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Balance Sheet vs. Profit and Loss Statement: What’s the Difference?

The balance sheet and the profit and loss (P&L) statement are two of the three financial statements companies issue regularly. Such statements provide an ongoing record of a company’s financial condition and are used by creditors, market analysts, and investors to evaluate a company’s financial soundness and growth potential. The third financial statement is called the cash-flow statement.

Key Takeaways

  • A balance sheet reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
  • A balance sheet provides both investors and creditors with a snapshot as to how effectively a company’s management uses its resources.
  • A profit and loss (P&L) statement summarizes the revenues, costs, and expenses incurred during a specific period of time.
  • A P&L statement provides information about whether a company can generate profit by increasing revenue, reducing costs, or both.

Balance Sheet 

A balance sheet reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time. It provides a basis for computing rates of return and evaluating the business’ capital structure. This financial statement provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.

The balance sheet shows a company’s resources or assets, and it also shows how those assets are financed—whether through debt under liabilities or by issuing equity as shown in shareholders’ equity. The balance sheet provides both investors and creditors with a snapshot of how effectively a company’s management uses its resources. Just like the other financial statements, the balance sheet is used to conduct financial analysis and to calculate financial ratios. Below are a few examples of the items on a typical balance sheet.

Assets

  • Cash and Cash Equivalents—These are the most liquid assets, which may include Treasury bills (T-bills), short-term certificates of deposit (CDs), and cash.
  • Marketable Securities—This category includes equity and debt securities for which there is a liquid market.
  • Receivables—Also known as “accounts receivable,” this represents money owed to the company by customers.
  • Inventory—This area covers all the goods available for sale.

Liabilities

  • Debt—This includes the current portion of long-term debt and bank indebtedness.
  • Overhead—This accounts for such financial obligations as rent, tax, and utilities.
  • Payables—This includes both wages and dividends owed.

Shareholders’ Equity

Shareholders’ equity is equal to a firm’s total assets minus its total liabilities and is one of the most common financial metrics employed by analysts to determine the financial health of a company. Shareholders’ equity represents the net value of a company, meaning the amount that would be returned to shareholders if all the company’s assets were liquidated and all its debts repaid.

Retained earnings are recorded under shareholders’ equity and refer to the percentage of net earnings not paid out as dividends but retained by the company either to be reinvested in its core business or to pay the debt.

Trial Balance vs. the Balance Sheet

It’s important to note that the trial balance is different from the balance sheet. This is an internal report that stays in the accounting department. The balance sheet, on the other hand, is a financial statement distributed to other departments, investors, and lenders.

The trial balance provides financial information at the account level, such as general ledger accounts, and is therefore more granular. Eventually, the information in the trial balance is used to prepare the financial statements for the period.

In contrast, the balance sheet aggregates multiple accounts, summing up the number of assets, liabilities, and shareholders’ equity in the accounting records at a specific time. The balance sheet includes outstanding expenses, accrued income, and the value of the closing stock, whereas the trial balance does not. In addition, the balance sheet must adhere to a standard format as described in an accounting framework, such as the International Financial Reporting Standards (IFRS) or the generally accepted accounting principles (GAAP).

Comparing the P&L Statement and the Balance Sheet

Profit and Loss (P&L) Statement

A P&L statement, often referred to as the “income statement,” is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period of time, usually a fiscal year or quarter. These records provide information about a company’s ability—or lack thereof—to generate profit by increasing revenue, reducing costs, or both. The P&L statement’s many monikers include the “statement of profit and loss,” the “statement of operations,” the “statement of financial results,” and the “income and expense statement.”

Top Line and Bottom Line

The P&L statement provides the top and bottom line for a company. It begins with an entry for revenue, known as the “top line,” and subtracts the costs of doing business, including the cost of goods sold, operating expenses, tax expenses, interest expenses, and any other expenses sometimes referred to as “extraordinary” or “one-time” expenses. The difference, known as the “bottom line,” is net income, also referred to as “profit” or “earnings.” 

Realized Profits and Loss

The P&L statement reveals the company’s realized profits or losses for the specified period of time by comparing total revenues to the company’s total costs and expenses. Over time it can show a company’s ability to increase its profit, either by reducing costs and expenses or increasing sales. Companies publish P&L statements annually, at the end of the company’s fiscal year, and may also publish them on a quarterly basis. Accountants, analysts, and investors study a P&L statement carefully, scrutinizing cash flow and debt financing capabilities.

Revenues and Expenses

From an accounting standpoint, revenues and expenses are listed on the P&L statement when they are incurred, not when the money flows in or out. One beneficial aspect of the P&L statement in particular is that it uses operating and nonoperating revenues and expenses, as defined by the Internal Revenue Service (IRS) and GAAP.

A balance sheet considers a specific point in time, while a P&L statement is concerned with a set period of time.

Balance Sheet vs. P&L Statement

Although the balance sheet and the P&L statement contain some of the same financial information—including revenues, expenses, and profits—there are important differences between them. Here’s the main one: The balance sheet reports the assets, liabilities, and shareholders’ equity at a specific point in time, while a P&L statement summarizes a company’s revenues, costs, and expenses during a specific period of time.

