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what are high earners not rich yet henrys | high earners not rich yet henrys are individuals who currently have significant discretionary income and a strong chance of being wealthy in the future the term henrys was coined in a 2003 fortune magazine article written by shawn tully to refer to a segment of families earning between 250 000 and 500 000 but not having much left after taxes schooling housing and family costs not to mention saving for an affluent retirement 1the original article in which the high earners not rich yet henrys term appeared discussed the alternative minimum tax amt and how hard it hits this group of people the term has since been used to describe a younger demographic for the purposes of marketing products and services to them understanding high earners not rich yet henrys the henrys segment of the population was a hotly debated topic during the u s presidential race of 2008 the democratic party often classified households earning over 250 000 as the rich and wealthiest americans 2 one problem with this classification is that it does not distinguish the cost of living in different areas in the u s for example 250 000 may go a long way in houston but wouldn t provide anything like a lavish lifestyle in new york city 3 these high earners are expected to have much of the same lifestyle as wealthier compatriots but they do so by sacrificing their ability to amass wealth many professionals including lawyers doctors dentists and so on have the potential to be henrys due to the income range for their professions the fact that much of their future wealth is projected off of a six figure income rather than income generating assets makes the henrys the working rich meaning they won t be as rich if they stop working more of a henrys earnings go into costs than go into wealth building investments leaving them feeling like they are more like regular people working paycheck to paycheck than the wealthy 1 in america henrys as prime target for luxury marketing the 2008 election has come and gone but the term henrys has stuck around as a useful way to identify a demographic that is on its way to wealth but not quite there marketers see a lot of potential in this transitional phase where a future rich person is still adapting to a rapid increase in disposable income the transition is seen as the prime opportunity for a luxury brand or service to insert itself into the henrys lifestyle and begin creating loyalty that will continue into the future as there are more henrys in the world than ultra wealthy folks there is a deeper market there even if the product or services are marked down a bit in price marketers believe that henrys are more likely to be aspirational buyers meaning that they are starting to purchase the trappings of the lifestyle they one day hope to be able to fully afford 4 this segment s incomes make up about 40 of household spending which makes a good business case for companies to market to them 1luxury brands like watchmaker tag heuer and retailer louis vuitton once catering to society s elite have developed new marketing strategies targeting henrys they use advertising centered around henrys core values uniqueness and identity they also use popular well liked celebrities and athletes to position their brand promote its appeal and communicate a message about status 5many henrys appreciate luxury goods for status and often use social media to flaunt their consumption of these items 4 as a result louis vuitton tag heuer and other luxury brands incorporate social media advertising and the use of social media influencers into their marketing strategies investment strategies for henryshenrys earn substantial wages but have few investments and meager savings developing better spending habits increasing savings diversifying investments and taking advantage of tax credits and deductions can transform them from the not right yet to the wealthy because henrys are high wage earners they typically pay the most in taxes on income henrys should explore deductions and credits that reduce their tax obligations less money for taxes means more money for investing one way to lessen the burden is to contribute to a retirement account such as an individual retirement account ira in 2024 individuals are allowed to contribute up to 7 000 or 8 000 for people 50 years or older and contributions to traditional iras are tax deductible in 2023 this contribution limit was 6 500 or 7 500 with the catch up contribution 6alternatively contributions to a 401 k reduce taxable income as well as long as contributions are made to a traditional 401 k as opposed to an ira these contributions are made with pre tax dollars which reduce the total amount of taxable income reported by the employer for example if a henry earning 200 000 per year contributes 15 000 per year to a 401 k the taxable income reported will be 185 000 henrys benefit dually from a reduction in taxes and an increase in savings and investments the contribution limit for a 401 k in 2024 is 23 000 with a 7 500 allowable qualifying catch up contribution for individuals age 50 and above in 2023 this limit was 22 500 with a 7 500 qualifying catch up contribution 6debt reductionone roadblock preventing henrys from reaching their full rich potential is the accumulation of debt most of the burden comes from educational costs mortgages auto loans and credit card debt large debt can erode earnings limiting what can be invested and saved to reduce credit card debt henrys can pay more than the minimum amount due and limit the use of the cards paying more than the minimum due will reduce the balance faster and the amount of interest applied limiting or discontinuing the use of credit cards can reduce the henrys overall debt and prevent more debt from accumulating applying this strategy to other debt can also have the same effect of quickly reducing debt and freeing up income for savings and investments for example paying more than the required amount on student loans can reduce the debt quickly as well as accrued interest furthermore consolidating student loans can reduce the monthly obligation and save money with a lower interest rate and payment the average amount of a henry s student loan debt 7whereas reducing debt is perhaps the first step towards wealth investing is the way to build it after reducing debt henrys will have more disposable income to invest retirement savings accounts are popular investment vehicles for their tax benefits and investment options for example 401 k s allow the henry to benefit from employer matching various investment options and pre taxed invested dollars which reduce reportable taxable income investing in real estate can generate profits that contribute to wealth accumulation if personal monthly rent or mortgage obligations are not large the henry may be able to pursue real estate investments to generate streams of income that income can be reinvested into other vehicles for growth likewise the henry can invest in real estate investment trusts reit for growth and to avoid the responsibilities associated with owning and managing investment real estate properties henrys can enlist the services of a professional wealth or investment advisor to select investments suitable to their risk tolerance and investment goals developing and following a plan can help them move from being a wealthy prospect to being a tycoon who qualifies as a henry there are no universal rules for qualifying as a henry but most analysts will describe individuals with income between 250 000 and 500 000 with minimal savings as henrys 1 | |
how do i become a henry | becoming a henry entails prioritizing your career to deliver a high paying job a henry will have just started out investing not necessarily having put aside money for a long time therefore to become a henry focus more on your job career development and changes to your working income | |
what is a henry millennial | similar to a traditional henry a millennial henry are those in the their early 30 s earning a six figure salary these individuals especially if they live in a high cost of living area may leave them struggling to make ends meet or pay current bills despite having a very large income the bottom linehigh earners not rich yet henrys is a term to describe people who earn high incomes usually between 250 000 to 500 000 but have not saved or invested enough to be considered rich most of henrys incomes are consumed by consumer spending educational costs and housing not much remains for retirement and investments which makes achieving a wealthy status difficult to better their financial position henrys can employ different strategies such as reducing debt increasing contributions to retirement and investment accounts and reducing tax obligations as well as seek help from a professional wealth advisor in no time they can see the scale move from not rich yet to high society | |
what is a high deductible health plan hdhp | the term high deductible health plan hdhp refers to a health insurance plan with a sizable deductible for medical expenses an hdhp usually has a larger annual deductible usually four figures than a typical health plan but charges lower monthly premiums plans fully cover routine preventive care which means that individuals aren t responsible for copays or coinsurance the minimum deductible varies from year to year for 2022 the irs defines an hdhp as one with a deductible of at least 1 400 for individuals and 2 800 for families 1 for 2023 the 2023 minimum annual deductible rises to 1 500 for individuals and 3 000 for families 2understanding a high deductible health plan hdhp a deductible is the portion of an insurance claim that the insured must pay out of pocket before the policy coverage is activated when an individual pays that portion of a claim the insurance company covers the remaining portion as specified in the contract 3hdhps are thought to lower overall healthcare costs by making individuals more conscious of medical expenses the higher deductible also lowers insurance premiums leading to more affordable monthly costs this arrangement benefits healthy people who need coverage for serious health emergencies wealthy families who can afford to meet the deductible also benefit because it offers access to a tax advantaged health savings account 4the flipside of hdhps is first dollar coverage plans these plans have no deductible but you ll pay a much higher premium and the plan may put strict limits on the total value of coverage these plans fully cover routine preventive care without copays or coinsurance before the deductible kicks in for the following list which is not exhaustive hdhp coverage comes with an annual catastrophic limit on out of pocket expenses for covered services from in network providers for example plans set a minimum deductible of 1 400 and 2 800 for individuals and families respectively rising to 1 500 and 3 000 respectively for 2023 the maximum deductible for 2022 is 7 050 for an individual and 14 100 for a family rising to 7 500 and 15 000 for 2023 12 | |
when you reach this limit your plan pays 100 of your expenses for in network care if you re interested in taking this route it s important to understand how hdhps work and how having one will change how you pay for health care | hdhps became more common when hsa establishing legislation was signed into law in 2003 6special considerationsone of the perks of an hdhp is being able to open a health savings account hsa which is a tax advantaged savings account in fact hsas are exclusively available to people covered by an hdhp and you can t have any other type of health insurance to qualify for one 7regular contributions to the account are made by the insured individual or their employer these funds are not subject to federal income taxes at the time of the deposit or withdrawal 7 the idea is to use them for qualified medical expenses that hdhps don t cover including an hsa can cut costs if you face high deductibles as long as withdrawals from an hsa are used to pay for qualified medical expenses that are not covered under the hdhp the amount withdrawn will not be taxed unlike a flexible spending account fsa contributions made to an hsa do not have to be spent or withdrawn during the tax year they were deposited any unused contributions can be rolled over indefinitely 9for wealthy families who can afford to self insure an hdhp allows access to hsa tax advantaged savings that they can use in retirement when the early withdrawal penalty for nonqualified expenses no longer applies withdrawals for nonqualified expenses are subject to income tax and a 20 early withdrawal penalty if you re under the age of 65 10advantages and disadvantages of an hdhpthe high cost associated with hdhps comes with certain benefits and drawbacks we ve listed some of the most common ones below as noted above insured individuals with an hdhp end up paying lower monthly premiums this can save you money if you know that you re only going to use the plan for preventive care rather than more complicated procedures make sure you stay within your network in order to reap the benefits otherwise you ll incur extra costs covered individuals are allowed to use an hsa in conjunction with an hdhp remember that hsas are tax advantaged accounts which can be used to pay for qualified medical expenses that your plan may not pay for such as acupuncture and dental expenses the money that you deposit into your hsa is tax free and can help cut the cost of your high deductible the main and obvious disadvantage is the high cost associated with these plans higher deductibles mean that you have to pay more out of your own pocket for your medical and health care before the plan actually starts to pay for you this can put a dent in your pocket especially if you have unexpected health issues with which you have to deal you have a high deductible with a plan like this hence the name the deductible is the portion of the plan that you re responsible for before your insurer steps in to cover your expenses keep in mind though that your preventive care is completely covered which means that you ll have to pay for covered costs on your own lower monthly premiumsworks with a health savings account which is tax free and covers qualified medical expenseshigher out of pocket costshigher deductiblesexample of an hdhpas noted above high deductible health plans are suitable for people who are fairly healthy and don t need to pay for complicated medical procedures they are suited for people who generally only require preventive care for instance a 30 year old without any underlying conditions and other health problems may be considered a good candidate for an hdhp this person may only require certain preventive procedures such as flu shots nutritional counseling or health screenings they would not be responsible for any copays or coinsurance either but they may need to save up in case there is an unexpected medical emergency as their plan wouldn t cover this expense until they reach their deductible | |
what qualifies as a high deductible health plan for an hsa | you can combine your hdhp with an hsa which is a tax advantage health care plan in order to qualify for an hsa you must be enrolled in an hdhp and not have any other type of health insurance | |
how much does a high deductible health plan cost | in order to qualify as such an hdhp must have a minimum deductible in 2022 of 1 400 for individuals and 2 800 for family coverage rising to 1 500 and 3 000 in 2023 the maximum amount of money insured individuals must spend is 7 050 per individual and 14 100 for families in 2022 rising to 7 500 and 15 000 in 2023 12 insured individuals are also responsible for monthly premiums which vary based on the insurer | |
what does a high deductible health plan cover | medical expenses covered under an hdhp include preventive care such as blood pressure screening depression screening diet and nutritional counseling hiv screening and immunizations for diseases like chickenpox the flu and measles insured individuals are not responsible for copays or coinsurance associated with any of these procedures non qualified medical expenses aren t covered such as acupuncture dental and vision care keep in mind you re allowed to establish and use an hsa in conjunction with an hdhp which can be used to pay for qualified medical and dental expenses to help you reach your deductible the list of qualified expenses was expanded as part of the cares act enacted by congress in response to the covid 19 pandemic using hsa funds to pay for non qualified medical expenses will incur income taxes and possibly a 20 penalty depending on your age 10who offers high deductible health plans you can get coverage under an hdhp through your employer these plans are also available through government health care exchanges the bottom lineit s important to choose the right health care plan one that fits your medical and financial needs some plans make you pay more out of pocket including copays and coinsurance but start kicking in after you reach a low deductible but others come with higher deductibles which are offset by lower monthly premiums these high deductible health plans are suited for those who are healthy can afford to pay more out of pocket and only need preventive care although the low upfront cost of these plans may be attractive it s important to weigh out any other factors like your medical history and the overall affordability before you sign up | |
what is high frequency trading hft | high frequency trading hft is a trading method that uses powerful computer programs to transact a large number of orders in fractions of a second hft uses complex algorithms to analyze multiple markets and execute orders based on market conditions traders with the fastest execution speeds are generally more profitable than those with slower execution speeds hft is also characterized by high turnover rates and order to trade ratios understanding high frequency trading hft high frequency trading is a type of algorithmic trading traders are able to use hft when they analyze important data to make decisions and complete trades in a matter of a few seconds hft facilitates large volumes of trades in a short amount of time while keeping track of market movements and identifying arbitrage opportunities some of the key characteristics of high frequency trading include because of the complexities and intricacies involved with hft it isn t surprising that it is commonly used by banks other financial institutions and institutional investors it became popular when exchanges started to offer incentives for companies to add liquidity to the market for instance the new york stock exchange nyse has a group of liquidity providers called supplemental liquidity providers slps that attempts to add competition and liquidity for existing quotes on the exchange 1the slp was introduced following the collapse of lehman brothers in 2008 when liquidity was a major concern for investors as an incentive to companies the nyse pays a fee or rebate for providing said liquidity with millions of transactions per day this results in a large amount of profits 2some of the best known hft firms include tower research capital citadel llc and virtu financial advantages and disadvantages of hftthe main benefit of high frequency trading is the speed and ease with which transactions can be executed banks and other traders are able to execute a large volume of trades in a short period of time usually within seconds hft has improved market liquidity and removed bid ask spreads that would have previously been too small this was tested by adding fees on hft which led bid ask spreads to increase one study assessed how canadian bid ask spreads changed when the government introduced fees on hft it found that market wide bid ask spreads increased by 13 and retail spreads increased by 9 3hft is controversial and has been met with some harsh criticism it has replaced a number of broker dealers and uses mathematical models and algorithms to make decisions taking human decisions and interaction out of the equation decisions happen in milliseconds and this could result in big market moves without reason as an example on may 6 2010 the dow jones industrial average djia suffered what was then its largest intraday point drop declining 1 000 points and dropping 10 in just 20 minutes before rising again a government investigation blamed a massive order that triggered a sell off for the crash 4an additional critique of hft is it allows large companies to profit at the expense of the little guys its so called ghost liquidity is also a source of criticism the liquidity provided by hft is available to the market one second and gone the next preventing traders from actually being able to trade this liquidity large volume of transactions at onceeasy and speedy processimproves market liquidityremoves small bid ask spreadsremoves human decision making and interactionspeedy transactions could result in major market movestraders can t trade liquidity | |
