netherlands sweden switzerland the united kingdom and the united states 10 | |
what is the g7 | the g7 is a group of seven highly developed and wealthy nations that come together to discuss global affairs and shape global policy the member nations are the united states canada france the united kingdom germany italy and japan 11 | |
why did russia leave the g7 | russia was suspended from the g7 in 2014 when it annexed crimea from ukraine the bottom linethe g 30 is a group of individuals from various backgrounds who seek to understand the economic and financial climate of the world and how policies impact nations and people the group publishes its research and findings for all to share | |
what is a group health insurance plan | group insurance health plans provide coverage to a group of members usually comprised of company employees or members of an organization group health members usually receive insurance at a reduced cost because the insurer s risk is spread across a group of policyholders there are plans such as these in both the u s and canada | |
how group health insurance works | group health insurance plans are purchased by companies and organizations and then offered to their members or employees plans can only be purchased by groups which means individuals cannot purchase coverage through these plans plans usually require at least 70 participation in the plan to be valid because of the many differences insurers plan types costs and terms and conditions between plans no two are ever the same group plans cannot be purchased by individuals and typically require at least 70 participation by group members once the organization chooses a plan group members are given the option to accept or decline coverage in certain areas plans may come in tiers where insured parties have the option of taking basic coverage or advanced insurance with add ons the premiums are split between the organization and its members based on the plan health insurance coverage may also be extended to the immediate family and or other dependents of group members for an extra cost the cost of group health insurance is usually much lower than individual plans because the risk is spread across a higher number of people simply put this type of insurance is cheaper and more affordable than individual plans available on the market because more people buy into the plan history of group health insurancethe earliest known example of group coverage for health services dates to 1798 when congress established the u s marine hospital for navy seamen participation was compulsory with deductions coming from salaries other examples include the mining lumber and railroad industries in the late 1800s which had a vested interest in ensuring the health of its workers montgomery ward is credited with establishing the nation s first group health insurance policy in 1910 the policy did not reimburse workers for medical expenses but provided cash payments to workers equal to half their wages in the event of injury or illness the progressive political movement of the early 1900s led to several proposals to establish compulsory national health insurance however these proposals failed to counter opposition from doctors who objected to uniform fee structures labor groups which felt their power would be weakened and insurance companies which feared encroachment on their business 1employer sponsored group health insurance grew rapidly in the 1940s as a way for employers to get around wage controls set during world war ii in 1943 the war labor board introduced wage caps but did not include insurance premiums as part of the cap as such employers were free to offer health insurance to attract and retain workers resulting in a tripling of health insurance coverage by the end of the war 2but this failed to address the needs of retirees and other non working adults federal efforts to provide coverage to those groups led to the social security amendments of 1965 which laid the foundation for medicare and medicaid 3benefits of a group health insurance planthe primary advantage of a group plan is that it spreads risk across a pool of insured individuals this benefits the group members by keeping premiums low and insurers can better manage risk when they have a clearer idea of who they are covering insurers can exert even greater control over costs through health maintenance organizations hmos in which providers contract with insurers to provide care to members the hmo model tends to keep costs low at the cost of restrictions on the flexibility of care afforded to individuals preferred provider organizations ppos offer the patient a greater choice of doctors and easier access to specialists but tend to charge higher premiums than hmos the percent of the u s population covered by employer provided group health insurance in 2021 4the vast majority of group health insurance plans are employer sponsored benefit plans it is possible however to purchase group coverage through an association or other organizations examples of such plans include those offered by the american association of retired persons aarp the freelancers union and wholesale membership clubs insurance options for uninsured individualsnot everyone is covered by a group health insurance plan for many decades these uninsured people were forced to bear the cost of healthcare on their own but that has changed government sponsored health plans are an option for those left out of employer sponsored group health insurance the affordable care act aca adopted in 2010 created a marketplace for health insurance that provides coverage to 16 3 million people as of the 2022 2023 open enrollment season 5after the passage of the aca taxpayers were required to show they had health insurance coverage or qualified for an exemption or else they were required to pay a penalty described as a shared responsibility payment this mandated payment was eliminated with the passage of the tax cuts and jobs act beginning in the 2019 tax year 6example of group health insuranceunited healthcare a division of unitedhealth group uhc is one of the nation s largest health insurers it offers a buffet of group health insurance options for all types of businesses include are medical plans and specialty supplemental plans such as dental vision and pharmacy united healthcare offers plans under the federally sponsored small business health options shop program a provision of the affordable care act in most states employers must have 50 or fewer full time employees although some states allow for as many as 100 employees businesses that pay at least 50 of the insurance premium qualify for a 50 tax credit 7midsize businesses with between 51 and 2 999 employees have various options available including bundles large businesses with 3 000 or more employees qualify as national accounts which have more services and healthcare features including the ability to customize plan offerings group health plans are employer or group sponsored plans that provide healthcare to members and their families the most common type of group health plan is group health insurance which is health insurance extended to members such as employees of a company or members of an organization a group health cooperative also known as mutual insurance is a health insurance plan owned by the insured members insurance is offered at a reduced cost and what they collect from members is based on claims paid the cost of care is spread out across the insured population many group health insurers offer plans to companies with one or more employees the type of plans available however may vary according to the size of the business for example united healthcare provides various plans for small businesses with 1 50 employees midsize businesses with 51 2 999 and large employers with 3 000 or more employees group health insurance plans offer medical coverage to members of an organization or employees of a company they may also provide supplemental health plans such as dental vision and pharmacy separately or as a bundle risk is spread across the insured population which allows the insurer to charge low premiums and members enjoy low cost insurance which protects them from unexpected costs arising from medical events the average group health insurance policy costs roughly 7 400 annually for an individual with the employee paying 17 of the premium for family coverage the average cost was about 21 000 per year with the employee paying 27 of the premium 8the bottom linegroup health insurance plans are one of the most affordable types of health insurance plans available because risk is spread among insured persons premiums are considerably lower than traditional individual health insurance plans this is possible because the insurer assumes less risk as more people participate in the plan for employees who ordinarily would not be able to afford individual health insurance it is an attractive benefit | |
what is group life insurance | group life insurance is offered by an employer or another large scale entity such as an association or labor organization to its workers or members it is fairly inexpensive may even be free for certain employees and is pretty common nationwide group life often has a relatively low coverage amount and is offered as a piece of a larger employer or membership benefit package members of a group life policy do not need to submit to a medical examination and are not subject to individual underwriting understanding group life insurancegroup life insurance is a single contract for life insurance coverage that extends to a group of people by purchasing group life insurance policy coverage through an insurance provider on a wholesale basis for its members companies are able to secure costs for each individual employee that are much lower than if they were to purchase an individual policy those receiving group life insurance coverage may not have to pay anything out of pocket for policy benefits people who choose to take more advanced coverage alongside it may elect to have their portion of the premium payment deducted from their paycheck just as with regular insurance policies insured parties are required to list one or more beneficiaries before the policy comes into effect beneficiaries can be changed at any point during the coverage period the typical group policy is for term life insurance often renewable each year with a company s open enrollment process this is in contrast to whole life insurance which provides coverage no matter when you die whole life insurance policies are permanent have higher premiums and death benefits and constitute the most popular type of life insurance with group life insurance the employer or organization purchasing the policy for its staff or members retains the master contract employees who elect coverage through the group policy usually receive a certificate of coverage which is needed to provide to a subsequent insurance company in the event that an individual leaves the company or organization and terminates their coverage requirements for group life insurancegroup life insurance policies generally come with certain conditions some organizations require group members to participate for a minimum amount of time before they are granted coverage for instance an employee may need to pass a probationary period before being allowed to take part in employee health and life insurance benefits coverage is normally only valid for as long as a member is part of the group once the member leaves whether through resignation or firing the coverage ends group life insurance policies remain intact until insured parties are terminated or leave the group advantages and disadvantages of group life insurancethe biggest appeal group life insurance has for employees is its value for money group members typically pay very little if anything at all any premiums are drawn directly from their weekly or monthly gross earnings qualifying for group policies is easy with coverage guaranteed to all group members unlike individual policies group insurance doesn t require a medical exam however low cost and convenience aren t everything group life insurance generally comes with only basic coverage which means it may not fulfill the needs of policyholders typical amounts are 20 000 50 000 or one or two times the insured s annual salary that s why experts say it should be treated as a perk and supplemented with a separate individual policy rather than being seen as sufficient standalone coverage another drawback is that the employer controls the policy which means your premiums can increase based on decisions that your employer makes if an organization opts to terminate group life insurance or a person decides to switch jobs coverage usually stops however the former employee does have an option to continue coverage at the individual level this means the policy is converted from a group life policy to an individual one which comes with higher premiums while many people may not want the greater cost those who are otherwise uninsurable will benefit from the conversion as a medical exam still would not be required some organizations allow group members to purchase more coverage than basic life insurance that extra voluntary coverage may make financial sense because even the added premium will still be based on the less expensive group rate that part of the policy also may be portable between jobs unlike the basic group policy additional coverage often requires applicants to answer a medical questionnaire but it may not require an actual physical exam that could be a good option for people whose health issues might make it difficult to qualify for an affordable individual policy no medical underwritinginexpensive to buy or paid by the employer in some cases may be able to add coverage for dependentsrelatively low death benefitsnot portable once you leave the organizationorganization controls the policy and its terms | |
what is the purpose of group life insurance | group life insurance is a common employee benefit that provides a death benefit to the insured s beneficiaries if they die while part of the organization the purpose is to provide financial support to the families of such employees | |
what happens to group life insurance coverage after i retire | once you leave the organization group life insurance terminates either immediately or after a short grace period this includes being fired quitting changing jobs or retirement certain employees may be able to convert their group coverage into an individual policy upon retirement but the employer may not continue to pay these premiums | |
what are the types of group life insurance | the most common type of group life insurance is group term insurance that renews yearly this type of insurance provides only a death benefit and is the least expensive option group universal life is more expensive but offers the opportunity to build cash value alongside the death benefit variable group universal life is similar but offers an investment option for increasing the potential returns on the cash value portion | |