Purpose of Each Statement

Each document is built for a slightly different purpose. Balance sheets are built more broadly, revealing what the company owns and owes as well as any long-term investments. Unlike an income statement, the full value of long-term investments or debts appears on the balance sheet. The name “balance sheet” is derived from the way that the three major accounts eventually balance out and equal each other. All assets are listed in one section, and their sum must equal the sum of all liabilities and the shareholders’ equity.

The P&L statement answers a very specific question: Is the company profitable? While accountants use the P&L statement to help gauge the accuracy of financial transactions—and investors use the P&L statement to judge a company’s health—the company itself can review its own statement for productive purposes. Closely monitoring financial statements highlights where revenue is strong and where expenses are incurred efficiently, and the opposite is true as well. For example, a company might notice increasing sales but decreasing profits and search for new solutions to reduce costs of operation.

Profit vs. Total Value

The P&L statement shows net income, meaning whether or not a company is in the red or black. The balance sheet shows how much a company is actually worth, meaning its total value. Though both of these are a little oversimplified, this is often how the P&L statement and the balance sheet tend to be interpreted by investors and lenders.

It’s important to note that investors should be careful to not confuse earnings/profits with cash flow. It’s possible for a firm to operate profitably without generating cash flow or to generate cash flow without producing profits.

How the Statements Are Calculated

The P&L statement requires accountants to add up the company’s revenue on one portion and add up all of its expenses on another. The total amount of expenses are subtracted from the total revenue, resulting in a profit or loss. The balance sheet has a few different calculations that are all performed as representations of one basic formula:

Assets = Liabilities + Owner’s Equity

The Bottom Line

When used together along with other financial documents, the balance sheet and P&L statement can be used to assess the operational efficiency, year-to-year consistency, and organizational direction of a company. For this reason the numbers reported in each document are scrutinized by investors and the company’s executives. While the presentation of these statements varies slightly from industry to industry, large discrepancies between the annual treatment of either document are often considered a red flag.

A firm’s ability (or inability) to generate earnings consistently over time is a major driver of stock prices and bond valuations. For this reason every investor should be curious about all of the financial statements—including the P&L statement and the balance sheet—of any company of interest. Once reviewed as a group, these financial statements should then be compared with those of other companies in the industry to obtain performance benchmarks and understand any potential market-wide trends.

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  • Continuing Education. Investopedia may offer continuing education Webinars that are Certified Financial Planner Board of Standards Inc. (“CFP Board”) and/or Investments & Wealth Institute® (“IWI”) approved. Investopedia will identify which Webinars are approved for such credit on the landing page(s) for each Webinar. You understand and agree that Investopedia may be required to share information regarding your participation in and/or completion of such certified program to the CFP Board and/or IWI in order for you to be eligible for and/or receive continuing education credits.
  • General Education. Investopedia may offer Webinars that are for general education and are not approved for any credit by any professional or state/provincial/territorial board or organization or by any educational institution.

For Informational Purposes Only. Each Webinar and any content or materials provided in connection with any Webinar is for informational purposes only. Information may not be applicable for each state/province/territory and/or jurisdiction. Investopedia cannot guarantee that any information provided in a Webinar will be accurate, complete, and/or current at all times. We make no representations or warranties regarding the quality of the Webinar content, related materials, or any instructor.

All Webinar content is owned by or licensed to Investopedia and/or its licensed content providers, and all such rights are reserved. You may not reproduce, upload, transmit, distribute, publicly display, sell, publish, copy, or otherwise use the Webinar, and/or any content or materials provided in connection with any Webinar for any commercial purpose without Investopedia’s express written consent.

The appearance of any instructor in any Webinar is not and shall not be deemed an endorsement or recommendation of that instructor by Investopedia and the views expressed in any Webinar are those of the instructor and not Investopedia.

Investopedia Academy

General. Investopedia offers online information courses, workshops, classes and other educational programs relating to the world of finance to you for a fee (“Course(s)”) through its Investopedia Academy services. For clarity, the Investopedia Academy is included as part of the Services offered by Investopedia. Investopedia may also offer you the ability to engage in communication with fellow users taking the Courses. This TOU, including this section specifically on Investopedia Academy, govern your purchase, use and/or access to any Course. You must login to your account to sign up for a Course. Investopedia uses third party services to provide the platform for the Courses as well as for payment processing and those third parties may have access to your information for the purposes of providing the Course Services. Please note that we may communicate with you as set forth in the “Communications” section of this TOU in connection with the provision of the Investopedia Academy and/or other Investopedia services.

Informational Purposes Only. These Courses are offered for information purposes only. Neither Investopedia, nor any person providing instruction in any Course, is providing you legal, accounting, investment or financial advice. You are solely responsible for confirming the accuracy and appropriateness of the information for your own uses with your tax, finance, or legal advisor. Investopedia’s provision of any Course or the appearance of any specific person instructing any Course is not a recommendation by Investopedia of that Course, the content contained therein or the person providing instruction. We do not employ any instructors and are not responsible or liable to you for any interactions between you and any instructor or any other user of the Services. We make no representations or warranties as to the quality of any Course or instructor. 

