You can borrow a TSP loan for general purposes, and you can use funds to construct or close on a home. TSP loans come with some fees and may mean paying more in taxes. You will also accrue less interest on your retirement funds when you borrow. A Thrift Savings Plan (TSP) is a ret...
A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete ...
Dollar-cost averaging spreads out the risk. Drawbacks to dollar-cost averaging. Stick to the plan. Related: Sign up for stock news with our Invested newsletter. Dollar-Cost Averaging Smooths Out Returns Over Time The idea behind dollar-cost averaging is to reduce the impact of short-term marke...
When purchased to provide insurance on an investment, CDSs do not necessarily need to cover the investment for its lifetime. For example, imagine an investor is two years into a 10-year security and thinks that the issuer is in credit trouble. The bond owner may buy a credit default swap ...
Why Invest in the Credit Default Swap Index (CDX)? The CDX is standardized and exchange-traded, unlike single CDSs, which trade OTC. As such, the CDX index has a high level ofliquidityand transparency. CDX indexes also may trade at smaller spreads than CDSs. Thus, investors may hedge a ...
Spreads in Lending For any business that lends money, the interest rate spread is what the company charges on a loan compared to its cost of money. A bank runs on interest rate spreads, paying a certain rate on savings and CD deposits and making loans at higher rates than it pays to ...
If a margin call is issued, an investor can respond in one of three ways to meet their minimum balance: 1. Deposit cash into the margin account. 2. Move securities from another account into the margin account. 3. Sell some securities in the margin account to pay off the margin loan. ...
Credit default swaps are a type of derivative, meaning their value is derived from the performance of an underlying asset—in this case, a bond or loan. These instruments provide a way for investors to protect themselves against the risk of default by the issuer of the underlying debt. In ...
When you sell something for more than you paid for it, you report the income on your taxes for the year in which the sale took place. Sometimes, though, the buyer spreads the payments out over more than one year. In that case, it’s what the Internal Rev
While a portfolio line of credit can give you access to cash, it’s not a good idea to use it merely because you have it. Here are the pros and cons of a portfolio line of credit. Pros Your investments serve as collateral with your broker or lender, and as the loan is directly tie...