what is group term life insurance | group term life insurance is a type of temporary life insurance in which one contract is issued to cover multiple people the most common group is a company where the contract is issued to the employer who then offers coverage to employees as a benefit many employers provide at no cost a base amount of group coverage plus options for employees to purchase supplemental coverage for themselves as well as their spouses and children group term is also sold by various associations and professional organizations group term life insurance is relatively inexpensive compared to individual life insurance as a result participation is high | |
how group term life insurance works | life insurance is available to 57 of private company employees and 83 of government employees through the workplace according to the u s bureau of labor statistics 1 group life insurance policies are generally written as term insurance and offered to employees who meet eligibility requirements such as being a permanent employee who has been with the company for at least 30 days 2 group term life insurance coverage can be adjusted for qualifying life events or during an open enrollment period the standard amount of coverage is usually tied to the covered employee s annual salary with premiums primarily based on the insured s age employers typically pay most or all of the premiums for basic coverage additional amounts ordinarily in multiples of the employee s annual salary may be offered for an extra premium paid by the employee as with other types of life insurance group term pays out a death benefit to the beneficiary you choose if you pass away while the policy remains in effect insured members often receive certificates of insurance as proof of coverage 3if your company offers group term life insurance you may not be able to take it with you if you change jobs employer provided group term life insurance is not always a portable benefit 4advantages and disadvantages of group term life insurancegroup term coverage is generally inexpensive especially for younger people participants are not normally required to go through an underwriting process as all eligible employees are automatically covered however unlike individual term insurance plans which typically lock in a rate for 20 to 30 years most group plans have rate bands in which the cost of insurance automatically goes up in increments for example at ages 30 35 40 etc 5 the premiums for each rate band are outlined in the plan document provided by the employer while inexpensive the amount of coverage offered by group life insurance may not be enough for many families employers or association groups offering the insurance often limit the total coverage available to employees or members based on factors such as tenure base salary number of dependents and employment status participants cannot customize group term coverage to meet individual needs like they could with their own policy 6lastly group term coverage often ends when an individual s employment terminates some employers do allow ex employees to maintain the same coverage known as porting the life insurance 7 former employees could also possibly convert the group term to an individual permanent policy the conversion options vary may not be automatic and could require underwriting consequently an individual could be offered a policy with a much higher premium also the policies available when converting may be limited and are not always the most competitive products some employers only offer accidental death dismemberment insurance ad d policies only cover deaths or severe injuries resulting from an accident rather than from natural causes and contain significant coverage limitations always read the fine print to be sure you understand your group coverage and benefitsrequirements for group term life insurancetypically all employees are automatically enrolled in the base coverage once they meet the eligibility requirements those requirements vary by plan and employer they can include working a certain number of hours per week or being an employee for a certain period of time group term life sold by associations such as fraternal organizations trade groups and charitable groups includes other requirements such as maintaining membership in the organization the availability of supplemental group term coverage also differs among employers they may offer extra coverage for the employee beyond the base insurance as well as optional insurance for a spouse and or children in some plans individuals can only enroll for supplemental insurance when they are initially employed or upon a qualifying life event such as the birth of a child in other plans supplemental group term coverage can be added during open enrollment periods 8supplemental coverage may require underwriting usually it is a simplified underwriting process whereby the insurance applicant answers some questions to determine eligibility rather than undergoing a physical exam the carrier then decides whether or not it will offer the additional coverage special considerationsemployers are allowed to provide employees with 50 000 of tax free group term life insurance coverage as a benefit any amount of coverage above 50 000 that is paid for by an employer must be recognized as a taxable benefit and included on the employee s w 2 9it s worth comparing your employer s offering with what you could get buying your own individual policy to ensure you ll be receiving the best term life insurance policy possible it is also important to revisit the coverage you selected during open enrollment each year to make sure the plan still fits your needs consider your employer sponsored group life insurance to be one piece of your insurance plan to calculate your total needs and understand how group insurance can play a part it makes sense to determine | |
does group term life insurance provide permanent coverage | no group term life provides temporary coverage while you work for your employer or while you pay premiums through a membership association unlike permanent insurance term life does not last your entire lifetime and does not accumulate cash value am i required to pass a medical exam to apply for group term insurance most employer based plans provide a standard amount of coverage to all eligible employees with no medical exam however if you want to purchase supplemental coverage for yourself or your family members you may be required to take a medical exam or provide additional health information when you apply 8 | |
how does basic group term life differ from supplemental insurance | employers provide a basic level of group term life insurance at little or no cost to all eligible employees supplemental coverage is optional insurance at work that employees can purchase for an additional premium if they want more coverage for themselves their spouse or their children | |
is supplemental insurance a good choice | it all depends on your insurance needs and what other coverage you already have supplemental insurance for yourself and your family members provides additional coverage beyond your employer s standard limits while supplemental insurance offers fewer options than other types of policies it can be worthwhile if your health history or age make it difficult to obtain coverage through a private insurer 10group term life insurance through your employer or an association offers affordable easy to get coverage that provides financial protection for your family if you die however employment based group life is temporary coverage that may not provide a sufficient death benefit to meet all your family s financial needs consider combining group term with your own individual life insurance policy | |
what is a group universal life policy | a group universal life policy is a form of universal life insurance offered to a group of people at a lower cost than what is typically offered to an individual group universal life insurance is commonly purchased by corporations that want to provide their employees with life insurance coverage these policies provide each insured party with permanent insurance coverage with an option to grow their savings | |
how group universal life policies work | many businesses feature group universal life insurance as part of their employee benefits package in some cases coverage may be extended to spouses and other immediate family members of employees as well like other policies group universal life insurance pays a death benefit to the insured party s beneficiaries but also features a savings component two distinctly different financial benefits 1policyholders choose coverage that starts with the amount of their base salary from there the amount of coverage depends on the individual s financial situation and the needs of their beneficiaries for instance someone who earns 50 000 per year may choose a coverage option of 150 000 three times their salary based on their current situation this amount is paid to their beneficiaries upon their death as long as the premiums are paid employers may cover the cost of the premiums in their entirety while others split the cost of coverage with their employees through pre tax payroll deductions the cost of coverage is much less than paying for an individual policy it s akin to buying food items in bulk the cost to cover each individual is much cheaper because the policy is designed to cover a large group just as purchasing a large amount of a particular grocery item is cheaper on a per item basis than buying each item separately policies generally accumulate cash value after about a year an amount that increases every year thereafter these sums are relegated to a guaranteed account earning the policyholder a minimum fixed interest rate cash value is available for withdrawal at any time at any age usually without tax penalties policyholders may choose to leave the savings in the policy and allow the cash value to grow employees can start change or stop additional premiums at any time without charge policyholders also get the convenience of making contributions via payroll deductions or they may contribute any lump sum in addition to their premiums 2cash values generally accumulate after a year grow at a fixed rate and can be accessed tax free at any time special considerationsa group universal life policy does not receive dividends some other types of life insurance may pay dividends the amount of a dividend is set by a company s board of directors each year and is not guaranteed when a dividend is payable a policyholder can take it in cash or use it to purchase more insurance they may also be used to pay or reduce premiums earned dividends usually tend to fluctuate from year to year if you are someone who would like to earn dividends it s important to review other types of life insurance policies advantages and disadvantages of a group universal life policylife insurance can be expensive and may have many different requirements taking group coverage through your employer can be cheaper than taking out an individual policy on your own you may also be able to get guaranteed coverage without having to answer too many medical questions 3some employers also provide some other benefits with these policies there are also some distinct disadvantages to group coverage first if you don t have portable coverage you will lose your policy if and when you leave or lose your job secondly because the policy is provided through your employer you may not be able to get as much coverage as you want and or need keep in mind if you want to increase the amount of coverage you re probably going to have to pay more and you ll likely have to take a medical exam | |
how do i get group universal life insurance | this form of permanent life insurance is typically offered by an employer as a benefit to employees one of the biggest advantages is that the cost is much lower for the customer than if they had purchased the policy on their own | |
what are some other benefits | these policies come with a cash savings benefit that earns the policyholder a minimum fixed interest rate they may be portable permitting the owner to keep the policy if they change jobs or retire | |
do group universal life insurance policies have any disadvantages | the policy is canceled when you leave or lose your job unless you have a portability option another thing is that since your employer is offering the policy you may not be able to get as much coverage as you want or need if you want to increase coverage you re probably going to have to pay more and get a medical exam correction sept 15 2023 this article has been corrected to state that dividends are not paid out on group universal life insurance policies | |
what is groupon | groupon is a website and mobile app that offers coupons cashback on purchases and group deals to consumers restaurants retailers and manufacturers use groupon deals in an effort to lure customers into their establishments or to purchase their products the word groupon is a portmanteau of the words group and coupon the company partners with providers of goods and services by hosting a discount deal and keeping a percentage of the profit as a marketing fee that percent varies but the reported average is 50 unlike a standard coupon a groupon lets consumers pay the discounted price for goods in advance by purchasing the deal the average groupon grants a 15 to 30 discount but it can be as high as 90 for example a merchant may offer 50 worth of food for 35 or a 200 spa package for 90 understanding grouponthe original idea behind groupon was to tap into the power of collective purchasing by offering a substantial discount to a group of people if they buy a product or service that s the group in groupon ostensibly merchants would benefit because the discount offered through the coupon would be offset by the scale of new customers until 2016 groupon deals included a tipping point which requires a predetermined number of consumers such as 200 to make a purchase before the merchant must honor the discount this model s design helps the business make an initial profit to cover the upfront cost of providing the service after 2016 groupon no longer requires a tipping point because most deals reach high sales volumes in a short period of time real world examples of groupons and grouponingconsumers typically receive daily deal ads through the groupon app location specific email lists or social media sites the company releases at least one local deal every day with a predetermined purchase period ranging from a few hours to a few days in most cases the discount is valid for up to six months and the groupon amount is redeemable indefinitely consumers use a code or printed voucher for redemption at the time of service since the discount is prepaid the customer owes the merchant only for services exceeding the value of the groupon the fine print section of a groupon states the unique restrictions for each deal such as excluded days or products however merchants may impose unadvertised limitations upon redemption such as a limited menu or inflated pricing for groupon customers groupon has added new features in the last few years that expand its offerings beyond the original groupon business model groupon goods offers discounts on merchandise groupon live is for ticketed events like concerts and sports events and groupon getaways is for vacation packages and travel deals pros and cons of groupon for businessesgroupon collects a percentage of the daily deal profit in exchange for providing merchants with a broad customer base through the company s extensive email list and social media presence the merchant can profit from the discount if groupon customers come back after redeeming the voucher promote the business to their friends or spend more than the value of the groupon groupon deals may be unprofitable for businesses with variable operating costs because they often need additional staff and supplies to satisfy a sudden increase in demand daily deals may also attract customers outside the merchant s target audience reducing the rate of repeat visits | |