No Academic Credit. Investopedia is not an accredited educational institution. Your participation in, or completion of, any Course does not confer any academic credit. Nothing in this TOU or otherwise through the Services or on our Site, enrolls you in any educational institution or in any course offered by any such institution.

Payment. Each Course, bundle of Courses, or subscription package (the “Online Course Offering”) is offered for certain price as listed on the relevant landing page. All fees are in U.S. dollars. To purchase an Online Course Offering you must provide one or more Payment Methods. You represent and warrant that you are authorized to use any and all Payment Method(s) you use to purchase an Online Course Offering. You agree to pay for all Investopedia products and services that you purchase, and agree that we may charge your selected payment method through our third party payment processor for any such payments. If your payment method fails, we may collect fees owed or use other collection methods. We may also suspend or terminate your access to our Services. For some Payment Methods, the issuer may also charge you certain fees, such as foreign transaction fees or other fees relating to the processing of your Payment Method. Local tax charges may vary depending on the Payment Method used. Check with your provider for details. Payment Method” means a current, valid, accepted method of payment as may be updated from time to time and which may include payment through your account with a third party).

We use a secure third party payment processor(s) for the Online Course Offering. These payment processors accept payment methods as detailed on the payment page. Information that you supply to our payment processors is not stored or controlled by us and is subject to the third-party payment processors’ privacy policy and terms and conditions. To the extent allowed under applicable law, we disclaim all liability with regard to any problems you have with any third party payment processors.Refunds. For individually purchased Courses, Investopedia will provide a full refund in limited circumstances where the user has viewed less than 50% of the applicable Course, and such request for refund occurs within 30 days of the purchase date. For Courses purchased as part of a bundle, Investopedia will provide a full refund in limited circumstances where the user has viewed less than 50% of all content in the bundle and such request for refund occurs within 30 days of the purchase date. For subscription purchases, Investopedia will provide refunds in accordance with the Subscription section below. In order to request a refund, user must contact Investopedia. You can contact us at academysupport@investopedia.comContacting Investopedia through any other contact page, email, or number for a refund request will not be deemed notice to Investopedia of such request. 

Taxes. If you elect to access or use Services that involve payment of a fee, then you agree to pay that fee and all taxes associated with such access or use, including, if applicable, any sales tax Investopedia believes in good faith that it is required to collect Investopedia may collect taxes (e.g., sales tax or VAT) on any transaction where it reasonably believes that tax collection is required. Where Investopedia believes in good faith that VAT collection is required for any Course, VAT will be calculated and added once your billing information is provided. You will indemnify and hold Investopedia harmless against any and all claims by any tax authority for any underpayment of VAT, and any penalties and/or interest thereon. Investopedia is unable to provide you with tax advice and you should consult your own tax advisor.

Compliance with Laws. You agree to comply with all applicable laws in connection with your purchasing and/or viewing of any Course. Further, access to our Courses from certain territories is prohibited. You agree that you will not violate any data export laws in connection with your purchase and/or viewing of the Courses if you reside outside the United States.

Course Ownership. We and our licensors own all right, title and interest in and to the Course(s) and related materials. We and/or third party licensors either own or have all necessary rights in and to the content contained in any Course (e.g., lectures, video lessons, quizzes, presentation materials, assignments, images, text, displays, documents, audio and/or video clips, HTML, etc.). The foregoing includes any and all copyrights, trademarks, or other proprietary rights under applicable law. Nothing contained in this TOU or in any Course conveys to you any ownership or other proprietary right except as otherwise set forth herein.

Any Investopedia logos and/or trademarks that appear in any Course are our property and may not be used without our express written consent. All other trademarks, service marks and logos used in connection with any Course, with or without attribution, are the trademarks, services, or logos of their respective owners and may not be used without their express written consent.

Your Use of the Courses. Subject to your compliance with this TOU and any other guidelines or policies we include through the Services, Investopedia grants you a limited, non-transferable, non-sublicenseable, non-exclusive, revocable license to make non-commercial, personal use of the Courses you purchase. Purchase of a Course only entitles you to the view the Course, and is not a purchase of the software or content included in the Course. Except as set forth below, Investopedia reserves the right to terminate your access to the Site at any time for any reason or no reason at all, with or without notice to you. Unless you have, as determined in our sole discretion, violated this TOU, such termination will not terminate your right to view any Courses you have already purchased. You may not transfer your account to any other person or use anyone else’s account. Except as otherwise expressly permitted in this TOU, you are prohibited from and may not copy, sell, re-sell, display, reproduce, publish, modify, creative derivative works from, transfer, distribute, or commercially exploit the Courses and/or any related materials; and Investopedia reserves the right to pursue legal action against you in connection with any unauthorized use of the Courses, the related materials, or your violation of this TOU, whether at law or equity.

