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how are earnings calculated for mutual funds | investors typically earn returns from a mutual fund in three ways | |
when researching the returns of a mutual fund you ll typically come upon a figure for the total return or the net change in value either up or down over a specific period this includes any interest dividends or capital gains the fund has generated along with the change in its market value during a given period in most cases total returns are given for one five and 10 year periods as well as from the day the fund opened or inception date | types of mutual fundsthere are many types among the more than 8 700 mutual funds in the u s with most in four main categories stock money market bond and target date funds 5as the name implies this fund invests principally in equity or stocks within this group are assorted subcategories some equity funds are named for the size of the companies they invest in firms with small mid or large sized capitalization others are named by their investment approach aggressive growth income oriented and value equity funds are also categorized by whether they invest in u s stocks or foreign equities to understand how these strategies and sizes of assets can combine you can use an equity style box like the example below 6value funds invest in stocks their managers see as undervalued while aiming at long term appreciation when the market recognizes the stocks true worth these companies are characterized by low price to earnings p e ratios low price to book ratios and dividend yields meanwhile growth funds look to companies with solid earnings sales and cash flow growth these companies typically have high p e ratios and do not pay dividends 7 a compromise between strict value and growth investment is a blend these funds invest in a mix of growth and value stocks to give a risk to reward profile somewhere in the middle large cap companies have market capitalizations of over 10 billion market cap is derived by multiplying the share price by the number of shares outstanding large cap stocks are typically for blue chip firms whose names are recognizable small cap stocks have a market cap between 250 million and 2 billion these companies tend to be newer riskier investments mid cap stocks fill in the gap between small and large cap 8a mutual fund may combine different investment styles and company sizes for example a large cap value fund might include in its portfolio large cap companies that are in strong financial shape but have recently seen their share prices fall these would be placed in the upper left quadrant of the style box large and value the opposite of this would be a small cap growth fund that invests in startup technology companies with high growth prospects this kind of fund is in the bottom right quadrant above small and growth a mutual fund that generates a consistent and minimum return is part of the fixed income category these mutual funds focus on investments that pay a set rate of return such as government bonds corporate bonds and other debt instruments the bonds should generate interest income that s passed on to the shareholders with limited investment risk there are also actively managed funds seeking relatively undervalued bonds to sell them at a profit these mutual funds will likely pay higher returns but aren t without risk for example a fund specializing in high yield junk bonds is much riskier than a fund that invests in government securities because there are many different types of bonds bond funds can vary dramatically depending on when and when they invest and all bond funds are subject to risks related to changes in interest rates index mutual funds are designed to replicate the performance of a specific index such as the s p 500 or the djia this strategy requires less research from analysts and advisors so fewer expenses are passed on to investors through fees and these funds are designed with cost sensitive investors in mind they also frequently outperform actively managed mutual funds and thus potentially are the rare combination in life of less cost and better performance balanced funds invest across different securities whether stocks bonds the money market or alternative investments the objective of these funds known as an asset allocation fund is to cut risk through diversification mutual funds detail their allocation strategies so you know ahead of time what assets you re indirectly investing in some funds follow a strategy for dynamic allocation percentages to meet diverse investor objectives this may include responding to market conditions business cycle changes or the changing phases of the investor s own life the portfolio manager is commonly given the freedom to switch the ratio of asset classes as needed to maintain the fund s stated strategy the money market consists of safe risk free short term debt instruments mostly government treasury bills the returns on them aren t substantial a typical return is a little more than the amount earned in a regular checking or savings account and a little less than the average certificate of deposit cd money market mutual funds are often used as a temporary holding place for cash that will be used for future investments or for an emergency fund while low risk they aren t insured by the federal deposit insurance corporation fdic like savings accounts or cds income funds are meant to disburse income on a steady basis and are often seen as the mutual funds for retirement investing they invest primarily in government and high quality corporate debt holding these bonds until maturity to provide interest streams while fund holdings may rise in value the primary goal is to offer a steady cash flow an international mutual fund or foreign fund invests only in assets located outside an investor s home country global funds however can invest anywhere worldwide their volatility depends on where and when the funds are invested however these funds can be part of a well balanced diversified portfolio since the returns from abroad may provide a ballast against lower returns at home often international in scope regional mutual funds are investment vehicles that focus on a specific geographic region such as a country a continent or a group of countries with similar economic characteristics these funds invest in stocks bonds or other securities of companies that are headquartered or generate a significant part of their revenue within a targeted region examples of regional mutual funds include europe focused mutual funds that invest in that continent s securities emerging market mutual funds which focus on investments in developing economies worldwide and latin america focused mutual funds that invest in countries like brazil mexico and argentina the main advantage of regional mutual funds is that they allow investors to capitalize on the growth potential of specific geographic areas and diversify their portfolios internationally however these funds also carry unique risks such as political instability currency fluctuations and economic uncertainties though they depend on the region sector mutual funds aim to profit from the performance of specific sectors of the economy such as finance technology or health care theme funds can cut across sectors for example a fund focused on ai might have holdings in firms in health care defense and other areas employing and building out ai beyond the tech industry sector or theme funds can have volatility from low to extreme and their drawback is that in many sectors stocks tend to rise and fall together socially responsible investing or so called ethical funds invest only in companies and sectors that meet preset criteria for example some socially responsible funds do not invest in industries like tobacco alcoholic beverages weapons or nuclear power sustainable mutual funds invest primarily in green technology such as solar and wind power or recycling there are also funds that review environmental social and governance factors when choosing investments this approach focuses on the company s management practices and whether they tend toward environmental and community improvement mutual fund fees | |
when investing in mutual funds it s essential to understand the fees associated with them as these costs will significantly affect your investment returns over time here are some common mutual fund fees | expense ratio this is an annual fee that covers the fund s operating expenses including management fees administrative costs and marketing expenses the expense ratio is expressed as a percentage of the fund s average net assets and is deducted from the fund s returns pressured by competition from index and exchange traded funds etfs and other market changes mutual funds have lowered the expense ratio by more than half over the last 30 years in 1996 equity mutual fund investors incurred expense ratios of 1 04 1 04 for every 100 in assets by 2022 that average had fallen to 0 44 according to the investment company institute the fees for bond mutual funds were slightly less at 0 37 and hybrid models which often require more management had expense fees averaging 0 59 9sales charges or loads some mutual funds charge sales fees known as loads when you buy or sell shares front end loads are charged when you buy shares while back end loads or contingent and deferred sales charges are assessed if you sell your shares before a certain date sometimes however management firms offer no load mutual funds which don t have commission or sales charges redemption fees some mutual funds charge a fee when you sell shares within a short period usually 30 to 180 days after purchasing them which the u s securities and exchange commission sec limits to 2 10 this fee is designed to discourage short term trading in these funds for stability other account fees some funds or brokerage firms may charge extra fees for maintaining your account or transactions especially if your balance falls below a certain minimum mutual fund managers are legally obligated to follow the fund s stated mandate and to work in the best interest of mutual fund shareholders 11classes of mutual fund sharesif you re trying to cut your fees you ll want to watch the type of mutual fund shares you buy traditionally individual investors would buy mutual funds with a shares through a broker then a front end load of up to 5 or more plus management fees and ongoing fees for distributions also known as 12b 1 fees would be tacked on financial advisors selling these products may encourage clients to buy higher load offerings to generate commissions with front end funds the investor pays for these expenses as they buy into the fund to remedy these problems and meet fiduciary rule standards investment companies have designated new share classes including level load c shares which generally don t have a front end load but carry a 12b 1 annual distribution fee of up to 1 funds that charge management and other fees when investors sell their holdings are classified as class b shares 12 | |
how to invest in mutual funds | investing in mutual funds is relatively straightforward and involves the following steps while many mutual funds are no load you can frequently avoid brokerage fees and commissions anyway by purchasing a fund directly from the mutual fund company instead of going through an intermediary | |
how mutual fund shares are priced | the value of the mutual fund depends on the performance of the securities it invests in when buying a unit or share of a mutual fund you get a part of its portfolio value investing in a share of a mutual fund differs from investing in stock shares unlike stock mutual fund shares do not give their holders voting rights and unlike etfs you can t trade your shares throughout the trading day mutual fund share prices come from the net asset value nav per share sometimes listed on platforms as navps a fund s nav is derived by dividing the total value of the securities in the portfolio by the number of shares outstanding mutual fund shares are typically bought or redeemed at the fund s nav which doesn t fluctuate during market hours but is settled at the end of each trading day the price of a mutual fund is also updated when the navps is settled pros and cons of mutual fund investingthere are many reasons that mutual funds have been the retail investor s vehicle of choice with an overwhelming majority of money in employer sponsored retirement plans invested in mutual funds the sec in particular has long paid very close attention to how these funds are run given their importance to so many americans and their retirements liquiditydiversificationminimal investment requirementsprofessional managementvariety of offeringshigh fees commissions and other expenseslarge cash presence in portfoliosno fdic coveragedifficulty in comparing fundslack of transparency in holdingsdiversification or the mixing of investments and assets within a portfolio to reduce risk is one of the advantages of investing in mutual funds a diversified portfolio has securities with different capitalizations and industries and bonds with varying maturities and issuers a mutual fund can achieve diversification faster and more cheaply than buying individual securities trading on the major stock exchanges mutual funds can be bought and sold with relative ease making them highly liquid investments also for certain types of assets like foreign equities or exotic commodities mutual funds are often the most workable way sometimes the only way for individual investors to participate mutual funds also provide economies of scale buying only one security at a time could lead to hefty transaction fees mutual funds also enable investors to take advantage of dollar cost averaging which is putting away a set amount periodically no matter the changes in the market because a mutual fund buys and sells large amounts of securities at a time its transaction costs are lower than what an individual would pay for securities transactions a mutual fund can invest in certain assets or take larger positions than a smaller investor could a professional investment manager uses research and skillful trading a mutual fund is a relatively inexpensive way for a small investor to get a full time manager to make and monitor investments mutual funds require much lower investment minimums providing a low cost way for individual investors to experience and benefit from professional money management mutual funds are subject to industry regulations meant to ensure accountability and fairness for investors in addition the component securities of each mutual fund can be found across many platforms you can research and choose from funds with different management styles and goals a fund manager may focus on value investing growth investing developed markets emerging markets income or macroeconomic investing among many other styles this variety enables investors to gain exposure not only to stocks and bonds but also to commodities foreign assets and real estate through specialized mutual funds mutual funds provide prospects for foreign and domestic investment that might otherwise be inaccessible liquidity diversification and professional management all make mutual funds attractive options however there are drawbacks like many other investments without a guaranteed return there is always the possibility that the value of your mutual fund will depreciate equity mutual funds experience price fluctuations along with the stocks in the fund s portfolio the fdic does not guarantee mutual fund investments 13mutual funds require a significant part of their portfolios to be held in cash to satisfy share redemptions each day to maintain liquidity and the ability to accommodate withdrawals mutual funds typically have to keep a larger percentage of their portfolio as cash than other investors because this cash earns no return it s called a cash drag fees that reduce your overall payout from a mutual fund are assessed whatever the performance of the fund failing to pay attention to the fees can cost you since actively managed funds incur transaction costs that accumulate and compound year over year dilution is also the result of a successful fund growing too big when new money pours into funds with solid track records the manager could have trouble finding suitable investments for all the new capital to be put to good use the sec requires that funds have at least 80 of assets in the particular type of investment implied by their title 14 how the remaining assets are invested is up to the fund manager however the categories that qualify for 80 of the assets can be vague and wide ranging some less scrupulous fund managers might manipulate prospective investors via their fund titles for example a fund that focuses narrowly on argentine stocks could be sold with a much more ranging title like international high tech fund a mutual fund allows you to request that your shares be converted into cash at any time however unlike stocks and etfs that trade throughout the day mutual fund redemptions can only take place at the end of the trading day | |
when the mutual fund manager sells a security a capital gains tax is triggered which can be extended to you etfs for example avoid this through their creation and redemption mechanism your taxes can be lowered by investing in tax sensitive funds or by holding non tax sensitive mutual funds in a tax deferred account such as a 401 k or ira 15 | evaluating mutual fundsresearching and comparing funds can be more difficult than for other securities unlike stocks mutual funds do not offer investors the opportunity to juxtapose the price to earnings p e ratio sales growth earnings per share eps or other important data a mutual fund s nav can offer some basis for comparison but given the diversity of portfolios comparing the proverbial apples to apples can be difficult even among funds with similar names or stated objectives only index funds tracking the same markets tend to be genuinely comparable watch out for diworsification diworsification a play on words that performs the concept is an investment term for when too much complexity can lead to worse results many mutual fund investors tend to overcomplicate matters that is they acquire too many funds that are too similar and as a result lose the benefits of diversification example of a mutual fundamong the most notable mutual funds is fidelity investments magellan fund fmagx established in 1963 the fund had an investment objective of capital appreciation via investment in common stocks the fund s height of success was between 1977 and 1990 when peter lynch served as its portfolio manager under lynch s tenure magellan s assets under management increased from 18 million to 14 billion 16as of march 2024 fidelity magellan has about 33 billion in assets managed by sammy simnegar since 2019 the s p 500 is the fund s primary benchmark 17mutual funds vs index fundsindex funds are mutual funds that aim to replicate the performance of a market benchmark or index for example an s p 500 index fund tracks that index by holding the 500 companies in the same proportions a key goal of index funds is minimizing costs to mirror their index closely by contrast actively managed mutual funds try to beat the market by stock picking and shifting allocations the fund manager seeks to achieve returns greater than a benchmark through their investing strategy and research index funds offer market returns at lower costs while active mutual funds aim for higher returns through skilled management that often comes at a higher price when deciding between index or actively managed mutual fund investing investors should consider costs time horizons and risk appetite mutual funds vs etfsmutual funds and etfs are pooled investment funds that offer investors a stake in a diversified portfolio however there are some crucial differences among the most important is that etf shares are traded on stock exchanges like regular stocks while mutual fund shares are traded only once daily after markets close this means etfs can be traded anytime during market hours offering more liquidity flexibility and real time pricing this flexibility means you can short sell them or engage in the many strategies you would use for stocks another significant difference is pricing and valuation etf prices like stocks fluctuate throughout the day according to supply and demand meanwhile mutual funds are priced only at the end of each trading day based on the nav of the underlying portfolio this also means that etfs have the potential for larger premiums discounts to nav than mutual funds compared with mutual funds etfs tend to have certain tax advantages and are often more cost efficient 18 | |
are mutual funds safe investments | all investments involve some degree of risk when purchasing securities such as stocks bonds or mutual funds and the actual risk of a particular mutual fund will depend on its investment strategy holdings and manager s competence unlike deposits at banks and credit unions the money invested in mutual funds isn t fdic or otherwise insured can i withdraw money from a mutual fund anytime yes mutual funds are generally highly liquid investments meaning you can redeem your shares on any business day however it s important to be aware of any potential fees or penalties associated with early withdrawals such as redemption fees or short term trading fees which some funds impose to discourage people from trading in and out of the funds frequently withdrawing funds may have tax implications particularly if the investment has appreciated in value which means you ll have to pay taxes on the capital gains 19 | |
do you actually make money in mutual funds | yes many make money for retirement and other savings goals through capital gains distributions dividends and interest income 20 as securities in the mutual fund s portfolio increase in value the value of the fund s shares typically rises leading to capital gains in addition many mutual funds pay out dividends from the income the fund has earned by the securities they hold if the fund holds bonds then it will earn interest on them 21 however returns are not guaranteed and the performance of a mutual fund depends on market conditions the fund s management what assets it holds and its investment strategy | |
what are the risks of mutual funds | depending on the assets they hold mutual funds carry several investment risks including market interest rate and management risk market risk arises from the potential decline in the value of the securities within the fund interest rate risk affects funds holding bonds and other fixed income securities as rising interest rates can lead to a decrease in bond prices management risk is linked to the performance of the fund s management team you are putting your money in their hands and poor investment decisions will negatively impact your returns before investing it s important for investors to carefully review the fund s prospectus and consider their own risk tolerance and investment objectives | |