what is groupthink | groupthink is a phenomenon that occurs when a group of individuals reaches a consensus without critical reasoning or evaluation of the consequences or alternatives groupthink is based on a common desire not to upset the balance of a group of people this desire creates a dynamic within a group whereby creativity and individuality tend to be stifled in order to avoid conflict understanding groupthinkin a business setting groupthink can cause employees and supervisors to overlook potential problems in the pursuit of consensus thinking because individual critical thinking is de emphasized or frowned upon employees may self censor and not suggest alternatives for fear of upsetting the status quo yale university social psychologist irving janis coined the term groupthink in 1972 janis theorized that groups of intelligent people sometimes make the worst possible decisions based on several factors for example the members of a group might all have similar backgrounds that could insulate them from the opinions of outside groups 1some organizations have no clear rules upon which to make decisions groupthink occurs when a party ignores logical alternatives and makes irrational decisions groupthink is not always problematic in the best cases it allows a group to make decisions complete tasks and finish projects quickly and efficiently in the worst cases it leads to poor decision making and inefficient problem solving groupthink characteristicsjanis identified eight signs symptoms or traits of groupthink all of which lead to flawed conclusions in summary the group may have an illusion of invincibility and consider that nothing the group decides to do can go wrong the eight traits of groupthink according to janis are 2collectively these behaviors may make members of a group be excessively optimistic about their success ignoring any possible negative outcomes members are convinced their cause is right and just so they ignore any moral quandaries of the group s decisions the group body tends to ignore the suggestions of anyone outside the group any dissenters are pressured to come around to the consensus after the pressure is exerted members censor themselves to prevent further shunning once decisions are made the group assumes them to be unanimous some members of a group may act as a mindguard these sentinels prevent any contrary advice from reaching the leaders of the organization time constraints may exacerbate all of these issues and any decisions that need to be made fast may not undergo due diligence groupthink is a dynamic that can lead to bad decisions and even disasters it is a phenomenon in which a group of individuals may consider themselves infallible 1 | |
what causes groupthink | janis also identified certain factors that may contribute to or exacerbate problems related to groupthink one of the key factors is group identity when there is a strong sense of shared identity group members may place a higher value on in group perspectives and disregard those perspectives from outside the group leadership influences may also be a factor members may be more likely to ignore their own misgivings if the group has a powerful or charismatic leader 1information levels and stress may also contribute to groupthink by causing group members to act irrationally if members of the group lack information or feel that other members are better informed they may be more likely to defer to others in group decision making high stress situations can also contribute to poor decisions by reducing the opportunities for careful discussion 31these issues may be exacerbated by extrinsic factors such as the perception of an external threat to the group or isolation from outside sources of information group members might not be able to make rational decisions when they believe that they are under urgent pressure for immediate action groupthink can be exacerbated by a strong leader or a strong sense of pressure to make an immediate decision | |
why is groupthink dangerous | groupthink may cause people to ignore or reject important information ultimately leading to poor decisions and errors in leadership 3 these errors can sometimes result in disaster or unethical behavior because the key decision makers are unaware of potential risks and contrarian viewpoints have been silenced groupthink is particularly dangerous in political situations where decisions are made through collective deliberation and no single member of the group has enough knowledge to make an informed decision 1 members of the group may feel pressure to conform to the consensus or pressure other members to conform this may result in the false perception that the group is unanimous creating even more pressure for group members to hide their misgivings 3 | |
how to avoid groupthink | even in highly cohesive groups there are steps that can be taken to lessen the impact of groupthink on collective decision making groupthink arises out of a natural pressure for conformity so the problem can be alleviated by assigning one member to act as a devil s advocate intentionally raising every possible objection since this is an assigned role the devil s advocate need not worry about the perception of being opposed to the group group members may avoid speaking out to avoid contracting the group s leadership to avoid that problem leaders should step back from early discussions to allow lower ranked members to air their views first after discussion leaders should consider holding a second chance discussion for any objections that were not raised before 4example of groupthinkafter the space shuttle challenger exploded 73 seconds after liftoff on the morning of jan 28 1986 investigators discovered that a series of poor decisions led to the deaths of seven astronauts the day before the launch engineers from morton thiokol the company that built the solid rocket boosters had warned flight managers at nasa that the o ring seals on the booster rockets would fail in the freezing temperatures forecast for that morning the o rings were not designed for anything below 53 degrees fahrenheit nasa personnel overrode the scientific facts presented by the engineers who were experts in their fields and fell victim to groupthink when flight readiness reviewers received the go ahead for launch from lower level nasa managers no mention was made of morton thiokol s objections the shuttle launched as scheduled but the result was disastrous 5other events that may be possible groupthink involved failures include the bay of pigs invasion watergate and the escalation of the vietnam war 6 | |
why is groupthink often bad | groupthink causes people to ignore or silence opposing viewpoints creating the illusion that members of the group are in agreement this may cause them to ignore potential dangers or take excessive risks in military or political situations groupthink can sometimes result in disasters or unethical actions because there is high pressure to agree with the group s consensus | |
what are the symptoms of groupthink | irving janis identified eight signs that are closely associated with groupthink illusions of unanimity unquestioned beliefs rationalization stereotyping mindguards illusions of invulnerability and direct pressure on opposing views each of these signs leads members of the group to ignore dissenting viewpoints and to hide their own doubts this enforces the illusion that the group s decisions are superior to individual judgment and that any opposing views are contrary to the group s interests 2under what conditions is groupthink most likely to occur groupthink is most likely to occur in highly cohesive groups with a strong sense of shared identity where there is a strong pressure to arrive at the correct decision this pressure may lead some members of the group to withhold key information in order to avoid undermining the sense of group agreement a strong or charismatic leader is also a major contributor to groupthink since members will be under pressure to agree with the leader s decisions 2the bottom linegroupthink occurs when people converge on the same idea with little critical thinking or opposition within the ranks while groupthink can signal solidarity and may show respect or deference to more senior leaders it also shuts down dissenting voices and alternative opinions this means that wrong ideas or bad strategies can become amplified and ultimately implemented groupthink therefore can lead to suboptimal or even disastrous outcomes | |
what is a growing equity mortgage gem | a growing equity mortgage gem is a type of fixed rate mortgage where monthly payments increase over time according to a set schedule rather than remaining fixed and equal over the loan term the interest rate on the loan does not change and there is never any negative amortization instead the first payment is a fully amortizing payment and as the payment amount increases over time the additional amount beyond what would be a fully amortizing payment is applied directly to the remaining mortgage principal shortening the life of the loan and increasing overall interest savings | |
how growing equity mortgages work | a growing equity mortgage effectively allows a borrower to accelerate repayment of their fixed rate mortgage by scheduling additional principal payments that increase over time in addition to paying off the loan early a growing equity mortgage helps to build up home equity faster that the borrower could leverage if needed payments for growth equity mortgages typically rise annually increasing up to 5 per year there is one caveat to this type of financing because payment amounts increase annually homeowners salaries or their ability to pay must also increase to accommodate the larger payments a growing equity mortgage is not to be confused with a graduated payment mortgage a graduated payment mortgage also has a fixed interest rate and payments that increase at set intervals however a graduated payment mortgage also has negative amortization in other words unlike a growing equity mortgage the initial payments on a graduated payment mortgage are set below what a fully amortizing payment would be they are actually set below what an interest only payment would be this creates negative amortization not interest savings other considerations for gemsapplying for a growing equity mortgage can be the same as applying for other types of mortgages with comparable credit requirements there may be options for lower down payments associated with this type of mortgage some lenders who offer growing equity mortgages target first time home buyers who would otherwise might not be able to afford upfront purchasing costs furthermore these loans are offered to borrowers who might not qualify for conventional mortgages the federal housing administration offers a growing equity mortgage program specifically for this purpose fha guidelines make growing equity mortgages available to borrowers with a limited income but who also have a reasonable expectation of increases to their earnings 1 | |
what is a growth and income fund | a growth and income fund is class of mutual fund or exchange traded fund etf that has a dual strategy of both capital appreciation growth and current income generated through dividends or interest payments a growth and income fund may invest only in equities or in a combination of stocks bonds real estate investment trusts reit and other securities a growth and income fund is a type of blend fund which invests in both growth and value stocks understanding growth and income fundsgrowth and income funds are popular among investors with moderate but not excessive appetites for risk the ever popular balanced investor although returns will typically lag those of pure growth funds sometimes high yielding stocks become favored in the stock markets driving growth and income funds to superior performance the stability of these funds appears most attractive when the broad economy looks to be weakening growth and time horizonsinvestors in growth and income portfolios favor stability without forsaking returns that outpace inflation depending on risk tolerance a balanced investment objective is adopted by individuals who either shun volatility completely or scale back growth objectives as retirement approaches when planning investment strategies the age of an investor is vital in determining asset allocation and risk tolerance a 25 year old investor initially entering the workforce holds a longer time horizon than a 70 year old retiree investment advisers suggest that regardless of age exposure to equities is a necessary for any portfolio however the percentage of equity exposure shifts as time horizons shorten a rule of thumb among financial professionals holds that growth allocations decrease as an investor ages if individuals subtract their ages from 100 the remainder represents the percentage of stocks they should hold with the balance in less volatile bonds and cash investors can select from numerous funds that meet balanced objectives portfolios such as the john hancock balanced fund svbax exemplify low volatility with an average annual return of 7 84 for 10 years through june 30 2022 falling short of the s p 500 index which returned 12 96 over the same time frame 1income and retirement needsthe investment objective of a retiree involves income needs a scenario in which earnings are replaced by personal savings and dividend and interest income financial advisers recommend that retirees replace 75 of working wages with income producing securities such as bonds and large cap dividend paying equities a balanced fund holds a considerable allocation of corporate and government bonds offering semi annual interest payments while seeking to preserve capital the less volatile nature of u s treasury and investment grade bonds couple with the growth potential of stocks providing income and a potential rate of appreciation to combat rising prices of goods and services ensuring that an individual does not outlive his or her retirement savings growth and income funds fulfill both objectives within a single security examples of growth and income fundsthe dodge and cox balanced fund dodbx chalked up an annual average 10 year return of 9 91 as of june 30 2022 a measure that exceeds its comparative index however its yield dropped below the yield on the 10 year treasury which had a 1 year return of around 2 832 as of aug 4 2022 2 thus growth and income funds fulfill dual investment objectives under one roof under certain circumstances such as when interest rates are low though they have the same objective of growth and income investors should be aware that just like other types of mutual funds each fund will have a bias in its investment strategy for instance the dodge cox balanced fund leans toward value stocks seeking securities that appear undervalued by the market other funds may highlight either the growth or income side of the equation or have higher exposure to bonds also though these funds are considered a low volatility category some have more than others for example the vanguard growth and income fund investor shares vqnpx is lists a key risk as volatility due to its full exposure to the stock market 3 | |