how does high frequency trading work | high frequency trading hft is an automated form of trading it involves the use of algorithms to identify trading opportunities hft is commonly used by banks financial institutions and institutional investors it allows these entities to execute large batches of trades within a short period of time because everything is automated trading becomes easy hft provides the market with liquidity but it can result in major market moves and removes the human touch from the equation | |
does the cryptocurrency market use high frequency trading | yes high frequency trading does occur in the cryptocurrency market it works the same way that hft does in other markets using algorithms it analyzes crypto data and facilitates a large volume of trades at once within a short period of time usually within seconds | |
how fast is a high frequency trade | high frequency trading is fast it can be as fast as 10 milliseconds in some cases it can be even less to execute a large batch of trades 5the bottom lineadvances in technology have helped many parts of the financial industry evolve including the trading world computers and algorithms have made it easier to locate opportunities and make trading faster high frequency trading allows major trading entities to execute big orders very quickly although it makes things easier hft and other types of algorithmic trading does come with drawbacks notably the danger of causing major market moves as it did in 2010 when the dow suffered a large intraday drop | |
what is the high low index | the high low index compares stocks that are reaching their 52 week highs with stocks that are hitting their 52 week lows the high low index is used by investors and traders to confirm the prevailing market trend of a broad market index such as the standard and poor s 500 index s p 500 understanding the high low indexthe high low index is simply a 10 day moving average of the record high percent indicator which divides new highs by new highs plus new lows the record high percent indicator is calculated as follows record high percent new highs new highs new lows 1 0 0 begin aligned text record high percent frac text new highs text new highs text new lows times 100 end aligned record high percent new highs new lowsnew highs 100 investors consider the high low index to be bullish if it is positive and rising and bearish if it is negative and falling since the index can be volatile on a day to day basis market technicians generally apply a moving average on the data to smooth out the daily swings this helps generate more reliable signals interpreting the high low indexa high low index above 50 means more stocks are reaching 52 week highs than reaching 52 lows conversely a reading below 50 shows that more stocks are making 52 week lows compared to stocks making 52 week highs therefore investors and traders are generally bullish when the index rises above 50 and bearish when it declines below 50 typically readings above 70 indicate that the market is trending higher while a reading below 30 suggests that the market is in a downtrend investors should also be aware that if the market is trending strongly the high low index can give extreme readings for a prolonged period trading with the high low indexmany traders add a 20 day moving average to the high low index and use it as a signal line to enter a trade the index generates a buy signal when it crosses above its moving average and a sell signal when it crosses below its moving average traders should filter the signals generated by the high low index with other technical indicators for example a trader might require the relative strength index rsi to be above zero when the index crosses above its 20 day moving average to confirm upward momentum the high low index can also be used to form a bullish or bearish bias for instance if the indicator is above 50 a trader may decide to trade on the long side of the market only example of the high low indicator | |
what is the high low method | in cost accounting the high low method is a way of attempting to separate out fixed and variable costs given a limited amount of data the high low method involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level if the variable cost is a fixed charge per unit and fixed costs remain the same it is possible to determine the fixed and variable costs by solving the system of equations it is worth being cautious when using the high low method however as it can yield more or less accurate results depending on the distribution of values between the highest and lowest dollar amounts or quantities understanding the high low methodcalculating the outcome for the high low method requires a few formula steps first you must calculate the variable cost component and then the fixed cost component and then plug the results into the cost model formula first determine the variable cost component variable cost hac lowest activity costhaus lowest activity unitswhere hac highest activity costhaus highest activity unitsvariable cost is per unit begin aligned text variable cost frac text hac text lowest activity cost text haus text lowest activity units textbf where text hac text highest activity cost text haus text highest activity units text variable cost is per unit end aligned variable cost haus lowest activity unitshac lowest activity cost where hac highest activity costhaus highest activity unitsvariable cost is per unit next use the following formula to determine the fixed cost component fixed cost hac variable cost haus begin aligned text fixed cost text hac text variable cost times text haus end aligned fixed cost hac variable cost haus use the results of the first two formulas to calculate the high low cost result using the following formula high low cost fixed cost variable cost ua where ua unit activity begin aligned text high low cost text fixed cost text variable cost times text ua textbf where text ua text unit activity end aligned high low cost fixed cost variable cost ua where ua unit activity | |
what the high low method tells you | the costs associated with a product product line equipment store geographic sales region or subsidiary consist of both variable costs and fixed costs to determine both cost components of the total cost an analyst or accountant can use a technique known as the high low method the high low method is used to calculate the variable and fixed costs of a product or entity with mixed costs it takes two factors into consideration it considers the total dollars of the mixed costs at the highest volume of activity and the total dollars of the mixed costs at the lowest volume of activity the total amount of fixed costs is assumed to be the same at both points of activity the change in the total costs is thus the variable cost rate times the change in the number of units of activity example of how to use the high low methodfor example the table below depicts the activity for a cake bakery for each of the 12 months of a given year below is an example of the high low method of cost accounting the highest activity for the bakery occurred in october when it baked the highest number of cakes while august had the lowest activity level with only 70 cakes baked at a cost of 3 750 the cost amounts adjacent to these activity levels will be used in the high low method even though these cost amounts are not necessarily the highest and lowest costs for the year we calculate the fixed and variable costs using the following steps variable cost tcha total cost of low activityhau lowest activity unitvariable cost 5 550 3 750125 70variable cost 1 80055 32 72 per cakewhere tcha total cost of high activityhau highest activity unit begin aligned text variable cost frac text tcha text total cost of low activity text hau text lowest activity unit text variable cost frac 5 550 3 750 125 70 text variable cost frac 1 800 55 32 72 text per cake textbf where text tcha text total cost of high activity text hau text highest activity unit end aligned variable cost hau lowest activity unittcha total cost of low activity variable cost 125 70 5 550 3 750 variable cost 55 1 800 32 72 per cakewhere tcha total cost of high activityhau highest activity unit to calculate the total fixed costs plug either the high or low cost and the variable cost into the total cost formula total cost vc units produced total fixed cost 5 550 32 72 125 total fixed cost 5 550 4 090 total fixed costtotal fixed cost 5 550 4 090 1 460where vc variable cost per unit begin aligned text total cost text vc times text units produced text total fixed cost 5 550 32 72 times 125 text total fixed cost 5 550 4 090 text total fixed cost text total fixed cost 5 550 4 090 1 460 textbf where text vc text variable cost per unit end aligned total cost vc units produced total fixed cost 5 550 32 72 125 total fixed cost 5 550 4 090 total fixed costtotal fixed cost 5 550 4 090 1 460where vc variable cost per unit using all of the information above the total cost equation is as follows total cost total fixed cost vc units produced total cost 1 460 32 72 125 5 550 begin aligned text total cost text total fixed cost text vc times text units produced text total cost 1 460 32 72 times 125 5 550 end aligned total cost total fixed cost vc units produced total cost 1 460 32 72 125 5 550 this can be used to calculate the total cost of various units for the bakery the difference between the high low method and regression analysisthe high low method is a simple analysis that takes less calculation work it only requires the high and low points of the data and can be worked through with a simple calculator it also gives analysts a way to estimate future unit costs however the formula does not take inflation into consideration and provides a very rough estimation because it only considers the extreme high and low values and excludes the influence of any outliers regression analysis helps forecast costs as well by comparing the influence of one predictive variable upon another value or criteria 1 it also considers outlying values that help refine the results however regression analysis is only as good as the set of data points used and the results suffer when the data set is incomplete it s also possible to draw incorrect conclusions by assuming that just because two sets of data correlate with each other one must cause changes in the other regression analysis is also best performed using a spreadsheet program or statistics program limitations of the high low methodthe high low method is relatively unreliable because it only takes two extreme activity levels into consideration the high or low points used for the calculation may not be representative of the costs normally incurred at those volume levels due to outlier costs that are higher or lower than would normally be incurred in this case the high low method will produce inaccurate results the high low method is generally not preferred as it can yield an incorrect understanding of the data if there are changes in variable or fixed cost rates over time or if a tiered pricing system is employed in most real world cases it should be possible to obtain more information so the variable and fixed costs can be determined directly thus the high low method should only be used when it is not possible to obtain actual billing data | |
how is the high low method used | the high low method is used to calculate the variable and fixed costs of a product or entity with mixed costs it considers the total dollars of the mixed costs at the highest volume of activity and the total dollars of the mixed costs at the lowest volume of activity | |
why is the high low method a simple analysis | because it takes less calculation work the high low method only requires the high and low points of the data and can be worked through with a calculator | |
why is the high low method considered unreliable | because it only considers two extreme activity levels the high or low points used for the calculation may not represent the costs normally incurred at those volume levels due to outlier costs that are higher or lower than would normally be incurred the high low method will then produce inaccurate results the bottom linethe high low method is a simple way in cost accounting to segregate costs with minimal information the high low method involves comparing total costs at the highest level of activity and the lowest level of activity after each level is determined | |
what is high minus low hml | high minus low hml also referred to as the value premium is one of three factors used in the fama french three factor model the fama french three factor model is a system for evaluating stock returns that the economists eugene fama and kenneth french developed hml accounts for the spread in returns between value stocks and growth stocks this system argues that companies with high book to market ratios also known as value stocks outperform those with lower book to market values known as growth stocks understanding high minus low hml to understand hml it is important to first have a basic understanding of the fama french three factor model founded in 1992 by eugene fama and kenneth french the fama french three factor model uses three factors one of which is hml in order to explain the excess returns in a manager s portfolio the underlying concept behind the model is that the returns generated by portfolio managers are due in part to factors that are beyond the managers control specifically value stocks have historically outperformed growth stocks on average while smaller companies have outperformed larger ones much of portfolio performance can be explained by the observed tendency of small stocks and value stocks to outperform large or growth oriented ones on average the first of these factors the outperformance of value stocks is referred to by the term hml whereas the second factor the outperformance of smaller companies is referred to by the term small minus big smb by determining how much of the manager s performance is attributable to these factors the user of the model can better estimate the manager s skill in the case of the hml factor the model shows whether a manager is relying on the value premium by investing in stocks with high book to market ratios to earn an abnormal return if the manager is buying only value stocks the model regression shows a positive relation to the hml factor which explains that the portfolio s returns are attributable to the value premium since the model can explain more of the portfolio s return the original excess return of the manager decreases fama and french s five factor modelin 2014 fama and french updated their model to include five factors along with the original three the new model adds the concept that companies reporting higher future earnings have higher returns in the stock market a factor referred to as profitability the fifth factor referred to as investment relates to the company s internal investment and returns suggesting that companies that invest aggressively in growth projects are likely to underperform in the future hml finance faqsthe fama french three factor model is an expansion of the capital asset pricing model capm the economists eugene fama and kenneth french developed the fama and french three factor model in order to gap the limitations posed by capm 1 empirical results from a study published in 2012 point out that the fama and french three factor model is better than capm at explaining expected returns this study tests the expected returns according to the capm and fama and french three factor model of a portfolio selection from the new york stock exchange nyse however the study revealed that the outcomes varied depending on how the portfolios were constructed 2 high minus low hml is a value premium it represents the spread in returns between companies with a high book to market value ratio and companies with a low book to market value ratio once the hml factor has been determined its beta coefficient can be found by linear regression the hml beta coefficient can also take positive or negative values a positive beta means that a portfolio has a positive relationship with the value premium or the portfolio behaves like one with exposure to value stocks if the beta is negative your portfolio behaves more like a growth stock portfolio | |
what is a high net worth individual hnwi | a high net worth individual hnwi is someone who generally has liquid assets of at least 1 million after accounting for their liabilities 1 liquid assets held by hnwis include cash and investments that can be easily liquidated or converted to cash including stocks the term hnwi is commonly used within the financial industry to identify individuals who need tailored financial and money management services due to their net worth investopedia mira norianunderstanding high net worth individuals hnwis there are several ways to reach a high net worth working saving money and making smart investments can lead to an increase in your net worth other ways include inheriting a large sum winning the lottery selling a valuable asset and or business and getting a settlement or a life insurance policy hnwis usually get more benefits than those whose net worth falls under 1 million most banks require that a customer have a certain amount of liquid assets a certain amount in depository accounts with the bank or both to qualify for special hnwi treatment if they qualify they may get services with reduced fees special rates and access to investor events that are closed to most 23the more money a person has the more work it takes to maintain and preserve those assets these individuals generally demand and can justify personalized investment management estate planning and tax planning services they generally qualify for separately managed investment accounts rather than mutual funds their wealth allows high net worth individuals to participate in initial public offerings ipos and invest in startups that demonstrate financial potential | |
where are most high net worth individuals hnwis | north america had about 7 9 million hnwis in 2023 according to the capgemini world wealth report this is the highest concentration of hnwis in the world followed by the asia pacific region with 7 4 million individuals hnwis in europe totaled 5 8 million in 2023 latin america with 600 000 the middle east had 900 000 hnwis while africa had 200 000 collectively the total number of hnwis around the world increased by 5 1 from 2022 to 2023 with north america experiencing the largest increase of 7 1 the hnwi population reached 22 8 million in 2023 with a total of 86 8 trillion in wealth 1the management consulting firm capgemini separates the hnwi population into three wealth bands globally the ultra hnwi population numbered 220 000 in 2023 that s an increase of 5 0 mid tier millionaires numbered 2 08 million while the millionaires next door category made up the largest group at 20 53 million 4the exact amount that defines an hnwi can often differ by financial institution and region it generally excludes the person s primary residence as well as possessions like fine art and antiques that are relatively difficult to sell and volatile in value 5benefits afforded to high net worth individuals hnwis as a high net worth individual you may qualify for banking investment and other financial services with reduced fees discounts and special rates along with access to special events and perks hnwis can invest in hedge funds which are generally open only to accredited investors who meet certain criteria including a minimum net worth hnwis may also invest in private equity pe and venture capital vc funds which are not available to the general public these benefits and opportunities vary depending on the financial institution and region types of high net worth individuals hnwis an investor with less than 1 million but more than 100 000 is considered to be a sub hnwi the upper end of hnwi is around 5 million at which point the client is referred to as a very hnwi ultra high net worth individuals uhnwis are defined as people with investable assets of at least 30 million this excludes property such as collectibles and consumer durables | |
