What is the Securities Investor Protection Corporation (SIPC)? The Securities Investor Protection Corporation (SIPC) is a non-profit, member-funded organization that works to protect customers from financial loss when a brokerage firm goes bankrupt. The SIPC was created in the United States in 1970 under the Securities Investor Protection Act in order to reduce insecurity among…
What are Robo-Advisors? Robo-advisors are online investment management services that employ mathematical algorithms to provide financial advice with minimal human intervention. They use their algorithms to manage and allocate client assets in the most efficient way possible. Robo-advisors use online questionnaires that obtain information about the clients’ degree of risk-aversion, financial status,…
What is an Acceleration Clause? An acceleration clause is a covenant in loan agreements that requires borrowers to repay the full principal amount upon breach of contract or failure to meet certain requirements set by the lender. Acceleration clauses are most prevalent in the real estate industry, where they protect the lender when the borrower…
What are Futures and Forwards? Future and forward contracts (more commonly referred to as futures and forwards) are contracts that are used by businesses and investors to hedge against risks or speculate. Futures and forwards are examples of derivative assets that derive their values from underlying assets. Both contracts rely on locking in a specific…
What is a Liquidity Premium? A liquidity premium compensates investors for investing in securities with low liquidity. Liquidity refers to how easily an investment can be sold for cash. T-bills and stocks are considered to be highly liquid since they can usually be sold at any time at the prevailing market price. On the other…
What Are Preferred Shares? Preferred shares, also called preferred stock, are a unique class of equity ownership in a company, but with bond-like features such as fixed dividends. Investors buy preferred shares for steady dividend income and potentially higher yields. Preferred shareholders are also paid before common shareholders, but after debt holders, in the event…
What is the Exponential Moving Average (EMA)? The Exponential Moving Average (EMA) is a technical indicator used in trading practices that shows how the price of an asset or security changes over a certain period of time. The EMA is different from a simple moving average in that it places more weight on recent data…
What is Cash Flow? Cash Flow (CF) is the increase or decrease in the amount of money a business, institution, or individual has. In finance, the term is used to describe the amount of cash (currency) that is generated or consumed in a given time period. There are many types of CF, with various important…