what is growth at a reasonable price garp | growth at a reasonable price garp is an equity investment strategy that seeks to combine tenets of both growth investing and value investing to select individual stocks garp investors look for companies that are showing consistent earnings growth above broad market levels while excluding companies that have very high valuations the overarching goal is to avoid the extremes of either growth or value investing this typically leads garp investors to growth oriented stocks with relatively low price earnings p e multiples in normal market conditions understanding growth at a reasonable price garp garp investing was popularized by legendary fidelity manager peter lynch 1 while the style may not have rigid boundaries for including or excluding stocks a fundamental metric that serves as a solid benchmark is the price earnings growth peg ratio the peg shows the ratio between a company s p e ratio valuation and its expected earnings growth rate over the next several years a garp investor would seek out stocks that have a peg of 1 or less which shows that p e ratios are in line with expected earnings growth this helps to uncover stocks that are trading at reasonable prices in a bear market or other downturn in stocks one could expect the returns of garp investors to be higher than those of pure growth investors but subpar to strict value investors who generally purchase shares at p es under broad market multiples garp investors vs value investorsvalue investors try to buy stocks that are on sale value investors look for stocks at bargain prices for a a larger chance to earn a future profit and b less risk of losing your money if the stock doesn t perform well as you had anticipated this fundamental principle is called the margin of safety value investors also do not buy into the efficient market hypothesis which postulates that stock prices already take the full spread of company industry and market information into account value investors believe that it s possible to pick overvalued or undervalued stocks relative to their current market price value investors may perform a discounted cash flows analysis dcf to determine a stock s intrinsic value famous value investors include warren buffett ceo and chair of berkshire hathaway which grew to become one of the largest publicly traded companies in the world garp strategyone of the most straightforward ways to utilize the garp strategy is by investing in an index fund that utilizes the strategy this removes having to analyze your own stocks and come up with investments that fit the criteria of a garp investment standard and poor s has created the s p 500 garp index which is an index that tracks companies with consistent fundamental growth reasonable valuation solid financial strength and strong earning power 2one fund that tracks the s p 500 garp index is the invesco s p 500 garp etf spgp it is an exchange traded fund that aims to invest 90 of its assets into the securities that make up the s p 500 garp index 3the fund s largest holdings are in healthcare 29 39 followed by information technology stocks 21 40 financials is the next heavily invested sector at 17 28 the smallest invested sector is consumer staples at 3 71 above that is communication services at 5 61 well known stocks include meta formerly facebook adobe and cigna the fund also comes with a low expense ratio of 0 36 making it an affordable investment choice 4 | |
what is a growth company | a growth company is any company whose business generates significant positive cash flows or earnings which increase at significantly faster rates than the overall economy a growth company tends to have very profitable reinvestment opportunities for its own retained earnings thus it typically pays little to no dividends to stockholders opting instead to put most or all of its profits back into its expanding business understanding a growth companygrowth companies have characterized the technology industry the quintessential example of a growth company is google which has grown revenues cash flows and earnings substantially since its initial public offering ipo growth companies also known as gazelles are expected to increase their revenues and profits markedly in the future thus the market bids up their share prices to high valuations this contrasts with mature companies such as utility companies which tend to report stable earnings with little to no growth growth companies create value by continuing to expand above average earnings free cash flow and spending on research and development growth investors are less worried about the dividend growth high price to earnings ratios and high price to book ratios that growth companies face because the focus is on sales growth and maintaining industry leadership overall growth stocks pay lower dividends than value stocks because profits are reinvested in the business to drive earnings growth growth companies during bull and bear marketsduring bull markets growth stocks are preferred and tend to outperform value stocks because of environmental risk and the perceived low risk in the markets however growth stocks tend to underperform value stocks during bear markets because weak economic activity hinders sales growth and the growth engine that drives the stocks higher mature companies tend to weather bear markets better than growth companies as they are firmly rooted within their industry have a dedicated consumer base are well known and have stronger financials such as larger cash reserves to ride out the poor performing economy mature companies also have an easier time raising capital in difficult economic times because of the fact that they are established and their credit is proven growth companies often have less established financials so obtaining a loan for example may be more difficult this is why growth companies often receive capital from venture capital firms or angel investors this additional capital can be imperative to helping some growth companies survive an economic downturn real world examplesthe vast majority of growth companies reside in the technology sector where rapid innovation and growth spending is typical google googl tesla tsla and amazon amzn are three classic examples of growth companies because they continue to focus on investing in innovative technologies sales growth and expansion into new businesses while these three growth stocks have more expensive valuations than the s p 500 google tesla and amazon are also the leaders in their respective niche industries google is continuing its technology conglomerate status by expanding into new technologies such as artificial intelligence tesla is the popular electric car maker and undisputed leader of the industry meanwhile amazon continues to disrupt the retail sector through its e commerce platform which takes away business from traditional brick and mortar retail competitors those are attractive narratives for investors looking for growth to continue into the future that being said these three companies are also now fairly established within their industries and are considered solid investments that have very different characteristics from when they started out as small companies years ago many growth companies exist in different sectors one being etsy etsy the e commerce retail platform that sells a large array of vintage and craft items | |
what is a growth curve | a growth curve is a graphical representation how how something changes over time an example of a growth curve might be a chart showing a country s population increase over time growth curves are widely used in statistics to determine patterns of growth over time of a quantity be it linear exponential or cubic 1 businesses use growth curves to track or predict many factors including future sales understanding a growth curvethe shape of a growth curve can make a big difference when a business determines whether to launch a new product or enter a new market slow growth markets are less likely to be appealing because there is less room for profit exponential growth is generally positive but could mean that the market will attract a lot of competitors growth curves were initially used in the physical sciences such as biology 2 today they re a common component of social sciences as well 1advancements in digital technologies and business models now require analysts to account for growth patterns unique to the modern economy for example the winner take all phenomenon is a fairly recent development brought on by companies such as amazon google and apple researchers are scrambling to make sense of growth curves that are unique to new business models and platforms growth curves are often associated with biology allowing biologists to study organisms and how these organisms behave in a specific environment and the changes to that environment in a controlled setting 2shifts in demographics the nature of work and artificial intelligence will further strain conventional ways of analyzing growth curves or trends analysis of growth curves plays an essential role in determining the future success of products markets and societies both at the micro and macro levels example of a growth curvein the image below the growth curve displayed represents the growth of a population in millions over a span of decades the shape of this growth curve indicates exponential growth that is the growth curve starts slowly remains nearly flat for some time and then curves sharply upwards appearing almost vertical this curve follows the general formula the current value v of an initial starting point subject to exponential growth can be determined by multiplying the starting value s by the sum of one plus the rate of interest r raised to the power of t or the number of periods that have elapsed in finance exponential growth appears most commonly in the context of compound interest the power of compounding is one of the most powerful forces in finance this concept allows investors to create large sums with little initial capital savings accounts that carry a compounding interest rate are common examples | |
what are the 2 types of growth curves | the two types of growth curves are exponential growth curves and logarithmic growth curves in an exponential growth curve the slope grows greater and greater as time moves along in a logarithmic growth curve the slope grows sharply and then over time the slope declines until it becomes flat | |
why use a growth curve | growth curves are a helpful visual representation of change over time growth curves can be used to understand a variety of changes over time such as developmental and economic they allow for the understanding of the effect of policies or treatments | |
what is a business growth model | a business growth model provides a visual representation for businesses to track various metrics and key drivers allowing businesses to map out growth and adjust the businesses accordingly to foster these metrics the bottom linea growth curve is a graph that represents the way a phenomenon changes over time it can show both the past and the future they typically use two axes where the x axis is time and the y axis is growth growth curves are used in many disciplines including sciences such as biology and ecology they are also used in finance and economics businesses can use growth curves to see how a specific market is changing over time this can help them decide whether to enter or leave a certain market or adjust their selling strategy to account for changes | |
what is a growth fund | a growth fund is a diversified portfolio of stocks that has capital appreciation as its primary goal with little or no dividend payouts the portfolio mainly consists of companies with above average growth that reinvest their earnings into expansion acquisitions or research and development r d most growth funds offer higher potential capital appreciation but usually at above average risk | |
how a growth fund works | the high risk high reward mantra of growth funds can make them ideal for those not retiring anytime soon typically investors need a tolerance for risk and a holding period with a time horizon of five to ten years growth fund holdings often have high price to earnings p e and price to sales p s multiples this trade off from investors is the above average revenue and earnings gains these companies produce types of growth fundsgrowth funds along with value funds and blend funds are one of the main types of mutual funds and exchange traded funds etfs they are more volatile than funds in the value and blend categories growth funds are typically split by market capitalization with funds representing small cap mid cap and large cap groupings large cap growth mutual funds are one of the largest types of mutual funds in terms of market share large blend funds which offer investors value and growth are also very popular foreign large cap growth funds are much lower in terms of market share foreign growth funds are becoming more common for investors who want to take advantage of global growth these funds invest in international stocks posting strong revenue and earnings growth for international growth funds technology and consumer sectors are the most common large internet names such as tencent tctzf baidu bidu and alibaba baba can be found among the top ten holdings for many international growth funds largest growth fundone of the largest growth funds is the growth fund of america agthx from american funds this mutual fund has over 253 billion in assets under management aum as of march 2022 and the stock price is up 10 over the last year despite the market volatility the fund s average annual return has been 14 28 over the last ten years as of feb 28 2022 1the growth fund of america has tesla as its largest holding representing 7 1 of assets technology stocks represent the largest sector weighting at 34 9 consumer discretionary stocks follow closely behind with 24 3 of assets 1technology stocks are a major part of growth funds with high growth and high p e and p s ratios technology stocks fit the criteria perfectly for growth funds performance of growth fundsthe majority of the best performing large company stock funds over the last decade have been growth funds for example the morgan stanley multi cap growth a cpoax is the best performing large company stock fund over the last ten years with an annualized return of 23 3 currently its top three holdings include snowflake inc snow cloudflare inc net and the trade desk ttd 2 | |