Subject to your satisfactory completion of a Course, as determined by Investopedia in its sole discretion, Investopedia may provide you with a certificate of accomplishment upon conclusion of the applicable Course. You acknowledge that any such certificate merely indicates completion of a Course and is not affiliated with any college, university, company, or other certifying institution, and does not stand in the place of a course taken at any academic institution and does not convey academic credit or certification for any such academic institution and neither Investopedia nor any instructor has any obligation to you to assist you in obtaining any such credit or certification.

Indemnification. You agree to indemnify and hold Investopedia harmless from and against any claims arising out of or related to your use of the Investopedia Academy Service, including without limitation, for your violation of any law or regulation or if your use infringes or otherwise violates any intellectual property or other proprietary right of Investopedia or any person or entity.

Modification and/or Termination of Courses. We reserve the right to at any time, modify or discontinue, temporarily or permanently any one of the Courses or the Investopedia Academy in whole or part. You agree that we are not liable to you or any third party for any such modifications, suspension, or termination of any or all Courses. Nothing in this TOU shall be construed to obligate us to maintain and/or support any of the online Course services, in whole or part, during the term of this TOU or thereafter.

Subscription Services

Subscription Services: Investopedia may offer certain paid subscription services in certain regions. If you enroll in any Investopedia paid subscription service, your subscription will continue month-to-month until terminated. You agree that your account will be subject to this automatic renewal feature. If you do not wish your account to renew automatically or want to change or terminate your subscription, please email academysupport@investopedia.com. To use the Investopedia subscription service you must have internet access and provide us with one or more Payment Methods.

Billing: Unless you cancel your subscription(s) before your monthly billing date, you authorize us to charge your next month’s subscription fee to your Payment Method. You also authorize Investopedia to charge you for any sales or similar taxes that may be imposed on your subscription payments. Such fees will be charged on the calendar day corresponding to the commencement of your subscription. In some cases your payment date may change, for example if your Payment Method has not successfully settled or if your paid subscription began on a day not contained in a given month. In order to see your next payment date, please contact us at academysupport@investopedia.com.

Payment Methods and Subscriptions: In order to enroll in an Investopedia paid subscription service you must provide one or more Payment Methods. We may update your Payment Method using information provided to us by our payment processors. Following an update, you authorize us to continue to charge the applicable Payment Method(s). You agree to promptly update all information to keep your Payment Methods current, complete, and accurate (such as change in billing address, card number, or expiration date), and you must promptly notify Investopedia if your Payment Method is canceled (or if you lose your credit card or it is stolen), or if you become aware of a potential breach of security (such as an unauthorized disclosure or use of your name or Account password). Changes may be made by visiting your Learned Dashboard at academy.investopedia.com and submitting an updated payment method which will be received by our payment processor. You authorize us to charge any Payment Method associated with your account in case your primary Payment Method is declined or no longer available to us for payment of your subscription fee. You remain responsible for all unpaid amounts. If any payment it not successfully settled due to expiration, insufficient funds, or otherwise, and you do not cancel your account, we may terminate your access to the service until we have successfully charged a valid Payment Method. If you initiate a chargeback or otherwise reverse a payment made with your Payment Method, Investopedia may in its discretion terminate your account immediately. If Investopedia successfully disputes the reversal, and the reversed funds are returned, you are not entitled to a refund or to have your account or subscription reinstated.

Refunds and Cancellations: If you cancel your subscription and request a refund within the first 30 days of your subscription, we will refund your initial payment. Thereafter you can cancel your subscription at any time, and you will continue to have access to the subscription service through the end of your monthly billing period. To the extent permitted by the applicable law, payments are non-refundable and we do not provide refunds or credits for any partial-month subscription periods or unwatched Investopedia content. Notwithstanding the forgoing, if you cancel within 3 business days of signing up for a paid subscription, we will refund your full subscription fee; however, we may charge you (or withhold from your refund) the prorated value of the subscription service used by you and your account during this 3-business day period. To cancel, please email academysupport@investopedia.com. If you cancel your subscription, your account will automatically close at the end of your current billing period. In the event you cancel your subscription, please note that we may still send you promotional communications about Investopedia products and services, unless you opt out of receiving those communications by following the unsubscribe instructions provided therein.

Price and Subscription Plan Changes: We may change the subscription plans available and / or the price of our service from time-to-time, provided that any price changes will apply to you no earlier than 30 days following notice to you. We may offer several different subscription plans, including special promotional plans and some plans may have different terms and conditions, which will be provided to you at sign-up or through other communications to you. 

Virtual Cash and Virtual Securities

If you register for the Site’s Stock Market Game, you may accrue virtual cash and securities (“Virtual Assets”) that may be used and virtually spent in the Site environment. Virtual Assets are a limited license right, distributed at our discretion, and have no monetary value. You may not sell, transfer or trade Virtual Assets, except as permitted on the Site in accordance with the rules of the Stock Market Game, which we may change at any time at our sole discretion. You shall not acquire any ownership right to Virtual Assets. We may terminate your license right and withdraw or discontinue any Virtual Asset, or may remove your right to use any particular Virtual Asset at any time for any reason, with or without notice to you.