what is a mutual insurance company | a mutual insurance company is an insurance company that is owned by policyholders the sole purpose of a mutual insurance company is to provide insurance coverage for its members and policyholders and its members are given the right to select management mutual insurance companies make investments in portfolios like a regular mutual fund with any profits returned to members as dividends or a reduction in premiums federal law rather than state law determines whether an insurer can be classified as a mutual insurance company understanding a mutual insurance companythe goal of a mutual insurance company is to provide its members with insurance coverage at or near cost when a mutual insurance company has profits those profits are distributed to members via a dividend payment or a reduction in premiums mutual insurance companies are not traded on stock exchanges therefore their investment strategy avoids the pressure of having to reach short term profit targets and can operate as best suited to its members with the goal of long term benefits as a result they invest in safer low yield assets however because they are not publicly traded it can be more difficult for policyholders to determine how financially solvent a mutual insurance company is or how it calculates dividends it sends back to its members large companies can form a mutual insurance company as a form of self insurance either by combining divisions with separate budgets or by teaming up with other similar companies for example a group of physicians may decide that they can get better insurance coverage and lower premiums by pooling funds to cover their similar risk types | |
when a mutual insurance company switches from being member owned to being traded on the stock market it is called demutualization and the mutual insurance company becomes a stock insurance company this shift may result in policyholders gaining shares in the newly floated company most often this is done as a form of raising capital stock insurance companies can raise capital by distributing shares whereas mutual insurance companies can only raise capital by borrowing money or increasing rates | history of mutual insurance companiesmutual insurance as a concept began in england in the late 17th century to cover losses due to fire it began in the united states in 1752 when benjamin franklin established the philadelphia contributionship for the insurance of houses from loss by fire 1 mutual insurance companies now exist nearly everywhere around the world in the past 20 years the insurance industry has gone through major changes particularly after 1990s era legislation removed some of the barriers between insurance companies and banks as such the rate of demutualization increased as many mutual companies wanted to diversify their operations beyond insurance and to access more capital some companies converted completely to stock ownership while others formed mutual holding companies that are owned by the policyholders of a converted mutual insurance firm | |
what is mutually exclusive | mutually exclusive is a statistical term describing two or more events that cannot happen simultaneously it is commonly used to describe a situation where the occurrence of one outcome supersedes the other for example war and peace cannot coexist at the same time this makes them mutually exclusive understanding mutually exclusivemutually exclusive events are events that can t both happen but should not be considered independent events independent events have no impact on the viability of other options for a basic example consider the rolling of dice you cannot roll both a five and a three simultaneously on a single die however you absolutely can roll a five and a three on two dice rolling a five and three simultaneously means this outcome is mutually exclusive rolling a five on one and a three on the other means they are not mutually exclusive outcomes | |
when faced with a choice between mutually exclusive options a company must consider the opportunity cost which is what the company would be giving up to pursue each option the concepts of opportunity cost and mutual exclusivity are inherently linked because each mutually exclusive option requires the sacrifice of whatever profits could have been generated by choosing the alternate option | the time value of money tvm and other factors make mutually exclusive analysis a bit more complicated for a more comprehensive comparison companies use the net present value npv and internal rate of return irr formulas to mathematically determine which project is most beneficial when choosing between two or more mutually exclusive options example of mutually exclusivethe concept of mutual exclusivity is often applied in capital budgeting companies may have to choose between multiple projects that will add value to the company upon completion some of these projects are mutually exclusive for example assume a company has a budget of 50 000 for expansion projects if available projects a and b each cost 40 000 and project c costs only 10 000 then projects a and b are mutually exclusive if the company pursues a it cannot also afford to pursue b and vice versa project c may be considered independent regardless of which other project is pursued the company can still afford to pursue c as well the acceptance of either a or b does not impact the viability of c and the acceptance of c does not impact the viability of either of the other projects moreover when looking at opportunity costs consider the analysis of projects a and b assume that project a has a potential return of 100 000 while project b will only return 80 000 since a and b are mutually exclusive the opportunity cost of choosing b is equal to the profit of the most lucrative option in this case a minus the profits generated by the selected option b that is 100 000 80 000 20 000 because option a is the most lucrative option the opportunity cost of going for option a is 0 | |
what does it mean if projects are mutually exclusive | in business managers and directors often need to plan resource allocation if a company is building a bridge and a skyscraper and both projects require an extremely specialized piece of equipment and only one exists in the world it would mean that these projects are mutually exclusive as that piece of equipment cannot be used by both projects at the same time this idea can be extended to consider specialized professionals software systems which cannot run both mac and windows and allocated budgets | |
what is the difference between independent and mutually exclusive | to illustrate the difference between what is independent and what is mutually exclusive consider the war and peace example from earlier there could be war in france and peace in italy these are two independent nations and therefore each one could be in its own state of peace however there cannot be war in france and peace in france since they cannot coexist that makes them mutually exclusive | |
what does mutually exclusive mean in finance | typically this involves budgeting and payments if a company has 180 million to spend it cannot spend that 180 million both by reinvesting in the business and offering bonuses to upper management in this case those two options are mutually exclusive if the company can only retain licensing in a single country that means they should not attempt to be licensed in two separate countries as they are mutually exclusive the bottom linethings that are mutually exclusive are not able to occur simultaneously in business this is typically concerning the undertaking of projects or allocating a budget if two things are not mutually exclusive it means the existence and occurrence of one does not necessarily mean the other cannot coexist | |
what is nacha | nacha is the steward of the electronic system that connects all u s bank accounts and facilitates the movement of money among them according to the organization 73 trillion moved through its automated clearing house ach network in 2021 1previously known as the national automated clearinghouse association nacha is a non profit association that is funded by the financial institutions that use its network 2 nacha and the interactive financial exchange ifx forum merged in 2018 an international industry association that develops specifications for financial data systems 3understanding nachathe ach network enables billions of electronic financial transactions including direct deposits social security and government benefits statements electronic bill payments person to person p2p and business to business b2b payments 4nacha merged with the interactive financial exchange ifx forum in 2018 3 through its supervisory and rule making functions nacha provides the foundation for electronic payment systems to operate effectively while working to update technologies and implement new payment systems history of nachanacha was created in 1974 with the merger of several regional bodies it was originally part of the american bankers association 5it has been instrumental in the development and standardization of such innovations as direct payroll deposit electronic benefits deposit and automated credit card transactions 5more recently it has taken over the task of enabling the processing of b2b health insurance payments under the 2010 affordable care act nacha now administers the healthcare electronic funds transfer eft standard which supports hipaa compliant transactions between health plans and providers that allow for information to travel with the payment simplifying accounting procedures for providers 6the ach networkthe ach network connects all u s financial institutions through a ubiquitous payment system that is built to securely and efficiently move money and information from one bank account to another nacha develops rules and codes of business practices and is involved in the development of new applications it also institutes and monitors quality and risk management controls although it is not a government agency nacha works closely with various government agencies including the federal reserve u s treasury and state banking authorities in order to ensure the integrity of the electronic payments systems used by u s financial institutions in 2014 nacha formed the payments innovation alliance as a voice for the payments industry and the ach network 7 the alliance consists of hundreds of companies and organizations across the global payment ecosystem it offers discussion debate education and networking on such topics as payment system modernization trends standards security and ongoing innovation 8faster paymentsin november 2019 nacha unveiled an initiative called the faster payments playbook that aims to allow consumers to pay anyone anywhere at any time with near immediate funds availability 9nacha also provides services in education and accreditation industry engagement with financial institutions businesses and government and advocacy resources 10nacha s api standardization industry group asig supports the advancement and use of standardized application programming interfaces apis within the u s financial services industry 11 | |
what is a naked call | a naked call is a risky options strategy in which an investor writes sells call options on the open market without owning the underlying security many brokers including robinhood forbid retail traders from trading naked calls given the risk however charles schwab and others allow them when there s a certain minimum of funds in the account 12this strategy also called an uncovered or unhedged short call contrasts with the less risky covered call strategy where the investor owns the underlying security on which the call options are written the potential profit in this strategy is limited but losses are theoretically limitless 3understanding naked callsinvestors use naked call options to generate premium income without directly selling the underlying security essentially the premium received is the sole motive for writing an uncovered call option 4it s inherently risky since there is limited upside potential and in theory unlimited downside losses in fact the maximum gain is the premium that the option writer receives upfront which is usually credited to their account so the writer s goal is to have the option expire worthless 5the maximum loss is theoretically unlimited because there is no cap on how high the underlying security price can rise in more practical terms the seller of the options will likely repurchase them well before the price of the underlying rises too far above the strike price based on their risk tolerance and stop loss settings 3therefore the seller of call options wants the underlying security to fall so they can collect the entire premium if the option expires worthless but if the underlying security price rises they may have to sell the stock at a price far below the market price this happens when the option buyer exercises their right to buy the security margin requirements understandably tend to be quite steep given the unlimited risk potential of this strategy using naked callsagain there is a significant risk of losses with writing uncovered calls however investors who are confident that the expected price of an underlying security usually a stock will fall or stay the same can write call options to earn the premium if the stock stays below the strike price between the time the options are written and their expiration date then the writer of the option keeps the entire premium minus commissions however if the stock price rises above the strike price by the option expiration date the buyer of the options can demand the seller deliver shares of the underlying stock the options seller will then have to go into the open market and buy those shares at market price to sell them to the buyer of the option at the option strike price 6if for example the strike price is 60 and the open market price for the stock is 65 at the time the options contract is exercised the options seller will incur a loss of 5 per share of stock less the premium received naked options and riskthe writer s breakeven point is calculated by adding the option premium received to the strike price of the sold call 7 any rise in implied volatility is a problem for the writer since the probability of the option being in the money and thus being exercised also increases 6 since the option writer wants the naked call to expire out of the money the passage of time or time decay is a positive outcome for this strategy due to the risk involved only experienced investors who are highly confident that the underlying security price will fall or remain flat should use this sophisticated strategy the margin requirements are often very high for this strategy because of the possibility of open ended losses and the investor may be forced to purchase shares on the open market before expiration if the margin threshold is crossed 3the upside to the strategy is that investors could receive income through premiums without putting up much initial capital risk management strategies can help mitigate losses but naked call writing remains high risk even with many of these and other methods and is therefore not suitable for most investors understanding the risks involved thoroughly and having a solid grasp of options trading before writing naked calls is crucial when doing so here are some strategies for mitigating potential losses 36covered calls obviously the first way to mitigate risk is not to write naked calls in the first place in this strategy you own the underlying stock and sell call options against those shares this limits your upside potential and reduces your risk as you already own the shares you may be obligated to sell if the trade goes against you diversification spread your naked call positions across underlying securities sectors and expiration dates this can help reduce the impact of any position that moves against you fund your account well ensure you have sufficient capital to cover potential losses and meet margin requirements don t overleverage your account position sizing limit the size of your naked call positions relative to your overall portfolio this helps to ensure that a single trade doesn t have an outsized impact on your portfolio spreads use option spreads to limit risk for example a call credit spread involves selling a call option and simultaneously buying another call option with a higher strike price this caps your maximum loss at the difference between the two strike prices minus the net premium received stop loss orders as with other derivative trading these are your best risk management tools place stop loss orders to automatically close out your position if the underlying security s price reaches a preset threshold this would limit your losses if the market moves against you advantages and disadvantages of naked call optionsgenerates immediate premium incomea way to short the market without selling short the underlyinglimited potential profitsunlimited potential losseshigh margin requirements from brokersdespite the risks an appealing feature of naked call options is the ability to earn premium income without owning or shorting the underlying security the premium collected upfront is the primary source of profit in this strategy credited to the investor s account immediately upon selling the call option for those good at forecasting market moves this strategy can be lucrative of course it can be a disaster for those who aren t as such the risks and downsides of the naked call strategy are considerable and warrant careful consideration the most glaring issue is the strategy s inherent risk profile which includes limited profit potential strictly capped at the premium received against theoretically unlimited losses if the underlying asset rises above the call s strike price this imbalance stems from the fact that there is no upper limit to how high the underlying asset price can climb if the market moves contrary to the investor s expectations the costs to buy back the option or cover the position in the market can be exorbitant leading to significant losses the need for high margin deposits when doing these trades comes from this high level of risk safeguarding the brokers involved in addition even if the underlying falls somewhat an increase in implied volatility can work against the seller raising the likelihood of the option ending in the money and being exercised magnifying the risk of loss given these considerations the naked call strategy is best reserved for seasoned investors with a high risk tolerance and a well calibrated approach to managing potential losses le s use a scenario involving tesla inc tsla known for its volatility and significant price moves in early 2024 tesla s stock was trading at about 200 per share several investors pool their money and believe that tesla s stock price will fall or remain at about that price in the short term they write a naked call option with a strike price of 300 expiring in january 2025 the investors get a premium of 30 per option if tesla s stock price remains below 300 by the expiration date the call options will expire worthless and the investor gets to keep the 30 premium however let s imagine tesla announces some groundbreaking technology or significantly better than expected earnings causing the stock to surge to 400 by the end of the year in that case the investor would be obligated to sell tesla shares at the strike price of 300 or a loss of 100 per share minus the 30 premium received resulting in a net loss of 70 per share this example highlights the income generating potential and the significant risks of naked call options emphasizing why it s one of the riskiest options strategies | |
why is it called a naked call | the term naked refers to a strategy in which the seller or writer of the call option does not own the underlying asset that they must sell if the option is exercised 6 the naked aspect emphasizes the exposure to risk without the security of holding the underlying stock as in being unprotected or exposed in financial terms | |
how does a covered call differ from a naked call | a covered call strategy involves selling call options while simultaneously owning an equal number of shares in the underlying asset this approach is considered safer than selling naked calls because the potential losses are offset by gains in the owned shares if the stock price rises 5 the primary goal of a covered call is to generate income through the premiums received with the security of owning the underlying asset to cover the obligation if the option is exercised can anyone sell naked calls no only those approved by their broker can typically sell naked calls understanding the high risks involved the financial industry has erected specific measures to protect themselves and investors 3 brokerages often impose higher margin requirements and proof of significant trading experience before allowing an investor to sell naked calls these barriers are in place to ensure that only those with a deep understanding of market dynamics and the capacity to absorb potential losses venture into this high risk territory the bottom linea naked or uncovered call is when you sell a call option without owning the underlying security or some equivalent the seller writer of the call gets immediate premium income from the option s buyer and will collect the full amount if the option expires out of the money however if the underlying rises above the strike price there s the potential for unlimited losses this makes it a very high risk strategy suitable only for certain investors or traders | |