what is a growth industry | a growth industry is that sector of an economy which experiences a higher than average growth rate as compared to other sectors growth industries are often new or pioneer industries that did not exist in the past their growth is a result of demand for new products or services offered by companies in the field an example of a growth industry is the technology sector whose products have become runaway hits with consumers and led to multibillion dollar valuations for tech companies in the stock market understanding growth industriesseveral factors are responsible for catalyzing a growth industry one of them is the advent of new and innovative technologies that can drive entrepreneurs and startups to develop new products and services related to the industry given the constantly changing nature of technology the rationale behind investing in such technologies is the promise of exponential future growth the smartphone industry which packed multiple innovative technologies into a single phone became a growth industry during the earlier part of this decade in recent times virtual reality vr and machine learning are two examples of such an approach vr is an immersive computer generated scenario that can simulate a real life experience it has applications across many industries from vr headsets for gaming to simulations for driving tests and for learning in medical schools big data involves the processing of large amounts of data for research or to identify trends and statistical probabilities companies in big data provide services to large corporations or industries such as healthcare startups and companies in the sector have multiplied as the technology becomes popular investors typically value companies at a multiple of their current earnings and their future growth potential changes in regulations can also spur growth for example growth in the healthcare industry is mostly driven by changes in regulation relating to insurance the deregulation of electricity markets and greater awareness about sustainable living has also led to investors putting their money into stocks for solar companies and renewable energy companies medical marijuana is another growth industry that came into being due to the relaxing of strict marijuana laws tesla inc tsla which has among the highest valuations of car companies is an example of a company that benefits from changing regulations and its technology chops investors have flocked to the company due to its promise of a greener future as well as its cars which incorporates state of the art technology a third factor driving growth industries is a change in lifestyle and consumer preferences with more leisure time and the availability of technology and transportation options consumers have begun traveling more travel apps and websites have proliferated travel related startups such as airbnb and uber have garnered record valuations in private markets and are considered hot commodities for public markets characteristics of growth industriesparticular characteristics of growth industries include companies across an industry exhibiting consistent and quickly growing sales figures and an influx of investments this can often be accompanied by a lot of press hype growth industries tend to be composed of relatively volatile and risky stocks often investors are willing to accept increased risk in order to take part in the potentially large gains additional risks that growth industries pose can include high rates of cash burn lack of profitability despite consumer and investor excitement bubbles and technological setbacks that can obstruct progress growth industries and cagrmany analysts use the compound annual growth rate cagr when determining the present viability and future potential of an investment the cagr is the mean annual growth rate of an investment over a set period of time longer than one year and can apply to companies in both growth and regular industries to calculate compound annual growth rate analysts divide the value of an investment at the end of the period by its value at the beginning of the period the analyst then raises the result to the power of one divided by the period length and subtracts one from the subsequent result cagr ending valuebeginning value 1 of years 1 text cagr left frac text ending value text beginning value right left frac 1 text of years right 1cagr beginning valueending value of years1 1cagr is widely used to calculate the average growth of an investment an investment may increase in value by 6 in one year decrease in value by 3 the following year and increase again by 2 in the next with inconsistent annual growth cagr may be used to give a broader picture of an investment s progress however it doesn t take into account external factors such as market volatility example of a growth industrythe marijuana industry has become an example of a growth industry in recent times marijuana had a bad reputation and its possession and use was heavily regulated in the country the situation has changed in the last decade as a groundswell of popular opinion has led to lawmakers changing their prohibitive stance on the plant as of august 2022 37 states have legalized medical marijuana and its use and possession is legal in 19 states 1 universities are conducting research into its uses and applications to medical science for example new york university researchers are using it to treat incoming veterans with ptsd 2 food entrepreneurs and beverage companies are infusing their products with marijuana chemicals investors have poured money into marijuana companies on growth expectations for the future | |
what is growth investing | growth investing is an investment style and strategy that is focused on increasing an investor s capital growth investors typically invest in growth stocks that is young or small companies whose earnings are expected to increase at an above average rate compared to their industry sector or the overall market growth investing is highly attractive to many investors because buying stock in emerging companies can provide impressive returns as long as the companies are successful however such companies are untried and thus often pose a fairly high risk growth investing may be contrasted with value investing value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value understanding growth investinggrowth investors typically look for investments in rapidly expanding industries or even entire markets where new technologies and services are being developed growth investors look for profits through capital appreciation that is the gains they ll achieve when they sell their stock as opposed to dividends they receive while they own it in fact most growth stock companies reinvest their earnings back into the business rather than paying a dividend to their shareholders these companies tend to be small young companies with excellent potential they may also be companies that have just started trading publicly the idea is that the company will prosper and expand and this growth in earnings or revenues will eventually translate into higher stock prices in the future growth stocks may therefore trade at a high price earnings p e ratio they may not have earnings at the present moment but are expected to in the future this is because they may hold patents or have access to technologies that put them ahead of others in their industry in order to stay ahead of competitors they reinvest profits to develop even newer technologies and they seek to secure patents as a way to ensure longer term growth because investors seek to maximize their capital gains growth investing is also known as a capital growth strategy or a capital appreciation strategy evaluating a company s potential for growthgrowth investors look at a company s or a market s potential for growth there is no absolute formula for evaluating this potential it requires a degree of individual interpretation based on objective and subjective factors plus personal judgment growth investors may use certain methods or criteria as a framework for their analysis but these methods must be applied with a company s particular situation in mind specifically its current position vis a vis its past industry performance and historical financial performance in general though growth investors look at five key factors when selecting companies that may provide capital appreciation these include companies should show a track record of strong earnings growth over the previous five to 10 years the minimum earnings per share eps growth depends on the size of the company for example you might look for growth of at least 5 for companies that are larger than 4 billion 7 for companies in the 400 million to 4 billion range and 12 for smaller companies under 400 million the basic idea is that if the company has displayed good growth in the recent past it s likely to continue doing so moving forward an earnings announcement is an official public statement of a company s profitability for a specific period typically a quarter or a year these announcements are made on specific dates during earnings season and are preceded by earnings estimates issued by equity analysts it s these estimates that growth investors pay close attention to as they try to determine which companies are likely to grow at above average rates compared to the industry a company s pretax profit margin is calculated by deducting all expenses from sales except taxes and dividing by sales it s an important metric to consider because a company can have fantastic growth in sales with poor gains in earnings which could indicate management is not controlling costs and revenues in general if a company exceeds its previous five year average of pretax profit margins as well as those of its industry the company may be a good growth candidate a company s return on equity roe measures its profitability by revealing how much profit a company generates with the money shareholders have invested it s calculated by dividing net income by shareholder equity a good rule of thumb is to compare a company s present roe to the five year average roe of the company and the industry stable or increasing roe indicates that management is doing a good job generating returns from shareholders investments and operating the business efficiently in general if a stock cannot realistically double in five years it s probably not a growth stock keep in mind a stock s price would double in seven years with a growth rate of just 10 to double in five years the growth rate must be 15 something that s certainly feasible for young companies in rapidly expanding industries you can find growth stocks trading on any exchange and in any industrial sector but you ll usually find them in the fastest growing industries growth investing vs value investingsome consider growth investing and value investing to be diametrically opposed approaches value investors seek value stocks that trade below their intrinsic value or book value whereas growth investors while they do consider a company s fundamental worth tend to ignore standard indicators that might show the stock to be overvalued while value investors look for stocks that are trading for less than their intrinsic value today bargain hunting so to speak growth investors focus on the future potential of a company with much less emphasis on the present stock price unlike value investors growth investors may buy stock in companies that are trading higher than their intrinsic value with the assumption that the intrinsic value will grow and ultimately exceed current valuations those interested in learning more about the growth investing value investing and other financial topics may want to consider enrolling in one of the best investing courses currently available some growth investing gurusone notable name among growth investors is thomas rowe price jr who is known as the father of growth investing in 1950 price set up the t rowe price growth stock fund the first mutual fund to be offered by his advisory firm t rowe price associates this flagship fund averaged 15 growth annually for 22 years today t rowe price group is one of the largest financial services firms in the world philip fisher also has a notable name in the growth investing field he outlined his growth investment style in his 1958 book common stocks and uncommon profits the first of many he authored emphasizing the importance of research especially through networking it remains one of the most popular growth investing primers today peter lynch manager of fidelity investments legendary magellan fund pioneered a hybrid model of growth and value investing which is now commonly referred to as growth at a reasonable price garp strategy example of a growth stockamazon inc amzn has long been considered a growth stock in 2021 it remains one of the largest companies in the world and has been for some time as of q1 2021 amazon ranks in the top three u s stocks in terms of its market capitalization 1amazon s stock has historically traded at a high price to earnings p e ratio between 2019 and early 2020 the stock s p e has remained upwards of 70 moderating to around 60 in 2021 despite the company s size earnings per share eps growth estimates for the next five years still hover near 30 per year 2 | |
what are growth rates | growth rates refer to the percentage change of a specific variable within a specific time period growth rates can be positive or negative depending on whether the size of the variable is increasing or decreasing over time growth rates were first used by biologists studying population sizes but they have since been brought into use in studying economic activity corporate management or investment returns for investors growth rates typically represent the compounded annualized rate of growth of an investment or a company s revenues earnings or dividends growth rates are also applied to more macro concepts such as gross domestic product gdp and unemployment expected forward looking or trailing growth rates are two common kinds of growth rates used for analysis investopedia xiaojie liu understanding growth ratesat their most basic level growth rates are used to express the annual change in a variable as a percentage for example an economy s growth rate is derived as the annual rate of change at which a country s gdp increases or decreases this rate of growth is used to measure an economy s recession or expansion if the income within a country declines for two consecutive quarters it is considered to be in a recession conversely if the country has grown its income for two consecutive quarters it is considered to be expanding | |