how are hnwis categorized | the most commonly quoted figure for qualification as a high net worth individual is at least 1 million in liquid financial assets excluding personal assets such as a primary residence investors with less than 1 million but more than 100 000 in liquid assets are considered sub hnwis very high net worth individuals have investable assets of at least 5 million while ultra high net worth individuals have at least 30 million in investable assets | |
what benefits do hnwis get | hnwis are highly sought after clients for wealth managers they generally qualify for personalized managed investment accounts instead of regular mutual funds they also qualify for estate planning and tax planning as well as portfolio management services | |
where are most of the high net worth individuals | in sheer numbers of high net worth individuals north america leads the pack with 7 9 million followed by the asia pacific region with 7 4 million and europe with 5 8 million 1the bottom linea high net worth individual hnwi is someone with liquid assets of at least 1 million these individuals often seek the assistance of financial professionals to manage their money and their high net worth qualifies them for additional benefits and investing opportunities that are closed to most hnwis are in high demand by private wealth managers because it takes more work to maintain and preserve their assets the united states boasts the most hnwis in the world | |
what is a high ratio loan | a high ratio loan is a loan whereby the loan value is high relative to the property value being used as collateral mortgage loans that have high loan ratios have a loan value that approaches 100 of the value of the property a high ratio loan might be approved for a borrower who is unable to put down a large down payment for mortgages a high ratio loan usually means the loan value exceeds 80 of the property s value the calculation is called the loan to value ltv ratio which is an assessment of lending risk that financial institutions use before approving a mortgage the formula for a high ratio loan using ltvalthough there s no specific formula to calculate a high ratio loan investors should first calculate the loan to value ratio in their situation to determine if the loan exceeds the 80 ltv threshold loan to value ratio mortgage amount appraised property value text loan to value ratio frac text mortgage amount text appraised property value loan to value ratio appraised property valuemortgage amount | |
what does a high ltv ratio loan tell you | lenders and financial providers use the ltv ratio to measure the level of risk associated with making a mortgage loan if a borrower can t make a sizable downpayment and as a result the loan value approaches the value of the appraised value of the property it ll be considered a high ratio loan in other words as the loan value gets closer to 100 of the property value lenders might consider the loan too risky and deny the application the lender is at risk of borrower default particularly if the ltv is too high the bank might not be able to sell the property to cover the amount of the loan given to the defaulted borrower such a scenario can easily occur in an economic downturn when housing properties typically decrease in value if the loan given to the borrower exceeds the value of the property the loan is said to be underwater if the borrower defaults on the mortgage the bank will lose money when they go to sell the property for a lower value than the outstanding mortgage balance banks monitor ltv to prevent such a loss as a result most high ratio home loans require some form of insurance coverage in order to protect the lender the insurance is called private mortgage insurance pmi which the borrower would need to purchases separately to help protect the lender high ratio loans can have higher interest rates especially if borrowers have a low credit score your credit score is a numeric value that represents your ability to pay back debt and shows lenders how much of a risk you are of defaulting if your score is low your interest rate will likely be higher high ratio loan historyup until the 1920s people bought homes not by going to a bank but by saving their own money until they had enough for at least a piece of land or land with a house on it 1 then there emerged building and loan companies which would lend people the money to buy a house then have them pay it back in installments over many years even then loans typically were for half the value of the house or less by the end of the 1920s banks were making high ratio loans for up to 80 of the value of the house private mortgage insurance came into being to protect the banks but all that went by the wayside in the 1930s when jobless people stopped making payments and the banks and the pmi companies went under as well 2congress enacted the home owners loan corp which began guaranteeing mortgages and ratios sunk to 15 3 later through the federal housing administration fha and other agencies down payments fell to the low single digits and even 0 to encourage homeownership this system thrived until around 2007 2008 when the mortgage crisis of 2008 took hold the sharp increase in high risk mortgages that went into default beginning in 2007 contributed to the most severe recession in decades 2 the housing boom of the mid 2000s combined with low interest rates at the time prompted many lenders to offer home loans to individuals with poor credit after the real estate bubble burst many borrowers were unable to make payments on their subprime mortgages high ratio lendersthe federal housing administration offers programs through which borrowers can get fha loans with an ltv ratio of up to 96 5 in other words the program requires a 3 5 down payment however the program requires a minimum credit score to get approved for a high ratio loan there are other offers whereby a lower credit score is allowed with a 10 down payment also the fha loans require a mortgage insurance premium mip however you can refinance once the ltv falls below 80 and the loan is no longer considered a high ratio loan which would eliminate the insurance example of a high ratio loansay a borrower plans to buy a home that has a 100 000 appraised value the borrower can only afford to make a 10 000 down payment and the remaining 90 000 will have to be borrowed after approaching several lenders one finally agrees to underwrite a mortgage but with a higher than average interest rate the result is a loan to value ratio of 90 or 90 000 100 000 which would be considered a high ratio loan high ratio loans vs home equity loansa home equity loan is an installment loan or a second mortgage that allows homeowners to borrow against the equity value in their residence the loan is based on the difference between the homeowner s equity and the home s current market value a home equity loan is for those borrowers who already have a mortgage and have paid down some of the mortgage balance and whereby the property value exceeds the loan balance in other words a home equity loan allows homeowners to borrow based on the equity in the house a high ratio loan on the other hand can have a loan value that approaches 100 of the value of the property | |
what is a high speed data feed | high speed data feeds transmit data such as price quotes and yields without delays and are used in high frequency trading hft for real time data analysis these data feeds may be transmitted over fiber optic cable microwave frequency broadcast or via co location at exchange server sites since hft profitability depends on low latency these and other financial firms have collectively invested billions of dollars in building upgraded high speed data feeds | |
how a high speed data feed works | high speed data feeds provide computerized algorithmic traders with faster more reliable data because hft is driven by faster access to data there has been a technological arms race as data feeds and transactions approach the speed of light hft creates natural monopolies in market data which critics say has given high frequency traders an unfair advantage over institutional and retail investors advocates claim hft has a beneficial role in the market deepening market liquidity and pricing securities more efficiently than other intermediaries and lowering trading costs for everyone by tightening spreads to maintain a fair and orderly market the new york stock exchange nyse introduced designated market makers in 2008 to facilitate price discovery and provide liquidity to both institutional and retail investors much of it electronically through hft 1the hft industry has used many controversial predatory trading practices as our guide to hft terminology outlines such as front running where traders detect incoming orders and jump in front of them before they can be executed investors say that because there are so many hfts in the market it reduces long run returns because they take a share of the profit traders at banks and institutions began to see the effects of hft on their large orders in the 2000s the traders began noticing how their order flow appeared to be taken advantage of as stocks would race higher immediately after a trader began buying the shares this caused institutional investors to have to chase the stock in order to get filled the hft firms would see the order flow demand and buy shares ahead of it with the aim of selling sell the shares back to the investor at a higher price it wasn t until years later that many of the investors learned of what exactly was happening thus they had to learn to deal with hfts in the years afterward bloomberg s b pipe data feed thomson reuters matching binary multicast feed and ebs brokertec s ultra are examples of high speed feeds which provide investors and vendors market data with extremely low latency the time that elapses from the moment a signal is sent to its receipt special considerationsthe stock market now consists of a vast fragmented network of interconnected and automated trading systems hft characterized by high speeds ultra short holding periods and high order to trade ratios comprises a 50 share of u s equity trading volume which is significant but less than the over 60 share recorded in 2009 23 smaller volumes low market volatility and rising regulatory costs have compressed hft margins and led to consolidation in the industry to address issues of exchange competition regulators have introduced speed bumps that randomize entry times and introduce random order processing delays after the new iex exchange introduced its alternative trading system which slows orders by 350 microseconds to neutralize high frequency traders advantage the new york stock exchange followed suit in 2017 on its exchange for small and mid cap companies 4 | |
what is a high street bank | the term high street bank refers to a large retail bank that has many branch locations high street banks are major widespread institutions such as those found in the main commercial sector of a town or city they offer everyday banking services such as deposit accounts and credit facilities to consumers and businesses people generally refer to high street banks as such in order to differentiate them from other institutions such as investment banks the term originated in the united kingdom where high street is commonly used as the british equivalent of main street understanding high street banksas mentioned above high street is a term that originated in the united kingdom and is commonly used to refer to the main thoroughfare where primary business activities take place in cities and towns it is akin to the term main street used in north america banks that are found in these areas are therefore referred to as high street banks high street banks are major commercial institutions that provide retail banking services to individuals and small to mid sized businesses they accept deposits make withdrawals provide consumer investment and other savings vehicles and offer their customers lending services such as overdraft protection loans lines of credit and mortgages major high street banks in the u k include barclays royal bank of scotland group rbs lloyds bank and hsbc these large high street banks offer both branch based and online banking options just like major american banks high street banks offer their customers in branch and online services just like other retail banks across the world high street banks are coming under increasing pressure because of the competition created by niche and challenger banks while high street banks serve a range of customers across a variety of demographics niche banks usually target a specific market or type of customer for instance zenith bank is a nigerian based institution that has a presence in the u k providing customers with a connection to the african financial markets challenger banks on the other hand try to compete with major high street institutions many of these banks forego the traditional brick and mortar model and provide an online only presence this helps cut down costs giving customers a chance to earn higher rates on their savings products while paying lower interest on their debt atom bank is an app based service that provides customers with savings and mortgage products additional activities and servicessome high street banks may also have other financial arms for instance barclays engages more broadly in investment banking wealth management and investment management in addition to the retail services it offers the institution serves about 48 million customers and clients across personal wealth and business units in over countries 1 barclays primary listing is on the london stock exchange lse with a secondary listing on the new york stock exchange nyse the royal bank of scotland headquartered in edinburgh uk is part of natwest group and was founded in 1727 2 the bank provides a vast array of services to customers and clients including lloyds bank is both a retail and commercial bank with branches in england and wales it is among one of the big four clearing banks in the country founded in birmingham in 1765 lloyds expanded by acquiring many smaller financial institutions in the nineteenth and twentieth centuries in 1995 lloyds merged with the trustee savings bank together they began to trade as lloyds tsb bank between 1999 and 2013 before simply becoming lloyds 3hsbc is another one of the four major clearing banks in the united kingdom one of the largest international financial institutions in the world hsbc serves approximately 39 million customers in 62 countries 4 holding more deposits than loans many consider hsbc to be less risky than other major banks hsbc was able to fund its operations and generally maintain its share price throughout the credit crunch | |
what is the best high street bank | it depends on the specific services you are looking for as a customer some of the major high street banks with a good reputation include barclays the royal bank of scotland natwest lloyds bank and hsbc | |
where does the name high street bank come from | the name high street bank derives from the fact that these financial institutions were historically located on the high street or the main commercial street of a city | |
how many banks are there in the uk | there are 365 businesses in the bank industry in the uk as of 2023 this is an increase of 3 5 from 2022 5the bottom line high street bank is the name given to traditional brick and mortar banks in the uk they are large retail banks with hundreds of branch locations across the country serving mostly individuals and small sized businesses rather than large firms high street banks provide the same services and products as commercial banks they accept deposits facilitate withdrawals provide investment and savings vehicles and offer loans lines of credit and mortgages some reputed high street banks in the uk include barclays the royal bank of scotland natwest lloyds bank and hsbc | |
what is a high water mark | a high water mark is the highest peak in value that an investment fund or account has reached this term is often used in the context of fund manager compensation which is performance based the high water mark ensures the manager does not get paid large sums for poor performance if the manager loses money over a period he must get the fund above the high water mark before receiving a performance bonus from the assets under management aum 1investopedia julie bangunderstanding high water marka high water mark ensures that investors do not have to pay performance fees for poor performance but more importantly guarantees that investors do not pay performance based fees twice for the same amount of performance a high water mark is different from a hurdle rate which is the lowest amount of profit or returns a hedge fund has to earn to charge an incentive fee high water mark examplefor example assume an investor is invested in a hedge fund that charges a 20 performance fee which is quite typical in the industry 2 assume the investor places 500 000 into the fund and during its first month the fund earns a 15 return thus the investor s original investment is worth 575 000 the investor owes a 20 fee on this 75 000 gain which equates to 15 000 at this point the high water mark for this particular investor is 575 000 and the investor is obligated to pay 15 000 to the portfolio manager next assume the fund loses 20 in the next month the investor s account drops to a value of 460 000 this is where the importance of the high water mark is noted a performance fee does not have to be paid on any gains from 460 000 to 575 000 only after the high water mark amount assume that in the third month the fund unexpectedly earns a profit of 50 in this unlikely case the value of the investor s account rises from 460 000 to 690 000 without a high water mark in place the investor owes the original 15 000 fee plus 20 on the gain from 460 000 to 690 000 which equates to 20 on a gain of 230 000 or an additional 46 000 in performance fees value of a high water markthe high water mark prevents this double fee from occurring with a high water mark in place all gains from 460 000 to 575 000 are disregarded but gains above the high water mark are subject to the performance based fee in this example beyond the original 15 000 performance based fee this investor owes 20 on the gains from 575 000 to 690 000 which is an additional 23 000 in total with a high water mark in place the investor owes 38 000 in performance fees which is 690 000 less than the original investment of 500 000 multiplied by 20 without a high water mark in place which is below industry standards the investor owes a 20 performance fee on all gains which equates to 61 000 the value of a high water mark is unquestionable a high water mark both protects the fund s investors from double fees and motivates the fund s managers to perform well in order to earn fees a high water mark and the free ride several things can happen when an investor enters a fund during a period of under performance for instance at goldman sachs asset management an investor who buys into the fund at a net asset value nav below the high water mark will enjoy the upside from the subscription nav to the high water mark without paying a fee this situation is known as a free ride it allows new investors to benefit from buying into an under performing fund without penalizing existing investors other funds may avoid the free ride by charging a performance fee for any positive performance | |