what is a naked option | a naked option is created when the option writer or seller doesn t own any or enough of the underlying security to meet their potential obligation also known as an uncovered option it doesn t provide the seller with any protection against an adverse shift in price understanding a naked optiona naked option also known as an uncovered option is created when the seller of an option contract doesn t own the underlying security that s needed to meet the potential obligation that results from selling this is also known as writing or shorting an option the seller has no protection against an adverse shift in price naked options are attractive to traders and investors because their expected volatility is built into the price 1the seller of the option gets to keep any out of the money otm premium if the underlying security moves in the direction opposite to what the option buyer anticipated they also get to keep the premium if it moves in the buyer s favor but not enough to account for the volatility that s already built into the price that has typically translated to the option seller winning around 70 of trades which can be quite appealing selling an option creates an obligation at expiration for the seller to provide the option buyer with the underlying shares or futures contract for a corresponding long position for a call option or the cash necessary for a corresponding short position for a put option the ultimate effect for a seller who sold a put option would be to create a long stock position in the option seller s account a position purchased with cash from the option seller s account the seller must acquire it at expiration based on current market prices if they have no ownership of the underlying asset or the corresponding cash necessary for the execution of a put option such positions are considered highly vulnerable to loss and are referred to as uncovered or naked because they have no protection from price volatility naked callsa trader who writes a naked call option on a stock has accepted the obligation to sell the underlying stock for the strike price at or before expiration no matter how high the share price rises the seller will have to acquire the stock and then sell it to the option buyer to satisfy the obligation if the option is exercised and the trader doesn t own the underlying stock the ultimate effect is that this creates a short sell position in the option seller s account on the monday after expiration 1imagine a trader who believes that a stock is unlikely to rise in value over the next three months but they re not very confident that a potential decline would be very large assume that the stock is priced at 100 and a 105 strike call with an expiration date 90 days in the future it s selling for 4 75 per share they decide to open a naked call by selling to open those calls and collecting the premium the trader decides not to purchase the stock in this case because they believe the option is likely to expire worthless and the trader will keep the entire premium there are two possible outcomes for a naked call trade naked putsthere s no limit as to how high a stock can rise so a naked call seller theoretically has unlimited risk the seller s risk is contained with naked puts because a stock or other underlying asset can only drop to zero dollars a naked put option seller has accepted the obligation to buy the underlying asset at the strike price if the option is exercised at or before its expiration date the risk is contained but it can still be quite large so brokers typically have specific rules in place regarding naked option trading inexperienced traders may not be permitted to place this type of order a seller who sold a put option is essentially liable to have a long stock position if the option buyer exercises | |
what is an out of the money option | an out of the money otm option is the result of an asset s current market price being less attractive than the strike price an option that expires out of the money will cost the buyer their premium paid to enter the trade 2 | |
what are the risks of selling naked options | the trader is selling without the security of holding some ownership interest in the underlying instrument it s generally not a recommended move for a trader who s new to the game losses can be significant | |
what is implied volatility | volatility is the up and down movement of a stock s price over a prescribed period it can be historical and based on past fluctuations or it can be implied and effectively forecasted it s not firm but rather an estimate that traders can and should use to gauge their best and most advantageous moves particularly if they re dealing in naked options 3the bottom linenaked options are sold without any reserves to guarantee the obligation price changes can run rampant between the time of sale and expiration and the seller or writer doesn t necessarily own enough or even any of the underlying security to meet their obligations they re highly vulnerable to loss and shouldn t be attempted by an inexperienced trader at least not without first getting solid experienced advice and guidance from a professional the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info | |
what is a naked put | a naked put is an options strategy in which the investor writes or sells put options without holding a short position in the underlying security a naked put strategy is sometimes referred to as an uncovered put or a short put and the seller of an uncovered put is known as a naked writer the primary use of this strategy is to capture the option s premium on an underlying security forecast as going higher but one which the trader or investor would not be disappointed to own for at least a month or maybe longer | |
how a naked put works | a naked put option strategy assumes that the underlying security will fluctuate in value but generally rise over the next month or so based on this assumption a trader executes the strategy by selling a put option with no corresponding short position in their account this sold option is said to be uncovered because the initiator has no position with which to fill the terms of the option contract should a buyer wish to exercise their right to the option since a put option is designed to create profit for a trader who correctly forecasts that the price of the security will fall the naked put strategy is of no consequence if the price of the security actually goes up under this scenario the value of the put option goes to zero and the seller of the option gets to keep the money they received when they sold the option a seller of put options wants the underlying security to rise so that they end up profiting but if the price of the underlying security falls they may end up having to buy the stock because the option buyer might decide to exercise their right to sell someone the security traders who like this strategy prefer only to do this on underlying securities that they view favorably if they get the stock put to them and it is a stock they like and see prospects for they will not mind buying the stock and holding it for a least a month naked put vs covered puta naked put option strategy stands in contrast to a covered put strategy in a covered put the investor keeps a short position in the underlying security for the put option the underlying security and the puts are respectively shorted and sold in equal quantities | |
when executed in this manner a covered put works in virtually the same way as a covered call strategy with the primary difference being that the individual executing the covered put strategy expects to profit from the mildly declining price of a security while a covered call trader expects to profit from a mildly rising price that is because the underlying position for covered puts is a short instead of a long position and the option sold is a put rather than a call | special considerationsa naked put strategy is inherently risky because of the limited upside profit potential and theoretically a significant downside loss potential the maximum profit is only achievable if the underlying price closes merely at or above the strike price at expiration further increases in the cost of the underlying security will not result in any additional profit the maximum loss meanwhile is theoretically significant because the price of the underlying security can fall to zero the higher the strike price the higher the loss potential however in more practical terms the seller of the options will likely repurchase them well before the price of the underlying security falls too far below the strike price based on their risk tolerance and stop loss settings using naked putsbecause of the risk involved only experienced options investors should write naked puts the margin requirements are often quite high for this strategy as well due to the propensity for substantial losses investors who firmly believe the price of the underlying security usually a stock will rise or stay the same may write put options to earn the premium if the stock persists above the strike price between the time of writing the options and their expiration date then the options writer keeps the entire premium minus commissions | |
when the price of the stock falls below the strike price before or by the expiration date the buyer of the options vehicle can demand the seller take delivery of shares of the underlying stock the options seller will then have to go to the open market and sell those shares at the market price loss even though the options writer had to pay the options strike price for example imagine the strike price is 60 and the open market price for the stock is 55 at the time the options contract is exercised in this case the options seller will incur a loss of 5 per share of stock | the premium collected does somewhat offset the loss on the stock but the potential for loss can still be substantial the breakeven point for a naked put option is the strike price minus the premium giving the options seller a little leeway | |
what is naked short selling | naked short selling is a notorious trading practice that has been largely banned in the u s and eu since the 2007 2008 crisis but that doesn t mean the practice still doesn t occur it was banned because naked short selling is when the seller sells securities they do not own or have not borrowed which leads to a lack of supply for the shorted securities and a potential drop in the price 1the aim is to profit from a decline in the asset s price by later buying the shares at a lower cost to cover the short position this is different from traditional short selling when you borrow the shares before selling them 1understanding naked short sellingyou re engaged in naked short selling when you sell shares in an asset without owning borrowing or securing the right to borrow them unlike traditional short selling when you borrow the shares before selling them in naked short selling you haven t taken on the greater risk of borrowing the asset first 1the practice is highly risky and could lead to unlimited losses the sec and other regulatory bodies such as the european securities and markets authority esma say it contributes to market volatility and is highly unethical you re distorting the regular supply and demand of a security and taking on the risk that you might try to flee from all by selling a right to something you don t have while naked short selling could offer lucrative profits the risks and ethical considerations make it highly scrutinized and illegal 112naked short selling processthe method of naked short selling involves two main steps first you sell shares without owning borrowing or securing the right to borrow them later you purchase and deliver the shares at the market price hoping for a profit if you can t afford the shares or if they aren t available the result is a failure to deliver ftd 3let s use a simplified example suppose you sell short 1 000 shares in company a you haven t borrowed the shares still you re betting on a rapid downturn in the stock price for company a which makes this not a problem the price going down should mean many sellers are looking to get out of their positions just before the deadline to deliver the shares the price moves downward and you close out the short sale for 1 000 shares at the lower price you ve essentially bet you could square up for the shares you sold that you didn t possess however if the market moved the other way you d be in a big hole trying to purchase 1 000 shares of a stock at a great loss and the shares might not even be available if there are problems in liquidity short selling in general can create declines in a company s stock price affecting its ability to raise capital it can also affect the liquidity of the security when a share isn t readily available naked short selling gives you a shortcut you can participate in the market even though you didn t borrow the share this could create false liquidity readings which could distort the share price 24naked shorting was precluded in regulatory changes in 2005 but further regulatory scrutiny jumped after the 2007 2008 financial crisis in reaction to the piling on of shorts for failing financial giants lehman brothers and bear stearns 5 | |
what is a named beneficiary | a named beneficiary is an individual decreed by a written legal document who is entitled to collect assets from a trust insurance policy pension plan account ira or any other financial instrument if a property has multiple named beneficiaries they share in the proceeds at the time of disposition in some cases such as an annuity policy the policyholder and the named beneficiary may be the same person beneficiary designations can be complex for example by naming a specific beneficiary in a life insurance policy the proceeds will not be subject to the stipulations of will nor will they be affected by probate proceedings types of named beneficiarythere are several types of beneficiaries in late december 2019 president trump signed the setting every community up for retirement enhancement secure act the act encourages employers to offer annuities as investment options within 401 k plans 1it is important to note that a named beneficiary does not necessarily have to be an individual for example the named beneficiary of an insurance policy can be the estate of the deceased in which case the actual beneficiaries will be designated in the will a beneficiary differs from an heir the first is entitled to collect property by decree of a will while the latter is someone entitled to assets via intestate succession risks related to named beneficiariesit s essential for grantors to formally name the beneficiary or beneficiaries in a full estate planning process furthermore many financial advisors recommend reviewing and updating all beneficiary designations every few years particularly after a major life event such as a divorce or death of a loved one | |
what is the difference between a primary and secondary beneficiary | the primary beneficiary is the first named to receive benefits as stated in a will if the primary either can t or is unwilling to accepts the assets the secondary beneficiary also called the contingent beneficiary would be next to receive assets who can be a named beneficiary a named beneficiary is often an individual or a group of people such as a personal acquaintance or family member but the beneficiary can also be an estate or a non profit organization chosen by the account holder s insurance policy | |
what are the advantages of having a named beneficiary | having a named beneficiary guarantees that the deceased person s assets are left to the person or individual of their choosing it also benefits the beneficiary as there are tax advantages to being a named beneficiary named beneficiaries are also able to skip probate the bottom linea named beneficiary is the person entitled to receive benefits from a will trust or other financial arrangement when you open a life insurance policy or retirement account you will be asked to list the named beneficiaries for the account these are the people who will be able to access the account after you die | |
what is a named perils insurance policy | a named perils insurance policy is a home insurance or business insurance policy that only provides coverage on losses incurred to your property from hazards or events named on the policy named peril coverage may be purchased as a less expensive alternative to a comprehensive coverage or broad policies which are policies that tend to offer coverage to most perils 1 | |
how a named perils insurance policy works | if a homeowner doesn t live in an earthquake and flooding prone area they may elect to get a named perils insurance policy and only declare coverage against fire theft and hail while leaving the earthquake and flooding coverage off the policy keep in mind that all risks policy does not necessarily guarantee your property will be covered against all forms of perils it s thus a good idea for homeowners to check their broad coverage policies to make sure they do cover all the perils that they are concerned about if the broad policy isn t sufficient homeowners should buy a named peril policy to fill that hole in their coverage named perils insurance vs all risks insuranceinsurance providers generally offer two types of property coverage for homeowners and businesses named perils and all risks all risks is a type of insurance coverage that automatically covers any risk that the contract does not explicitly omit 1for example if an all risk homeowner s policy does not expressly exclude hurricane damage then the house will be covered in the event of a hurricane a named perils policy contains conditions that cover what the insurer thinks are the most likely perils a named perils insurance contract only covers the perils specifically stipulated in the policy as an example an insurance contract might specify that losses caused by fire or vandalism will be covered therefore an insured who experiences a loss or damage caused by a flood cannot file a claim to his or her insurance provider as a flood is not named as a peril under the insurance coverage under a named perils policy the burden of proof is on the insured by contrast an all risks policy covers the insured from all perils except those specifically excluded from the list contrary to a named perils contract an all risks policy does not name the risks covered but instead names the risks not covered in so doing any peril not named in the policy is automatically covered special considerationsthe most common types of perils excluded from all risks include earthquake war government seizure or destruction wear and tear infestation pollution nuclear hazard market loss etc an individual or business who requires coverage for any excluded event under all risks may have the option to pay an additional premium known as a rider or floater to have the peril included in the contract 1 | |
what is a nanny tax | a nanny tax is a federal tax paid by people who employ household employees and pay wages over a certain amount in 2021 for cash wages of 2 300 or more per employee social security and medicare taxes must be withheld at a rate of 15 3 with the employer and employee each paying half 7 65 if paying cash wages of 1 000 or more per quarter per employee the employer pays a 6 unemployment tax on annual cash wages up to 7 000 1understanding the nanny taxhousehold employees are hired persons whose work is controlled by the employer such employees include babysitters nannies butlers and cooks 2 the nanny tax exists because the irs considers an ongoing household helper as the taxpayer s household employee rather than an independent contractor as such the taxpayer becomes an employer and must pay social security medicare and federal and state unemployment taxes on the wages paid to that employee there may be state level nanny taxes as well the federal and state nanny tax requirements are detailed in irs publication 926 3 for example if a taxpayer pays an adult babysitter 50 every weekend they must pay nanny taxes 52 weekends year x 50 2600 the nanny tax does not apply if the babysitter is the taxpayer s parent or spouse or if the babysitter is under the age of 18 and is not primarily engaged in the household employment profession nanny taxes also aren t applicable if a taxpayer hires household help through an employment agency in which case the agency is the employer and is responsible for paying the associated tax 4 2 the nanny tax enables a household employee to receive covered employment benefits and protections such as social security medicare and unemployment benefits 5 it also provides a household employee with a verifiable income and a legal employment history which can be important when applying for a credit card loan or mortgage the nanny tax also allows an employer to take advantage of significant tax savings from a flexible spending account and the child and dependent care credit 6 7 nanny tax requirementstaxpayers with household employees must file to become an employer and receive an employer identification number for dealing with the irs and other agencies failure to pay employment taxes can result in penalties and families who misclassify a household employee as an independent contractor can be charged with tax evasion 895in 2021 the withholding amount for social security taxes was set at 6 2 and the rate for medicare taxes is 1 45 which amounts to a total of 7 65 withheld from all cash wages the employee and employer are responsible for paying 7 65 each but some employers choose to pay the total 15 3 tax 10those looking for help around the house may be disappointed to discover the complexities of maintaining tax compliance fortunately there are plenty of nanny payroll services that can help automate some or all of the payroll process | |
what is narrow money | narrow money is a category of money supply that includes all physical money such as coins and currency demand deposits and other liquid assets held by the central bank in the united states narrow money is classified as m1 m0 demand accounts in the united kingdom the narrowest measure of money is notes and coins in circulation understanding narrow moneythe name is derived from the fact that m1 m0 are the narrowest or most restrictive forms of money that are the basis for the medium of exchange within an economy this category of money is considered to be the most readily available for transactions and commerce the narrow money supply only contains the most liquid financial assets these funds must be accessible on demand which limits the category to physical notes and coins and funds held in the most accessible deposit accounts according to the organisation for economic co operation and development oecd as of december 2020 the united states has the world s largest stock of narrow money followed by hungary poland israel and new zealand 1typically the availability of liquid money supply whether long term or short term should have a direct impact on its economic health however changes in the economy coupled with changes in the finance industry have translated into an uncoupling of that direct relationship the federal reserve does not implement its policy through changes in money supply it focuses on interest rates instead but it does track changes in narrow and broad money to formulate its response to the prevailing state of the economy 2qualifying accountsthe most accessible accounts such as savings and checking deposit accounts qualify as narrow money the funds in the accounts are seen as accessible on demand even if mechanisms other than physical currency are used for the transaction this typically includes funds paid using either debit card transactions or a variety of checks narrow money and broad moneywhile m1 m0 are used to describe narrow money m2 m3 m4 qualify as broad money and m4 represents the largest concept of the money supply broad money may include various deposit based accounts that would take more than 24 hours to reach maturity and be considered accessible these are often referred to as longer term time deposits because their activity is restricted by a specific time requirement narrow money and the money supplym1 m0 are only a portion of the money supply the money supply includes items within all of the categories from m0 to m4 therefore it represents both the most liquid and the less liquid cash and deposit based assets held within a nation this includes funds in bonds or other securities as well as institutional money market accounts for m4 the broadest of the money supply definitions and the general outside limit for an investment to be considered part of the money supply are those scheduled to mature in five years or less this duration however is not a strict definition as with all levels of the money supply countries may classify their funds differently for example excluding m0 or m4 as measures and considering the money supply as divided into the m1 m2 and m3 categories only | |
