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What do you need to retire? Retirement - think: 401k, pension fund, IRA, roth IRA, etc. All of these savings socked away while you worked hard are...

How do you stay rich after you...get rich? The focus: index funds, mutual funds, way more stocks than bonds. Three words: don't be stupid.

What is par value? The notional value of a stock or bond before an offering takes place. When a company is started, founders come up with a par val...

What is amortization? Amortization tracks the decline in value of a contract or service, usually paid for in advance. You received $10,000 in advan...

What is venture capital? Venture capital is the money that companies use to start conducting business. Usually startups will go out and raise ventu...

The Russell Index is a series of indices that tracks the progress of stocks in a given basket. Aw. We were hoping it tracked adorable Jack Russell...

A swaption is a type of option that gives you the choice to swap the currency in which payments are made. No word on whether Monopoly money is acce...

Tax basis is your cost for assessing how much you owe in taxes, and is determined by multiplying your gains by your tax rate.

A tax haven is a nation that offers special tax incentives for corporations doing business there.

What is tax loss carry-forward? We promise it's a real thing, not just a bunch of words strung together.

What is an underwriter? Hit play to find out.

Unearned income is more than just the lunch money you stole on the playground. Hit play to find out more about unearned and earned income. And mayb...

What is VAT, or value added tax? Hit play to find out.

What is the difference between progressive and regressive taxes (flat tax vs. marginal tax)? In the most basic sense, progressive taxes affect the...

What are Return on Equity and Return on Assets? Return on equity is a percentage that is found by dividing net income by shareholder’s equity. It...

What is spread (bid-ask)? The bid-ask spread compares how much a buyer will pay to how much the seller will sell for. The asking price is what the...

What is real return? Real return is the actual return made from an investment after inflation is factored in. Return is expressed as a percentage c...

What is a pension? Pensions are just retirement plans. Employers provide them and pay into funds as an investment for their employees. Once employe...

How do you calculate rates of return? Calculating rate of return on an investment that pays dividends can be a bit tricky. You need to look at the...

What is the difference between taxable and untaxed returns? Not all returns and investments are taxed. Some of these can be considered nontaxable income. One example of an investment that has untaxed returns is muni bonds. Specifically, the interest from these bonds is not taxed.

When you buy and sell something for investment purposes, whether it be a stock, artwork, gemstones, a bond, a condominium, you know that once you have sold the asset, you have a cost basis, a sale price, and a profit or loss. However, one asset may have made you a 50% profit and taken 15 years, whereas another might only have made 25% but took just two years. How do you quantify which was the investment that earned at a better rate for you? Does compounding enter into the equation? Did the investment asset cost you additional money over the period, such as maintenance, repair, insurance, etc.? These are all factors that are calculated to equate to an annualized return rate, which takes the total return and spreads it out over the period of time it was held, amd averages it out over a 12 month period.

GAAP is an acronym for Generally Accepted Accounting Practices. In order to remove as much subjectivity as possible, accounting policy bodies, such as the Federal Accounting Standard Board (FASB) and American Institute of Certified Public Accountants (AICPA), have created guidelines for general standards, procedures, and principles that are intended to objectively quantify the data so that there is accounting transparency. This is especially important for public companies and government agencies.

What are Five Questions You Can Expect to be Asked in a Venture Capital Investing Interview? Why are you doing this? What DO you know? What do you expect your day to be like? What do you want to earn? What happens if you wash out?

What is a 409a valuation? Taking its name from the IRS section 409A code, a 409A valuation is an independent analysis and appraisal of a company’s fair market value, which can determine a company’s IPO price or option strike price. It is valid for 12 months The 409A provides the company with provisions under the Safe Harbor rules, which protect companies from frivolous suits over accusations of misstatements over financial matters and other material events. A new 409A valuation is advisable after reporting any new material event.

