26
Nov
Paying Off Credit Card Debt: Avoid These 3 Costly Mistakes
About seven in 10 American citizens have at least one credit card. These cards are helpful for everyday transactions, especially as having physical cash is becoming even more antiquated. The problem with credit cards, however, is that it’s a lot easier to get into financial trouble.
Whether you’re a college student or a hardworking professional with a great job, anyone can get into serious debt. And it can be incredibly difficult getting out of debt. Paying off your card or cards will certainly help, but you’ll have to do so much more. You’ll need to learn how to properly budget, how to prioritize payments, handle your checking accounts, savings accounts, emergency accounts, and so much more.
Unfortunately, even for those who are financially responsible, there are all kinds of mistakes that can be easily made when getting out of debt.
Here are some common mistakes people make when paying off credit card debt:
- Spending like you used to – For the most part, your aggressive spending is probably what got you in debt in the first place. So it makes sense to change those spending habits when you’re trying to get out of debt — but a lot of people don’t. They might pay closer attention to their debt and accounts, but they’ll shop at the same expensive stores, eat out regularly, and do everything else the same because it’s comfortable. You must avoid making these spending mistakes if you’re serious about getting out of debt and better handling your money.
- Attempting to do everything on your own – Though getting out of debt is your responsibility, you shouldn’t try and dig out all by yourself. No one wants to ask family members or friends for loans, but there are credit counseling agencies that can help you handle every aspect of your finances, from your overall debt to proper budgeting.
- Closing accounts after they are paid off – You should be paying off your accounts, but you should not be closing them afterwards. The credit scoring systems involve how much money you owe, yes, but also how much credit you have available. Having credit and not using it shows restraint, which will subsequently improve your credit score.
If you want to learn more about getting and staying out of debt, and are ready to set up a credit union account, give us a call right away.
27
Sep
Top 3 Online Banking Features to Make Your Life Easier
In the modern age of technology, online banking options are quickly being embraced by individuals and businesses eager to find convenient and everyday solutions. But despite growing in popularity, it’s important to recognize that not all online banking services are created equal. Many offer a variety of features, while other stick to more to the basics. But above all should be convenience. Here are just a few basic features you should prioritize when looking for the right online banking solutions.
Mobile Check Depositing
As one of the most convenient features available for online banking, this feature can essentially prevent you from ever needing to step foot inside of an actual bank in order to cash a check. With mobile check depositing, cashing a check is as easy as taking a picture of the front and back of the check and endorsing it with your signature. When all is said and done, you can cash a check just moments after it gets handed to you!
Online Bill Pay
If you’re sick and tired of losing track of your overly complicated monthly bill paying schedule, you’ll be quite relieved to know that paying bills online is just about as easy as it gets. Ideally, you can program your bills’ payments to get withdrawn automatically from your personal checking accounts or savings. You’ll never have to worry about missing a monthly payment again.
Easy Account Creation/Management
Many people are still unaware, but long gone are the days of having to physically go to a bank in order to open a new account. Many online banking options comprise a user interface that allows users to easily enter the details for a new checking or savings account. From there, all they have to do is send out a few forms of ID and other paperwork required by your bank, and your account will be ready within a few days or weeks.
According to a Bankrate study, 32% of Americans between the ages of 53 and 62 reported they had zero dollars saved, more than any other age group. But knowing how to make the most of your services involving banking online can help you manage your money more efficiently. For more information about how to get started banking online, contact First Bank of the Palm Beaches.
15
May
What do you do when you own bonds or stocks issued by a bankrupt company?
Ok so you own securities in a bankrupt company. If they’re stock, you’re probably going to be wiped out. If you own bonds, you are a creditor in the bankruptcy proceedings. Depending on how the proceedings go, you may get shares or bonds in the company. Or you may get cash as the company sells off their assets. Often times, you will receive a good chunk (but not all) your par value in either new securities or cash. Generally financial companies have paid out less in default but this is not always the case. You may also be able to sell your bonds on the open market, the market offerings will give you an indication of when and how much the bonds are expected to pay off. However, people may lowball you, and you will probably have to vote on some of the deals in bankruptcy so you will want to work with an advisor.
Municipal bonds are a little different, and the paradigms of municipal bankruptcy proceedings are changing so I won’t go through those. However, many municipal bonds are insured, and the insurer will continue making payments on the issuer’s behalf if they do go into bankruptcy.
27
Apr
Investing in Volatility: Understanding the VIX
If you follow the stock market coverage on CNBC or Bloomberg, or read the Wall Street Journal, you’ve probably seen references to the VIX, especially in politically and economically volatile times like the 2008 financial crisis or last year’s election.
While it appears in charts and tickers like a stock or exchange-traded fund, the VIX itself is not an investment product. Calculated by the Chicago Board of Exchange (CBOE), the VIX Volatility IndeX is a measurement of the implied volatility across the options trading market — in other words, the higher the VIX, the more options are being bought at larger distances from a stock’s current share price.