what is the nasdaq | nasdaq is a global electronic marketplace for buying and selling securities its name was originally an acronym for the national association of securities dealers automated quotations nasdaq started as a subsidiary of the national association of securities dealers nasd now known as the financial industry regulatory authority finra nasdaq was launched after the securities and exchange commission sec urged nasd to automate the market for securities not listed on an exchange the result was the first electronic trading system nasdaq opened for business in 1971 investopedia theresa chiechiunderstanding the nasdaqas noted above the nasdaq is a stock exchange headquartered in new york it began as a subsidiary of the nasd and officially opened for business on feb 8 1971 it was the world s first automated stock exchange nasdaq officially separated from the nasd and began to operate as a national securities exchange in 2006 in 2008 it combined with the scandinavian exchanges group omx to become the nasdaq omx group the company changed its name to nasdaq inc in 2015 there are more than 5 000 companies that are listed and traded on the exchange on a daily basis many of these companies are major technology companies such as apple aapl and microsoft msft since 2006 the nasdaq has consisted of three tiers the nasdaq global select market the nasdaq global market and the nasdaq capital market the exchange operates 29 markets enabling the trading of stocks derivatives fixed income and commodities in the u s canada scandinavia and the baltics the company also runs a clearinghouse and five central securities depositories in the united states and europe its trading technology is used by 100 exchanges in 50 countries nasdaq compositethe term nasdaq is also used to refer to the nasdaq composite this is an index of more than 2 500 stocks listed on the nasdaq exchange this index includes some of the major technology giants such as the nasdaq composite closed at a record high of 16 057 44 on nov 19 2021 the index proceeded to drop more than 23 from that point through april 2022 the nasdaq composite s 13 3 decline in april 2022 was its worst monthly drop since october 2008 when the index lost 17 4 amid the global financial crisis it closed at 13 787 92 on june 30 2023 nasdaq inc is listed on the nasdaq stock market under the symbol ndaq and has been part of the s p 500 index since 2008 nasdaq trading systemthe nasdaq computerized trading system was initially devised as an alternative to the inefficient specialist system which was the prevalent model for almost a century the rapid evolution of technology has made nasdaq s electronic trading model the standard for markets worldwide it was only fitting for the world s up and coming technology companies to list on an exchange using the latest technology as the tech sector grew in prominence in the 1980s and 1990s the nasdaq composite index became its most widely quoted proxy that turned nasdaq composite into the index of the dot com boom and bust after rallying nearly 150 in the 16 months through march 2000 the nasdaq composite then slumped almost 80 by october 2002 history of the nasdaqin november 2016 chief operating officer coo adena friedman was promoted to the role of chief executive officer ceo becoming the first woman to run a major exchange in the united states on dec 1 2020 nasdaq proposed a new rule requiring companies listed on the exchange to report on the diversity of their board of directors the rule requires companies to include on their boards at least one female director and one who is a member of an underrepresented minority or lgbtq or to publicly explain why they have not done so the sec approved the board diversity disclosure rule on aug 6 2021 nasdaq generates revenue from clients including financial institutions brokers institutional investors and corporations nasdaq s revenue is mainly derived from fees charged for the following nasdaq reported total net income of 1 12 billion on total revenue of 6 23 billion for the 2022 fiscal year ending dec 31 2022 revenue less transaction based expenses came in at 3 58 billion the company also increased the quarterly dividend per common share to 0 78 in 2022 from 0 70 in 2021 | |
is the nasdaq a u s stock market | the nasdaq is a u s stock exchange based in new york city it officially opened for business in february 1971 there are more than 5 000 companies that trade on the exchange including domestic and international firms it was the first automated exchange in the world | |
what is the nasdaq 100 | the nasdaq 100 is a large cap growth index it is comprised of 100 of the largest u s and international non financial companies all of which are listed on the nasdaq stock exchange based on their market caps some of the major companies listed include apple dollar tree keurig sirius xm holdings and zoom video communications investors who are interested in taking advantage of the index s returns can do so by investing in mutual funds exchange traded funds etfs options futures and annuities that track and try to mimic its performance | |
does apple trade on the new york stock exchange or the nasdaq | apple trades on the nasdaq under the ticker symbol aapl the company went public on dec 12 1980 when it first traded at 22 apple stock closed at 190 25 on june 30 2023 the bottom linethe nasdaq is one of the major stock exchanges in the united states more than 5 000 domestic and foreign companies are listed with a major focus on technology the exchange opened up for business in 1971 and was the first automated exchange in the world the nasdaq composite index which is comprised of more than 2 500 listed companies is one of the world s most watched stock market indexes and is considered a gauge of the u s and global economies correction march 20 2024 this article has been corrected to state that the nasdaq consists of three tiers the nasdaq global select market the nasdaq global market and the nasdaq capital market | |
what is the nasqad 100 index | the nasdaq 100 index is a collection of the 100 largest most actively traded companies listed on the nasdaq stock exchange the index includes companies from diverse industries like manufacturing technology healthcare and others the index excludes those in the financial sector like commercial and investment banks understanding the nasdaq 100 indexfor inclusion in the nasdaq 100 index securities must be listed exclusively on a nasdaq exchange these can include common stocks ordinary shares american depositary receipts and tracking stocks they must also be nonfinancial and have traded for at least three months on an exchange the nasdaq 100 s liquidity criteria require that each security have a minimum average daily trading value of 5 million measured over the previous three calendar months there is no market capitalization requirement 1the nasdaq 100 index is constructed using a modified capitalization method this method uses the individual weights of included items according to their market capitalization 2 weighting limits the influence of the largest companies and balances the index among all members nasdaq reviews the composition of the index each quarter and adjusts the weights if the distribution requirements are not met 3composition of the nasdaq 100 indexthe nasdaq 100 index comprises assets in various sectors except financial services there are eight total sectors which are the following as of june 20 2025 the top 10 companies by weight in the nasdaq 100 as of june 20 2024 are as follows nasdaq undertook a special rebalancing of the nasdaq 100 index on july 24 2023 the component companies weights were rebalanced to address overconcentration in the index and make it less dependent on just a few large companies nasdaq s rules state that if stocks with a weight of more than 4 5 in the index collectively account for more than 48 of the index then the index must be rebalanced nasdaq has only undertaken a special rebalance twice before in 1998 and 2011 6 the latest special rebalance was triggered by a recent rally in tech stocks and tesla shares which pushed the aggregate weight of the top five companies microsoft apple nvidia amazon and tesla above the 48 threshold the special rebalance reduced their weights and increased those of other companies like alphabet meta platforms netflix and costco the special rebalance was expected to impact the performance and volatility of the index and the individual stocks as some investors were likely to adjust their portfolios to align with the new weights however an increase in volatility never materialized but a short decline did it s difficult to say whether this was due to the rebalance or if the index was simply following the rest of the market which is more likely because prices began trading upward in october 2023 market wide investing in the nasdaq 100 indexthe nasdaq 100 index is a list of the largest 100 companies by modified market cap trading on nasdaq exchanges you have many choices for gaining exposure to the index without buying the individual stocks included in the index exchange traded funds etfs mutual funds futures and options or annuities all exist that mirror the performance of the nasdaq 100 for the average investor etfs are generally the simplest and least risky means of gaining exposure to the companies in the index 7 | |
what companies make the nasdaq 100 | the nasdaq 100 is made up of the 100 largest companies by modified market cap that trade on nasdaq exchanges in the basic materials consumer discretionary consumer staples healthcare industrials technology telecommunications and utilities sectors | |
what does nasdaq 100 stand for | nasdaq 100 is an abbreviated form of the nasdaq 100 index the 100 largest non financial companies by modified market cap trading on a nasdaq exchange | |
is nasdaq 1000 a buy or sell | it depends on your market outlook investing goals and risk tolerance it s best to speak to a financial advisor to learn if the nasdaq 100 is right for your financial circumstances the bottom linethe nasdaq 100 index focuses on the largest 100 nonfinancial companies trading on nasdaq exchanges it is a diversified index providing a broad overview of the market covering a variety of sectors investors seeking broad exposure to some of the world s largest companies can invest in the index via etfs mutual funds futures and options or annuities | |
what is the nasdaq capital market | the nasdaq capital market is one of nasdaq s u s market tiers containing early stage companies that have relatively lower market capitalizations listing requirements for companies on the nasdaq capital market are less stringent than for the two other nasdaq market tiers which focus on larger companies with higher market capitalization understanding the nasdaq capital marketthe nasdaq capital market known until 2005 as the nasdaq smallcap market primarily lists so called small cap stocks typically those with market capitalizations of around 300 million to 2 billion the name change reflected a shift in focus towards listing companies that need to raise capital it s meant to be a less encumbered entrance for a smaller company or a special purpose acquisition company spac to capitalize and grow through a nasdaq listing 12although the initial listing requirements are relaxed the corporate governance required to maintain a nasdaq listing is the same across all tiers this means nasdaq capital market companies must have a code of conduct an audit committee independent directors and so on 3listing requirements for the nasdaq capital marketthe nasdaq capital market makes it easier for early stage companies to get listed especially when compared to other senior exchanges with more onerous requirements to list initially on the nasdaq capital market companies must meet all of the criteria under at least one of three listing standards the equity standard the market value of listed securities standard or the net income standard all the standards share some requirements such as one million publicly held shares 300 shareholders and three market makers mms however these also differ in important ways the equity standard requires stockholders equity of 5 million where the other two require only 4 million and it also requires an operating history of two years while the other two do not require an operating history the market value of listed securities requires a market value of listed securities of 50 million and a market value of publicly held shares of 15 million the net income standard is the only one requiring a net income 750 000 in the latest fiscal year or in two of the last three years but has the lowest requirement for market value of publicly held shares at 5 million 4although companies can pick the standard that best fits their situation the listing standards and the required governance are more stringent than some early phase capital markets because of the costs involved with meeting these standards companies listing on the nasdaq capital market often handily exceed the minimum requirements before they decide to list 5other early phase capital markets like the alternative investments market or aim have positioned themselves as lighter regulation destinations to provide bridge listings for companies as they grow large enough for the nasdaq 6nasdaq listing tiersthe nasdaq exchange has three tiers for listed companies 7the listing requirements for each tier require varying levels of documentation average market capitalization over the previous month and a number of shareholders companies may move from one tier to another over time depending on how they meet requirements the top tier nasdaq global select typically has about 1 400 companies listed while the lower tiers fluctuate around 650 to 1 300 companies each 8910 | |
what is the nasdaq composite index | the nasdaq composite index is a market capitalization weighted index of more than 2 500 stocks listed on the nasdaq stock exchange it is a broad index that is heavily weighted toward the important technology sector the index is composed of both domestic and international companies the nasdaq composite index is a highly watched index and is a staple of financial markets reports understanding the nasdaq composite indexthe nasdaq composite index includes all equity securities listed on the nasdaq they include common stocks ordinary shares american depositary receipts adrs units of real estate investment trusts reits and publicly traded partnerships as well as tracking stocks stocks that aren t eligible for inclusion are the securities of closed end funds exchange traded funds etfs preferred shares rights warrants convertible debenture securities or other derivatives 3the nasdaq composite includes the stocks of companies headquartered in the u s international companies are also included in the index which is in contrast to the s p 500 index and the dow jones industrial average djia the two other most frequently cited market benchmarks the nasdaq composite index is one of the most widely watched indexes in the world and is often seen as a stand in for the technology sector due to its heavy weighting in tech companies nasdaq composite index methodologythe nasdaq composite index was launched on feb 5 1971 it uses a market capitalization weighting methodology the index s value is calculated by summing the market capitalization of its components based on the current price of the constituents this total is then adjusted by a constant index divisor 4 the index had a value of 100 when it was first established 5the index is constantly calculated throughout the trading day its value is disseminated once per second from 9 30 a m to 5 16 p m et the closing value of the index may change up until 5 15 p m et as a result of corrections to the last reported price for index components 6two versions of the nasdaq composite index are calculated the first is a price return index and the other is a total return index the total return index assumes the reinvestment of cash dividends distributed by companies included in the index 7the year the nasdaq composite index was launched it had an initial value of 100 changes in the share price as a result of corporate actions such as stock splits stock dividends or spinoffs are tallied on the action s ex date changes in total shares outstanding following conversions stock repurchases secondary offerings or acquisitions are usually reflected on the night before the action s effective date 8eligibility requirements for the index are reviewed throughout the year a security that does not meet the eligibility requirements can be removed at any time usually at its last sale price nasdaq composite index compositionas noted above the nasaq composite is made up of more than 2 500 different companies that trade on the nasdaq 9 the industry weighting of the nasdaq composite index based on the included stocks was as follows as of july 10 2023 2the 10 most heavily weighed securities in the nasdaq composite index as of march 31 2023 were nasdaq composite index market performancethe nasdaq composite index produced an annualized return of 14 66 over the 10 years through july 7 2023 10its 9 1 decline in q1 2022 was the nasdaq composite s worst since the 14 2 loss in q1 2020 as the covid 19 pandemic struck the nasdaq s 12 drop in april 2022 was its worst since the 17 4 decline in october 2008 at the height of the global financial crisis the nasdaq composite met the common definition for a bear market in mid march of 2022 by dropping more than 20 from its jan 3 2022 peak from there the index saw a strong relief rally that roughly halved its losses by the start of april then gave back all those gains over the next month because the nasdaq composite is dominated by the historically volatile technology sector index performance tends to be more volatile than that of the s p 500 or the dow industrials | |
how can i invest in the nasdaq composite index | no you can t invest in the nasdaq composite index but you can invest in a security that mimics its performance there are assets like mutual funds or exchange traded funds etfs that are composed of the same stocks with the same weightings that try to at least match the index s performance | |
what are the benefits of index investing | there are several key benefits of index investing they give you broad exposure to the market that s because they are made up of stocks from a wide range of different sectors for instance the nasdaq is heavily focused on technology stocks but also has exposure to consumer discretionary healthcare and financial stocks among others index investing is easier to manage because securities like mutual funds and etfs are reallocated whenever the corresponding index changes this eliminates any bias as portfolio managers only make adjustments when the index does | |
how is the nasdaq composite index constructed | the nasdaq composite index is a market capitalization weighted index this means the index is heavily influenced by larger companies the index is one of the most heavily watched in the world the bottom linethe nasdaq composite index rose to prominence thanks to the rapid growth of the most successful companies with nasdaq listed stocks including microsoft and more recently apple and alphabet the flip side of such ling term success in an index based on market capitalization is that the nasdaq composite is very top heavy the top five companies and six stocks including both traded classes of alphabet s shares account for more than 40 of the nasdaq composite s index weight moreover high growth stocks prevalent in the index tend to be more economically sensitive and more volatile as a result when the market does well the nasdaq composite can be a standout it gained 43 6 in 2020 despite a rough march after a 35 2 surge in 2019 when the going gets rough you get its 40 5 loss in 2008 or the first four months of 2022 | |
what is the nasdaq global select market composite | the nasdaq global select market composite is a market capitalization weighted index made up of u s based and international stocks that represent the nasdaq global select market as of august 2020 the nasdaq global select market composite consisted of more than 1 400 stocks that meet nasdaq s strict financial and liquidity requirements and corporate governance standards 1 the global market select composite is more exclusive than the global market composite every october the nasdaq listing qualifications department reviews the global market composite to determine if any of its stocks have become eligible for listing on the global select market understanding the nasdaq global select market compositethis stock index was created in july 2006 when the nasdaq national market split into two tiers the nasdaq global market and the nasdaq global select market 3 the change was nominal as it did not affect listing standards but rather was meant to reflect the global scope of the index and the companies listed on it the select index encompasses about a third of the largest companies listed on the nasdaq the companies that comprise each tier of the nasdaq are placed according to their market capitalization the nasdaq global select market tier is the most selective tier to qualify for this large cap category a company must meet the strictest financial requirements a company s stock is reviewed annually to ensure it continues to be listed under the proper tier 2 if a stock meets or exceeds its current market cap requirements under its current tier it could be promoted to the larger market capitalization tier if however a company s stock does not measure up to the market cap requirements of its current tier it can be demoted to a smaller market capitalization tier nasdaq global select market vs other nasdaq tiersthe nasdaq has three distinct tiers the nasdaq global select market the nasdaq global market and the nasdaq capital market potential nasdaq companies must satisfy a variety of financial liquidity and corporate governance requirements to be approved for listing on any market tier 2requirements for inclusion in the nasdaq global select market are the most stringent of the three requirements for the nasdaq global market are more stringent than those for the nasdaq capital market it s important to note that corporate governance requirements are the same across all nasdaq market tiers 2even though a company s securities qualify for initial inclusion nasdaq may deny initial listing or apply additional conditions if necessary to protect investors and the public interest 2requirements for nasdaq global select marketa company interested in pursuing a stock market listing on the nasdaq must complete and submit an application in general it will take nasdaq four to six weeks to process a new listing application the nasdaq listing qualifications staff is responsible for conducting a preliminary review of the application and issuing the company a comment letter the company will have a specified time period to resolve or address any issues raised in the comment letter if all issues are resolved satisfactorily nasdaq will complete their review and the company will be approved for listing 2 as mentioned the listing requirements for nasdaq global select are more stringent than the other tiers to meet the financial requirements a company will need to meet all the criteria of at least one of these four standards established by nasdaq additionally the company must meet liquidity requirements that vary depending on whether the company is an initial public offering ipo a spinoff or already currently trading common stock 2 | |