Incentives, Rewards, Discounts and Other Promotional Offers

Investopedia may offer incentives, offers, promotions, discounts, sweepstakes, or contests in connection with its Services. In the case of sweepstakes or contests, you will be provided separate terms and conditions that must be agreed to in order to be eligible for participation in any sweepstakes and/or contests. In connection with any incentives, rewards, or similar programs (For example, but not limited to, the Advisor Insights incentives program for financial advisor users and discount codes for Investopedia Academy), any such program is issued at Investopedia’s sole discretion and cannot be transferred, bartered or sold or used for a purchase where payment is made using payment information (e.g., a credit card number or PayPal account). Any such incentives and/or programs are not a payment instrument; they are issued without any exchange of money or value from you and you have no vested property right or interest in the incentives. Investopedia reserves the right to cancel or revoke any incentives or programs, or your participation therein, for any reason or no reason whatsoever, including, without limitation, if it determines in its sole discretion that you have violated these terms, the terms specific to any rewards, incentive, or other program, or the rest of this TOU. Investopedia reserves the right in its sole discretion at any time and without prior notice to you, to add to, remove or otherwise change the terms applicable to the issuance and use of any incentive, offers, promotions or other similar program. 

Investopedia may, at its sole discretion, offer discounts to Investopedia Academy courses. Such discounts are not applicable toward past purchases and cannot be combined with any other offers or promotions. Discounts apply toward the purchase price of an Investopedia Academy course, only, and cannot be applied toward taxes or other fees. Discounts offered by Investopedia have no cash value, and are nontransferable. No cash/credit back. Each discount code may only be used once, and only one discount code may be used per purchase. Investopedia reserves the right to modify or discontinue accepting any discount code or other discount at any time without notice. Void where prohibited by law. In the event of any violation of this TOU or other terms of any discount offered by Investopedia, Investopedia shall be entitled to suspend and/or revoke access to your Investopedia Academy account.

Broker Reviews

In the event that Investopedia makes available reviews of online brokers (each a “Review” and together the “Reviews”), the below applies in addition to the rest of the terms of these TOU. You understand and agree to receiving communications from Investopedia, including as set forth in the “Communications” section of this TOU. Investopedia reserves the right at any time and for any reason and without notice to you, to change, modify, suspend, or cancel access to and/or any and all of the Reviews.

For Informational Purposes Only. Each Review is provided for informational purposes only. Information may not be applicable for each state/province/territory and/or jurisdiction. Investopedia cannot guarantee that any information provided in a Review will be accurate, complete, and/or current. We make no representations or warranties regarding the quality of the Review content.

You may not reproduce, upload, transmit, distribute, publicly display, sell, publish, copy, or otherwise use the Review, and/or any content or materials provided in connection with any Review for any commercial purpose without Investopedia’s express written consent.

The publication by Investopedia of any Review is not and shall not be deemed an endorsement or recommendation of that broker by Investopedia and the views expressed in any Review are those of the Reviewer and not Investopedia.

The information contained in a Review may be different from the information provided when you visit the website of a financial institution, service provider or specific product. When evaluating online brokers, please review the online broker’s own terms and conditions. We do not make any warranties or representations regarding the quotes, fees, terms, rates, coverage or services offered or made available by online brokers. We do not guarantee that quotes, fees, terms, rates, coverage or services offered by online brokers are the best available. We are not involved with and are not responsible for any fee arrangement that you may enter into with any online broker or other service provider. You hereby release us of any and all losses, costs, damages or claims in connection with, arising from or related to your use of a service provider’s products or services.

Investopedia may receive compensation from online brokers when a user applies or gets approved for a financial product through our Website. Compensation may influence which products and brokers we review and write about, and whether products appear on our Website. The Website does not purport to feature every online broker or financial product available on the market.

Exam Preparation Materials

In the event that Investopedia makes available study guides and other exam preparation information, including study guides and/or links to such materials on third party sites (collectively the “Exam Prep”), the below applies in addition to the rest of the terms of these TOU. You understand and agree to receiving communications from Investopedia, including as set forth in the “Communications” section of this TOU. Investopedia reserves the right at any time and for any reason and without notice to you, to change, modify, suspend, or cancel access to and/or any and all of the Exam Prep material.

All Exam Prep material and information available on Investopedia or third party sites linked-to through Investopedia are for informational purposes only. Exam content review, methods of study, tips and sample questions are only recommendations, and use of this material does not guarantee passing any exam. While Investopedia has made reasonable efforts to provide current and accurate information, Investopedia will not be held liable for any unintentional errors or omissions that may be found. Investopedia is not affiliated, approved, or endorsed by FINRA, the NFA, NAASA, the CFA Institute, CMT Association, GARP, IIROC or the IRA.

