Robo-advisors are alternatives to traditional financial advisors, and they’re often much more cost-effective. These products are also alternatives to simply picking and choosing investments on your own. How Do Robo-Advisors Work? A new customer who signs up for a robo-advisor usually starts by giving basic information about their investment goals through an online questionnaire. These questions may touch on subjects like your timeline, your risk tolerance, and how much money you have in savings....

But workplace retaliation can be devastating, and it can (but doesn’t always) break the law. Understanding the rules around workplace retaliation is critical for Human Resources staff members, managers, and anyone who has a position of influence in the business. What Does Retaliation Look Like? Jane comes to HR and says, John is a high performer, so you transfer Jane to another less desirable shift. This is a classic case of retaliation: Jane complained about sexual harassment, and you punished her by moving her to a different shift....

How a HELOC Works A HELOC, or home equity line of credit, is a type of loan that works like a revolving line of credit. It allows you to borrow money against the equity in your home by using your home as collateral. Typically, a HELOC loan offers you access to up to 80% of your home’s equity. All HELOCs have a credit limit, and most often start with a variable interest rate....

AzmanL / Getty Images Surety bonds are involved in many common business transactions, such as applying for a permit or bidding on a construction job. Some are required by law and others by the terms of a contract. To gain a better understanding of what bonded means, it’s important to learn more about surety bonds, how they work, and the types, including construction bonds, commercial bonds, and fidelity bonds....

The Definition of Vested Vested is a term that’s used to determine how much of your 401(k) funds you can take with you if you leave your company. Vesting refers to the ownership of your 401(k). All the money that you personally have contributed to your 401(k) is yours and you can take it with you if you leave your position, but the terms may be a bit different when it comes to your employer’s match of that money....

What Does It Mean When a Company ‘Goes Public’? A company goes public when it meets the criteria of public reporting obligations laid down by the Securities and Exchange Commission (SEC). This includes sale of privately held shares on a public market through an offering such as an IPO, meeting the SEC’s investor base trigger for public reporting or voluntarily registering with the SEC to disclose certain business and financial information to the public....

To forecast the amount of money they need in claims reserves, insurers use complex methods, relying on data and mathematical calculations. They also employ different types of claims reserves to mitigate the risk of higher-than-expected claims and claims that policyholders have yet to report. The level of funding a provider allocates to a claims reserve can impact policyholder premiums. Let’s take a closer look at what a claims reserve is and how it’s determined....

Alternate definition: A physical building or warehouse where valuable assets are housed may also be called a depository. Some common examples of depositories include credit unions, commercial banks, retail banks, and thrift institutions. How a Depository Works A depository receives most of its funding through customer deposits. These include direct deposits, cash deposits at a teller or ATM, electronic transfers from other banks, and check deposits. Deposits are federally insured, so you’re guaranteed to get your money back, up to certain amounts, if the institution goes under....

The borrower’s credit score usually determines the size of the margin. Most loans have caps on how high variable interest rates can rise or fall over a given period of time. Definition and Example of a Fully Indexed Interest Rate A fully indexed interest rate is a variable rate set at a fixed rate above a reference rate. The typical reference rates used are the secured overnight financing rate (SOFR), the federal funds rate, or the one-year Treasury rate....

There are many varieties of funds out there, so it’s easy to get confused. We’ll explain some of the most common types of funds, how they work, and how they may impact individual investors. Find out what funds you need to achieve your money goals. Definition and Examples of a Fund A fund is a pool of money individuals, businesses, investment companies, or governments create for a designated purpose. Funds are common in daily life, and you may have established or contributed to a fund without even knowing it....

When a loan is guaranteed, lenders are more willing to work with borrowers who usually wouldn’t be considered good candidates for a loan. Alternate definition: A loan that a third-party repays if you can’t.Alternate name: Guaranteed mortgage For instance, the federal government offers guaranteed mortgages to borrowers who may otherwise not be able to get a home loan. Borrowers apply for a mortgage through a private lender, and the government backs the loan....

Let’s take a closer look at what a high-yield savings account is and how it works so you can determine if opening one is the right choice for you. Definition of a High-Yield Savings Account A high-yield savings account is a savings vehicle that has a higher interest rate than a traditional savings account. It can be a good option if you’d like to save for a house, car, home improvement project, or another long-term goal....

Below, we’ll discuss what a letter of credit is, how it works, and why it’s an important term to understand. Definition and Example of a Letter of Credit A letter of credit is a document outlining the agreed-upon terms and conditions of a transaction between buyer and seller. Banks act as a third-party intermediary for the sale and guarantee to make payment in the instance that the buyer defaults. There are different kinds of letters of credit that provide various types and levels of security for buyers and sellers....

Employers may offer these life-cycle funds as an investment option in their 401(k), but it’s important to understand how they work before buying in. Learn if life-cycle funds could make sense as a way to simplify your portfolio. Definition and Example of Life-Cycle Fund A life-cycle fund is a diversified mutual fund that shifts its asset allocation to become more conservative over time as it approaches a target date, according to its glide path....

This time frame, and how it impacts your taxes, is set by the Internal Revenue Service (IRS). If the IRS says your asset counts as long-term, then the proceeds can be taxed under capital gains tax rates. Suppose you bought $1,000 worth of stock on Nov. 1, 2020, then sold it on Nov. 15, 2022, for $1,500. You would earn $500 on your investment. Because you held the stock for more than one year, that $500 would be a long-term capital gain....

Lenders that extend mortgage and car loans generally establish maximum loan-to-value ratios. For example, Fannie Mae offers first-time homebuyers and homeowners looking to refinance with Fannie Mae various options for loans with a 97% maximum loan-to-value (LTV) ratio. The maximum LTV ratio is calculated by dividing the amount you want to borrow by the appraised market value of the collateral guaranteeing the loan. This number is usually expressed as a percentage....

Alternate name: State-owned bank Some examples of public banks include the Bank of North Dakota, the World Bank, and the European Investment Bank. How Does a Public Bank Work? Public banks offer many of the same financial services as traditional banks, such as checking accounts, loans, and mortgages. However, their main purpose is to serve the public interest in their area. As a result, public banks put a huge focus on improving their local communities, using most of their resources to:...

Qualified retirement plans meet all the stipulations laid out in the IRC to allow for tax-deferred contributions. For the most part, these plans include employer-sponsored plans such as 401(k)s, 403(b)s, and Keogh (H.R. 10) plans. Voluntary, employer-based retirement plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA). These are standards set in order to provide protection for employees investing in the plans, including regulations for tax-deferred contributions....

Alternate definition: A self-directed IRA allows you more leeway to choose investments that might be considered “alternative” investmentsAcronym: SDIRA How Does a Self-Directed IRA Work? IRAs are held by custodians that usually provide a limited menu of assets to invest in. Custodians can include brokerages, trust companies, and banks. In many cases, custodians steer investors toward asset classes such as stocks, bonds, and CDs. It’s also possible to find some custodians that allow you to invest in real estate through Real Estate Investment Trusts (REITs)....

Instead, small-dollar loans help consumers quickly access cash from reputable financial institutions such as banks and credit unions. Customers can borrow up to $2,500 depending on the financial institution, and the money is typically borrowed in increments of $100. Small-dollar loan fees have fixed rates with no hidden costs. The rates can be as little as a flat fee of $5 for the entire loan, a simple pricing fee such as $12 for every $100 you borrow, or a fixed percentage rate....