what is nash equilibrium | nash equilibrium is a concept in game theory where the game reaches an optimal outcome this is a state that gives individual players no incentive to deviate from their initial strategy the players know their opponent s strategy and still will not deviate from their initial chosen strategies because it remains the optimal strategy for each player overall an individual can receive no incremental benefit from changing actions assuming that other players remain constant in their strategies a game may have multiple nash equilibria or none at all jiaqi zhou investopediaunderstanding nash equilibriumnash equilibrium is named after its inventor john nash an american mathematician it is considered one of the most important concepts of game theory which attempts to determine mathematically and logically the actions that participants of a game should take to secure the best outcomes for themselves the reason why nash equilibrium is considered such an important concept of game theory relates to its applicability the nash equilibrium can be incorporated into a wide range of disciplines from economics to social sciences to quickly find the nash equilibrium or see if it even exists reveal each player s strategy to the other players if no one changes their strategy then the nash equilibrium is proven nash equilibrium vs dominant strategynash equilibrium is often compared to dominant strategy both being strategies of game theory the nash equilibrium states that the optimal strategy for an actor is to stay the course of their initial strategy while knowing the opponent s strategy and that all players maintain the same strategy dominant strategy asserts that the chosen strategy of an actor will lead to better results out of all the possible strategies that can be used regardless of the strategy that the opponent uses all models of game theory only work if the players involved are rational agents meaning that they desire specific outcomes operate in attempting to choose the most optimal outcome incorporate uncertainty in their decisions and are realistic in their options both terms are similar but slightly different nash equilibrium states that nothing is gained if any of the players change their strategy while all of the other players maintain their strategy dominant strategy asserts that a player will choose a strategy that will lead to the best outcome regardless of the strategies that the other players have chosen dominant strategy can be included in nash equilibrium whereas a nash equilibrium may not be the best strategy in a game example of nash equilibriumimagine a game between tom and sam in this simple game both players can choose strategy a to receive 1 or strategy b to lose 1 logically both players choose strategy a and receive a payoff of 1 if you revealed sam s strategy to tom and vice versa you see that no player deviates from the original choice knowing the other player s move means little and doesn t change either player s behavior outcome a represents a nash equilibrium julie bang investopediaprisoner s dilemmathe prisoner s dilemma is a common situation analyzed in game theory that can employ the nash equilibrium in this game two criminals are arrested and each is held in solitary confinement with no means of communicating with the other the prosecutors do not have the evidence to convict the pair so they offer each prisoner the opportunity to either betray the other by testifying that the other committed the crime or cooperate by remaining silent if both prisoners betray each other each serves five years in prison if a betrays b but b remains silent prisoner a is set free and prisoner b serves 10 years in prison or vice versa if each remains silent then each serves just one year in prison in this example the nash equilibrium is for both players to betray each other even though mutual cooperation leads to a better outcome if one prisoner chooses mutual cooperation and the other does not one prisoner s outcome is worse | |
what is a nash equilibrium in game theory | nash equilibrium in game theory is a situation in which a player will continue with their chosen strategy having no incentive to deviate from it after taking into consideration the opponent s strategy | |
how do you find nash equilibrium | to find the nash equilibrium in a game one would have to model out each of the possible scenarios to determine the results and then choose what the optimal strategy would be in a two person game this would take into consideration the possible strategies that both players could choose if neither player changes their strategy knowing all of the information a nash equilibrium has occurred | |
why is nash equilibrium important | nash equilibrium is important because it helps a player determine the best payoff in a situation based on not only their decisions but also the decisions of other parties involved nash equilibrium can be utilized in many facets of life from business strategies to selling a house from war to social sciences and so on | |
how do you calculate nash equilibrium | there is not a specific formula to calculate nash equilibrium it can be determined by modeling out different scenarios within a given game to determine the payoff of each strategy and which would be the optimal strategy to choose | |
what are the limitations of nash equilibrium | the primary limitation of nash equilibrium is that it requires an individual to know their opponent s strategy a nash equilibrium can only occur if a player chooses to remain with their current strategy if they know their opponent s strategy in most cases such as in war whether that be a military war or a bidding war an individual rarely knows the opponent s strategy or what they want the outcome to be unlike dominant strategy the nash equilibrium doesn t always lead to the most optimal outcome it just means that an individual chooses the best strategy based on the information they have furthermore in multiple games played with the same opponents the nash equilibrium does not take into consideration past behavior which often predicts future behavior the bottom linethe nash equilibrium is a component of game theory that asserts that a player will continue with their chosen strategy while knowing their opponent s strategy as they have no incentive to change course the nash equilibrium can be applied in a variety of real life situations to determine what the best payoff in a scenario would be based on your decisions as well as knowledge of your opponent s decisions | |
what is the national association of certified valuators and analysts nacva | the national association of certified valuators and analysts nacva is a group of business professionals that provide valuation and litigation services for various types of business transactions national association of certified valuators and analysts members receive training education and certification in asset valuation disciplines that they put to use in their respective professions the organization also enforces standards of ethical conduct among its members the association uses the axiom the authority in matters of value understanding the national association of certified valuators and analysts nacva the national association of certified valuators and analysts nacva was founded in 1991 and is headquartered in salt lake city utah nacva members work in careers that provide valuation and litigation services including mergers and acquisitions initial public offerings ipos and bankruptcy 1the nacva also provides accreditations of certified valuation analysts cva master analyst in financial forensics maff accredited in business appraisal review abar certified business appraiser cba and master certified business appraiser mcba 2across databases software certifications and professional standards the association s mission includes providing members with a range of high quality resources to facilitate their consultants success by enhancing their efficiencies and giving them a competitive advantage as the art and science of business valuation have gotten increasingly more complex the nacva is playing a central role in positioning its members and candidates to meet these evolving challenges through ongoing educational materials peer support and professional standards in the field of business valuation the national association of certified valuators and analysts nacva is the only accredited organization by the national commission for certifying agencies ncaa and the american national standards institute ansi 1certificationsthe certifications that nacva provides focus on different areas of analysis and litigation certified valuation analyst cva cvas focus on providing business valuations to consulting companies and their clients master analyst in financial forensics maff maffs provide assurance to companies that need financial litigation services the certification requires prerequisites experience and passing a five hour exam that tests the candidate on nacva s financial forensics body of knowledge accredited in business appraisal review abar abar is the highest standard in the valuation field particularly in business appraisal reports however abar has now ceased and active members need to recertify every three years but no new members can be certified certified business appraiser cba and master certified business appraiser mcba these two credentials are considered to be the industry s most difficult to obtain these credentials have also ceased being offered as the difficulty did not generate enough demand membershipthe national association of certified valuators and analysts nacva provides a variety of different memberships suited to different needs and qualifications the memberships are the practitioner membership ultimate membership professional membership affiliate membership academician membership government employee membership student membership and legal professional membership 3depending on the membership the annual cost ranges from 135 to 545 each membership comes with different benefits and access to different aspects of nacva 4the benefits of membership include an entire support network for individuals wishing to pursue a career in business valuation nacva provides education certifications online learning access to a variety of publications industry specific training such as in healthcare software and database litigation and managementthe organization also has a variety of support groups such as a writer s guild a mentor support group a pro bono group a training team and a speakers bureau nacva has trained over 40 000 cpas and other valuation and consulting professionals in the fields of business valuation financial forensics financial litigation and related specialty services in the business and legal communities 1 | |
how do i become a certified valuation analyst cva | there are six primary steps to becoming a cva these are 1 meeting the cva qualifications and applying for the designation 2 paying a cva designation fee or becoming a member at nacva 3 studying the provided material for the exam 4 passing the cva exam 5 participating in a peer reviewed business valuation report 6 and paying membership fees and completing the continuing education requirements every three years to maintain the designation | |
how long does it take to become a cva | to become a cva an individual must study for and pass the exam however to become a cva an individual must meet certain prerequisites these include having a bachelor s degree in business management and or an mba two or more years of experience in business valuation or related fields and having performed 10 or more business valuations the time to complete the above prerequisites will vary from individual to individual 5 | |
what does a valuation analyst do | a valuation analyst performs an appraisal of a business which includes examining costs risks industry trends budgets timelines cash flows and a slew of other metrics to determine the valuation of a business | |
what is the national association of federally insured credit unions nafcu | the national association of federally insured credit unions nafcu is an industry trade group founded in 1967 to represent the interests of federal credit unions and promote the success and efficiency of the industry its membership is made up of both large and small credit unions nafcu represents 72 of total federal credit union fcu assets and 51 of all ficu assets nafcu s membership includes over 180 federally insured state chartered credit unions fiscus its activities include representing informing educating and assisting its members regarding industry issues headquartered in arlington va one of its main purposes is to influence the laws and regulations affecting federal credit unions 12understanding the national association of federally insured credit unions nafcu the national association of federally insured credit unions nafcu is a trade group for federal credit unions federal credit unions are similar to banks but are owned by their members and are organized under federal rather than state law they are regulated by the national credit union administration and members deposits are protected by the national credit union share insurance fund which is similar to fdic insurance 3the federal credit union system was established by the federal credit union act in 1934 to promote savings and the financing of homeownership and other productive purposes credit unions that are recognized by the federal government through the national credit union administration ncua an independent federal agency are tax exempt under section 501 c 14 of the united states internal revenue code though federal credit unions don t earn income and pay no corporate income tax they are required to pay fees to fund regulatory functions and deposit insurance federal credit unions are also required to report their finances to the ncua at least once per year but they also may be required to report more than once per year 45priorities of the national association of federally insured credit unionsthe nafcu was formed in 1967 and its first major policy victory was the establishment of the national credit union share insurance fund which is the deposit insurance program for credit unions the next big policy battle for the nafcu was in the 1990s when the organization fought off efforts to roll back deposit insurance for credit unions it also took great interest in the dodd frank financial reform legislation fighting efforts to make credit unions subject to oversight by the consumer financial protection bureau the national association of federal credit unions argued that due to credit unions non profit and member owned structure they do not deserve the same level of scrutiny as for profit banks and that compliance with cfpb regulations would be unduly burdensome 6 | |
what is the national association of insurance commissioners naic | the national association of insurance commissioners naic is a nonprofit nonpartisan organization governed by the chief insurance regulators of the 50 states the district of columbia and the five u s territories american samoa guam the northern mariana islands puerto rico and the virgin islands the naic sets standards and establishes best practices for the u s insurance industry and provides support to insurance regulators it also provides information and resources to consumers 1 insurance products sold in the u s are largely regulated by the states rather than the federal government history of the national association of insurance commissionersthe naic was founded in 1871 by state insurance regulators to address the need to coordinate regulation of multistate insurers the first major step in that process was the development of uniform financial reporting by insurance companies 1because insurers often do business in multiple states the question of whether they should be regulated on a state or federal level has long been a matter of debate in the u s the 1944 supreme court case united states v the south eastern underwriters association determined that the insurance industry should be subject to regulation by congress under the commerce clause of the constitution which gives lawmakers regulatory authority over interstate and international commerce however congress effectively overrode that ruling the following year with the passage of the mccarran ferguson act which exempted the insurance industry from most federal regulation including antitrust laws 2today with few exceptions that regulatory authority still resides with the states and their elected or appointed insurance commissioners | |
how the national association of insurance commissioners works | the naic is headquartered in kansas city mo with executive offices in washington d c 3 the group says its regulatory goals are to through committees task forces and working groups the naic develops model laws and regulations to help standardize insurance across the states its standing committees include life insurance and annuities health insurance and managed care property and casualty insurance market regulation and consumer affairs the financial condition of insurers financial regulation standards and accreditation and international insurance relations 4the naic and its committees normally meet three times a year these meetings are generally open to the public 5the naic also offers education and training courses for insurance regulators in 2006 it launched the insurance regulator professional designation program and awarded its first professional designation the following year 6the naic website has a variety of resources consumers can use to learn about insurance products and check out complaint data on specific companies the naic and consumer complaintsin addition to its work in support of state insurance regulators the naic offers a number of tools for consumers its consumer insurance search tool helps consumers research specific insurance companies including any complaint data the naic has collected companies are scored on a national complaint index which shows whether they ve received more or fewer complaints than other insurers after adjusting for market share according to the naic s most recent aggregated data from state insurance departments the majority of complaints in 2021 involved how an insurer handled policyholders claims with unsatisfactory settlements or offers delayed claims and denied claims collectively accounting for just over 50 of all complaints other types of complaints though much lower on the list in terms of percentages included high pressure sales tactics misleading advertising and discrimination 7for consumers who would like to register a complaint of their own the naic website also has a file a complaint tool with links to state insurance departments for further information on the process along with those consumer resources the naic website offers basic information on life health homeowners automobile and several other types of insurance it also has a life insurance policy locator tool which consumers can use to request information on whether a deceased relative left behind an unclaimed policy the naic should not be confused with groups with similar acronyms the national association of investors corp or the north american industry classification system | |
what is the national association of insurance and financial advisors naifa | the national association of insurance and financial advisors naifa is a trade organization for insurance professionals and financial advisors based in virginia near washington d c it is one of the largest trade groups in the financial industry naifa works on behalf of its members to promote a favorable regulative environment provide professional education services and ensure ethical professional conduct for insurance and financial advisors naifa represents insurance professionals in all 50 states and has at least one local chapter in every state as well as the district of columbia its main offices are based in falls church virginia the organization provides its members with sales training networking facilities and other tools to help them succeed and build their practices in addition the organization also lobbies on capitol hill to promote favorable legislation for the insurance and financial advisory industry understanding the national association of insurance and financial advisors naifa naifa was originally founded in 1890 as the national association of life underwriters nalu naifa has many endorsements from large insurance and financial corporations who encourage their employees to join a local naifa chapter some leading companies support naifa membership by contributing towards dues payments and facilitating payments for their employees one of the goals of naifa is to promote life insurance and other risk mitigation practices as the core of a solid financial plan above all naifa exists to ensure professional and ethical conduct among all insurance representatives and financial advisors the organization s vision plan is to protect and promote the critical role of insurance in a sound financial plan and the essential role provided by our professional agents and advisors 1the organization calls itself the top association for producers in financial services members of naifa provide life insurance and annuities health insurance and employee benefits multiline insurance products and financial advice to their clients insurance agents financial advisors multiline agents and health insurance and employee benefits specialists are all members of naifa naifa offers educational offerings for its members including professional development and continuing education programs the organization also offers more than 50 professional programs and products that are intended to enhance skills and provide value added business services for professionals this programming is intended to help ensure that all insurance agents groups and financial advisors adhere to a framework of principles rules and regulations that ensure customers are given the very best services requirements for membershipnaifa has a code of ethics which all members must abide by naifa is a federation of 700 state and local associations benefits of naifanaifa is the insurance industry s leading lobby in washington d c and in state legislatures committed to protecting the careers of its members as well as their clients interests from unfavorable legislation and regulation it also runs ifapac one of the largest political action committees pacs in the financial services industry naifa membership also comes with networking opportunities and access to the latest industry ideas and top practitioners naifa members receive a free subscription to advisor today the official publication of naifa and a resource for sales ideas and industry news for insurance and financial advisors in addition naifa hosts a number of centers that can be resources for members these include 3 | |