Viruses

Investopedia does not guarantee that files available for downloading through its Site will be free of infection or viruses or other code that may have contaminating or destructive properties. You are responsible for implementing sufficient procedures and checkpoints to satisfy your particular requirements for integrity, security and accuracy of data input and output, and for maintaining a means external to the Site for the reconstruction of any lost data. 

Advertisers Are Not Endorsed

Though we seek to partner with quality companies, we are not responsible for the claims or representations made by advertisers and sponsors. Investopedia does not review, endorse or recommend the products or services of any company mentioned on our Site. We will not be liable in any way for damages of any kind resulting out of the misuse of any personal information or data submitted by you to an advertiser or sponsor.

Links

As a convenience to Users, the Site and Services may provide links to other sites or resources. Because we do not review and have no control over such sites and resources, Investopedia shall not be responsible or liable for use of or reliance on any content, products, services or information at such sites or resources. Inclusion of any links does not imply any endorsement, affiliation, approval, association or sponsorship by Investopedia of the linked websites, resources, their operators or owners. When you select a link, you may be leaving our Site. The information available on third parties websites may have certain restrictions on its use or distribution which differ from this TOU.

Prohibited Conduct

The following activities are strictly prohibited:

  • Posting unsolicited or unauthorized advertising, promotional materials, junk mail, spam, chain letters, pyramid schemes, or any other form of solicitation (“Spamming”);
  • Postings for any unlawful or fraudulent purpose (including links);
  • Posting of personal information (for yourself or anyone else);
  • Posting materials containing viruses or other malicious or destructive code;
  • Posting of offensive content including profanity, obscenity, racist or pornographic material;
  • Engaging in any activities that are defamatory, violate the personal privacy rights of others, or infringe any person’s rights, including but not limited to, collecting and distributing information about Internet users without their permission, except as permitted by applicable law;
  • Posting any content that is unlawful, harmful, threatening, abusive, harassing, tortious, defamatory, vulgar, obscene, libelous, hateful, degrading to others on the basis of gender, race, class, ethnicity, national origin, religion, sexual preference, disability or other classification or otherwise objectionable in any way;
  • Copying, modifying, creating a derivative work of, reverse engineer, reverse assemble or otherwise attempt to discover any source code of the Site or Services;
  • Removing or obscuring the copyright notice or other notices displayed in connection with the content accessible through the Site or Services;
  • Interfering with or disrupting the Site functionalities, Services, or servers and networks connected to Site, or disobeying any requirements, procedures, policies, or regulations of networks connected directly or indirectly to the Site;
  • Modifying the Site or Services in any manner or form, or using modified versions of the Site or Services, including (without limitation) for the purpose of obtaining unauthorized access to the Site or Services;
  • Reproducing, printing, caching, storing, or distributing content retrieved from the Site or Services in any way not authorized by this TOU or for any commercial use without the prior written permission of Investopedia;
  • Selling, assigning, sublicensing, or otherwise transferring any right in the Services or content accessible through the Site;
  • Accessing the Site or Services by any means other than through the interface that is provided by Investopedia;
  • Using the Site or Services to violate any law (whether local, state/provincial/territorial, national, or international), whether or not intentionally;
  • Impersonating any person or entity, or falsely stating or otherwise misrepresenting your affiliation with any person or entity;
  • Manipulating identifiers in order to disguise the origin of any question, answer or comment you post on the Site;
  • Engaging in “screen scraping,” “database scraping,”; and/or
  • Facilitating violations of this TOU or the Privacy Policy.

Privacy

This Site may collect personal information from some Users. Please review our Privacy Policy to understand what information we collect and store, how that information is used, how we may share that information, and your rights in connection with your personal information. The Privacy Policy is incorporated by reference and made a part of this TOU.

Communications

When you visit our Site, use any of our Services, or send us an email, you expressly indicate your consent to electronically receive any and all communications, notices, and our disclosures that we may provide in connection with your use of the Site and/or Services, including, without limitation, e-mail, in-app, and in-website chat communications. All agreements, notices and communications that we provide to you by email will satisfy all legal requirements that they be in writing and delivered to you. Investopedia will have the right to disclose any email sent by a User, or any objectionable material, to comply with legal process or to protect the rights or property of Investopedia, its customers, suppliers and Users. Any such notices may also include emails with promotional, marketing, and advertising information and recommendations that we believe may be of interest to you, in accordance with applicable law. Consistent with federal CAN-SPAM or anti-spam laws, if you do not wish to receive commercial emails, you may unsubscribe following the instructions on any email, excepting that we may still send you administrative and transactional notices, including, without limitation, information about your Account, confirmation of your registration for Courses, information about your progress, or other services that may be necessary to provide you with any one of the Services.