The scale of the VIX is a prediction of how much the S&P 500 is likely to vary in the next year. So, for example, a relatively normal VIX of 20 means that at some point in the next year, the S&P 500 (and therefore its associated index fund, for the investor) is expected to touch a point either 20% above, or 20% below its current value as its furthest extreme. The lowest possible VIX, 0, would imply a completely flat market for an entire year, an unlikely occurrence as stocks rise and fall daily. The highest reasonable VIX, 100, would indicate that the market is reasonably confident in a total collapse within the next year — or an equally severe correction over a shorter period — and is an urgent signal to sell and short. (In the 1987 crash, the VIX actually spent a few days ABOVE 100, led by the Black Monday crash and a 23% daily drop in the S&P 500)
Theoretically, this measure of volatility would increase in both bull and bear markets, but the nature of the stock market is such that rising markets generally occur slowly and steadily, while selloffs happen in a series of one or more sudden crashes. Therefore, VIX tends to spike the highest when the market is is falling, making it seem at first sight to be a useful hedge.
But as we mentioned before, it isn’t possible to buy shares in the VIX. While many indices do have exchange-traded index funds, which are possible because a typical stock index is made up of a basket of shares of a known list of companies (and therefore, a fund invested in those companies in the same proportions, will move parallel with the index), the VIX is based on trading volume in the options market, and cannot easily be replicated with only equities.
It is possible, however, to invest in the VIX indirectly. CBOE offers VIX futures loosely based on the VIX, and options with the ability to put and call based on the value of the VIX futures. These alternative products do track volatility, but do not necessarily move in real time, except at the end of the month when the contracts expire, since they are traded based on market value, and are likely to lead the actual VIX based on investor sentiment. The delivery of the share occurs after the end of the month, when it will pay off at the fair value of the VIX index.
Another choice (although historically not a very good one) is to invest in one of the “VIX” ETFs on the market. However, these only approximate the VIX, and do so with portfolios of shorts and leveraged options, making them lose money in bull markets and only be viable for a quick return ahead of an expected drop in the stock market.
A more prudent usage of the VIX is in deciding whether to buy or sell, go long or short, or consider shifting into more conservative investments. When used as a guide, rather than an investment in and of itself, it can be a valuable metric to help understand investor sentiment in real time.
23
Apr
Are Option Quotes All Greek To You?
Once investors move on from basic equity trading, for purposes of seeking alpha, or leverage (investments that move up and down at a faster rate parallel to the market), it’s hard to get very far without making use of options. But where most companies only have one stock, and one price for that stock, dozens of options exist for each share with options available.
Options, in general, give you (hence the name) the option to buy or sell one share of a stock at a named price, whether or not that price is the market value of the security. Like futures, options also have an expiration, or execution, date. However, unlike the commodities futures, where a forgetful investor can suddenly find themselves drowning in a tanker-truck worth of orange juice, all an expiring option does is whatever it says it will do — for example, if you have an option agreement to buy 400 shares of Wal-Mart stock for $73 each at the end of August 2017, and you do not actively exercise it, it goes into expiration.
At that point, if the option is “in the money”, i.e. if you will break even or profit from exercising it because you are buying a stock for less, or selling for more, than its market value, your broker is obligated to carry out the option’s direction, possibly putting you on margin if you did not have enough cash in your brokerage account. This is not as scary as it seems, however, since you can immediately sell that stock (or buy to cover) to resolve the margin situation, and leave you with more cash than you started with.
If the option is “out of the money”, it then “expires worthless:” it simply disappears as if it never existed, since no one rational would use their right to pay MORE for a stock they could already buy for less, the exchange assumes that it is in everyone’s best interest to forget that that option exists, meaning that all you lose is what you paid for the option.
Just like commodities, while the original intent was for option contracts to run to expiration, it is possible to buy and sell the options themselves at market price, which can often be as low as 10c per share for options that are currently far out of the money, making them potentially an attractive investment if you’re expecting volatility or major shifts in particular stocks.
The first choice to make is between a put option and a call option. A put option gives you the right to sell shares you already have at a specified price*, ideally higher than the market price at the option’s expiration. A call option, on the other hand, gives you the right to buy shares at a specified price, ideally lower than the market price. In certain situations, it can even make sense to get matched pairs of options: a put and a call on the same shares, at different prices, in effect creating an instant profit if the required price is reached (or losing the cost of the options, if it isn’t reached).
*if you do not have these shares, and your put option expires, you will short the shares required to exercise the option, requiring you to buy to cover the short.
Option “Greeks”, additional data points included along with the price in an option quote, attempt to show future trends in the option’s price. Delta, the most important one, tracks the change in share price against the change in the option’s price. The closer delta is to 1, the higher the probability that the option will finish in the money (if delta is zero, that means that the share price changes and the option price doesn’t, usually because the option is so far out of the money that it’s already worthless).
Vega, also referred to as kappa or nu, quantifies the rate of change of the option relative to the VIX, a broad market measurement of volatility. Higher volatility in the share price, and a higher vega, meaning an option more responsive to volatility, are both associated with more profitable options.
Theta, the time derivative, tracks the change in the option’s value relative to the approach of the expiration date. Lambda, the leverage factor, represents how much the option’s value changes relative to the underlying asset. For common or vanilla options, this will always be 1 for an option in the money, and zero for an option out of the money; leveraged options, which greatly increase volatility and risk in exchange for higher profits off of small moves in share price, can have a lambda as high as 64.
If you’re lost, but would still like to invest in options and increase your portfolio’s potential to make bigger moves, consult a financial advisor who specializes in options.
30
Jan
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17
Dec
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17
Nov
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01
Oct
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Oct
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