what are high yield bonds | high yield bonds also called junk bonds are bonds that pay higher interest rates because they have lower credit ratings than investment grade bonds high yield bonds are more likely to default so they pay a higher yield than investment grade bonds to compensate investors 1issuers of high yield debt tend to be startup companies or capital intensive firms with high debt ratios however some high yield bonds are fallen angels which are bonds that lost their good credit ratings investopedia nono floresunderstanding high yield bondsa high yield bond or junk bond is a corporate bond that represents debt issued by a firm with the promise to pay interest and return the principal at maturity junk bonds are issued by companies with poorer credit quality bonds are characterized by their credit quality and fall into one of two bond categories investment grade and non investment grade non investment grade bonds or high yield bonds carry lower credit ratings from the leading credit agencies a bond is considered non investment grade if it has a rating below bb from standard poor s and fitch or ba1 or below from moody s bonds with ratings above these levels are considered investment grade credit ratings can be as low as d in default and most bonds with c ratings or lower carry a high risk of default 2high yield bonds are typically broken down into two subcategories advantages of high yield bondsinvestors choose high yield bonds for their potential for higher returns high yield bonds do provide higher yields than investment grade bonds if they do not default typically the bonds with the highest risks also have the highest yields modern portfolio theory states that investors must be compensated for higher risk with higher expected returns disadvantages of high yield bondswhile high yield bonds do offer the potential for more gains compared to investment grade bonds they also carry a number of risks like default risk higher volatility interest rate risk and liquidity risk default is itself the most significant risk for high yield bond investors the primary way of dealing with default risk is diversification but that limits strategies and increases fees for investors with investment grade bonds you can buy bonds issued by individual companies or governments and hold them directly when you hold individual bonds you can build bond ladders to reduce interest rate risk investors can often avoid the fees related to funds by holding individual bonds however the possibility of default makes individual bonds riskier than investing in bond funds small investors may want to avoid buying individual high yield bonds directly because of high default risk high yield bond exchange traded funds etfs and mutual funds are usually better choices for retail investors interested in this asset class because their diversity helps reduce risk historically high yield bond prices have been significantly more volatile than their investment grade counterparts the volatility of the high yield bond market is similar to the volatility of the stock market unlike the investment grade bond market which has much lower volatility all bonds face interest rate risk this is the risk that market interest rates will rise and cause the price of a bond to decrease the price of bonds move in the opposite direction of the price of market interest rates the longer a bond s term the higher the interest rate risk because there is more time for interest rates to change 4liquid assets are ones that you can sell easily for cash when bonds are traded frequently they have higher liquidity liquidity risk is the risk that you won t be able to sell an asset at the time and for the price that reflects the true value of the bonds high yield bonds generally have higher liquidity risk than investment grade bonds even high yield bond mutual funds and exchange traded funds etfs carry liquidity risk 4investment grade vs non investment gradeyou can typically classify bonds into investment grade and non investment grade bonds are rated by three major ratings agencies moody s standard poor s and fitch | |
when a bond is rated baa3 or higher by moody s or bbb or higher by standard poor s or fitch it is considered investment grade bonds rated ba1 or lower by moody s or bb or lower by standard poor s or fitch are considered non investment grade 2 | you ll want to have a higher risk tolerance for investing in non investment grade bonds | |
how to invest in high yield bonds | you can invest in high yield bonds in several ways with the latter strategy you buy shares of a fund that is managed by a fund manager who chooses which bonds to include | |
when researching your choices in high yield bonds you can read primary documents like the bond s prospectus which provides information about the financial health of the company issuing the bond it also includes the company s plans for using the proceeds of the bond along with the bond terms and risks involved | the effect on high yield bonds when interest rates rise | |
when interest rates rise the market value of high yield bonds can decline because investors can get higher returns with newer bonds | however rising interest rates can also help high yield bonds because interest rates tend to increase when the economy expands so the corporations issuing the bonds can benefit from increased spending this means that these bonds would have a lower risk of default 5 | |
what is a non investment grade bond | a non investment grade bond is a bond that pays higher yields but also carries more risk and a lower credit rating than an investment grade bond non investment grade bonds are also called high yield bonds or junk bonds | |
are bbb bonds investment grade | bonds that have a bbb rating from either standard poor s or fitch are considered investment grade bonds although they are the lowest tiers of investment grade bonds non investment grade bonds are rated bb through cc moody s uses a different rating system 2the bottom linelike with any investment high yield bonds have risks and rewards to consider for investors with a high risk tolerance high yield bonds may fit their investing goals these bonds can offer more attractive yields but they carry more risk and a lower credit rating than investment grade bonds factor in your individual financial situation including your income net worth investment goals and risk tolerance when deciding whether high yield bonds are right for you | |
what is a high yield bond spread | a high yield bond spread is the percentage difference in current yields of various classes of high yield bonds compared against investment grade corporate bonds treasury bonds or another benchmark bond measure spreads are often expressed as a difference in percentage points or basis points the high yield bond spread is also referred to as credit spread | |
how a high yield bond spread works | a high yield bond also known as a junk bond is a type of bond that offers a high rate of interest because of its high risk of default a high yield bond has a lower credit rating than government bonds or investment grade corporate bonds but the higher interest income or yield draws investors to it the high yield sector has a low correlation to other fixed income sectors and has less sensitivity to interest rate making it a good investment asset for portfolio diversification the greater the default risk of a junk bond the higher the interest rate will be one measure that investors use to assess the level of risk inherent in a high yield bond is the high yield bond spread the high yield bond spread is the difference between the yield for low grade bonds and the yield for stable high grade bonds or government bonds of similar maturity as the spread increases the perceived risk of investing in a junk bond also increases and hence the potential for earning a higher return on these bonds increases the higher yield bond spread is therefore a risk premium investors will take on the higher risk prevalent in these bonds in return for a premium or higher earnings high yield bonds are typically evaluated on the difference between their yield and the yield on the u s treasury bond a company with weak financial health will have a relatively high spread relative to the treasury bond this is in contrast to a financially sound company which will have a low spread relative to the us treasury bond if treasuries are yielding 2 5 and low grade bonds are yielding 6 5 the credit spread is 4 since spreads are expressed as basis points the spread in this case is 400 basis points high yield bond spreads that are wider than the historical average suggests greater credit and default risk for junk bonds benefits of high yield bond spreadshigh yield spreads are used by investors and market analysts to evaluate the overall credit markets the change in the perceived credit risk of a company results in credit spread risk for example if lower oil prices in the economy negatively affect a wide range of companies the high yield spread or credit spread will be expected to widen with yields rising and prices falling if the general market s risk tolerance is low and investors navigate towards stable investments the spread will increase higher spreads indicate a higher default risk in junk bonds and can be a reflection of the overall corporate economy and therefore credit quality and or a broader weakening of macroeconomic conditions the high yield bond spread is most useful in a historical context as investors want to know how wide the spread is today compared to the average spreads in the past if the spread is too narrow today many savvy investors will avoid buying into junk bonds high yield investments are attractive vehicles for investors if the spread is wider than the historical average | |
what is a high yield investment program hyip | a high yield investment program hyip is a fraudulent investment scheme that purports to deliver extraordinarily high returns on an investment hyips often advertise yields of more than 100 per year in order to tempt investors they regularly use new investors money to pay off long standing investors monies received in such schemes aren t actually invested hyips should not be confused with a legitimate high yield bond investment which offers higher than investment grade bond interest rates understanding a high yield investment programhyips are ponzi schemes the organizers of such schemes aim to steal the money provided by the investors that they deceive in a ponzi scheme money from new investors is used to pay returns to more established investors money is not invested and no actual underlying returns are ever earned though these types of ponzi schemes have existed since the early 20th century the proliferation of digital communications has made it much easier for con artists to operate such scams usually an operator will use social media and a website to attract unsuspecting investors promising very high returns however information about the investment itself remains vague investors will get no details about the management of the investment fund how the money is to be invested or where the fund is located these schemes typically involve the alleged trading or issuance of prime bank financial securities and may include references to prime european or prime world bank instruments for this reason this scam is also known as the prime bank scam 1the securities and exchange commission sec advises that there are several warning signs that can prevent investors from being victimized by hyip scams these can include excessive guaranteed returns fictitious financial instruments extreme secrecy claims that the investments are an exclusive opportunity and inordinate complexity surrounding the investments 23perpetrators of hyips use secrecy and a lack of transaction transparency to hide the fact that there are no legitimate underlying investments the best weapon against losing money to a hyip is to ask a lot of questions and use common sense if an investment s return sounds too good to be true it probably is hyip operators will typically use social media including facebook x formerly twitter or youtube to appeal to potential investors and create the illusion of social consensus surrounding the legitimacy of these programs example of a high yield investment programzeekrewards was a hyip run by paul burks and shut down by the sec in august 2012 zeekrewards offered investors the opportunity to share in the profits of a penny auction website zeekler at returns of 125 investors were encouraged to let their returns compound and to increase their returns by recruiting new members investors were required to pay a monthly subscription fee of 10 to 99 and make an initial investment of up to 10 000 4in 2017 the u s district court found that zeekrewards was a 900 million internet ponzi scheme about 98 of the funds disbursed were paid out of the pockets of new investors burks was fined 244 million and sentenced to 176 months in prison 5 | |
does anyone make money from a hyip | the scheme organizers make money when they accept funds from investors so may those investors who get involved early in the life of the fraudulent scheme and are paid by the organizers with money invested by later investors but investor funds received by the organizers are never actually invested legitimately | |
what s another well known hyip | although it didn t involve use of the internet the ponzi scheme run by bernie madoff and revealed in 2008 is very well known and remembered by the financial community including the investors he bilked his was a word of mouth investment scam that involved among other things secrecy attractive returns a lack of information about the invested funds and false transaction records | |
what is a high yield investment | a high yield investment typically refers to the corporate bonds issued by corporations with low credit ratings these are legitimate investments unlike hyips they offer higher yields than other corporate bonds such as those referred to as investment grade bonds to compensate investors for the higher level of risk associated with the credit ratings high yield bonds are also referred to as junk bonds the bottom linehigh yield investment programs or hyips are fraudulent investment programs that are also known as ponzi schemes they re sometimes referred to as prime bank investment scams because of the alleged investments that their organizers may advertise perpetrators of hyips often use social media and compelling websites in addition to more traditional methods of communication to attract investors who are eager for big returns they often guarantee returns of more than 100 the key to spotting and avoiding hyips is to ask pointed questions about an investment and to take note if you receive no satisfactory details look to sources of pertinent information other than the program itself for instance contact the sec to learn whether the operator is registered ask your financial advisor or brokerage firm what they know about the program most importantly use your common sense to recognize when a high yield is too high to be lawfully possible | |
what is the higher education act of 1965 | the higher education act of 1965 hea is a law designed to provide financial assistance to post secondary school students and to strengthen the educational resources of the colleges and universities of the united states the hea increased the amount of federal money given to post secondary school institutions developed scholarship programs provided low interest loans to students and founded the national teachers corps 12part of president lyndon b johnson s great society domestic agenda the act was signed into law on nov 8 1965 and has been reauthorized by congress a number of times since 3the act expired in 2013 and congress has been unable to reach an agreement on its reauthorization 4 however it has been running on temporary extensions since then with now familiar programs including pell grants and stafford loans remaining available 5understanding the higher education act of 1965president johnson advocated the passage of the higher education act with the stated goals of increasing educational opportunities for the children of lower and middle income families bolstering cash strapped small colleges and improving library resources at higher education institutions 6on the 50th anniversary of its passage in 2015 the national education association nea lauded the program for making a college education affordable to millions of smart low and middle income americans by establishing need based grants work study opportunities and federal student loans 7it also enabled the establishment of a program called trio which assists educational programs designed to reach low income and disadvantaged students from middle school through graduate school 7the act has the following titles 2title i provides funding for extension and continuing education programs title ii authorizes grants for the purpose of recruiting educating and training teachers title iii contains provisions for strengthening developing institutions title iv provides student assistance through scholarships low interest loans and work study programs title v contains provisions for improving the quality of teaching title vi contains provisions for improving undergraduate instruction title vii contains provisions for graduate education programs and innovation in post secondary school education title viii contains provisions focused on a variety of post secondary and graduate level educational topics the higher education act of 1965 has undergone multiple reauthorizations and amendments including the addition of new title initiatives 2the total amount of student debt owed by americans pell grants once covered about up to 50 of college costs that s down to 30 in the 2022 2023 school year 8910 | |
what the hea provides | the hea established a variety of financial aid options for students attending post secondary schools in the u s financial assistance programs including pell grants and stafford loans were created as a direct result of this legislation pell grants which do not need to be repaid come from federal funding and are available to undergraduate students the amount offered under the grants is based on financial need the cost of the school and the students standing for full time or part time attendance there is a maximum amount of funding per recipient which is set by the legislation that reauthorizes the grant program 11stafford loans which can be direct subsidized or direct unsubsidized loans are offered to students in need of financial assistance direct subsidized loansfor direct subsidized loans which are available to undergraduate students who demonstrate financial need the amount of the loan is determined by the costs of the school they are attending 12the interest on such loans is paid by the u s department of education as long as the student remains enrolled at least halftime in college the interest is also covered for six months after they leave school 12direct unsubsidized loansdirect unsubsidized loans do not have financial need requirements and are available to graduate students as well as undergraduates 12 the college or university will determine the size of the loan in relation to other financial assistance that was received the borrower is responsible for repaying all of the interest on a direct unsubsidized loan 12technically stafford loans don t exist anymore as the term refers to a subsidized or unsubsidized federal stafford loan that students could apply for in the past if they went to schools that participated in the federal family education loan ffel program no loans have been made under that program since july 1 2010 but the terms stafford loans and direct stafford loans are still used by many schools and individuals to refer to direct subsidized loans and direct unsubsidized loans made under the william d ford federal direct loan program 13president biden announced a new income driven repayment idr plan on june 30 2023 in response to the same day supreme court decision that halted his previous student loan forgiveness plan called save it offers enhanced financial benefits to student loan borrowers three important features will launch during the summer of 2023 while the full regulations take effect on july 1 2024 for more information about save see the department of education s fact sheet 14hea reauthorization attemptsthe hea was reauthorized every five years from its initial passage in 1965 until 2008 frequently with amendments added to it 5 it has failed to gain formal reauthorization since 2013 but its programs have continued to operate on temporary extensions since then the hea technically expired at the end of 2013 although its programs were allowed to continue to operate as congress debated proposed changes to it 15in 2020 the senate was nearing an agreement on a reauthorization and update of the hea when the covid 19 pandemic placed discussions about it and many other matters on hold 15proposed changes that are still on the table include a simplified student aid application process and an increase in the maximum size of pell grants 15 | |
