Shareholder advocacy is when people who own stock in a company (and therefore technically own part of the company) use their influence to promote corporate responsibility. Basically it means that you use your voice within the company, however small, to encourage the company as a whole to practice policies that are socially and environmentally responsible. Yeah, you can really do that!
Proxy Voting is…
October 6th, 2010Proxy voting is when someone casts a vote for someone else. If you are a shareholder in a company, you are allowed to vote on certain general decisions made about the company. If you are unable to attend the meeting where the voting takes place, then you might ask someone to be your proxy and submit your vote on your behalf.
What does it mean to take a company public?
October 6th, 2010When a company “goes public” it means that it has decided to expand its ownership to include shareholders from the general public. When a company first goes public it’s called an IPO, or initial public offering. Proceeds (or the money raised from the IPO) can be used to fund further growth or to reward original shareholders (a “payout”). When a company is public, it breaks itself up into shares of stock available to be bought and sold by investors. In the U.S. public companies must register with the Securities and Exchange Commission (SEC) a government agency that regulates U.S. financial markets. Public companies are also required to file public financial statements with the SEC every quarter.
This isn’t true for every company, though. Many companies are “privately held,” which means that only a few people own the company and benefit from its success. In other words, if someone has created a great new company and gone public, anyone can invest their money in that company and share in its success (or, let’s be honest: failures). Private companies are not required to disclose financial information to the public.
How do you keep track of your investment profits or losses?
October 6th, 2010When you calculate your net profit or loss on an investment, you have to factor in what it cost you to make the investment in the first place. That’s called the “cost basis” or “tax basis.”
Here’s a simple example: let’s say you buy 100 shares of Company A for $10 a share – $1,000 in total. That $1,000 is your cost basis. Your gain on the investment is whatever you make that’s above that number. So if you later sell those 100 shares for $15 a share, you make $1,500 in that transaction, but you have to subtract your cost basis, so your profit is $500. If you sell them for $7.50 a share, you make $750, but once you factor in your cost basis, you actually have a $250 loss.
Net Profit is…
October 6th, 2010Net profit is the amount a company makes (or loses) after taking its expenses into account. You can figure out net profit easily by subtracting a company’s total expenses from its total revenue. For example, if Company X has a total revenue of $1,000 in May, but spent $500 to produce the revenue, the net profit would be $500.
A Liability is…
October 6th, 2010A liability is anything that an individual or organization owes to someone else. Liabilities can be salaries owed to employees, dividends owed to shareholders, taxes owed to the government, fixed or long-term debt such as bonds (which must be repaid with interest to the holder) or bank loans (which must be repaid with interest to the bank). Liabilities are the opposite of assets.
A 401(k) is…
October 6th, 2010A 401(k) is a retirement account that you don’t have to pay taxes on right away (the technical term is “tax-deferred”). These accounts are generally sponsored by employers, who can use them as a substitute for a traditional pension plan. Unlike a pension plan, which is managed and paid for entirely by the employer, a 401(k) acts as a personal retirement plan. Employees can contribute up to 15% of their salary every year (but no more than $11,000 a year for people under 50, and $12,00 for people over 50), which will not be taxed until they withdraw the money.
The interest, investment earnings and employer contributions (the employer can decide to pitch in to the account, if they want) are also not taxed until the employee withdraws the money. If the money is withdrawn before retirement age (currently 59.5 years old), the account holder faces an early withdrawal penalty fee.
Arbitrage is…
October 6th, 2010Arbitrage is a trading technique in which an investor (or sometimes a computer program) finds the same instrument (like a stock) offered at a lower price in one market and a higher price in another. The investor then buys the instrument at the lower price and immediately sells it in the other market for a higher price.
Monetary Policy is…
October 6th, 2010Monetary policy is a plan of action that a Central Bank (like the Federal Reserve) sets in order to keep an economy stable. It’s really important to the overall health of a nation’s finances. The goal is to manage demand by manipulating a company’s money supply and tweaking interest rates.
Central Banks implement monetary policy using a few different methods:
- Open-Market Operations – Directly buying and selling securities in the open market
- Reserve Requirements – Setting regulations that dictate the minimum amount of money a bank must hold in reserve to back up its deposits
- Discount Rate – Changing the rate of interest banks charge other banks to borrow money
A W-2 is…
October 6th, 2010A W-2 is a tax form that your employer gives you to help you fill out your federal tax return correctly. Basically, the form adds up all your wages and tips from that particular job. Every employer is required to send you a W-2 before the national tax filing deadline.
But the W-2 isn’t the whole story. If you’ve made money some other way – by working as an independent consultant, for example, or by collecting earnings on your investments, you’ll have to add up and report that income by yourself.