what does naifa do | the mission of the national association of insurance and financial advisors is to advocate for a positive legislative and regulatory environment enhance business and professional skills and promote the ethical conduct of our members it achieves this by lobbying the government advocating for its members and providing members with various benefits and resources | |
how many members does naifa have | naifa has more than 50 000 members 4 | |
how much does naifa membership cost | membership in naifa is 565 annually which includes local state and national dues 4 | |
what is the national association of investors corp | the national association of investors corp naic is a nonprofit organization founded in 1951 and dedicated to providing investor education and promote investor success the association is based in madison heights mich and is composed of investing clubs along with individual investors from around the united states the organization today goes mainly by the name betterinvesting 1it should not be confused with the national association of insurance commissioners or the north american industry classification system which also use the naic acronym understanding the national association of investors corp the national association of investors corp naic better known publicly by its brand betterinvesting is a michigan based 501 c 3 nonprofit organization whose aim is to teach and train individuals how to become more successful long term investors the naic is an umbrella organization that had about 3 000 member investment clubs and more than 34 000 individual members at the end of 2018 the original name of the naic was the national association of investment clubs 2the national association of investors corp s member magazine is called betterinvesting and it became the branded name of the association in 2004 the organization was founded in 1951 when three investment clubs formed the national association 1 its mission is to educate individuals on the benefits of long term investing in common stocks 3 with the popularity of 401 k s and other defined contribution retirement plans education regarding stock and bond mutual funds was added depending on their membership level members have access to online tools for determining whether a stock is that of a quality growth company and is selling at a price that will provide sufficient potential return members also receive educational webinars first cut stock studies contributed by the betterinvesting community digital and print editions of betterinvesting magazine local chapter support and other products and services 4naic core principlesthe national association of investors corp stresses four principles for successful long term investing the heart of the national association of investors corp investment approach to investing is the third principle investing in growth companies the primary tool naic uses to evaluate common stocks is a two page form with a semi log graph on the front called the stock selection guide ssg the ssg dates to the founding of the organization and was created by george a nicholson the ssg displays a company s 10 year sales and earnings per share history pretax profit margins and return on equity five year annual high and low price earnings ratios and other important information meant to answer two questions the second principle was added and emphasized in the 1980s and 90s | |
what is the national association of real estate investment trusts nareit | the national association of real estate investment trusts nareit is a trade association that represents the interests of real estate investment trusts reits and other public companies that deal with the u s real estate market nareit was established in 1960 as a result of changes in u s legislation that opened up real estate investing to smaller investors the organization is based in washington d c and advocates on behalf of the reit based and real estate investment industry with investors and policymakers it publishes research and regularly holds educational events and conferences understanding national association of real estate investment trusts nareit nareit is a trade organization based in washington d c it represents the interests of the real estate and real estate investment industry including commercial equity reits mortgage reits reits traded on major stock exchanges public non listed reits and private reits according to the organization reits own over 3 5 trillion in gross assets across the united states 1the organization s mission is to advocate for reit based real estate investment with policymakers and the global investment community and ensure that everyone has the opportunity to benefit from real estate investment it also lobbies for the industry by representing its interests to american and global legislators and policymakers nareit represents over 200 member organizations that collaborate to make investing in income producing real estate simpler and more accessible through the purchase of stock individuals can access comprehensive industry data that is regularly produced and published by nareit they can also attend nareit sponsored events and conferences about the real estate industry and the performance of member reits nareit is run by an independent executive board which is responsible for keeping the organization on track toward its goals including budgeting and planning board members come from a variety of areas within the industry and many of them head reits and other real estate investment companies members of the organization s executive team which is led by the president and chief executive officer ceo are also part of the executive board 2nareit is made up of a community of industry professionals academics and companies that work together to promote the real estate industry and reits special considerationsnareit is partnered with several foreign entities in its political endeavors the most prominent relationship is with the ftse group and the european public real estate association these groups established the ftse epra nareit global real estate index series which highlights general trends in eligible real estate equities worldwide in october 2016 nareit created a real estate sustainability council to increase its focus on promoting sustainability and environmental social and governance esg best practices 3functions of national association of real estate investment trusts nareit nareit functions as an advocate for reits and public real estate companies representing them in legislative matters as well as matters of public policy a large part of what it does is to inform the investing community about reits their purpose and how these investments are managed nareit works to educate the community domestically and internationally even extending its efforts to include governments 4the organization operates at the highest levels of the u s and other governments working with them in real estate legislation and policy decisions individuals and corporations can become members of nareit some of the benefits for corporate members include exclusive access to investors increased visibility advocacy across all levels of government access to bleeding edge real estate research and savings and events only available to members 5individual members need to be stakeholders in the reit industry with over 1 200 members nareit s individual membership receives access to investment research members savings and visibility enhancement individual membership is not limited to reit owners and can include the professionals who support service and invest in reits 5corporations must be reit based in the u s a reit in a country with reit legislation or a listed real estate company in order to become a member of nareit 5nareit is the leading producer and sponsor of research publications and conferences on reit investment and also publishes news data and industry perspectives for instance nareit publishes it also compiles a group of indexes which provide real time and monthly updates on publicly traded reits equity reits and mortgage reits the organization also honors the achievements and contributions of its members and industry professionals with the annual investor care communications reporting excellence awards for corporate excellence in investor relationships leader in the light awards for member companies demonstrating superior sustainability practices and the leadership and industry achievement awards for outstanding contributions to the industry history of national association of real estate investment trusts nareit on sept 14 1960 president dwight d eisenhower signed legislation that created a new approach to income producing real estate investment the move would help smaller investors take advantage of investing in the real estate market something that was generally only available for large commercial entities the national association of real estate was incorporated the next day as a way to represent reits and real estate based investment companies 78the organization was known in the industry as nareit until 2017 when it was rebranded as nareit the organization said it rebranded to reflect changes within the industry notably a new era for our industry defined by the introduction of the new gics real estate sector and the growth and globalization of the industry according to nareit changing its brand identity allowed it to educate the investment industry about reits 9 | |
are reits a good investment | reits can be a good investment depending on the investor s individual goals and tolerance for risk reits for many can be a good way to invest in the real estate industry while remaining liquid and without the overhead of the classic real estate investment the home purchase reits typically pay substantial dividends but can fluctuate in prices rapidly | |
what is the average return on a reit | there is no average return measurement for reits primarily because they operate in different sectors for example a reit with broad exposure to all commercial real estate may fare better if there was a dip in mortgage income in this scenario a broader reit would outperform a reit invested in residential mortgages | |
do reits do well during a recession | a reit can perform well during a recession if it invests in real estate holdings that are not affected by the market downturn some areas of real estate can outperform the general market during a recession but reits would underperform compared to a market index such as the s p500 if a recession hit the real estate sector particularly hard | |
are reits better than stocks | reits can be better than stocks in some ways and less attractive in others investors typically don t choose one or the other instead they often opt for a combination of both and consider their reit exposure their exposure to the real estate market without thinking about the general equities market although they are traded on the same exchanges reits serve different purposes and a reit is closer to an exchange traded fund etf than an individual company s stock | |
what are the disadvantages of a reit | some of the disadvantages of a reit are high expense ratios lack of investor input and lack of owner initiated property enhancement investors trade the higher liquidity of a reit with owning a property outright but that investor can t make enhancements such as adding a new roof or electrical to enhance the property s value reits themselves can sometimes suffer from a lack of market liquidity but those issues tend to be reserved for smaller reits that are not heavily traded | |
what is the national association of realtors nar | the national association of realtors nar is a national organization of real estate brokers known as realtors created to promote the real estate profession and foster professional behavior in its members the association has its own code of ethics to which it requires its members to adhere as of 2021 the nar has over one million members worldwide it has 54 state associations including d c guam the u s virgin islands and puerto rico as well as more than 1 600 national and international affiliate organizations 1understanding the national association of realtors nar the nar s membership increased to just under 1 4 million it claims to be the largest trade association comprising real estate brokers salespeople property managers appraisers counselors as well as others in the real estate industry members belong to one or more of the 1 200 local associations boards and 54 state and territory associations of realtors or to one of 87 cooperating associations in 66 countries 2the nar was founded as the national association of real estate exchanges in may 1908 with 120 members 19 boards local associations and one state association its objective was to standardize real estate practices and to unite the real estate men of america for the purpose of effectively exerting a combined influence upon matters affecting real estate interests the nar code of ethics was adopted in 1913 3over the years the association s name changed several times until in 1972 it became the national association of realtors today its mission is to help its members become more profitable and successful 2 by influencing and shaping the real estate industry 4 advocating for the right to own use and transfer real property 5 and developing standards for efficient and ethical real estate business practices who can jointhe principal of a real estate firm must join a realtor association before any non principal in the firm can join principals can be sole proprietors partners in a partnership corporate officers or branch office managers acting on behalf of a principal after the principal has joined a realtor association all agents brokers and appraisers who are licensed or affiliated with the principal have the option of joining as members of the association if the principal does not join a realtor association none of the individuals affiliated with the principal can become realtor members of the association members of local associations are automatically given membership in the state and national associations for a list of local and state associations of realtors see the nar website annual nar membership dues 150 per member for 2020 and 2021 with a 35 assessment for the nar s consumer advertising campaign are billed through the members local associations and are pro rated monthly for new members in accordance with the tax reform act of 1993 any portion of dues attributable to lobbying and political activities at the state and federal levels is considered nondeductible for income tax purposes this portion is disclosed annually to members 6nar members receive a variety of benefits business tools real estate market data research and statistics educational opportunities and discount programs geared towards helping real estate professionals succeed in business for example only realtors have access to the realtors property resource rpr a national database of information on every property in the u s built from public record and assessment data it includes facts on zoning permits mortgage and lien data schools and a large database of foreclosures 7the use of the realtor trademark by agents is heavily regulated by the nar which issues strict rules and guidelines nar research divisionthere is a research division that collects and disseminates real estate data and conducts economic analysis delivery of this information takes place via press releases reports presentations and daily blog posts about the overall economy and housing market well known national and regional housing statistics include existing home sales pending home sales index and the housing affordability index the organization releases existing home sales monthly providing national and regional price and volume statistics the data is for the past 12 months along with annual totals going back three years it is broken down into existing single family homes condos and co ops the first week of each month the nar releases the pending home sales index considered a leading indicator for housing activity the index measures signed real estate contracts for existing single family homes condos and co ops 8 the housing affordability index measures whether a typical family earns enough income to qualify for a mortgage loan on an average home based on recent monthly price and income data 9the nar also provides a host of research reports including a monthly report on foot traffic which attempts to predict future sales trends others are local market reports which analyze a host of data and a confidence index on march 15 2024 the national association of realtors settled a class action lawsuit by homeowners who alleged that the nar had illegally inflated the commissions charged to realtors as part of the 418 million settlement the nar agreed to stop allowing broker compensation offers on its listing platforms the change is expected to dispense with the traditional 6 commission giving homebuyers more freedom to negotiate agent compensation 10strategic plan and benefitsthe nar annually updates its strategic plan to reflect the challenges and opportunities that the association and the real estate industry expect to confront during the next three to five years 2 a member of the national association of realtors has access to certain benefits business tools real estate market data educational opportunities and discount programs the national association of realtors also has an educational program including an online ethics course | |
what is the purpose of the national association of realtors | the national association of realtors acts as a trade association for real estate professionals it publishes research on the real estate market compiles statistics and provides the multiple listing services that are used to sell properties in different real estate markets it also advocates for public policies that benefit members of the nar | |
is it worth joining the national association of realtors | professional real estate agents may benefit from joining the national association of realtors which provides access to market data and property listings on its multiple listing services as well as access to local realtor associations for full time professionals with many clients these services can be well worth the 156 annual membership fee 6 however there is no requirement to join the nar to work in the real estate industry the only requirement is to meet your state s licensing requirements | |
do you need a real estate agent to sell your home | there is no requirement to hire a real estate agent to buy or sell a property and their commissions can be costly that said hiring a real estate agent gives you access to a larger market of potential buyers or sellers allowing you to find a match more quickly and at a better price in addition real estate agents are familiar with the different financial and legal complications of a real estate transaction potentially avoiding further problems down the road the bottom linethe national association of realtors is the largest trade association in the united states representing the interests of 1 4 million agents brokers appraisers property managers and other real estate professionals | |
what is the national association of securities dealers nasd | the national association of securities dealers nasd was a self regulatory organization of the securities industry and a predecessor of the financial industry regulatory authority finra it was responsible for the operation and regulation of the nasdaq stock market and over the counter markets it also administrated exams for investment professionals such as the series 7 exam the nasd was charged with watching over the nasdaq s market operations understanding the national association of securities dealers nasd the nasd was founded in 1939 under provisions of the 1938 maloney act amendments to the securities exchange act of 1934 it was also the leading founder of the nasdaq stock market which was established in 1971 operating as an overseer of stock market operations for market activity and the nasdaq under the overall supervision of the securities and exchange commission sec the nasd played a leading part in the management of stock trading in the market from 1939 to 2007 in that year it merged with the regulation enforcement and arbitration arm of the new york stock exchange to form finra the year nasd merged with the regulation enforcement and arbitration arm of the new york stock exchange to form the financial industry regulatory authority finra nasd vs finrafinra is an independent regulatory entity that functions similar to the nasd overseeing all stock market operations in the united states its functions include the oversight of all brokerage firms branch offices and securities representatives finra is monitored by the sec and authorized to enforce the rules and regulations of the sec it provides for and facilitates the licensing of securities representatives dealing in all aspects of the market its licensing requirements are developed in conjunction with the regulations and oversight of the sec leading finra licenses include the series 3 6 and 7 in addition to licensing for individuals and firms finra also provides ongoing educational seminars and monitors individuals and firms active in the financial markets for regulatory compliance as the leading regulatory entity in the securities markets finra manages the market s central registration depository crd which includes records of securities activity for all firms and securities representatives trading in the market finra is also the lead arbitrator for all financial market trading disputes in the financial markets arbitration is the leading procedure for resolutions in dispute between entities and trading representatives finra facilitates arbitration proceedings which are similar to formal court cases but have lower costs finra arbitration panels are responsible for issuing final rulings on arbitration cases finra collaborates with the north american securities administrators association nasaa which oversees the licensing requirements of three key market licenses the series 63 65 and 66 | |