how did the hea contribute to post secondary education | the national education association calls the hea the cornerstone of college affordability for americans at this time 34 of college undergraduates receive pell grants to help pay for their education 16 more than 44 million americans have taken out federal student loans 17 | |
what is title iv of the hea | title iv authorizes and funds scholarships low interest loans and work study programs for students at eligible colleges and universities its best known programs include pell grants and stafford loans 2 | |
what type of school does the term higher education refer to | higher education refers to a course of study beyond the high school level leading to the award of a degree diploma or certificate this definition can encompass studies at a college a university a professional school or a technical school | |
what is a title i school | in the context of the higher education act a title 1 school is a post secondary institution of higher learning that has been approved to receive direct federal assistance to enhance its library or strengthen its programs or is approved to accept students whose tuition is subsidized by the hea it should not be confused with title 1 of the elementary and secondary education act that title 1 is a federal program that supplements state and local funding for public schools in economically disadvantaged areas of the u s 18the bottom linetoday s students were not born or even thought of when the higher education act was first passed in 1965 but its core concept making a college education accessible to americans of modest means has stood the test of time and served generations of american students correction aug 11 2023 a previous version of this article incorrectly stated that title ii of the higher education act allocates money to enhance library collections title ii actually authorizes grants for the purpose of recruiting educating and training teachers | |
what is highest in first out hifo | highest in first out hifo is an inventory distribution and accounting method in which the inventory with the highest cost of purchase is the first to be used or taken out of stock this will impact the company s books such that for any given period of time the inventory expense will be the highest possible for the cost of goods sold cogs and the ending inventory will be the lowest possible hifo usage is rare to non existent and is not recognized by gaap understanding highest in first outaccounting for inventories is an important decision that a firm must make and the way inventories are accounted for will impact financial statements and figures companies would likely choose to use the highest in first out hifo inventory method if they wanted to decrease their taxable income for a period of time because the inventory that is recorded as used up is always the most expensive inventory the company has regardless of when the inventory was purchased the company will always be recording the maximum cost of goods sold companies may occasionally change their inventory methods in order to smooth their financial performance contrast this with other inventory recognition methods such as last in first out lifo in which the most recently purchased inventory is recorded as used first or first in first out fifo in which the oldest inventory is recorded as used first lifo and fifo are common and standard inventory accounting methods but it is lifo that is part of generally accepted accounting principles gaap meanwhile hifo is not often used and is furthermore not recognized by gaap as standard practice some highest in first out implicationsa company could decide to use the hifo method to reduce taxable income but there are some implications to be made aware of including | |
what is a highly compensated employee hce | the internal revenue service irs defines a highly compensated employee hce as one who meets either or both of the following standards 1understanding highly compensated employeesthe disadvantage of being classified as a highly compensated employee is that your 401 k plan contributions are limited the irs wants to make sure that the taxable income lowering advantage offered by pre tax contributions doesn t benefit one group of employees more than others the 5 threshold for hces mentioned above is based on voting power or the value of company shares the interest owned by an individual also includes the interest held by relatives such as spouses parents children and grandparents but not grandchildren or siblings 3for example an employee with exactly 5 ownership in the company is not considered a highly compensated employee one with a 5 01 interest in the company has the hce status an employee with 3 holdings in the company will be considered an hce if the person s spouse owns 2 2 interest in the same company making the employee s total interest 5 2 tax deferred retirement plans such as 401 k plans were implemented by the irs to offer equal benefits to all workers initially all employees could contribute as much as they wanted to with the total contribution matched by the employer up to 22 500 for 2023 the figures increase to 23 000 in 2024 4that meant high earners could contribute much more than other employees thus they would benefit to a greater degree from the tax deductions that lower taxable income to correct this disparity the irs set limits on the dollar amount of contributions that can be made by high earners nondiscrimination testthe irs requires that all 401 k plans perform a nondiscrimination test every year the test separates employees into two groups non highly compensated and highly compensated employees by examining the contributions made by hces the compliance test determines whether all employees are treated equally through the company s 401 k plan the nondiscrimination stipulations are designed to make sure that the tax advantages of employee retirement plans do not disproportionately favor highly compensated employees if the average contributions of hces to the plan are more than 2 higher than the average contributions of non hces the plan would fail the non discrimination test in addition contributions by hces as a group cannot be more than two times the percentage of other employee contributions 5if you receive compensation in 2024 that s more than 155 000 and you re in the top 20 of employees as ranked by compensation your employer can classify you as a highly compensated employee 32 compensation includes overtime bonuses commissions and salary deferrals made toward cafeteria plans and 401 k s other considerations | |
when a company contributes to a defined benefit or defined contribution plan for its employees and those contributions are based on the employee s compensation the irs requires that the company minimize the discrepancy between the retirement benefits received by highly compensated and lower compensated employees 6 | if an employer fails to correct a discrepancy the plan is liable to lose its tax qualified status all contributions would have to be returned to the plan s participants the employer could also face severe financial and tax consequences as a result of distributing the contributions and earnings 7a company can correct any imbalance in its retirement plans by making additional contributions for its non highly compensated employees or the firm can make distributions from its retirement plans to the highly compensated employees who would then have to pay taxes on the withdrawals 5401 k contribution limits for highly compensated employeesfor 2023 highly compensated employees can contribute up to 22 500 to a 401 k plan if they re age 50 or older they can contribute an additional 7 500 catch up amount in 2024 they can contribute up to 23 000 plus 7 500 as a catch up contribution 4other retirement savings options for highly compensated employeesin addition to your 401 k open a traditional ira to add a pre tax contribution of up to 6 500 in 2023 in 2024 the number rises to 7 000 and the 1 000 catch up amount remains unchanged 4the deduction for contributions is reduced and ultimately phases out if you or your spouse have a workplace retirement plan and your adjusted gross income is above a certain amount 4 however you ll still be able to build your tax deferred retirement savings if you have a high deductible health plan hdhp consider opening a health savings account hsa while helping you save for uncovered healthcare expenses they also provide tax benefits 8you contribute pre tax dollars to an hsa and your earnings grow tax deferred you can invest in a variety of securities including stocks bonds and mutual funds moreover the money you withdraw from it is tax free as long as it s used to pay for qualified medical expenses 8it may not be a tax advantaged account but it can help you build more savings you can invest in all kinds of securities including those with their own tax advantages such as treasury bonds and municipal bonds you can invest as much as you wish and take money out at any time this type of plan allows you to defer a certain percentage of your salary and the taxes you d pay on it typically until after you retire there are no limits to the amount you can defer and the investment options are similar to those available to a 401 k you ll owe taxes on the plan payouts after you retire 94bear in mind that a deferred compensation plan is an asset of the company you don t own it as you do your 401 k if the company fails you won t have access to the compensation you deferred | |
what s a highly compensated employee | according to the irs a highly compensated employee is someone who either owned more than 5 of the interest in the business at any time during the year or the preceding year regardless of how much compensation that person earned or received or received more than 155 000 in compensation in the previous year if that year is 2024 and the person ranked in the top 20 of employees by compensation the numbers are revised annually by the irs 21 | |
why is it important to know whether i m a highly compensated employee | if you are a highly compensated employee the amount that the irs allows you to contribute to your 401 k plan is limited if you contribute more than that amount it would most likely be refunded to you and you d owe taxes on it 5 | |
why does the irs limit contributions for highly compensated employees | the irs places limits on hse contributions because it wants to ensure that the tax benefit of 401 k contributions doesn t favor highly paid employees over others 5 if hses were able to make larger contributions compared to other employees they d be able to reduce their taxable income to a greater degree the bottom line | |
when in doubt ask your company s benefits department whether or not you re a highly compensated employee double check on the amount you can contribute to your 401 k you also want to be prepared to pay additional taxes on what you may have contributed in the previous year | for example if it turns out that you are an hce and you contributed the maximum there could be consequences if your company fails the nondiscrimination test it will probably refund you the excess contributions you made this will be considered taxable income | |
what is a highly leveraged transaction hlt | a highly leveraged transaction hlt is a bank loan to a company that has a large amount of debt they were popularized in the 1980s as a way to finance buyouts acquisitions or recapitalizations understanding highly leveraged transactions hlts highly leveraged transactions are risky in that they add to a company s debt load and often result in an unattractive debt to equity ratio but the interest income generated from these transactions is significant enough to make them attractive to investors and financial institutions highly leveraged transactions are thought of as being similar to junk bonds and junk bonds may well be issued as part of the deal structure both junk bonds and highly leveraged transactions face significant default risk but hlts are more secure because they have stronger debt covenants due to their structure leveraged buyouts lbos are an example of a highly leveraged transaction highly leveraged transactions often include some type of debt restructuring regardless of what the intention is for the financing this is simply because the existing debt levels of the company must be dealt with for any chance of future success the end result is usually a complicated debt structure with several types of subordinated debt in the restructured entity the lenders behind the highly leveraged transaction often end up with an equity stake in the new enterprise guidance for highly leveraged transactionsguidance for highly leveraged transactions is set out by the u s office of the comptroller of currency occ the federal reserve board and the federal deposit insurance corporation the occ broadly considers a highly leveraged transaction as one where the borrower s post financing leverage when measured by debt to assets debt to equity and cash flow to total debt significantly exceeds industry norms for leverage depending on the particulars of the industry in question customized industry metrics can be substituted for these broader measures for a loan to be defined as an hlt it generally has to fit some combination of the following conditions the guidance on highly leveraged transactions isn t a legal regulation there is an implied high water mark of 6 times debt to ebitda for the restructured entity but this amount has been exceeded many times with highly leveraged transactions as with almost everything the limit is what the market will buy | |
what is hikkake pattern | the hikkake pattern is a price pattern used by technical analysts and traders hoping to identify a short term move in the market s direction the pattern has two different setups one implying a short term downward movement in price action and a second setup implying a short term upward trend in price understanding hikkake patternthe hikkake pattern pronounced h kah kay is a complex bar or candle pattern that begins to move in one direction but reverses quickly and is said to establish a forecast for a move in the opposite direction this pattern was developed by daniel l chesler cmt who first published a description of the pattern in 2003 the pattern has four key points once the fourth characteristic is achieved the pattern implies a continuation in the direction of the final candle the following two charts show examples of both setups image by sabrina jiang investopedia 2021the first pattern is for the bullish setup each of the four characteristics is marked to show where they have occurred in these examples the second pattern for the bearish setup is less frequently observed image by sabrina jiang investopedia 2021the name of this pattern comes from a japanese word meaning hook catch ensnare when the hikkake pattern was first described by chesler he was looking to describe a pattern he had noticed that seemed to trap traders committing capital to a market only to see it move away from what they expected from a conceptual basis the hikkake pattern is made up of a short term decrease in market volatility followed by a breakout move in price action this move the third candle in the pattern will tend to entice traders into thinking a breakout has formed traders enter the market and set a stop in the opposite direction of their trade if the price pattern reverses then the traders stop loss orders kick in and may give a boost to the price as it reverses past the boundary of the second candle in the formation where the stop orders are likely to be example of a hikkake patternimage by sabrina jiang investopedia 2021this pattern occurred in the price action for shares of microsoft msft and is somewhat typical of how this pattern plays out slightly more than half the time it occurs the pattern shown in this chart is the bullish setup and holds all four characteristics described above here the price pattern is highlighted by a rectangle and the implied forecast is for a bullish move in the days beyond the rectangle this example shows that the chart had a mild upward trend after leaving the boxed area not all hikkake patterns play out to the correct forecast direction investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is the hindenburg omen | the hindenburg omen is a technical indicator that was designed to signal the increased probability of a stock market crash it compares the percentage of new 52 week highs and new 52 week lows in stock prices to a predetermined reference percentage that is supposed to predict the increasing likelihood of a market crash named after germany s hindenburg airship that crashed on may 6 1937 it was conceived and promoted by james r miekka in 2010 it was reported that it had correctly predicted a significant stock market decline only 25 of the time 1understanding the hindenburg omengiven the inherent upward bias that is built into most stock markets any occurrence that is abnormal usually leads to a flight to safety response from investors this facet of investor psychology is arguably the single most relevant factor that leads to precipitous market declines or market crashes the hindenburg omen looks for a statistical deviation from the premise that under normal conditions some stocks are either making new 52 week highs or new 52 week lows it would be abnormal if both were occurring at the same time according to the hindenburg omen an occurrence such as this is a harbinger of impending danger for a stock market the signal typically occurs during an uptrend where new highs are expected and new lows are rare suggesting that the market is becoming nervous and indecisive traits that often lead to a bear market main criteria for a hindenburg omen signalfour criteria must be met to signal a hindenburg omen once these conditions are met the hindenburg omen is considered active for 30 trading days and any additional signals during that period should be ignored the hindenburg omen is confirmed if the mco is negative during the 30 day period and rejected if the mco turns positive 1traders using the indicator will go short or exit long positions when the mco turns negative during the 30 days following a hindenburg omen confirmation by doing so in the past traders could have escaped the 1987 market crash and the 2008 financial crisis 2of course since the omen s rate of success is estimated at only 25 they also would have jumped unnecessarily a number of times traders might use the indicator in conjunction with other forms of technical analysis to provide further confirmation of a sell or take profit signal for example traders might look for a breakdown from key support levels before going short or taking profit on a long position example of the hindenburg omenthe following chart shows an example of the hindenburg omen in an s p 500 spdr spy chart in this example the shaded area represents where hindenburg omen conditions were met the s p 500 moved sharply lower on high volume just one month after the indicator suggested that traders should brace for a bear market traders could have exited their long positions following the hindenburg omen and avoided the market decline | |