What is Accrued Interest? Most bonds pay interest on a fixed calendar schedule, which can be quarterly, bi-annually, or annually. The interest earned accrues from zero after each payment, until the next payment date. However, since they are tradeable, bonds that change hands in a transaction have earned a certain number of calendar days’ worth of interest for the prior owner before the date of the trade. As such, the new buyer of the bond must pay accrued interest, or the accumulated interest earned during that period, on top of the sale price of the bond.

What is an Alligator Spread? An alligator spread is a type of spread that creates a loss for the investor. This loss is the result of high fees or commissions on the transaction; these fees end up costing the investor more than they actually make on the transaction.

What is the Alternative Minimum Tax? Alternative minimum tax is a different way of calculating tax liability. It’s only available to some individuals and companies though; eligibility depends on income and different exemptions that can be claimed. After factoring in deductions that the taxable entity is eligible for, the alternative minimum tax exemption is subtracted from income to determine the amount that will be taxed.

What is Average Down, or Dollar Cost Averaging? Average down just means that an investor has bought more shares of a stock at a lower price than what they originally bought at. By doing this, their average share cost is lower. It’s more of a feel-good strategy than anything else, as the whole point is just to lower the average share cost (looks like the investor got a discount).

What is Accrual Accounting? Accrual accounting is used to determine how well a company is doing by looking at the present and the future. It takes into account purchases that are made and debts that are owed as soon as the transaction is made, rather than when the money is received or paid.

What are Active Investing and Active Management? Active investing means exactly what it sounds like. The investor is actively buying and selling, as well as keeping track of their performance and seeking investment strategies. Active management is the same thing, but in this case it’s not the investor doing all of the work, it is a fund manager or financial advisor.

What are Angel Investors and Seed Funds? Angel investors provide the funds for small start-ups. They are usually family and friends (not institutional or highly experienced investors) and make one-time investments. Seed funds refer to the money that angel investors put in. They are used to start a company and give the investor a percentage of the company in equity.

What is Bond Amortization? Bond amortization is simply the spreading out of the cost of the bond over time. Bonds have amortization schedules and these lay out how the bond is paid including principal and what is owed in interest.

What is the Barron’s Confidence Index? The Barron’s Confidence Index compares the yields of the highest graded bonds to intermediate graded bonds in order to help investors determine if the extra risk is worth it in terms of yield.

What is a 1035 Exchange? A 1035 exchange allows for certain financial instruments to be transferred tax-free. The IRS is ok with it because it usually happens when individuals exchange products (like life insurance and annuities) within the same financial institution.

What is a 401(k)? A 401(k) is a retirement plan that is offered by many employers (government entities, however, use a 403(b) plan). These plans use money contributed by both the company and the employee to invest in their own stock and/or the stock of other companies for the benefit of employee retirement.

What is Capital Gains Tax? Capital gain taxes are taxes collected by the IRS on trading profits from investments in equities, real estate, or any other type of transaction in which something defined as an asset is bought and then resold at a profit. The amount of assessed capital gains taxes is contingent upon the length of time the asset was held.

What is Closet Indexing? In the mutual fund arena, funds are usually active, meaning there is a highly paid fund manager calling the shots, or passive, meaning that the fund is essentially mirroring an particular index albeit on a prorated, smaller scale. The latter, as one would conclude, has cheaper fees. Closet Indexing occurs when an active fund’s portfolio essentially mirrors the portfolio composition and performance of an index, but at a higher fee than that of a passive fund.

What is a Consolidated Balance Sheet? A consolidated balance sheet is one that includes all of the subsidiary companies’ aggregate balance sheets within a conglomerate company. For example, Berkshire Hathaway’s consolidated balance sheet would include the balance sheet info of wholly owned subsidiaries, such as See’s Candy, Dairy Queen, Spalding Sporting Goods, Fruit of the Loom, GEICO, and numerous other companies.

What is a Consumption Tax? A consumption tax is one that is charged at the time of purchase for a product or service. Consumption taxes can include sales tax, value added tax, excise tax, import tax, and other taxes government wishes to charge at a point of sale.