how to calculate growth rates | growth rates can be calculated in several ways depending on what the figure is intended to convey a simple growth rate simply divides the difference between the ending and starting value by the beginning value or ev bv bv the economic growth rate for a country s gdp can thus be computed as economic growth gdp2 gdp1gdp1where gdp gross domestic product of nation begin aligned text economic growth frac text gdp 2 text gdp 1 text gdp 1 textbf where text gdp text gross domestic product of nation end aligned economic growth gdp1 gdp2 gdp1 where gdp gross domestic product of nation this approach however may be overly simplistic the compound annual growth rate cagr is a variation on the growth rate that is often used to assess an investment s or company s performance the cagr which is not a true return rate but rather a representation that describes the rate at which an investment would have grown if it had grown at the same rate every year and the profits were reinvested at the end of each year the formula for calculating cagr is cagr evbv 1n 1where ev ending valuebv beginning valuen number of years begin aligned cagr left frac ev bv right frac 1 n 1 textbf where ev text ending value bv text beginning value n text number of years end aligned cagr bvev n1 1where ev ending valuebv beginning valuen number of years the cagr calculation assumes that growth is steady over a specified period of time cagr is a widely used metric due to its simplicity and flexibility and many firms will use it to report and forecast earnings growth financial theory suggests that a company s shares can be fairly valued using a dividend discount model ddm based on the hypothesis that present day price is worth the sum of all of its future dividend payments when discounted back to its present value as a result dividend growth rates are important for valuing stocks the gordon growth model ggm is a popular approach used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate this dividend growth rate is assumed to be positive as mature companies seek to increase the dividends paid to their investors on a regular basis knowing the dividend growth rate is thus a key input for stock valuation using growth ratesgrowth rates are utilized by analysts investors and a company s management to assess a firm s growth periodically and make predictions about future performance most often growth rates are calculated for a firm s earnings sales or cash flows but investors also look at growth rates for other metrics such as price to earnings ratios or book value among others when public companies report quarterly earnings the headline figures are typically earnings and revenue along with the growth rates quarter over quarter or year over year for each for example amazon reported full year revenue of 232 89 billion for 2018 this represented growth of 30 93 from 2017 revenue of 177 9 billion amazon also reported that its earnings totaled 10 07 billion in 2018 compared to 3 03 billion in 2017 so the firm s growth rate for earnings on a year over year basis was a whopping 232 1the internal growth rate igr is a specific type of growth rate used to measure an investment s or project s return or a company s performance it is the highest level of growth achievable for a business without obtaining outside financing and a firm s maximum igr is the level of business operations that can continue to fund and grow the company investors often look to rate of return ror calculations to compute the growth rate of their portfolios or investments while these generally follow the formulae for growth rate or cagr investors may wish to also know their real or after tax rate of return thus growth rates for investors will net out the impact of taxes inflation and transaction costs or fees because stock prices are thought to reflect the discounted value of a firm s future cash flows a rising stock market implies improving forecasted growth rates for the company specific industries also have growth rates each industry has a unique benchmark number for rates of growth against which its performance is measured for instance companies on the cutting edge of technology are more likely to have higher annual rates of growth compared to a mature industry such as retail industry growth rates can be used as a point of comparison for firms seeking to gauge their performance relative to their peers the use of historical growth rates is one of the simplest methods of estimating the future growth of an industry however historically high growth rates do not always indicate a high rate of growth looking into the future as industrial and economic conditions change constantly and are often cyclical for example the auto industry has higher rates of revenue growth during periods of economic expansion but in times of recession consumers are more inclined to be frugal and not spend disposable income on a new car in addition to gdp growth retail sales growth is another important growth rate for an economy because it can be representative of consumer confidence and customer spending habits when the economy is doing well and people are confident they increase spending which is reflected in retail sales when the economy is in a recession people reduce spending and retail sales decline for example second quarter q2 2016 retail sales growth for ireland was reported in july 2016 revealing that domestic retail sales flatlined through the quarter it is believed that political instability within the country combined with the results of the brexit vote in june 2016 caused ireland s sales to stall while some industries such as agriculture and garden showed positive growth other industries within the retail sector counteracted that growth fashion and footwear had negative growth for the quarter 2example of a growth ratesay that we are comparing the annual growth rates of two countries gdp first we can look at the annual growth rates of each country for the first two years country a is growing at a modest rate that is declining over the three years country b is growing rapidly and at an increasing rate this is not unusual for large mature countries and emerging markets economies respectively but also notice that in year 3 the size of country a s economy is still more than 36 larger than it we can also consider the cagr of the two countries over the two year period taking place between years 1 and 3 we then get note that the cagr annualized rates are slightly lower than the arithmetic average of the two years individual growth rates limitations of growth rateswhile growth rates are important for understanding how things change over time they do come with some important limitations first the growth rate only considers the net change between two points in time but it says nothing about the price movements or volatility that may have occurred in between for instance if some variable has a value of 10 00 today and 10 00 as well a year from now the growth rate is zero however it could have fluctuated wildly or not at all during those 12 months the annual growth rate in this case cannot tell us anything about that growth rates also ignore the nominal amounts involved for instance company a s earnings may grow from 100 000 per year to 150 000 per year representing 50 growth but only a 50 000 change a much larger company b s earnings may only grow at say 5 a year 10 less in terms of the growth rate but amount to several millions of dollars in the company s coffers finally growth rates are hard to compare across industries or other unlike variables a 5 rate of growth for a company may be relatively good or bad depending on if it is a growth oriented tech startup vs a large incumbent consumer staples manufacturer likewise a 4 decline in unemployment does not necessarily carry the same impact as a 4 increase in gdp | |
how do you calculate gross domestic product gdp growth rate | the gdp growth rate according to the formula above takes the difference between the current and prior gdp level and divides that by the prior gdp level the real economic real gdp growth rate will take into account the effects of inflation replacing real gdp in the numerator and denominator where real gdp gdp 1 inflation rate since base year | |
what is a growth stock | a growth stock is any share in a company that is anticipated to grow at a rate significantly above the average growth for the market these stocks generally do not pay dividends this is because the issuers of growth stocks are usually companies that want to reinvest any earnings they accrue in order to accelerate growth in the short term when investors invest in growth stocks they anticipate that they will earn money through capital gains when they eventually sell their shares in the future understanding growth stocksgrowth stocks may appear in any sector or industry and typically trade at a high price to earnings p e ratio they may not have earnings at the present moment but are expected to in the future investment in growth stocks can be risky because they typically do not offer dividends the only opportunity an investor has to earn money on their investment is when they eventually sell their shares if the company does not do well investors take a loss on the stock when it s time to sell growth stocks tend to share a few common traits for example growth companies tend to have unique product lines they may hold patents or have access to technologies that put them ahead of others in their industry in order to stay ahead of competitors they reinvest profits to develop even newer technologies and patents as a way to ensure longer term growth because of their patterns of innovation they often have a loyal customer base or a significant amount of market share in their industry for example a company that develops computer applications and is the first to provide a new service may become a growth stock by way of gaining market share for being the only company providing a new service if other app companies enter the market with their own versions of the service the company that manages to attract and hold the largest number of users has a greater potential for becoming a growth stock many small cap stocks are considered growth stocks however some larger companies may also be growth companies you can find growth stocks trading on any exchange and in any industrial sector but you ll usually find them in the fastest growing industries and on more innovative exchanges like the nasdaq 1growth stocks vs value stocksgrowth stocks differ from value stocks investors expect growth stocks to earn substantial capital gains as a result of strong growth in the underlying company this expectation can result in these stocks appearing overvalued because of their generally high price to earnings p e ratios in contrast value stocks are often underrated or ignored by the market but they may eventually gain value investors also attempt to profit from the dividends they typically pay value stocks tend to trade at a low price to earnings p e ratio some investors may try to include both growth and value stocks in their portfolios for diversification others may prefer to specialize by focusing more on value or growth some value stocks are underpriced simply due to poor earnings reports or negative media attention however one characteristic that they often have is strong dividend payout histories a value stock with a strong dividend track record can provide reliable income to an investor many value stocks are older companies that can be counted on to stay in business even if they aren t particularly innovative or poised to grow example of a growth stockamazon inc amzn has long been considered a growth stock in 2023 it is one of the largest companies in the world and has been for some time as of december 2023 amazon ranks fourth among u s companies in terms of its market capitalization 2amazon s stock has historically traded at a high price to earnings p e ratio between september 2021 and december 2023 the stock s p e typically ranged from around 51 to 245 3 despite the company s size growth estimates for 2024 are over 33 4 | |
are growth stocks risky | as with all investing there is a fundamental trade off between risk and return growth stocks provide a greater potential for future return and they are thus equally matched by greater risk than other types of investments like value stocks or corporate bonds the main risk is that the realized or expected growth doesn t continue into the future investors have paid a high price expecting one thing and not getting it in such cases a growth stock s price can fall dramatically | |
what is an example of a growth stock | as a hypothetical example a growth stock would be a biotech startup that has begun work on a promising new cancer treatment say that currently the product is only in the phase i stage of clinical trials and there is uncertainty whether the fda will approve the drug candidate to continue on to phase ii iii trials if the drug passes and is ultimately approved for use it could mean huge profits and capital gains if however the drug either doesn t work as planned or causes severe side effects all of that r d spending may have been in vain and the stock never reaches its potential | |
how do you know if a stock is growth or value | instead of looking to future growth potential value stocks are those that are thought to trade below what they are really worth and will thus theoretically provide a superior return as their stock prices catch up with fundamentals unlike growth stocks which typically do not pay dividends value stocks often have higher than average dividend yields value stocks also tend to have strong fundamentals with comparably low price to book p b ratios and low p e values the opposite of growth stocks the bottom line | |