what is the national association of state boards of accountancy | the national association of state boards of accountancy nasba is a nonprofit group that serves the 55 state and u s territory boards of accountancy which are responsible for overseeing the accountancy profession in the united states and administering the uniform cpa examination 1 public accountancy is regulated at the state level with each state maintaining an independent board of accountancy that defines and upholds standards 2 understanding the national association of state boards of accountancythe national association of state boards of accountancy nasba was founded in 1908 to bring together best practices of the profession for the protection of the public that relies on sound financial reporting 1 nasba recognizes that a well functioning economy is built on trust and without accurate and understandable accounting this trust is compromised a core mission of nasba is maintaining public trust in the profession in the wake of accounting scandals at companies such as enron worldcom and others 5 the association also monitors and provides feedback for legislative and regulatory issues facing the accounting trade 1 nasba runs training and education programs for accountants for the certified public accountant cpa exam contrary to popular belief the nasba does not develop content or administer the exam that job belongs to the american institute of certified public accountants aicpa which takes input from the nasba and state boards of accountancy 3 however an important function that the group carries out with regard to cpas is licensing because the license to practice accountancy is granted at the state level a cpa licensed in one state has to obtain a new license if they move to a different state the nasba runs the national qualification appraisal service so that cpas licensed in one state may have their qualifications recognized in another state 4 nasba holds regional and national meetings each year publishes comment letters and white papers and disseminates its own annual report as of april 2021 the association s board consisted of five officers eight regional directors and nine directors at large 6 | |
what is the national average wage index nawi | the national average wage index nawi is a measure of u s wage trends calculated annually by the social security administration ssa the nawi is dependent on income subject to federal income taxes and contributions to deferred compensation plans 1the ssa primarily uses the national average wage index to index retirement and insurance benefits in the united states it is also used to update several factors in the operation of the old age survivors and disability insurance oasdi program 1understanding the national average wage index nawi the national average wage index provides insight into the direction of wage trends and may alert policymakers to wage inflation which might impact the federal reserve s decision to raise interest rates raising interest rates typically has a negative effect on bond and equity markets and slows inflation alternately if wage inflation is decreasing the federal reserve may lower rates which helps stimulate the economy and labor market 3so called wage push inflation is an overall rise in the cost of goods that results from a rise in wages to maintain corporate profits after an increase in wages employers must increase the prices they charge for the goods and services they provide the overall increased cost of goods and services has a circular effect on the wage increase eventually as goods and services in the market overall increase higher wages will be needed to compensate for the increased prices of consumer goods example of a national average wage index calculationthe 2021 national average wage index is calculated by multiplying the previous year s nawi by the change in average wages from the previous two years based on the ssa s average wage data for example the 2021 nawi would be calculated by multiplying the 2020 nawi by the change in the average wage from 2020 to 2021 the ssa website lists the nawi levels between 1951 and the current year 4the national average wage index for 2021 8 89 higher than it was in 2020 4national average wage index and wage indexingwage indexing is used by social security to adjust an individual s earning history to inflation an individual is first eligible for retirement benefits at age 62 however earnings are indexed to the average wage level of the year the individual turned 60 therefore a 62 year old individual would have their earnings indexed to the average wage level two years prior to eligibility or age 60 from age 60 the indexing factor equals one to calculate the indexing factor of a specific year before an individual turns 60 divide the average wage for the year they turn 60 by the average wage of the specific year 5for example suppose an individual s 1990 earnings were 30 000 in 2020 the individual turned 62 and the nawi for 2018 age 60 was 52 145 80 the 2018 nawi is divided by the 1990 nawi 52 145 80 21 027 98 to give an index factor of 2 48 the individual s 1990 earnings are then multiplied by the profit factor providing that year s inflation adjusted earnings of 74 400 30 000 x 2 48 2as wage indexing uses the nawi an individual cannot work out the exact amount of social security they are going to receive until they turn 62 they could estimate the nawi by taking average wage inflation into account the bottom linecalculated yearly by the social security administration ssa the national average wage index nawi tracks u s wage growth and trends social security uses the nawi to calculate benefits and policymakers use the index to help make monetary decisions such as increasing or decreasing rates correction feb 5 2023 this article previously misstated the age at which earnings are indexed and how the index factor is calculated | |
what is a national bank | in the united states a national bank is a commercial bank that the office of the comptroller of the currency occ charters and supervises however many people also refer to national banks as any financial institution operating nationally compared to local banks operating in one city state or region | |
how national banks work | in the u s a national bank is a commercial bank that engages in various financial services such as accepting customer deposits and offering loans the federal office of the comptroller of the currency charters national banks state banks are chartered by state banking agencies 1the occ regulates national banks with regard to banking activities and operations 2 as of 2023 the occ oversees 1 062 national banks 3 however the nation s four largest banks make up about 43 of the entire banking system s assets as of june 2023 these four national banks are national banks are required to be members of the federal reserve system and a national bank is an investing member of its district federal reserve bank national banks belong to the federal deposit insurance corporation fdic the fdic insures eligible customer deposits for up to 250 000 4national banks may facilitate daily transactions with their local federal reserve bank also called the fed such as fed bank wires national banks must generate call reports to the fed each quarter and ensure these reports are made public 5national banks in the u s and worldwide are essential in shaping a country s financial system an efficient banking system whether through a central bank or the u s federal reserve is critical for economic stability especially during times of recession or to help weather downturns in the economy history of national banksalexander hamilton the first secretary of the treasury was instrumental in forming the first national bank in the united states the structure in philadelphia pennsylvania was completed in 1797 and is a national historic landmark today first bank collected taxes paid government bills and printed banknotes similar to a national currency only first bank notes could be used to pay federal taxes the bank s 20 year charter began in december 1791 but congress didn t renew it when it expired in 1811 6in 1863 president lincoln s signature on the national currency act established the office of the comptroller of the currency the occ would help manage nationally chartered banks and create a uniform national currency 7in 1913 the federal reserve act created the federal reserve system to serve as the national bank of the u s while propping up a new national currency before this around three fourths of all u s banks were state chartered with fragile capitalization an amendment to the glass steagall act of 1933 introduced the federal deposit insurance corporation fdic to help restore public confidence during ongoing bank failures 8national bank examplesas mentioned above national banks in the united states are typically commercial banks the office of the comptroller of the currency maintains an up to date list of national banks and federal savings associations it charters and regulates examples of active national banks the occ regulates include in may 2022 the occ chartered houston texas based agility bank a woman owned and woman led bank categorized as a minority led institution mdi national bank 9frequently asked questions faqs | |
what is a national bank charter | a national bank charter as granted by the federal government allows an institution to do business as a bank when starting a new financial institution the owner applies for a state or national bank charter this charter allows the bank to offer customers financial services accepting deposits and providing loans for example since 2009 there have been far fewer new commercial bank charters compared to previous decades 10who is responsible for supervising national banks the office of the comptroller of the currency occ supervises all national banks the occ is an independent bureau of the u s department of the treasury the national credit union administration supervises federal credit unions | |
what is a national bank holiday | a national bank holiday is a holiday observed by the u s federal reserve system on this day financial services typically close nationwide national bank holidays in the u s include martin luther king jr day juneteenth national independence day columbus day and christmas day 11the bottom linenational banks are an important element of the federal banking system which is designed to encourage public trust through safety and resilience while still encouraging banks to innovate products and services that customers and businesses need federal regulation and fdic insurance help reassure the u s public about national banks and their services | |
what is the national best bid and offer nbbo | the national best bid and offer nbbo is a quote that reports the highest bid price and lowest ask offered price in a security sourced from among all available exchanges or trading venues the nbbo therefore represents the tightest composite bid ask spread in a security the securities exchange commission s sec regulation nms requires brokers to trade at the best available ask and bid price when buying and selling securities for customers and guarantee at least the nbbo quoted price to its customers at the time of a trade 1understanding the national best bid and offer nbbo the nbbo is calculated and disseminated by security information processors sip as part of the national market system plan nmsp which is used to process security prices there are two sips responsible for this task the consolidated quotation system cqs gives the nbbo for securities listed on the new york stock exchange nyse ny arca and ny mkt whereas the unlisted trading privileges utp quote data feed gives the nbbo for securities listed on the nasdaq the nbbo updates throughout the day with the highest and lowest offers for a security among all exchanges and market makers the lowest ask price and the highest bid price are displayed in the nbbo and are not required to come from the same exchange the best bid and ask price from a single exchange or market maker is called the best bid and offer rather than the nbbo dark pools and other alternative trading systems may not always appear in these results given the less transparent nature of their businesses traders that want to execute orders larger than those available through the nbbo should use an exchange or market maker s depth of book data or level ii market maker screens to identify the other potential bid and ask prices that they could use to execute their order advantages and disadvantages of the nbbothe nbbo helps ensure that all investors receive the best possible price when executing trades through their broker without worrying about aggregating quotes from multiple exchanges or market makers before placing a trade this helps level the playing field for retail traders who may not have the resources to always seek out the best prices across multiple exchanges the drawback is that the nbbo system may not reflect the most up to date data which means that investors may not get the prices they were anticipating when trades are actually executed this is a major concern for high frequency traders hft who rely on quotes to make their strategies work since they profit from extremely small price changes at volume regulation nms is also difficult to enforce because of the fast pace of trading and the lack of recorded nbbo prices this makes it difficult for a trader to prove whether or not they received the nbbo price on a given trade investors should keep in mind that the prices may be stale in some cases and that not all prices may be reflected since dark pools and other alternative trading systems may not have listed bid ask prices nbbo and high frequency trading hft high frequency traders generally invest in specialized infrastructure in order to directly connect to exchanges and process orders faster than other brokerages in effect they do not rely on sip data for their buy offer bids and take advantage of the latency between calculation of the nbbo and its publishing to mint profits research has focused on whether this enables them to front run others according to a 2013 university of michigan study traders profited by as much as 21 billion by taking advantage of this latency by anticipating future nbbo an hft algorithm can capitalize on cross market disparities before they are reflected in the public price quote in effect jumping ahead of incoming orders to pocket a small but sure pro t naturally this precipitates an arms race as an even faster trader can calculate an nbbo to see the future of nbbo and so on the study s authors wrote 2example of the nbbosuppose a broker receives the following orders to offer to sell stock for company abc at the same time the following are available bid prices for the same company s stock the nbbo for abc is 950 1 000 because they are the best bid offer prices available to traders within the given range | |
what is the national best bid and offer nbbo | the national best bid and offer nbbo is a quote that reports the highest bid price and lowest ask offered price in a security sourced from among all available exchanges or trading venues the nbbo therefore represents the tightest composite bid ask spread in a security the securities exchange commission s sec regulation nms requires brokers to trade at the best available ask and bid price when buying and selling securities for customers and guarantee at least the nbbo quoted price to its customers at the time of a trade 1understanding the national best bid and offer nbbo the nbbo is calculated and disseminated by security information processors sip as part of the national market system plan nmsp which is used to process security prices there are two sips responsible for this task the consolidated quotation system cqs gives the nbbo for securities listed on the new york stock exchange nyse ny arca and ny mkt whereas the unlisted trading privileges utp quote data feed gives the nbbo for securities listed on the nasdaq the nbbo updates throughout the day with the highest and lowest offers for a security among all exchanges and market makers the lowest ask price and the highest bid price are displayed in the nbbo and are not required to come from the same exchange the best bid and ask price from a single exchange or market maker is called the best bid and offer rather than the nbbo dark pools and other alternative trading systems may not always appear in these results given the less transparent nature of their businesses traders that want to execute orders larger than those available through the nbbo should use an exchange or market maker s depth of book data or level ii market maker screens to identify the other potential bid and ask prices that they could use to execute their order advantages and disadvantages of the nbbothe nbbo helps ensure that all investors receive the best possible price when executing trades through their broker without worrying about aggregating quotes from multiple exchanges or market makers before placing a trade this helps level the playing field for retail traders who may not have the resources to always seek out the best prices across multiple exchanges the drawback is that the nbbo system may not reflect the most up to date data which means that investors may not get the prices they were anticipating when trades are actually executed this is a major concern for high frequency traders hft who rely on quotes to make their strategies work since they profit from extremely small price changes at volume regulation nms is also difficult to enforce because of the fast pace of trading and the lack of recorded nbbo prices this makes it difficult for a trader to prove whether or not they received the nbbo price on a given trade investors should keep in mind that the prices may be stale in some cases and that not all prices may be reflected since dark pools and other alternative trading systems may not have listed bid ask prices nbbo and high frequency trading hft high frequency traders generally invest in specialized infrastructure in order to directly connect to exchanges and process orders faster than other brokerages in effect they do not rely on sip data for their buy offer bids and take advantage of the latency between calculation of the nbbo and its publishing to mint profits research has focused on whether this enables them to front run others according to a 2013 university of michigan study traders profited by as much as 21 billion by taking advantage of this latency by anticipating future nbbo an hft algorithm can capitalize on cross market disparities before they are reflected in the public price quote in effect jumping ahead of incoming orders to pocket a small but sure pro t naturally this precipitates an arms race as an even faster trader can calculate an nbbo to see the future of nbbo and so on the study s authors wrote 2example of the nbbosuppose a broker receives the following orders to offer to sell stock for company abc at the same time the following are available bid prices for the same company s stock the nbbo for abc is 950 1 000 because they are the best bid offer prices available to traders within the given range | |
what is the national commodity and derivatives exchange ncdex | the national commodity and derivatives exchange ncdex is a commodities exchange dealing primarily in agricultural commodities in india the ncdex was established in 2003 and its headquarters are in mumbai many of india s leading financial institutions have a stake in the ncdex as of 2024 significant shareholders included life insurance corp of india lic the national stock exchange of india ltd nse and the national bank for agriculture and rural development nabard 1understanding the ncdexthe ncdex is one of the top commodity exchanges in india based on value and the number of contracts it is comparable to multi commodity exchange mcx though that exchange is focused on energy and metals as opposed to commodities 2 the ncdex is located in mumbai but has offices across the country to facilitate trade according to the 2023 annual report the ncdex featured futures contracts on 23 agricultural commodities and one non agricultural product as well as options on six agricultural commodities 3 it also offers clearing services for derivatives contracts traded on the exchange 1india is a world power in terms of agriculture it is one of the largest producers of wheat rice milk and many types of fruits and vegetables the size of india s agriculture sector is somewhat hidden internationally because the populous nation consumes much of what it produces however increasing farm level productivity is making india s strength in agriculture more apparent 4 the ncdex plays a critical role in india s growing agriculture sector an independent board of directors runs the ncdex and they have no direct interests in agriculture 5benefits of the ncdexin establishing and maintaining an online futures market for crops the ncdex has helped increase market transparency the exchange assists indian farmers in the price discovery process the ncdex enables them to price their goods more accurately even if they are not active in the futures market intermediaries who are known as commission agents previously controlled much of the market information in india the introduction of online commodity exchanges like the ncdex reduces the cost of price data for farmers by cutting out the middlemen exchanges like the ncdex have also played a key role in improving indian agricultural practices by standardizing the quality specifications of various products through contracts the ncdex has raised quality awareness farmers in india increasingly focus on testing requirements and enacting farming practices that result in consistently high quality crops 6the ncdex is still young by some standards but traders and large market participants are already using contracts to hedge and speculate this trend is likely to continue as india s agricultural sector grows in terms of productivity and exports ncdex financial performancethe recent financial performance of the national commodity derivatives exchange limited for the fiscal year 2022 23 depicted less than stellar results on a standalone basis the exchange experienced a significant decrease in total income to 4 884 lakhs this was mainly driven by lower average daily traded value total expenses increased slightly to 10 302 lakhs meaning the exchange on its own experienced an operating loss before tax of 5 905 lakhs on a consolidated basis including the broader ncdex group it wasn t much better total income decreased by 12 to 13 557 lakhs with expenses rising to 19 624 lakhs this lead to a loss after tax of 4 237 lakhs despite challenges such as the suspension of key commodity derivatives contracts ncdex continued to expand its market share its agri derivatives trading reached 97 in fy 2022 23 the exchange also ventured into the non agri sector activating india s largest metal steel contract 3examples of commodities on the ncdexbarley wheat and soybeans are some of the leading agricultural commodities traded on the ncdex the exchange also hosts some contracts that are global benchmarks for commodities like coriander as well as commodities such as steel cotton palm oil and guar 7 the ncdex also manages three agricultural commodities indexes one based on soybeans one on guar and one a composite of several agricultural products 8910ncdex is seen as a significant source of information on spices as india is the leading producer and consumer of spices in the world 1112 | |