If you provide your telephone number to us when you register for an Account or use other Investopedia Services on the Site, you expressly consent to receive autodialed or prerecorded calls and text messages from Investopedia at that number. If a telephone number is a mobile telephone number, you hereby consent to receive SMS or text messages at that number. We may place such calls or texts to (i) notify you about your account and any use thereof; (ii) provide you with services associated with the Online Courses, Webinars, etc.; (iii) troubleshoot problems with your account; (iv) resolve disputes; (v) contact you with offers and promotions; or (vii) as otherwise necessary to service your account or enforce these TOU, our policies, applicable law, or any other agreement we may have with you. We will not share your phone number with third parties for their purposes without your consent. We may share your phone numbers with our Affiliates or with our service providers, such as customer support, billing or collections companies, who we have contracted with to assist us in pursuing our rights or performing our obligations under these TOU, our policies, applicable law, or any other agreement we may have with you. You agree these parties may also contact you using autodialed or prerecorded calls and text messages, as authorized by us to carry out the purposes we have identified above, and not for their own purposes. Standard telephone minute and text charges may apply.

You understand and consent that we may, in our discretion, monitor or record telephone conversations you or anyone acting on your behalf has with us or our agents for quality control and training purposes or for our own protection. You acknowledge and understand that, while your communications with us may be overheard, monitored, or recorded, not all telephone lines or calls may be recorded by us, and we do not guarantee that recordings of any particular telephone calls will be retained or retrievable.

Feedback

We welcome all feedback, ideas, inventions, materials, and suggestions (“Feedback”) from our Users regarding our Services. You understand and agree that Investopedia does not waive any rights to use similar and/or related Feedback previously or contemporaneously known to it, whether developed by its employees, contractors, obtained from other sources, or submitted by other Users. Further, by submitting any Feedback, you grant us the right to use the Feedback without any restrictions on the use of such Feedback or any compensation to you.

Proprietary Rights

The Investopedia Site and its content are protected by copyright, trademark, and other proprietary laws. See our Copyright Notice.

Reporting Copyright Infringement. Investopedia takes claims of copyright infringement seriously. We will respond to notices of alleged copyright infringement that comply with applicable law. For U.S. users, if you believe any materials accessible on or from the Site infringes your copyright, you may request removal of those materials (or access to them) from the Site by submitting written notification to our Copyright Agent (designated below). In accordance with the Digital Millennium Copyright Act (17 U.S.C. § 512) (“DMCA“), the written notice (the “DMCA Notice“) must include substantially the following:

  • Your physical or electronic signature.
  • Identification of the copyrighted work you believe to have been infringed, or, if the claim involves multiple works on the website, a representative list of such works.
  • Identification of the material you believe to be infringing in a sufficiently precise manner to allow us to locate that material.
  • Adequate information by which we can contact you (including your name, postal address, telephone number, and, if available, e-mail address).
  • A statement that you have a good faith belief that use of the copyrighted material is not authorized by the copyright owner, its agent, or the law.
  • A statement that the information in the written notice is accurate.
  • A statement, under penalty of perjury, that you are authorized to act on behalf of the copyright owner.

You may submit your DMCA Notice to the address below:

Copyright Agent
c/o About, Inc.
Attn: Legal Department
1500 Broadway, 6th Floor
New York, NY 10036

If you fail to comply with all of the requirements of Section 512(c)(3) of the DMCA, your DMCA Notice may not be effective.

Please be aware that if you knowingly materially misrepresent that material or activity on this website is infringing your copyright, you may be held liable for damages (including costs and attorneys’ fees) under Section 512(f) of the DMCA.

Repeat Infringers. It is our policy in appropriate circumstances to disable access to this Site and/or terminate the accounts of users who are repeat infringers of these TOU.

Subscription Services

Although Investopedia offers services in many parts of the world, certain Investopedia services may not be available in or suitable for certain countries or locales. We reserve the right to discontinue or to make changes to, our Site and any of our Services at any time without advance notice. 

DISCLAIMER OF WARRANTIES

THE SITE AND SERVICES ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY. NO CONTENT ON OUR SITE IS INTENDED TO CONSTITUTE PROFESSIONAL ADVICE, WHETHER MEDICAL, FINANCIAL, LEGAL OR OTHERWISE. YOUR USE OF THE SITE, THE WIDGETS AND SERVICES IS AT YOUR SOLE RISK. THE SITE, THE WIDGETS AND SERVICES ARE PROVIDED ON AN “AS IS” AND “AS AVAILABLE” BASIS. INVESTOPEDIA MAKES NO REPRESENTATION OR WARRANTY THAT THE SITE, THE WIDGETS OR SERVICES WILL MEET YOUR REQUIREMENTS, OR WILL BE UNINTERRUPTED, SECURE, CURRENT OR ERROR-FREE, OR THAT THE RESULTS THAT MAY BE OBTAINED FROM THE USE OF THE SITE, THE WIDGETS, AND SERVICES WILL BE ACCURATE, TIMELY, USEFUL OR RELIABLE. TO THE GREATEST EXTENT PERMITTED BY LAW, INVESTOPEDIA DISCLAIMS ALL WARRANTIES, REPRESENTATIONS AND CONDITIONS OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THE IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, WITH RESPECT TO THE USE OF THE WIDGETS THE SITE, AND ITS SERVICES, OR THE ACCURACY, COMPLETENESS, TIMELINESS OR CURRENTNESS OF ITS CONTENT, IN ANY WAY AND FOR ANY PURPOSE.