what is hindsight bias | hindsight bias is a psychological phenomenon that allows people to convince themselves after an event that they accurately predicted it before it happened this can lead people to conclude that they can accurately predict other events hindsight bias is studied in behavioral economics because it is a common failing of individual investors understanding hindsight biashindsight bias is when a person looks back at an event and believes they predicted the outcome even if they failed to act on that prediction unfortunately this leads people to think that their judgment is better than it is the idea is that once we know the outcome it s much easier to construct a plausible explanation with this we become less critical of our decisions leading to poor decision making in the future hindsight bias is caused by1the bias occurs when we remember something we believe we predicted and view it at the present time as an inevitable event we knew would happen investors often feel pressure to perfectly time buying or selling stocks to maximize their returns when they suffer a loss they regret not acting earlier with regret comes the thought that they saw it coming all along in fact it was one of the many possibilities that they might have anticipated whichever one of them pans out the investor becomes convinced that they saw it coming this allows them to make poor decisions in the future unknowingly preventing hindsight bias involves being able to make predictions beforehand such as keeping a decision making journal allowing the investor to compare later keeping an investment journal or diary may allow investors to avoid some issues tied to hindsight bias | |
what causes hindsight bias | hindsight bias occurs when new information comes to light about an experience changing how we recall that experience we selectively remember only the information that confirms what we know or believe to be true then if we feel we already knew what would happen all along we fail to carefully review the outcome or the reason for the outcome hindsight bias involves revising the probability of an outcome after the fact after knowing the outcome people tend to exaggerate the extent of their prediction of the event these biases can be found in just about any situation including predicting the weather or elections hindsight bias is rooted in overconfidence and anchoring after an event occurs we use the knowledge of the outcome as an anchor to attach our prior judgments to the outcome the issue may be partly science based as well hindsight bias might not be tied to only the ineffective processing of information but be rooted in adaptive learning people are susceptible to hindsight bias because it s comforting to think that the world is predictable and thus somewhat orderly as a result we seek to see unpredictable events as predictable we desire a positive view of ourselves and therefore try to make sense of it by creating a story or narrative that shows we knew the outcome | |
how to avoid hindsight bias | investors should be careful when evaluating their own ability to predict how current events will impact the future performance of securities believing that one can predict future results can lead to overconfidence and overconfidence can lead to choosing stocks or investments on a hunch not for financial performance or value here are some tips to help you avoid this bias professions that require a lot of feedback such as accounting are less prone to hindsight bias hindsight bias can distract investors from an objective analysis of a company sticking to intrinsic valuation methods helps them decide on data driven factors not personal ones intrinsic value refers to the perception of a stock s true value based on all aspects of the business it may not coincide with an investment s current market value to avoid hindsight basis it s best to use a mathematical model this takes much of the guesswork and bias out of analyzing a company quantitative factors such as financial statements and ratios are much more indicative of performance than opinions based on personal experience quantitative aspects such as financial statement analyses offer insights into whether the current market price is accurate or the company is overvalued or undervalued an intrinsic valuation will also take into account qualitative factors such as a company s business model corporate governance and target market notably there s no universal intrinsic value calculation there are many different models or valuation tools to use some assumptions must be plugged into any model which can open that model up to bias examples of hindsight biasfinancial bubbles are always subject to substantial hindsight bias after they burst for example following the dot com bubble in the late 1990s and the great recession of 2008 many pundits and analysts demonstrated their precise knowledge of how events that seemed trivial at the time were harbingers of future financial trouble they were right but other concurrent events reinforced the assumption that the boom times would never end in fact if a financial bubble were easy to spot as it occurred it would likely have been avoided altogether the usual subjects of hindsight bias are not on that scale for instance many investors in the 80s were interested in technology industrials and materials but computer software and hardware were only making their debut many didn t see the industry amounting to anything as a result there are quite possibly millions of investors from that time who deeply regret not buying stock in microsoft or apple when they saw it coming business professionals will often use hindsight bias in decision making assuming because a strategy worked previously it will continue to work unfortunately hindsight bias means executives can and might make risky or poorly analyzed decisions anyone that s heard the old sayings it worked before it should work again or this is how we ve always done it at work has experienced an example of hindsight bias in the professional space | |
what causes hindsight bias | hindsight bias is caused by memory distortion foreseeability and inevitability where we remember something we believe we predicted and view it at the present time as an inevitable event we knew would happen 1 | |
why is hindsight bias important in psychology | it is important because it clouds our ability to learn from experiences and make future decisions | |
what is the difference between hindsight bias and confirmation bias | confirmation bias is when you look for information to support your beliefs while hindsight bias is the belief that you predicted an event in the past the bottom linehindsight bias is a natural human response to past events in which we believe we knew the event would happen we then associate that belief with new events even when circumstances that can affect the outcome are different it can be difficult to identify when you re affected by hindsight bias but using tools to analyze events to find solutions can keep you from falling for this psychological trick your mind plays on you keeping and revisiting journals discussing the event with peers and analyzing the surrounding circumstances while imagining alternate outcomes are ways you can avoid making decisions when under the influence of hindsight bias | |
what is hipaa waiver of authorization | a legal document that allows an individual s health information to be used or disclosed to a third party the waiver is part of a series of patient privacy measures set forth in the health insurance portability and accountability act hipaa of 1996 breaking down hipaa waiver of authorizationthe hipaa waiver of authorization allows doctors to provide information on a patient s health to third parties such as researchers attorneys other doctors or family members it became necessary because healthcare privacy has come into increased focus in the digital age it is much easier for doctors to transmit patient health information via the internet than it was when records had to be mailed or faxed patient information covered under hipaa called protected health information phi is information that can be linked to a specific individual and is held by a covered entity such as a health insurer healthcare provider or healthcare clearinghouse hipaa defines 18 specific identifiers that create phi when linked to health information hipaa regulations allow researchers to obtain approval to access and use phi when necessary to conduct research examples of studies that involve the use of phi include there are some additional standards and criteria designed to protect an individual s privacy from re identification for example any code used to replace the identifiers in datasets cannot be derived from any information related to the individual and the master codes nor can the method for deriving the codes be disclosed getting a hipaa waiver of authorization approvedin order for a hipaa waiver to be approved for research purposes three criteria for the use of private health information must be met the health information to be disclosed must present a minimal risk to the privacy of the disclosing party the researchers must ensure that research activities could not be undertaken without the information and the research could not be practicably conducted without the waiver 1 | |
what is a hire purchase agreement | the term hire purchase refers to an arrangement for buying expensive goods in a hire purchase agreement the buyer makes an initial down payment and pays the remaining balance plus interest in installments the term is commonly used in the united kingdom and it s more commonly known as an installment plan in the united states although there are subtle differences between the two investopedia katie kerpel | |
how hire purchase agreements work | a hire purchase agreement is a type of credit agreement between a buyer and seller people typically enter into these contracts to buy products after an initial payment the buyer continues to make installment payments until the total purchase price is paid off at this point the buyer becomes the owner of the product these agreements are similar to rent to own transactions because they give the lessee the option to buy at any time during the agreement such as rent to own cars like rent to own hire purchases can benefit consumers with poor credit by spreading the cost of expensive items that they would otherwise not be able to afford over an extended time 12because ownership is not transferred until the end of the agreement hire purchase plans offer more protection to the vendor than other sales or leasing methods for unsecured items that s because the items can be repossessed more easily should the buyer be unable to keep up with the repayments 1 | |
do not confuse a hire purchase agreement with an extension of credit in an extension of credit the purchaser technically doesn t own the item until all of the payments are made | special considerationsas noted above hire purchase agreements are used in the u k and are known in the u s but they are known as installment plans although they seem the same there are some distinctions between the two for instance using hire purchase agreements as a type of off balance sheet financing is highly discouraged and not in alignment with generally accepted accounting principles gaap unless the assets and liabilities for leases with terms of 12 months or longer are recognized in the financial statement 3advantages and disadvantages of hire purchase agreementslike leasing hire purchase agreements allow companies with inefficient working capital to deploy assets it can also be more tax efficient than standard loans because the payments are booked as expenses though any savings will be offset by any tax benefits from depreciation businesses that require expensive machinery such as construction manufacturing plant hire printing road freight transport and engineering may use hire purchase agreements as could startups that have little collateral to establish lines of credit a hire purchase agreement can flatter a company s return on capital employed roce and return on assets roa this is because the company doesn t need to use as much debt to pay for assets hire purchase agreements usually prove to be more expensive in the long run than making a full payment on an asset purchase that s because they can have much higher interest costs for businesses they can also mean more administrative complexity in addition hire purchase and installment systems may tempt individuals and companies to buy goods that are beyond their means they may also end up paying a very high interest rate which does not have to be explicitly stated rent to own arrangements are also exempt from the truth in lending act because they are seen as rental agreements instead of an extension of credit 4hire purchase buyers can return the goods rendering the original agreement void as long as they have made the required minimum payments however purchasers suffer a huge loss on returned or repossessed goods because they lose the amount they have paid towards the purchase up to that point 2allows for the purchase of high value itemsprevents a large outlay of cashimproves a company s roa and rocehigher overall costsownership does not transfer till all payments are madepotential for loss of capital if the good is returned before the contract is upincreased administrative complexityhire purchase agreement contractsregardless of the parties involved several key factors generally find their way into all hire purchase agreement contracts to be legally enforceable these contracts must include contracts should specify that they are hire purchase agreements and indicate the withdrawal period for instance the seller can allow the buyer to vacate the agreement within 15 days of receiving the contract | |
what are the disadvantages of hire purchase agreements | some of the key disadvantages of hire purchase agreements include the overall higher cost of the product and the fact that ownership is not transferred until all payments are made these agreements can also be very complex arrangements with a lot of paperwork which can cause people to spend beyond their means there is also the potential for loss if the goods are returned | |
what are the types of hire purchase agreements | there are two types of hire purchase agreements consumer hire purchase agreements are designed for individual consumers purchasing personal products industrial hire purchase agreements are for businesses such as a company purchasing machinery who are the parties to a hire purchase agreement the parties to a hire purchase agreement are the hire purchaser the buyer and the hire vendor the seller there can also be a financier involved in the agreement the bottom linehire purchase agreements are used to pay for very expensive consumer goods so that the buyer doesn t have to outlay a large amount of cash in one go though hire purchase agreements do include payment installments plus interest they are not considered an extension of credit they can be a manageable way for buyers to purchase expensive goods but the goods end up costing more because of the interest | |
what is a hiring freeze | a hiring freeze is when an employer stops hiring workers usually temporarily in an effort to contain costs such cost cutting may be the result of financial distress but even large successful companies may opt to pause hiring amid an economic slowdown recession or instances of overcapacity hiring freezes may be short term or long term and may help a company avoid laying off employees hiring freezes leave unfilled vacancies resulting from firings or natural attrition in addition they bar the creation of new positions understanding a hiring freezehiring freezes can happen at struggling companies but also highly successful ones seeking to protect their profit margins a sudden economic downturn an industry slowdown or an acceleration in costs may lead management to conclude that a hiring freeze is the best short term solution hiring freezes allow companies to leave non essential positions unfilled in effect hitting a reset button on payroll expense growth after instituting a hiring freeze management may be able to restructure work groups to improve efficiency companies must ensure a hiring freeze doesn t lower their revenue since that might defeat its purpose of safeguarding earnings a hiring freeze may not mean that all hiring is stopped companies may still fill positions that are essential to meeting the demands of customers or specialized jobs otherwise key to their operations they may also authorize the contracting of freelancers or the hiring of part time or contract help at a lower cost than that of a permanent full time worker a hiring freeze allows a company to limit costs without impairing essential functions like research and development production and sales hiring freeze impacta hiring freeze can put a strain on the remaining employees since those who leave the company as a result of retirement family or medical leave or for a new job elsewhere are unlikely to be immediately replaced this often requires workers to add the job responsibilities of departing colleagues on top of their own as workloads grow performance is likely to suffer alongside morale that in turn can add to employee turnover making the hiring freeze unsustainable in the longer run a hiring freeze may also encourage managers to ignore poor performance by subordinates instead of firing or confronting them since those who quit or are fired may not be replaced in addition the hiring of temporary or freelance help is likely to reduce the cost savings from a hiring freeze while lowering long term performance for these reasons a hiring freeze is most often a temporary measure intended to limit costs during a slowdown | |
what is a histogram | a histogram is a graphical representation of data points organized into user specified ranges similar in appearance to a bar graph the histogram condenses a data series into an easily interpreted visual by taking many data points and grouping them into logical ranges or bins | |