what is the difference between the national commodity and derivatives exchange ncdex and the multi commodity exchange mcx | the national commodity and derivatives exchange ncdex and the multi commodity exchange mcx are both electronic commodities exchanges in india they are separate businesses and compete with one another the ncdex specializes more in agricultural commodities while the mcx is better known for its trading in metals and energy products 12 | |
how can i trade on the ncdex | to access ncdex markets you would need to have an account at an authorized broker who is connected to the exchange in india for example these could include angel one or edelweiss note that zerodha a large indian broker does not effect trades on the ncdex only on the mcx 13 | |
what are the most active listings on the ncdex | while these are subject to change the most active products on the ncdex are currently contracts on currently contracts on guar seed guar gum and castor oil 14the bottom linethe national commodity derivatives exchange limited is one of india s leading commodity exchanges facilitating trading in a wide range of agricultural and non agricultural commodities established in 2003 ncdex provides a platform for market participants and significantly contributes to india s commodity markets | |
what is the national credit union administration ncua | the national credit union administration ncua is an agency of the united states federal government the federal government created the ncua to monitor federal credit unions across the country understanding the national credit union administration ncua the ncua is a federal agency founded in 1970 and headquartered in alexandria virginia a three member board heads the agency all of whom are appointed directly by the president of the united states the agency currently monitors over 9 500 federally insured credit unions that service over 80 million customer accounts the ncua runs the national credit union share insurance fund ncusif which is one of the agency s most massive responsibilities the ncusif uses tax dollars to insure the deposits at all federal credit unions most ncua insured institutions are federal and state chartered credit unions and savings banks accounts insured in ncua insured institutions are savings share drafts or checking money markets share certificates or cds individual retirement accounts and revocable trust accounts the national credit union administration vs the federal deposit insurance corporationthe ncua is equivalent to the federal deposit insurance corporation or fdic the fdic is an independent federal agency that insures deposits in u s banks in the event of bank failures created in 1933 in response to the great depression the fdic maintains public confidence and encourages stability in the financial system through the promotion of sound banking practices the national credit union association ncua insures credit unions to protect their members funds in savings checking money markets and retirement accounts the fdic aims to prevent run on the bank scenarios which devastated many banks after the stock market crash of 1929 ultimately leading to the great depression with the threat of their banks closing small groups of worried customers rushed to withdraw their money after fears spread a stampede of customers seeking to do the same ultimately resulted in many banks being unable to support withdrawal requests those who were first to withdraw their money from a troubled bank would benefit whereas those who waited risked losing their savings overnight before fdic there was no guarantee for the safety of deposits beyond the confidence in the bank s stability insurance on deposits in extremely important in preventing future crises bank liquidity is like oxygen if it gets cut off there is a ripple effect in the system practically all banks offer fdic coverage and consumers face less uncertainty regarding their deposits in case of bank failure the fdic covers deposits up to 250 000 as a result banks have a better opportunity to address problems under controlled circumstances without triggering a run on the bank the fdic covers checking accounts savings accounts certificates of deposit and money market accounts fdic insurance does not cover mutual funds annuities life insurance policies stocks or bonds the significant difference between the fdic and the ncua is the former deals only with credit institutions and the latter uses the national credit union share insurance fund the fdic uses the deposit insurance fund | |
what is national currency | a national currency is a legal tender issued by a country s central bank or monetary authority it is typically the predominant medium of exchange for purchasing goods and services in the united states the dollar is the primary form of currency backed by the full faith and credit of the government and the federal reserve large currency bases like the dollar play an instrumental role in other regions of the world for example commodity prices are quoted in u s dollars usd despite trading in countries outside of the united states some countries peg their national currency to the u s dollar to keep inflation aligned with expectations and maintain a stable economy | |
how a national currency works | a national currency such as the u s dollar the euro and the japanese yen jpy is recognized as the world s most widely accepted type of currency each has a global status as a reliable reserve currency with minimal risk of collapsing as a result most foreign transactions are conducted in one of the three currencies some countries have also adopted other nations currencies as their own examples of countries that make use of another country s currency are parts of latin america regions like ecuador and el salvador which recognize and accept the u s dollar for the exchange of goods and services 12some countries like the united arab emirates peg or fix their currency rates to the u s dollar trading national currenciescurrency is not only used to buy goods and services it is also a store of value and can be traded and exchanged as a financial instrument similar to stocks bonds cryptocurrency and any other asset classes the currency market or forex fx is the largest marketplace in the world and continues to expand each year and currency trading has a longer window of time than stock trading it takes place 24 hours a day five days a week but more often than not a national currency will only actively trade during its country s regular market hours the u s dollar may record a large volume or wild fluctuations between 9 30 a m and 4 00 p m when the market opens and closes if we compare fx trading to crypto trading its window of time is less because crypto trades 24 hours a day seven days a week recent moves by a few companies have extended stock trading time in march 2022 robinhood added 4 hours to stock trading for its clients currency trading is often performed in pairs meaning you trade one currency with another that said greater adoption and creation of exchange traded funds etf have made it possible to trade individual currencies | |
how many currencies are pegged to the united states dollar | 23 currencies are pegged to the united states dollar including the lebanese pound and the venezuelan bol var 3 | |
when was a national currency established in the united states | on february 25 1863 president lincoln signed the national currency act into law which established the office of the comptroller of the currency occ charged with responsibility for organizing and administering a system of nationally chartered banks and a uniform national currency who maintains currency in the united states | |
what is the national futures association nfa | the national futures association nfa is an independent self regulatory organization for the u s futures and derivatives markets designated by the commodity futures trading commission cftc as a registered futures association the nfa s mandate is to safeguard the integrity of the derivatives markets protect investors and ensure that members fulfill their regulatory obligations understanding the national futures association nfa the nfa operates at no cost to the taxpayer and is primarily financed by membership dues fees and assessments paid by members and other users of the derivatives markets nfa membership provides assurance to the investing public that all firms intermediaries and associates who conduct business with them on the u s futures exchanges must adhere to the same high standards of professional conduct the firms working in the industry must pay membership dues to the nfa which is how the nfa gets its money the nfa began operating in 1982 subsequent to the establishment of the commodity futures trading commission cftc in 1974 this legislation also authorized the creation of registered futures exchanges thereby facilitating the creation of a national self regulatory organization 1in addition to regulation of the u s futures market the nfa s duties and functions include registration compliance and arbitration it combats fraud and abuse in the futures markets through a combination of registration requirements compliance rules strong enforcement authority and real time market surveillance responsibilities of the national futures associationthe following are the primary responsibilities of the nfa registration and membership firms that conduct derivatives business need to register with the cftc and most also need to register with the nfa the cftc has given the nfa registration responsibilities 2rulemaking this involves deciding what are the industry s best practices and then mandating those practices for the whole industry enforcement and registration actions when rules are not obeyed the nfa takes disciplinary action against members member education and resources the nfa provides educational resources to its members in order that they can understand the rules and regulations and how to abide by them arbitration any futures or forex related disputes can be resolved through the nfa s arbitration program investor protection the nfa provides investors with resources before making any investment decisions outreach programs the nfa offers a variety of training programs to entities on request market regulation designated contract makers dcms and swap execution facilities sefs can obtain regulatory services from the nfa 1member firmsall futures professionals required to register must undergo a background investigation before they may register as of june 30 2022 the nfa has 3 107 members 3 member categories are as follows the nfa as a self regulatory organization has the power to search for and implement what it believes are best practices for the industry the nfa creates rules that its members must follow and has the power to impose fines or revoke the membership which could shut down a business of its members it offers an arbitration process to help customers and businesses settle disputes or come to a resolution on allegations of wrong doing membership duesthe nfa has many dues and fees and they vary depending on the type of member for example the membership dues for a tier 1 swap dealer are 1 3 million whereas for a tier 2 swap dealer the dues are 325 000 for an introducing broker the dues are 750 and for an introducing broker swaps firm the dues are 2 500 these are annual dues 6the financial requirement to register with the nfa is an adjusted net capital of 1 million and for a swap dealer it is 20 million 7if payment is late there is a fee of 25 if dues are not paid within 30 days of the date they are payable then membership is withdrawn 6real world examplein 2019 based on complaints filed in 2018 east west global llc and two individuals at the firm were fined and one of the individuals had their nfa membership revoked for five years 8the firm and the two individuals were charged for using deficient promotional material deficient sales practices and failing to meet the high standards of commercial honor among several other charges 8one of the individuals was ordered jointly along with the firm and severally to pay a 75 000 fine the firm was also ordered to fix the issues addressed in the complaint 8the other individual following a settlement offer agreed not to apply for nfa membership or associate membership for five years after five years if he reapplies for membership he will need to immediately pay a 90 000 fine 9who does the nfa regulate the nfa regulates all qualified brokers futures merchants commodity pool operators swap dealers exchanges commodity trading advisors and retail foreign exchange dealers that deal in the futures markets | |
how many members are in the nfa | as of june 30 2022 the nfa has 3 107 members 3who needs to register with the nfa all qualified entities that deal in the futures markets need to register with the nfa these include a variety of entities such as brokers futures merchants commodity pool operators swap dealers exchanges and commodity trading advisors 10 | |
how do you become a member of the nfa | to become a member of the nfa one needs to apply directly with the nfa this is done through an electronic filing process 10 | |
what is the national housing act | the national housing act was a piece of legislation passed by congress in 1934 that was intended to strengthen the residential real estate market and promote homeownership a cornerstone of the new deal the act established the federal housing administration fha which by creating a federally guaranteed mortgage insurance program allowed banks to issue lower cost loans and make them more accessible to more people 1understanding the national housing actthe national housing act was one of the most important and lasting pieces of legislation to be enacted during the great depression of the 1930s when the franklin d roosevelt administration drafted and congress passed a series of new laws expanding the power of the federal government to influence the american economy and american standard of living its primary purpose was to improve housing standards and conditions provide a method of mutual mortgage insurance and reduce foreclosures on family homes the housing market was in dire need of intervention during the great depression in 1932 as many as 1 000 homeowners were defaulting on their mortgages every day and by 1933 fully half of all mortgages in the united states were in arrears foreclosures were skyrocketing home financing in general was not available to the typical american as loan terms were onerous with the typical mortgage requiring a 50 down payment and full repayment after five years there was no amortization on the loans either in effect they were basically balloon mortgages the law created two major agencies the federal savings and loan insurance corp fslic which insured savings and loans account holders deposits subsumed by the federal deposit insurance corp fdic in 1989 and the fha which insured mortgage lenders banks thrifts etc against the threat of borrower default on their loans in return for a small fee if a borrower defaulted then the fha would pay the lender a specified claim amount to qualify a lender had to meet certain specific qualifications over time the term fha approved lender has become a mark of distinction for a bank the underlying idea behind the program was that by providing insurance to lenders more individuals would ultimately qualify for mortgages and buy homes and it worked once mortgage lenders knew the government would guarantee their loans it enabled them to offer more generous terms like requiring just 20 down and repayment terms of 20 to 30 years the fha was successful at stabilizing and then stimulating national housing markets and extending housing credit to americans for whom homeownership had once been out of reach unlike many other new deal programs lawmakers in washington saw a purpose for the fha even after the worst effects of the great depression had dissipated in 1965 the fha was incorporated into the newly formed department of housing and urban development hud 2fha loans mortgages insured by the fha and issued by an fha approved lender still exist today designed for low to moderate income borrowers they require a lower minimum down payment and lower credit scores than many conventional mortgages 3 they are especially popular with first time homebuyers criticisms of the national housing actwhile the creation of the fha was a boon to many americans it also left out many of them particularly african americans and other racial minorities in the 1930s 40s and 50s the fha focused its financing insurance efforts on new communities and suburbs being built on the edges of the country s urban centers while also refusing to lend to people wishing to buy homes in certain neighborhoods in fact the fha would designate certain areas as risky mainly on the basis of their racial component and deny its federal mortgage backing on homes in these areas this process was known as redlining because officials and lenders would literally draw a red line on a map around the neighborhoods in which they would not invest due to demographics black inner city neighborhoods were the ones most likely to be redlined but any quarter anywhere near a predominantly african american community often got redlined too 4and those new subdivisions and developments that the fha was so eager to subsidize it often did so with a requirement that none of the homes be sold to african americans or be sold to whites only redlining practices were sometimes justified on the grounds that the black or minority neighborhoods were poorly maintained and hence homes in them were bad investments as for the new suburbs the justification was that if african americans bought homes in or near them the property values of the homes would decline putting loans at risk an assertion that had little empirical evidence behind it the civil rights act of 1964 and the fair housing act passed in 1968 helped end these practices at least in terms of official government policy however by locking millions of americans out of homeownership for generations they contributed significantly to the disparities and inequities in wealth and wealth building among races that exist today special considerationsthe national housing act was the first but not the last government effort to stabilize the housing market during times of economic crisis here are some government programs that succeeded it the housing and economic recovery act hera was drafted to address the fallout from the subprime mortgage crisis of 2007 08 the act allowed the fha to guarantee up to 300 billion in new 30 year fixed rate mortgages for subprime borrowers it allowed states to refinance subprime loans with mortgage revenue bonds and offered a refundable tax credit for qualified first time homebuyers 5hera was ultimately intended to renew public faith in the troubled government sponsored enterprises gses that deal in home loans namely fannie mae and freddie mac it created the federal housing finance agency fhfa to put these two major buyers and backers of mortgages under conservatorship 6although it didn t stave off the great recession which ensued from the mortgage crisis hera did ultimately help restore confidence in the gses and set important precedents in low income housing tax credits hope for homeowners was a federal aid program established by hera that was designed to help homeowners in financial distress as a result of the collapse of the subprime mortgage market in 2007 08 operational from october 2008 to september 2011 it allowed financially distressed homeowners close to default to refinance their mortgages into affordable 30 year or even 40 year fixed rate loans these were among the loans that the fha was allowed to guarantee the idea was that lenders would write down the principal balance of the loans to help people refinance and lower their mortgage payments 7the fair housing act is also known as the civil rights act of 1968 or title vii of the civil rights act 8the national housing act helped people buy homes the hope program aimed to enable people to keep their homes it was more of a direct bailout than the national housing act on march 18 2020 as the u s went into lockdown due to the covid 19 pandemic the fha and the fhfa implemented foreclosure moratoriums for single family homeowners whose mortgages are fha insured or backed by fannie mae or freddie mac mortgage forbearance was also put in place these moratoriums have been renewed repeatedly 9in february 2021 president biden extended the enrollment period for mortgage payment forbearance for government backed loans until sept 30 2021 and extended the period of mortgage payment forbearance available to borrowers who entered forbearance before june 30 2020 by up to six months 10did the national housing act help everyone the national housing act did help millions by the end of the 1930s 12 000 000 people have been enabled to improve their housing standards and conditions under the fha program including new home purchases and the modernization and repair provisions of the national housing act the sixth annual report of the federal housing administration fha noted in 1939 11on the other hand the fha adopted rules that confirmed existing patterns of racial discrimination in lending and segregation in housing many black latinx and other non white americans neither benefited from its programs nor were eligible to receive its insured loans or move into neighborhoods that it helped subsidize |
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