what is grunt work | grunt work is an expression often used to describe thankless and menial work it can also refer to jobs that may lack glamour and prestige or are dull in the context of the finance industry grunt work could entail combing through a company s financial records looking for positive and negative developments or analyzing historical trading data in the hope of finding the perfect stop limit order points understanding grunt workdespite its lowly status grunt work is often essential work that involves researching selecting and preparing a host of details or a wide range of data that are then relied on by others to draw conclusions and make recommendations in the financial industry such grunt work normally is required to make well informed financial and investment decisions whether in house or on behalf of clients for some grunt work can be an accepted rung on the career ladder banks and financial firms may have their own particular hierarchies but in general financial careers on wall street typically follow a job path from lower to higher level similar to the following with the lower level employees doing the grunt work typically analysts and associates handle the grunt work associates are either recruited directly out of mba programs or are analysts that have been promoted after two years at the firm the associate role is similar to the analyst role with the additional responsibility of serving as a liaison between junior and senior level personnel associates work closely with analysts given their familiarity with and expectations for the role they review the work of analysts particularly when the latter are working on any client facing materials or analytical projects in some instances associates may have opportunities to work directly with clients as well senior level personnel from vice presidents to directors and managing directors assume additional responsibilities as they climb the career ladder and become decision makers they assign grunt work to others these higher level employees prospect for deals and maintain client relationships they gain expert knowledge of how economic shifts and market dynamics can impact their industry in addition the longer their tenure at a firm the greater their institutional knowledge or access to it and the help it gives them to navigate their careers upward to attract and retain top talent and to alleviate the burden of grunt work many financial firms have quickened the pace of promotion also technology has helped to reduce some labor intensive grunt work associated with long hours and deadline pressures types of grunt workin the finance industry types of grunt work can include benefits of grunt workfor those just starting out in a career in the finance industry grunt work is highly relevant that s because you need to master this kind of meaningful yet tedious work if you are ever to be trusted with higher level more complex tasks and grunt work can provide a solid foundation upon which related business and financial success depends grunt work is a way for analysts and associates to demonstrate their competency it allows them to show those in senior level positions that they can handle the smaller or seemingly less important tasks effectively can i assign grunt work to others that depends on your job hierarchy if you re a newly hired entry level employee who isn t charged with managing others you probably should do the grunt work that you ve been assigned | |
is grunt work useful | it can be usually grunt work is required to support higher level assumptions conclusions and recommendations you might think of it as the basis for fees your company may be able to charge successful investment results for clients and your career advancement | |
how can i deal with grunt work | if you re assigned grunt work start be acknowledging that it may be very important to your company despite being potentially boring then plan to handle it during the day when you can get the most done without interruptions let the accomplishment of your grunt work inspire your other efforts in addition keep the big picture in mind handling grunt work can lead to more rewarding job responsibilities and higher paying positions the bottom linegrunt work is work that s considered menial time consuming boring and even meaningless it s usually handled by lower level employees such as analysts and associates at financial services and investment firms those who manage grunt work well and provide the results required by senior management can receive promotions that ultimately leave the grunt work to others | |
what is the s p gsci | the s p gsci is a composite index of commodities that measures the performance of the commodities market the index often serves as a benchmark for commodities investments investing in a gsci fund provides a broadly diversified unleveraged long only position in commodity futures the s p gsci was simply called the goldman sachs commodity index gsci before it was purchased by standard poor s in 2007 although owned by s p dow jones indices the gsci should not be confused with the similar dow jones commodity index djci | |
how the s p gsci works | the s p gsci is weighted by world production and comprises the physical commodities that have active liquid futures markets there is no limit on the number of commodities that may be included in the s p gsci any commodity whose contract satisfies the eligibility criteria and the other conditions specified in this methodology are included the s p gsci is designed to reflect the relative significance of each of the constituent commodities to the world economy while preserving the tradability of the index by limiting eligible contracts to those with adequate liquidity the calculation of the relative weights of commodities in the index involves a four step process based on world production levels 1the methodology of the s p gsci was left unchanged when standard poor s took over the index the s p gsci is made up of 24 exchange traded futures contracts that cover physical commodities spanning five sectors the sectors currently include energy industrial metals precious metals agriculture and livestock this sector mix has been consistent over the years but the weighting shifts year to year the s p gsci is designed to be investable and there are etf products designed to track its performance the s p gsci captures global inflation of core commodities therefore it is useful for creating funds that have low correlations with traditional asset classes the ishares s p gsci commodity index etf gsg is an etf product that tracks the index components of the s p gscithe index s components qualify for inclusion in the index based on liquidity measures and are weighted in relation to their global production levels that makes the gsci valuable as both an economic indicator and a commodities market benchmark below is a table of the 2021 reference percentage dollar weights rpdw for the s p gsci 1energy was the largest sector at 54 of the index agriculture had a 27 share while metals were 19 drawbacks of the s p gsci indexthe s p gsci automatically rolls futures contracts which may not be an optimal investment strategy futures contracts are affected by contango and backwardation and they can cause commodity futures to perform differently than actual commodities in theory professional commodities traders can also use contango and backwardation to profit at the expense of simple automatic rolling strategies this may be a significant flaw in the s p gsci it could also be more theoretical than real like many early criticisms of stock market index funds the component mix of the s p gsci is reevaluated and rebalanced on an annual basis other commodity indexesother widely watched and traded commodity indexes include the credit suisse commodity benchmark index the rogers international commodities index and the bloomberg commodity total return index the dow jones commodity index djci is a weighted index that tracks a wide range of 28 different commodity futures contracts including metals agricultural products and energy commodities such as oil and gas it is essential to understand how commodity indexes are weighted and rebalanced these differences will affect the performance of tracking products over time | |
what is guanxi | guanxi pronounced gwan ch is a chinese term meaning relationships in business it commonly refers to the networks or connections used to open doors for new business and facilitate deals the term refers not just to the existence of relationships but to their nature to having personal trust and a strong relationship it can also create moral obligations and require the exchanging of favors a person who has a great deal of guanxi will be better positioned to generate business than someone who lacks it closely intertwined with the confucian philosophy that has shaped many asian cultures guanxi holds that the self extends to family friends and society to create a harmonious community guanxi implies an obligation that one has to another in china the belief is that the wheels of business are lubricated with guanxi the exchange of favors between people in a network need not be the same merely saying that guanxi connects to confucian philosophy does not complete the explanation of the term confucian thought dates back more than 2 000 years and continues to be highly influential in china today given the importance of confucian thought it should be no surprise that its stress on relationships and duty to others should be reflected in the notion of guanxi in chinese business relationships business comes before the personal in the western business model and the two do not often combine in guanxi however the two are closely joined indeed the original chinese symbols relate to the concept of a gateway to a relationship a neat and relatively accurate way to think of guanxi in other words the exercise of guanxi leads to the connections through which business can happen | |
how guanxi works | guanxi is perhaps best understood by the old axiom it s not what you know but who you know that s important guanxi in the west comes in many forms alumni networks fraternity or sorority memberships past and present places of employment clubs churches families and friends in social sciences guanxi is similar to some concepts understood in network theory such as the idea of information or connection brokerage by well positioned individuals in a social network or their social capital much of our lives today depends on networking social networks like facebook business networks like linkedin we are all building these intertwined networks of connections to improve our business lives every day understanding guanxithe odds of gaining access to a business opportunity and then winning that opportunity are higher when you work your connections if you are bidding for a contract in competition with others and know someone on the other side of the deal naturally you will try to utilize this contact to your advantage if you are a wall street executive with guanxi in washington you will undoubtedly make a few phone calls to make sure lawmakers remain at least neutral and regulators stay off your back if you are a ceo who wants to make an acquisition you will tap into your guanxi at the golf club to find a quicker route to your objective special considerationsusing your guanxi can be innocuous or hazardous depending on where you do business and how aggressive you are using connections may be commonly accepted as simply conducting business affairs in the west still you must be careful of conflicts of interest whether governed by law or a company s code of ethics you can face severe consequences if your networking abroad violates the foreign corrupt practices act fcpa 1in china where the art of guanxi occurs in high form calling upon connections is the norm to get things moving however even there one can go too far business leaders with guanxi in the government have engaged in illegal activity with dire consequences abusing guanxi is a terrible idea virtually everywhere | |
what confucian beliefs are key to guanxi | confucianism is founded mainly on the five relationships and their importance to the individual it looks to create social harmony based on these intertwined harmonious relationships and mutual courtesy in a well ordered world | |
is guanxi the same as networking | networking and guanxi have essentially the same linguistic meaning however networking in western business is a recent concept that lies relatively lightly in our culture in contrast guanxi sits deeply in china s language and culture forming the basis for virtually all social relationships | |
how do you build guanxi in china | building guanxi is usually a long term process several techniques can help do so you can begin by gaining knowledge about china s history and culture seeking formal introductions to individuals with whom you want to do business is also helpful to start relationships especially where you make a conscious effort to create trust and social contact finally gifts and entertaining especially dinners are traditional chinese methods of building social capital | |
what are the downsides to guanxi | because it is so dependent on relationships guanxi taken to its extremes can cause cronyism nepotism and corruption on occasion illegal acts result from misapplied guanxi further guanxi often ignores the qualification or merit of the individual favored in other words guanxi can lead to the less qualified person obtaining a position or deal leading to a less productive situation for the business the bottom lineunderstanding guanxi is essential to doing business successfully in china only by building social and business networks and contacts can a western person fit well enough into the guanxi system to succeed | |
what is a guarantee company | a guarantee company is a type of corporation designed to protect members from liability guarantee companies often form when non profit organizations wish to attain corporate status clubs sports associations students unions and other membership organizations workers co operatives social enterprises and non governmental organizations ngos may also form guarantee companies typically a guarantee company does not distribute profits to its members nor divide its assets into shares members of a guarantee company pay a specific sum of money to participate this amount can vary by member as well as the size of the guarantee company and whether it is public or private guarantee companies can appoint directors who are allowed to take a salary or bonus earned to them in agreement with the company | |
how a guarantee company works | guarantee companies are common in the united kingdom they often form to protect the assets of non profit organizations unions and membership organizations they often use the word limited in their name although they may be exempt from doing so guarantee companies are also a popular choice for property management companies which are created to hold an interest in property that is divided into units guarantee companies are incorporated by having at least one director and one member similar to a traditional corporation limited by share if the company has any funds remaining from contributions from members these are often used according to the purpose of the guarantee company such as funding a museum or other public service projects a unique feature of guarantee companies is their limited liability members have legal protection to shield them from cases in which transactions might fail however each member will be responsible for a nominal sum of money if the guarantee dissolves this nominal amount set out in the company s articles is usually 1 but it can be tailored to any amount that is fit for the situation because a guarantee company doesn t have any shareholders receiving profits its members are all equally responsible for paying creditors if the company goes under example of a guarantee companyone example of a guarantee company is cricket australia the central administrative body for cricket in the nation cricket australia s full name is cricket australia company limited by guarantee it consists of six member associations cricket new south wales queensland cricket south australian cricket association cricket tasmania cricket victoria and western australian cricket association and has nine independent directors under its constitution the liability of each cricket australia member is limited to 1 000 each cricket australia receives all gate and signage revenue from international matches and distributes revenue to states under its minimum guarantee financial model this de risks states against volatile movements in gate revenue that might arise from the timing and duration of matches weather and other external factors | |
