The post Introduction to 401(K) in 2 Minutes appeared first on .

]]>Hi I’m Rayfil Wong. We hope these investment concepts will help you be a better investor.

The 401(K) Plan is one of the most widely used retirement vehicles. 401(K)s are established by employers to help employees realize their retirement goals.

It is considered a qualified plan, which means it is eligible for tax benefits.

In a 401(K) Plan, you could make contributions from a portion of your employment earnings. These contributions can be made before or after payroll taxes.

Once the contributions are in the account, the profits made from investing these funds grow on a tax deferred basis.

This means that if you make pre-tax contributions from your pay, you won’t pay taxes on your gains until you withdraw them in retirement.

This allows you to reduce your current taxable income and put off those taxes until retirement when you’ll likely be in a lower tax bracket.

Some 401(K) plans known as Roth 401(K)s allow you to make after tax contributions so you **won’t pay tax when you pull the money out after you retire**, but you need to hold the money in the plan for a minimum number of years before withdrawing it after retirement.

Some employers also match the amount an employee puts into the account or offer other incentives like profit sharing.

This is a great way to boost your savings but the IRS does set limits on how much you can contribute to these plans and also sets restrictions on how and when you can withdraw the funds.

Because of their tax advantages, **401(K) plans can help your retirement savings grow** much faster than saving and investing without them.

If you start contributing early and invest wisely, the 401(K) will help you leverage time and reduce taxes while achieving your retirement goals.

Professor Savings signing out. Make sure you subscribe to our channel so you can learn more about finance basics.

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]]>The post What is covered interest arbitrage? appeared first on .

]]>Unfortunately, unfavorable exchange rates could eliminate investor profits. To avoid this scenario, covered interest arbitrageurs use a Forward Currency Contract so that they know what exchange rate they will receive when they convert their investment back into their original currency.

Investors need to know two things, the exchange rate when they initiate the trade. For example, EUR1 equals $1.39, the spot rate and they also need to know that they can later convert Euros back dollars at a rate of EUR1 equals $1.35, the forward rate.

For the trade to be profitable, this hedge must cost less than what the investor will earn from investing in the currency with the higher interest rate. Angela has $1 million to invest.

If she invested home, she will earn 5% bringing her total to $1,050,000. But what if she uses covered interest arbitrage instead?

First, she converts $1 million to Euros to get EUR721,500, this investment earns 15% bringing her new total to EUR829,725.

She then converts her investment back into dollars receiving $1,120,129. Opportunities to profit from covered interest arbitrage are rare especially in highly active markets where all market participants are equally informed.

Also the market usually brings any imbalances back to equilibrium when investors who identifies such an opportunity plays a flurry of trades in an attempt to make a quick riskless profit. Their profits are typically small and taxes and transaction costs can eliminate gains from covered interest arbitrage.

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]]>The post QUICK + EASY Way to learn what is free cash flow appeared first on .

]]>Let’s look at free cash flow for Al’s Ice Cream. Al’s financial statement showed that he earned $150,000 last year. To calculate his free cash flow, Al would subtract his change in networking capital for the year – current assets minus current liabilities equaling $10,000; and his capital expenditures – $40,000 for a new ice cream machine. These numbers represent the cash that went out of the business. Finally, Al will add back any non-cash charges that reduced his net income such as depreciation or amortization – plus $20,000 + $5,000. This brings Al’s free cash flow to $125,000; $150,000 – $50,000 working capital and expenditure outlays + $25,000 in depreciation and amortization.

Free cash flow is the amount of money that companies have available for paying debt, providing dividends to investors, buying back stock and growing the business so it’s an important measure of a company’s performance. However, free cash flow can be subject to manipulation in a company’s books and is only one of the many metrics investors can use to analyze a stock.

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]]>The post Learn What Stocks are in 2 Minutes appeared first on .

]]>Hi I’m Rayfil Wong. We hope these investment concepts will help you be a better investor.

A stock is a share of the ownership of a company. As the owner of a stock, the stockholder, you have a claim on a company’s assets and earnings.

Supposed Professor Savings is starting a company, Pies R Us, he needs $100,000 but doesn’t want to borrow from a bank.

Instead, **Professor Savings** invests $10,000 of his own money and finds nine other investors who are willing to invest for $10,000 each. In return, he gives each investor a certificate that represents 10% of his company.

Each certificate represents 10% of the company’s assets: the building, the pie pans and the baking materials and 10% of any future earnings.

After one year, the company is doing well and the company’s total value increases to $200,000. This means each share of the company is now worth $20,000 – two hundred thousand dollars divided by 10 shares. That’s twice the original $10,000.

The original investors can sell their stock in the company to other investors for a 100% profit. This is how stocks work. Stocks are bought and sold daily on the major exchanges.

Professor Savings signing out. Make sure you subscribe to our channel so you can learn more about finance basics.

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]]>The post How Much Can I save refinancing? – Professor Savings appeared first on .

]]>Hi Welcome to professorsavings.com

We bring you daily money saving videos

HI I’m your host Rayfil Wong

Today, we talk about the big savings from switching from refinancing

finance somethingagain, with a new loan

at a lower rate of interest.

according to a Quicken blog, the savings can add up big time

let’s start with the loan amount of **$300,000**

at **5% the monthly payment is $1610**

after refinancing, at **3.5% monthly payment is $1,347**

multiply by 12 months

at** 5% total is $19,320 versus $16,164 yearly**

so refinancing, save up to **$3,156 per year that is 16% cheaper**.

I can surely have some ideas about how to save **$3,156 **

thanks for joining us, professor savings savings signing off

**subscribe** for more daily money savings videos

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