how histograms work | histograms are commonly used in statistics to demonstrate how many of a certain type of variable occur within a specific range for example a census focused on the demography of a town may use a histogram to show how many people are between the ages of zero 10 11 20 21 30 31 40 41 50 51 60 61 70 and 71 80 this histogram example would look similar to the chart below let s say the numerals along the vertical access represent thousands of people to read this histogram example you can start with the horizontal axis and see that beginning on the left there are approximately 500 people in the town who are from less than one year old to 10 years old there are 4 000 people in town who are 11 to 20 years old and so on histograms can be customized in several ways by analysts they can change the interval between buckets in the example referenced above there are eight buckets with an interval of ten this could be changed to four buckets with an interval of 20 another way to customize a histogram is to redefine the y axis the most basic label used is the frequency of occurrences observed in the data however one could also use percentage of total or density instead investopedia julie banghistograms vs bar chartsboth histograms and bar charts provide a visual display using columns and people often use the terms interchangeably technically however a histogram represents the frequency distribution of variables in a data set 1 a bar graph typically represents a graphical comparison of discrete or categorical variables you can create a histogram using microsoft excel using the histogram tool associated with the statistical icon 2histogram example the macd histogramtechnical traders may be familiar with a notable histogram example the moving average convergence divergence macd histogram it s a popular technical indicator that illustrates the difference between the macd line and the signal line for example if there is a 5 difference between the two lines the macd histogram graphically represents this difference the macd histogram is plotted on a chart to make it easy for a trader to determine a specific security s momentum a histogram bar is positive when the macd line is above the signal line and negative when the macd line is below the signal line an increasing macd histogram indicates an increase in upward momentum while a decreasing histogram is used to signal downward momentum investopedia sabrina jiangtrading with the macd histograma weakness of using just the macd line and signal line is the lagging nature of the signal given specifically when the macd line crosses over the signal line the trading signal lags price as the two lines are moving averages by definition they do not cross until a price move has already occurred this means that traders forego a portion of an initial move traders shouldn t overlook the macd histogram when using the macd indicator to make trading decisions the macd histogram helps to alleviate the signal lag problem by generating earlier entry signals traders can track the length of the histogram bars as they move away from the zero line for instance they may feel that the histogram is generating a trading signal when a histogram bar is shorter in length than the preceding bar once the smaller histogram bar completes traders might open a position in the direction of the histogram s decline other technical indicators should be used in conjunction with the macd histogram to increase the signal s reliability moreover traders should place a stop loss order to close out the trade if the security s price does not move as anticipated | |
what is a histogram in simple terms | a histogram is a graph that shows the frequency of numerical data using rectangles the height of a rectangle the vertical axis represents the distribution frequency of a variable the amount or how often that variable appears the width of the rectangle horizontal axis represents the value of the variable for instance minutes years or ages 31 | |
what is a histogram vs a bar graph | the histogram displays the distribution frequency as a two dimensional figure meaning the height and width of columns or rectangles have particular meanings and can both vary a bar chart is a one dimensional figure the height of its bars represent something specific the width of the bars has no meaning on a histogram there are no gaps between columns column width changes as the variable represented changes on bar charts the bars usually have gaps between them | |
when should a histogram be used | in general a histogram can be used whenever there s a need to display a comparison of the distribution of certain numerical data in various ranges of intervals histogram examples can help an audience see and understand quickly and easily essential meanings and patterns related to a large amount of data they can be a benefit to a company s or organization s process of decision making in various departments | |
what is historic pricing | historic pricing is a unit pricing method used to calculate the value of an asset using the last valuation point calculated historic pricing is used when the value of an asset does not update in real time understanding historic pricinghistoric pricing illustrates the importance of understanding when assets have last had their values calculated whether at a certain point or at various points during the trading day or in real time this is known as the valuation point if an investor happens to trade at the exact point that the net asset value nav is calculated then they do not have to consider gaps in time as part of their investment strategy however if an investor trades the asset before or after the net asset value has been determined they will be working off an old stale value this means that there may be the risk that the estimated valuation upon which the trading decision was based is in fact inaccurate mutual funds typically update their net asset values at the end of the trading day fund managers have two options they can look at the last calculated net asset value also known as the historic valuation point or they can note the net asset value of the next valuation point an investor looking to buy a fund based on historic pricing knows how many shares can be purchased for a certain amount of money because the valuation point is known in turn sellers know exactly how much money they can get for a specific number of shares the buyer s risk is that the net asset value of the fund actually decreases by the next valuation point meaning that they will have spent more on a particular number of shares the risk for the seller is that the shares increase in value at the next valuation point meaning that the seller does not make as much money for a given number of shares forward pricing vs historic pricingforward pricing is the net asset value calculation method used the most forward pricing involves processing buy and sell orders for shares of open ended mutual funds at the net asset value as of the next market close notably open ended mutual funds revalue their assets upon the close of the trading day buyers are at a disadvantage because they do not know how many fund shares can be purchased this pricing mechanism ensures that the shares are bought and sold at a price that more accurately reflects the changes in the fund that may have occurred since the previous valuation | |
what is a historic structure | a historic structure is a sub category of a historic property as designated by the national register of historic places referred to as the national register in casual conversation a historic structure refers to a building or other structure such as a bridge mine canal ship highway or locomotive that is significant because of its link to an important period in the past but the official designation distinguishes a structure as being distinct from a human shelter understanding a historic structurehistoric structures may have unique architectural features or political meaning areas with a large number of historic structures may be designated as historic districts 1 property owners in historic districts generally face special rules and restrictions on the maintenance of and alterations to the property sometimes grant money or tax credits are available to restore historic structures in disrepair 23a historic structure is an official designation by the national register of historic places the national register designates historic properties including buildings structures objects sites and districts historic properties including historic structures can be officially registered as historic with the national park service and placed on the national register of historic places by petitioning the state historic preservation office where the structure is located the petition contains information about the property s historic and current functions architectural classification and materials and other details to be listed the property must meet at least one of four key national register criteria 42the number of national historic landmarks in the united states 5the four criteria of the national registerthe national register of historic places has established four objectives specific criteria that can qualify a structure to be designated as historic from the national register documentation structures are historic a structure only has to fit one of these criteria to be designated as a historic structure by the national register the intent of these criteria is to ensure that structures that have some kind of cultural and historical relevance are preserved but the designation is not to be overused for a building that is simply a certain age but is not otherwise significant 6 | |
what is a historical cost | a historical cost is a measure of value that s used in accounting the value of an asset on the balance sheet is recorded at its original cost when it s acquired by the company the historical cost method is used for fixed assets in the united states under generally accepted accounting principles gaap investopedia joules garciaunderstanding historical coststhe historical cost principle is a basic accounting principle under u s gaap most assets are to be recorded on the balance sheet at their historical cost under the historical cost principle even if they ve significantly increased in value over time 1not all assets are held at historical cost marketable securities are recorded on the balance sheet at their fair market value and impaired intangible assets are written down from historical cost to their fair market value valuing assets at historical cost prevents overstating an asset s value when asset appreciation may be the result of volatile market conditions the asset would still be recorded on the balance sheet at 100 000 if a company s main headquarters including the land and building was purchased for 100 000 in 1925 and its current expected market value is 20 million asset depreciation must be recorded to account for wear and tear on long lived assets in accordance with accounting conservatism fixed assets such as buildings and machinery will have depreciation recorded regularly over the asset s useful life annual depreciation is accumulated over time and recorded below an asset s historical cost on the balance sheet 2the subtraction of accumulated depreciation from the historical cost results in a lower net asset value ensuring that there s no overstatement of an asset s true value asset impairment vs historical costan impairment may occur to certain assets including intangibles such as goodwill independent of asset depreciation from physical wear and tear over long periods of use an asset s fair market value has dropped below what s originally listed on the balance sheet with asset impairment an asset impairment charge is a typical restructuring cost as companies reevaluate the value of certain assets and make business changes goodwill must be tested and reviewed at least annually for any impairment the asset is considered impaired if it s worth less than carrying value on the books no change is made to historical cost if it s risen in value the devaluation of an asset based on present market conditions would be a more conservative accounting practice than keeping the historical cost intact | |
what are historical returns | historical returns are often associated with the past performance of a security or index such as the s p 500 analysts review historical return data when trying to predict future returns or to estimate how a security might react to a particular situation such as a drop in consumer spending historical returns can also be useful when estimating where future points of data may fall in terms of standard deviations understanding historical returnsanalyzing historical data can provide insight into how a security or market has reacted to a variety of different variables from regular economic cycles to sudden exogenous world events investors looking to interpret historical returns should bear in mind that past results do not necessarily predict future returns the older the historical return data the less likely it ll be successful at forecasting returns in the future a historical return for a stock index such as the s p 500 is typically measured from the open on january 1st to the market s close on december 31st to provide the annual return each year s annual return is compiled to show the historical return over several years investors can also calculate the average historical return i e a stock has returned an average of 10 per year for the past five years however it s important to note that an average historical return doesn t mean that the stock price didn t correct lower in any of those years the stock could have experienced price declines but in the other years when the stock price rose the gains more than offset the declines so that the average historical return was positive investors can calculate the historical return for any investment including the value of a home real estate mutual funds and exchange traded funds etfs which are funds containing a basket of various securities investors also use historical returns to measure the price performance of commodities such as gold corn wheat and silver | |
how to calculate historical returns | calculating or measuring the historical return of an asset or investment is relatively straightforward subtract the most recent price from the oldest price in the data set and divide the result by the oldest price we can move the decimal two places to the right to convert the result into a percentage for example let s say we want to calculate the return of the s p 500 for 2019 we start with the following data the returns were rounded to the nearest number 1the process can be repeated if an investor wanted to calculate the return for each month year or any period the individual monthly or yearly returns can be compiled to create a historical return data set from there investors and analysts can analyze the numbers to determine if there are any trends or similarities between one period or another historical chart patternsin contrast to traditional fundamental analysis which measures a company s financial performance technical analysis is a methodology that forecasts the direction of prices through the study of charting patterns technical analysis uses past market data such as price moves volume and momentum 23the historical returns are often analyzed for trends or patterns that may align with current financial and economic conditions 2 technical analysts believe potential market outcomes may follow past patterns hence there is a hidden value available from the study of historical return trends however technical analysis is more often applied to short term price movements of those assets that frequently fluctuate in price such as commodities longer term price trends tend to follow economic conditions and the long term market outlook for the asset or investment for example the long term historical return of a stock price over several years will likely have more to do with the market outlook for that industry and the company s financial performance than any technical charting pattern analyzing historical returnsin reality historical returns analysis often yields mixed results in determining trends as a dynamic and ever evolving system markets and economies at times repeat but it can be difficult to anticipate when past returns will occur again in the future however there are some merits to analyzing historical returns since we can gain insight as to what we might be in for in the near future for example the recession in 2020 might lead investors to compare the s p 500 return in 2020 to the last time the u s experienced a recession in 2008 and 2009 in the context of recessions exogenous events economic conditions and the resulting business and consumer spending patterns affect the stock market differently in each recession as a result when comparing historical returns the drivers of those returns should be considered before concluding that a trend exists if the underlying catalysts for the historical returns are completely different than the current situation it s likely that the future returns will not mirror the historical returns analysis perhaps the conclusions drawn from the study of historical returns don t provide investors with a crystal ball instead the analysis provides context into the current situation by knowing how an asset s price behaved under certain circumstances in the past can provide insight as to how it might react in the near future with the understanding that the return won t be the same from there investors can plan their asset allocation meaning what types of holdings to invest in and develop a risk management strategy in case the price of the market or asset moves adversely in short historical returns analysis might not predict future price movements but it can help investors be more informed and better prepared for what the future holds | |
what is historical volatility hv | historical volatility hv is a statistical measure of the dispersion of returns for a given security or market index over a given period of time generally this measure is calculated by determining the average deviation from the average price of a financial instrument in the given time period using standard deviation is the most common but not the only way to calculate historical volatility the higher the historical volatility value the riskier the security however that is not necessarily a bad result as risk works both ways bullish and bearish understanding historical volatility hv historical volatility does not specifically measure the likelihood of loss although it can be used to do so what it does measure is how far a security s price moves away from its mean value for trending markets historical volatility measures how far traded prices move away from a central average or moving average price this is how a strongly trending but smooth market can have low volatility even though prices change dramatically over time its value does not fluctuate dramatically from day to day but changes in value at a steady pace over time this measure is frequently compared with implied volatility to determine if options prices are over or undervalued historical volatility is also used in all types of risk valuations stocks with a high historical volatility usually require a higher risk tolerance and high volatility markets also require wider stop loss levels and possibly higher margin requirements aside from options pricing hv is often used as an input in other technical studies such as bollinger bands these bands narrow and expand around a central average in response to changes in volatility as measured by standard deviations using historical volatilityvolatility has a bad connotation but many traders and investors can make higher profits when volatility is higher after all if a stock or other security does not move it has low volatility but it also has a low potential to make capital gains and on the other side of that argument a stock or other security with a very high volatility level can have tremendous profit potential but at a huge cost it s loss potential would also be tremendous timing of any trades must be perfect and even a correct market call could end up losing money if the security s wide price swings trigger a stop loss or margin call therefore volatility levels should be somewhere in the middle and that middle varies from market to market and even from stock to stock comparisons among peer securities can help determine what level of volatility is normal | |
what is hit the bid | hit the bid is a term used when a trader agrees to sell at the bid price the highest price a buyer is willing to pay for a security or asset the bid ask spread is the difference between the highest price that a buyer is willing to pay and the lowest price that a seller is willing to accept an individual looking to sell will hit the bid if they wish to transact immediately at that price hit the bid can be contrasted with lift the offer | |