what are guarantee fees | the term guarantee fee refers to the sum of money paid to the issuer of a mortgage backed security mbs by the holder this charge helps the issuer pay for administrative costs and expenses related to the security and also cuts down on any risk or loss that may arise if any of the mortgages that back the security default also called g fees guarantee fees also refer to charges paid by a mortgagor to a guarantor for services rendered understanding guarantee feesissuers of mortgage backed security mbs providers like freddie mac ginnie mae and fannie mae charge lenders guarantee fees for the creation servicing and reporting of the asset as well as for the guarantee that the provider will supplement it to make certain that payments of principal and interest are made even if borrowers default while the fee is usually a certain percentage of the value of the asset the issuer may also charge a fixed amount this payment guarantee is the main component of the guarantee fees providers like fannie freddie and ginnie help banks by buying mortgages from mortgage companies commercial banks credit unions aggregators and so on in most cases these government sponsored enterprises gses pay for these mortgages by providing them back to the originators in the form of a securitized mbs that the recipient can then choose to sell or keep the guarantee fee built into the mbs is the revenue generator for the mbs provider and these are ideally sufficient across all products to cover individual mortgage defaults guarantee fees are primarily made up of the credit guarantee they provide to the end owner of the mbs but they also cover the costs of managing and administering the securitized mortgage pools reporting on the mbs to investors and the securities and exchange commission sec and other back office tasks although these fees are often referred to as a type of insurance for mortgage backed securities they also cover other services as mentioned for instance a bank may charge a g fee to the bearer of a note or asset in order to provide a guarantee they may also charge guarantee fees as part of the interest rate on a mortgage unlike other upfront fees document and origination charges these fees are imposed during the entire length of the loan lenders may charge guarantee fees as part of the interest rate on a mortgage special considerationsguarantee fees are set on the creditworthiness and size of the underlying mortgage pool prior to the mortgage meltdown and financial crisis guarantee fees were a small deduction of 15 to 25 basis points in exchange for this small fee the mortgage originator received a sellable asset while also clearing the loan off the books to free up more credit this was an excellent deal for lenders as the mbs providers depended on the information from loan originators to set the guarantee fees banks took the opportunity to push the boundaries of who could reasonably be given a mortgage resulting in ninja loans and overall market distortion unfortunately the guarantee fees were not being adjusted to reflect this reality resulting in a massive mortgage meltdown where the u s government ultimately had to bail out mbs providers due to their guarantee fees being insufficient to cover the true liability guarantee fees saw a sharp increase since the financial crisis and the great recession compared to pre meltdown averages of 15 to 25 basis points 1 the post meltdown average is more than double 2 the federal housing and finance agency fhfa provides an annual analysis of guarantee fees charged by freddie and fannie 3 the fhfa reported an average guarantee fee of 58 basis points on a fixed rate 30 year mortgage loan issued in 2019 4 although guarantee fees generally don t receive much attention outside of mortgage industry lobbying groups there were political attempts to make across the board increases of an additional 10 basis points through the fhfa to reduce future risks to american taxpayers 5 these proposed increases were suspended prior to implementation 6 | |
what is a guaranteed bond | a guaranteed bond is a debt security that offers a secondary guarantee that interest and principal payments will be made by a third party should the issuer default due to reasons such as insolvency or bankruptcy a guaranteed bond can be of either the municipal or corporate variety it can be backed by a bond insurance company a fund or group entity a government authority or the corporate parents of subsidiaries or joint ventures that are issuing bonds | |
how a guaranteed bond works | corporate and municipal bonds are financial instruments used by companies or government agencies to raise funds in effect they are loans the issuing entity is borrowing money from investors who buy the bonds this loan lasts for a certain period of time however long the bond term is after which the bondholders are repaid their principal that is the amount they originally invested during the life of the bond the issuing entity makes periodic interest payments known as coupons to bondholders as a return on their investment many investors purchase bonds for their portfolios due to the interest income that is expected every year however bonds have an inherent risk of default as the issuing corporation or municipality may have insufficient cash flow to fulfill its interest and principal payment obligations this means that a bondholder loses out on periodic interest payments and in the worst case scenario of the issuer defaulting may never get their principal back either to mitigate any default risk and provide credit enhancement to its bonds an issuing entity may seek out an additional guarantee for the bond it plans to issue thereby creating a guaranteed bond a guaranteed bond is a bond that has its timely interest and principal payments backed by a third party such as a bank or insurance company the guarantee on the bond removes default risk by creating a back up payer in the event that the issuer is unable to fulfill its obligation in a situation whereby the issuer cannot make good on its interest payments and or principal repayments the guarantor would step in and make the necessary payments in a timely manner the issuer pays the guarantor a premium for its protection usually ranging from 1 to 5 of the total issue advantages and disadvantages of guaranteed bondsguaranteed bonds are considered very safe investments as bond investors enjoy the security of not only the issuer but also of the backing company in addition these types of bonds are mutually beneficial to the issuers and the guarantors guaranteed bonds enable entities with poor creditworthiness to issue debt when they otherwise might not be able to do so and for better terms issuers can often get a lower interest rate on debt if there is a third party guarantor and the third party guarantor receives a fee for incurring the risk that comes with guaranteeing another entity s debt on the downside because of their lowered risk guaranteed bonds generally pay a lower interest rate than an uninsured bond or bond without a guarantee this lower rate also reflects the premium the issuer has to pay the guarantor securing an outside party s backing definitely increases the cost of procuring capital for the issuing entity it can also lengthen and complicate the whole issuing process as the guarantor naturally conducts due diligence on the issuer checking its financials and creditworthiness | |
what is a guaranteed death benefit | a guaranteed death benefit is a benefit term that guarantees that the beneficiary as named in the contract will receive a death benefit if the annuitant dies before the annuity begins paying benefits understanding guaranteed death benefita guaranteed death benefit is a safety net if an annuitant dies while the contract is in the accumulation phase this ensures that the annuitant s estate or beneficiary will at least receive a specified minimum amount even though the contract had not yet reached the point where it would start paying benefits in some cases the contract terms will stipulate that a designated individual will be instated as the new annuitant to assume the contract if the original annuitant dies during the accumulation period the guaranteed death benefit received amount differs among companies and contracts but the beneficiary is guaranteed an amount equal to what was invested or the value of the contract on the most recent policy anniversary statement whichever is higher the structure of the death benefit payout can also vary in some cases it is paid as a one time payoff in a lump sum while other contracts dictate that it be allocated on a periodic ongoing schedule guaranteed death benefit detailsthis type of clause is often encountered in relation to life insurance coverage a guaranteed death benefit is frequently offered as an extra optional benefit where a specific rider is added on to the primary policy to enhance the standard coverage and terms in this case the benefit proceeds are guaranteed as long as the premiums are paid and the policy remains active this is especially appealing for life insurance policies involving variable benefits tied to the performance of an underlying investment the contract holder benefits from this clause because they know that even in a worst case scenario their estate or beneficiary will at least get something so the amount the contract holder had invested or paid in premiums was not wasted or forfeited completely in this way this term of the contract provides a form of protection and security for the contract holder s heirs or beneficiaries this benefit gives the annuitant peace of mind by guaranteeing that his or her beneficiary will be protected from down markets and decreases in account value for example if there is an economic downturn and the overall market falls by 20 when the annuitant dies the beneficiary will still receive the full guaranteed amount as dictated by the terms of the annuity and death benefit special considerationsunder the setting every community up for retirement enhancement secure act of 2019 several rule changes were implemented regarding annuities that are offered as investment options to employees via their 401 k plans 1prior to the secure act if an employee died and held an annuity in their 401 k plan this would trigger the annuity s death benefit clause which could mean the beneficiary would be forced to liquidate the annuity the secure act however makes 401 k annuity investments portable allowing beneficiaries to move their inherited annuity to another direct trustee to trustee plan thereby eliminating the need to liquidate the annuity and pay surrender charges and fees | |
what is a canadian guaranteed investment certificate gic | a guaranteed investment certificate gic is an investment sold by canadian banks and trust companies that provides a fixed rate of return to investors gics are often purchased as retirement savings vehicles plans because they provide a low risk fixed rate of return gics are insured by the canadian government for up to 100 000 canadian per account 12they are marketed in canada in much the same way u s banks market certificates of deposit to their customers in the u s gics are created and promoted by insurance companies and have a slightly different client focus understanding canadian guaranteed investment certificates gics a gic works much like a certificate of deposit in the u s you deposit money in the bank and earn interest on that money the money must be deposited for a fixed length of time and interest rates vary with the length of the commitment | |
when you buy a gic you are lending money to the bank money and getting paid interest in return | gics are considered safe investments because the financial institutions that sell them are legally obligated to return investors principal and interest even if the bank fails investors are insured for up to 100 000 canadian by the canadian deposit insurance corporation gdic 3 | |
how banks profit from gics | a bank profits from offering gics by lending out the money deposited at a higher rate than the interest it pays on gics if the bank sells mortgages at 8 interest and its gics pay 5 the bank earns 3 in profit gics offer a slightly higher return than treasury bills or t bills making them an excellent option to diversify a stream of liquid safe securities in a portfolio as noted above many canadian banks and trust companies sell gics while a trust company does not own the assets of its customers it may assume some legal obligation to take care of them in these instances trust companies act as fiduciaries agents or trustees on behalf of a person or business entity they are a custodian and must safeguard the money and make investment selections that are solely in the interest of the outside party gics along with t bills treasury bonds and other income producing securities are safe and relatively liquid investments making them particularly attractive to retired investors seeking a stable stream of income gics and u s treasury securitiesother forms of safe and income producing securities are u s treasury securities including t bills t notes and t bonds gics and u s government securities can be cornerstones of certain portfolio strategies either those that rely on safe streams of income or as a hedge that balances out riskier investments such as growth stocks and derivatives | |
what is the guarantee in guaranteed investment certificates | the bank or other institution offering gics is guaranteeing that the investor will get back the principal deposit plus the promised interest payment | |
what is a guaranteed investment certificate in the u s | in the u s guaranteed investment contracts are savings vehicles issued by insurance companies not banks otherwise they work much like their canadian counterparts paying a set amount of interest for a deposit for a set length of time most of the purchasers of gics in the u s are pension funds or retirement savings plans if you have a 401 k account guaranteed investment contracts may be one of your investment choices confusingly certificates of deposit cds are more like canadian guaranteed investment certificates than u s guaranteed investment contracts since cds are available primarily at banks and credit unions in the u s | |
is there a downside to the canadian guaranteed investment certificate | canada s guaranteed investment certificates are among the safest and most reliable investment choices their investors can be very confident that their money will be returned and the promised interest will be paid that said nobody is going to double their money investing in gics you re choosing safety over the potential for higher returns on your investments the bottom lineguaranteed investment certificates issued by banks in canada are a relatively safe way to build savings they are government insured and deliver a steady if unspectacular return on investment gics are primarily used by retirees seeking a steady stream of income and by savers of all ages working towards a specific financial goal |
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