how hit the bid works | to hit the bid is to sell a security to another party at its bid price this price represents the highest price among competing offers for the security a trader will hit the bid if they think it is an attractive price or if they must sell quickly to hit the bid the most effective method is to enter a market order to sell although a sell limit order set at the current bid price is also possible to avoid selling lower than the prevailing bid in addition to the price that an investor is willing to buy the amount or volume bid is also important for understanding the liquidity of a market bid sizes are typically displayed along with a level 1 quote if the quote indicates a bid price of 50 and a bid size of 500 you can sell up to 500 shares at 50 if the best bid is for 100 shares and you have 500 to sell hitting the bid with a market order will fill the first 100 shares at that price but the additional 400 shares will be sold at progressively lower prices until the order is filled price quotes will often show the national best bid and offer nbbo from across all exchanges that a security is listed that means that the best bid price may come from a different exchange or location example of hitting the bida portfolio manager has a junk bond to sell the portfolio manager calls a junk bond broker to solicit bids for the junk bond the broker calls prospective buyers and immediately creates a bid of 75 for the bond the broker communicates this bid to the seller the seller declines another bid comes in from the market maker for 74 and the seller again declines later the broker goes back to the seller with a 74 50 bid the seller hits the bid and sells it at the requested price the other side of hitting the bid is lifting the offer in this scenario the trader buying the junk bond from the portfolio manager is lifting the offer from the broker investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is his majesty s revenue and customs hmrc | hm revenue customs hmrc is the tax authority of the u k government the agency is responsible for collecting taxes paying child benefits regulating tax and customs laws and enforcing the payment of minimum wage by employers 1hmrc was formed in 2005 following the merger of the inland revenue and the board of customs and excise the agencies which formerly handled internal taxes and customs collection 2role of the hmrchmrc collects all direct and indirect taxes in the u k including income tax corporation tax capital gains tax inheritance tax value added tax vat excise duties stamp duty land tax air passenger duty and the climate change levy 1the hmrc is the british equivalent of the internal revenue service irs in the united states the hmrc oversees the efficient collection of taxes and the transfer of funds to the treasury so that revenue for public services is available employers will submit full payment submission fps and employer payment summaries eps statements with each payroll showing payrolled benefits and deductions from wages 3the hmrc also educates and informs the public about their tax paying duties hmrc divisionshistory of hmrcestablished in 2005 under the commissioners for revenue and customs act the hmrc is a non ministerial department the agency reports directly to parliament through the treasury under the leadership of the chancellor of the exchequer the hmrc represents the merger of customs and excise and the inland revenue combining direct and indirect revenue departments the merger was previously overturned in 1862 in 1909 the excise duties were removed from the administration of the inland revenue and were combined with the board of customs to form the board of customs and excise once again a 1999 report by the treasury committee suggested a merger citing the potential savings in public expenditure and compliance costs the decision announced in march 2004 to merge the inland revenue and the board of customs and excise was met with some skepticism as the two departments had such different historical and cultural foundations and legal structures 4who oversees the hmrc hmrc is a non ministerial department and the agency reports directly to parliament through the treasury under the leadership of the chancellor of the exchequer the treasury in turn supervises spending by hmrc 1 | |
when was the hmrc established | the hmrc was established by an act of parliament in 2005 1 | |
where is the headquarters of the hmrc | the hmrc is headquartered in westminster london the bottom linein 2005 the hmrc was formed with the merger of inland revenue and the board of customs and excise his majesty s revenue customs hmrc is the national taxing authority of the united kingdom that collects all direct and indirect taxes and administers benefits and tax credit payments to residents the hmrc collects and records full payment submission fps and form p45 from employers to document benefit amounts paid in by employees | |
what is hoarding | hoarding is the purchase and warehousing of large quantities of a commodity by a speculator with the intent of benefiting from future price increases the term hoarding is most frequently applied to buying commodities especially gold however hoarding is sometimes used in other economic contexts for example political leaders might complain that speculators are hoarding dollars during a currency crisis understanding hoardinghoarding is commonly criticized for creating shortages of goods in the real economy it is possible for hoarding to create a cycle of speculation self fulfilling prophecies and inflation if several wealthy individuals start hoarding wheat the price will begin to increase middle class merchants will notice and then they might hold back wheat supplies in anticipation of future price increases that is enough to raise prices again panicked buying may create real shortages of wheat in some locations the poorest in some countries could even be at risk of starvation if the cycle continues beyond that point hoarding is sometimes blamed for shortages that are actually caused by price controls fixed exchange rates and other government policies illegal hoardinglaws are often passed against certain types of hoarding to prevent tragedies and reduce economic instability if a speculator intends to corner or otherwise monopolize a commodity then it may be considered an illegal act unfortunately for traders and regulators it is sometimes difficult to distinguish hoarding from unlawful attempts to manipulate the market owning more than 100 worth of gold bullion coins or certificates became a criminal act called hoarding in 1933 1 holding gold bullion became legal again in the u s in 1974 2hoarding vs investinghoarding is often considered harmful because it prevents commodities from being used in the rest of the economy investing can help firms to produce more commodities and other products legendary investor warren buffett said of gold it gets dug out of the ground in africa or someplace then we melt it down dig another hole bury it again and pay people to stand around guarding it it has no utility anyone watching from mars would be scratching their head in the long run investing in stocks has outperformed hoarding commodities that said there were years and decades when commodities had higher returns than stocks examples of hoarding in marketsone of the most famous cases of hoarding occurred in the silver market in the 1970s and 80s when the hunt brothers tried to hoard silver to corner the market nelson bunker hunt and william herbert hunt correctly predicted rising inflation but they used excessive leverage and were ill prepared when prices collapsed during the 1970s the hunt brothers purchased most of the physical silver inventory available on the market and later moved into futures contracts silver was less than two dollars per ounce when they started in the 70s by early 1980 the brothers managed to drive the price of silver to almost 50 per ounce at that point the hunts were no longer able to borrow the money they needed to keep buying silver and pushing up the price the hunt brothers eventually had to start selling and the ensuing panic caused the silver price to collapse in 1988 nelson bunker hunt and william herbert hunt declared bankruptcy yasuo hamanaka a commodities trader at sumitomo corporation became known as mr copper after he attempted to manipulate the copper price through hoarding he spent seven years in jail after more than ten years of unauthorized copper deals in the 1990s that led to more than 2 6 billion in losses 3at one point he hoarded as much as 5 of the world s total copper supply traders started calling him mr copper or the copper king 4hodl is a term derived from a misspelling of hold that refers to buy and hold strategies in the context of bitcoin and other cryptocurrencies it describes the hoarding behavior of cryptocurrency holders to accumulate and not sell or use in exchange because digital currencies like bitcoin are scarce and have a limited rate of new unit formation hoarding strategies increase the relative scarcity and can drive up the price | |
what is a hobby loss | the term hobby loss refers to a loss that results from a business deemed to be a recreational activity or hobby by the internal revenue service irs taxpayers cannot claim and recoup this money when the agency says it is spent while pursuing a hobby that s because losses aren t allowed for expenses in excess of hobby income 1 this means these expenses aren t deductible as they are with a business 1 | |
how hobby loss works | expenses are an expected part of running a business you have to spend money to make money expenses that are necessary to carry on a trade or business incurred to produce income or paid for investments in your company are deductible when despite a profit motive your overall expenses exceed your earnings the loss can offset unrelated income 2 any income you earn is taxable and must be claimed even if it doesn t come from your employer this includes any part time and temporary work side gigs and recreational pursuits that lead you to make a profit 1 expenses related to these activities that result in a loss are generally deductible that is of course unless the irs considers your activity to be a hobby 3 the hobby loss rule of the internal revenue code irc attempts to curb perceived loss deduction abuses by hobbyists the hobby loss rule applies to individuals s corporations trusts estates and partnerships but not to c corporations deductions are therefore limited for activities not engaged in for profit 4 according to the irs it applies the hobby loss rule to disallow losses of activities it finds likely not to be engaged in for profit profit must be demonstrated for three out of five consecutive tax years some activities such as horse racing have slightly different requirements taxpayers engaged in these activities must establish a profit motive to avoid the hobby loss limitations 5 proof of profit motives include receipts and detailed recordkeeping which is a good idea for every taxpayer in any situation 6 the tax cuts and jobs act eliminated itemized miscellaneous deductions including hobby losses until after the 2025 tax year special considerationsthe irs published a tip sheet to help taxpayers distinguish between hobbies and legitimate business operations 1 prior to the 2018 tax year you were allowed to claim itemized deductions as itemized on schedule a of form 1040 assuming you were engaged in a hobby and not a covert or nascent business the deductions were required to be taken as follows and only to the extent state in the following categories in 2017 president donald trump signed the tax cuts and jobs act into law the 200 page law went into effect on jan 1 2018 and made sweeping changes to the tax law including changes in the tax bracket mortgage interest deductions medical expenses miscellaneous expenses and itemized deductions so how does this affect hobbyists once the tcja was signed any expenses or hobby losses that a taxpayer was able to claim to reduce their hobby income in previous tax years are no longer allowed this applies to tax returns filed between the 2018 and 2025 tax years 6 avoiding a hobby lossalthough the tcja eliminated miscellaneous itemized deductions it s still important to know how to avoid the hobby loss rule if provisions aren t made after the 2025 tax year the easiest way to avoid the hobby loss rules is to frequently turn a profit the hobby loss rule presumes that an activity is for profit if the operation is profitable for three out of the previous five years ending with the current taxable year for actions involving horses the timeframe is two of the previous seven years 3 if the presumption is not met then the taxpayer must establish a profit motive the following nine factors define hobby income and losses a taxpayer that fails to turn a profit or to establish a profit motive is not engaged in a business the hobby loss rules will apply hobby expenses that fail its three tier deduction system are not deductible 7 hobby expenses that exceed hobby income are disallowed as non deductible hobby losses 1 | |
what is a hockey stick chart | a hockey stick chart is a price line chart in which a sharp increase occurs suddenly after a short period of quiescence or relative stability the line connecting the data points thus resembles a hockey stick hockey stick charts have been referenced in the world of business economics and policy as a visual device to illustrate dramatic shifts or explosive growth such as with corporate earnings global temperatures and poverty statistics understanding hockey stick chartsa hockey stick is comprised of a blade a small curve and a long shaft a hockey stick chart displays data as low level activity y axis over a short period of time x axis then a sudden bend indicative of an inflection point and finally a long and straight rise at a steep angle the chart is typically observed in science labs such as in the field of medicine or environmental studies scientists for example have plotted global warming data on a chart that follows a hockey stick pattern social scientists are also familiar with the chart some observations about the rate of increase in poverty have been delineated by this shape the hockey stick chart can command immediate attention a sudden and dramatic shift in the direction of data points from a flat period to what is visible in a hockey stick chart is a clear indicator that more focus should be given to causative factors if the data shift occurs over a short time period it is important to determine if the shift is an aberration or if it represents a fundamental change business example of a hockey stick chartgroupon inc has the distinction of being one of the fastest growing companies in business history to achieve the 1 billion in sales mark it accomplished this feat in about two and a half years which is half the time of other tech superstars like amazon and google put differently imagine logging sales of less than 100k in 2008 and then seeing 14 5 million in revenues in 2009 1 this is the blade part of the hockey stick chart in 2010 the company reported sales of 312 9 million representing the upward bend or inflection point of the hockey stick 1 then in 2011 groupon generated a whopping 1 6 billion in sales plotted visually on a graph with sales on the y axis and time on the x axis the data clearly illustrates a hockey stick pattern however as successful as the company may have seemed at the time the soaring revenues did not mean it was profitable in fact net losses in 2010 were 413 million due to selling and marketing expenses 2 | |
what does hodl mean | hodl is a term derived from a misspelling of hold in the context of buying and holding bitcoin and other cryptocurrencies it s also commonly come to stand for hold on for dear life among crypto investors the term originated from a 2013 online post to the bitcointalk forum where the typo appeared the price of bitcoin in 2013 was volatile at the time surging to over 950 at the beginning of december 2013 up from just over 130 in april of the same year 12 the poster encouraged people not to sell and that they were hodling sic investopedia daniel fishel | |
what is hodling | at 10 03 a m utc on dec 18 bitcointalk online forum user gamekyuubi posted a purportedly drunk semi coherent typo laden rant about the user s poor trading skills and determination to simply hold his bitcoin from that point on gamekyuubi concluded that the best course was to hold since you only sell in a bear market if you are a good day trader or an illusioned noob the people inbetween hold in a zero sum game such as this traders can only take your money if you sell he then confessed he d had some whiskey and briefly mused about the spelling of whisk e y 3within an hour hodl had become a meme initially the memes generated referenced the epic battle movies 300 and braveheart but there are now countless hodl memes floating around the internet 3the prices of bitcoin and other cryptocurrencies are notoriously volatile but hodlers disregard even large price swings they simply hodl hodling as a strategy and guiding philosophyhodl as an acronym for hold on for dear life has become a mantra among crypto enthusiasts denoting a long term approach to cryptocurrency investing this approach mirrors gamekyuubi s rationale in the original post that novice traders are likely to botch their attempts to time the market and should simply hold their coin for cryptocurrency maximalists hodl represents more than a strategy for reigning in fomo fear of missing out fud fear uncertainty and doubt and other profit eroding emotions long term crypto hodlers stay invested because they believe predictably a meme best captures this hodl maximalist philosophy neo from the matrix asks morpheus what are you trying to tell me that i can trade my bitcoin for millions someday morpheus responds no neo i m trying to tell you that when you re ready you won t have to | |
when to hodl | based on these principles the best time to hodl is now always and forever a true believer would always hold on to their tokens even if markets crash or become extremely volatile hodling becomes an ideological belief about the long term prospects of blockchain technology cryptocurrencies and the communities that have formed around them the vaneck bitcoin trust formed in january 2024 uses the ticker hodl 4other crypto slang termsthe crypto community has adopted several acronyms and terms often with accompanying emojis in addition to hodling many of these also overlap with terms used in meme stock communities and forums some of these include can you hodl stocks while hodling is generally associated with cryptocurrency investors the buy and hold investing strategy that it represents is not limited to crypto investing many stock investors hodl their investments for long periods of time although stock prices are almost always less volatile than the prices of crypto assets investors in stocks who buy and hold can benefit from long term price appreciation while experiencing much less price volatility than is associated with cryptocurrencies the hodl coinhodl may also refer to a defi token on the binance smart chain bsc hodl coin hodl hodl was launched in may 2021 much like the term itself hodl encourages users to hold onto their tokens for rewards in the binance coin bnb that are distributed every three days the rewards are generated from taxes collected on transactions made by users such as sale purchase or transfer of hodl tokens the tax amount is converted into bnb tokens and a percentage of the gains are redistributed to users from the collective liquidity pool 5 | |
what does hodl stand for | hodl originated as a misspelling of hold written in all caps in an online post by an early bitcoin investor but hodl as it has gained popularity among crypto enthusiasts has come to mean hold on for dear life crypto hodlers like buy and hold stock investors pride themselves on holding on by not selling their cryptocurrency no matter what happens in the crypto markets who started the term hodl the true identity is unknown of the person who inadvertently coined the term hodl the original misspelling of the word occurred in a post by the user gamekyuubi on the bitcointalk org online forum at 10 03 a m utc on dec 18 2013 | |
why do they say hodl instead of hold | hodl was a typo in a forum post title that quickly caught as a term that means hold on in the early cryptocurrency community the bottom linehodl is used in the crypto community to refer to a strategy of holding onto bitcoin holdings through its various price fluctuations and volatility the acronym is a misspelling of the word holding by a user on an online forum typically used by bitcoin maximalists a hodling strategy is similar to the conventional buy and hold investing strategy hodl is also the name and symbol of a token on cryptocurrency exchange binance s smart chain the comments opinions and analyses expressed on investopedia are for informational purposes only read our warranty and liability disclaimer for more info |
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