EXCLUSION OF CONSEQUENTIAL DAMAGES

IN NO EVENT WILL INVESTOPEDIA BE LIABLE FOR ANY INCIDENTAL, INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INDIRECT DAMAGES ARISING OUT OF THE USE OF OR INABILITY TO USE THE WIDGETS THIS WEBSITE OR ANY OF ITS SERVICES OR CONTENT, OR LOSS OF DATA, EVEN IF INVESTOPEDIA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND WHETHER BASED ON CONTRACT, TORT, NEGLIGENCE, PRODUCT LIABILITY, STRICT LIABILITY OR OTHERWISE.

EXCLUSION OF LIMITATIONS AND DISCLAIMERS

BECAUSE SOME JURISDICTIONS, SUCH AS NEW JERSEY, RESTRICT OR DO NOT ALLOW THE DISCLAIMER OF WARRANTIES, OR THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, IN SUCH JURISDICTIONS INVESTOPEDIA’S LIABILITY IS LIMITED TO THE GREATEST EXTENT PERMITTED BY LAW.

General

This TOU, and any applicable TOS, constitute the entire agreement between each User and Investopedia governing the User’s access to and use of the Site and its Services, and supersede all prior agreements regarding its subject matter. The TOU shall be governed by the laws of the State of New York without giving effect to any principles of conflicts of laws. Each User hereby attorns and agrees to the non-exclusive jurisdiction of the courts of the New York, New York.

The failure by a User or Investopedia to exercise any right or to enforce any provision of this TOU shall not constitute a waiver of such right or provision. If any provision of this TOU is found by a court of competent jurisdiction to be invalid or unenforceable, the court shall give effect to the intentions reflected in the provision to the degree possible, and the other provisions of this TOU will remain in full force and effect.

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The 5 Best Cars for Retirees

Right or wrong, there have always been certain cars associated with retirement and senior citizens. Disparagingly referred to as “old man cars,” this category has, in the past, included vehicles like the Lincoln Continental, Buick LeSabre, and Cadillac Eldorado.

Typically, they’re long, full-size sedans that are difficult to parallel park and elicit eye rolls from younger people.

Some cars are indeed better suited for older drivers and credible automotive authorities, such as Autotrader, Edmunds, and AutoGuide, regularly list them. Their choices—and the reasons behind them—may surprise you. One thing they don’t do is drive like a living room on wheels. Here are five cars that are considered to be a good fit for retirees and cost $30,000 or less.

Key Takeaways

  • In retirement, work income ceases, so owning and maintaining a car can become more expensive.
  • The best cars for retirees tend to be more affordable, reliable, and roomier.
  • Here, we look at five excellent options to consider as your new retirement vehicle.

1. Buick Encore

It’s still a Buick, but the Encore is quite different from the Buicks driven in the 1970s and 1980s. For starters, it’s a sport utility vehicle (SUV), and its high seating position provides good views of the road in all directions—a plus for seniors. The Encore is also easy to climb into and out of, given its proximity to the ground.

Standard features that could be helpful to retirees include a back-up camera, power windows, and keyless entry. A new, well-equipped Buick Encore can be purchased for about $23,200 for the 2020 model year. For a little more money, buyers can get the OnStar roadside assistance option. Finally, the Buick Encore was a 2016 Top Safety Pick of the Insurance Institute for Highway Safety (IIHS). 

2. Hyundai Sonata

One of the cars that pop up often in discussions about good picks for retirees is the Hyundai Sonata. Known for being reliable and low maintenance, the Hyundai Sonata is a roomy, mid-size sedan with many features likely to appeal to seniors. These include a wide dashboard, large buttons and controls, a telescopic steering wheel, and seats outfitted with lumbar supports. The car is also low to the ground and easy to enter and exit. And Sonatas are known for having one of the largest trunk spaces of any mid-size car.

Redesigned for the 2016 and later year models, the latest Sonata has great fuel economy: 23 miles per gallon in city driving and 32 miles per gallon on the highway. The gas/electric hybrid version of the Sonata has an even better fuel economy. The 2020 model starting price is around $23,600.

3. Subaru Outback

This selection might seem a bit curious, given that Subaru vehicles are known for off-road driving and racing. However, the Subaru Outback, an SUV, is mentioned regularly by automotive experts as appropriate cars for seniors because it’s a simple, functional, and durable vehicle. What’s more, it has great safety features: There’s an all-wheel-drive for slippery road conditions, and the Outback will stop automatically at low speeds if it detects that a collision is likely. There are also high seats, plenty of cargo space, and a dashboard that is intuitive to use, not over-complicated, with voice commands and touch screens.

At about $26,700, the 2020 basic model Outback is also less expensive than many comparable sport utility vehicles, and it consumes less gas—25 miles per gallon in the city and 33 miles per gallon on the highway. Subarus are so popular these days that you can expect a long waiting list for this vehicle.

4. Ford Taurus

A descendant of the Lincoln Continental, the Ford Taurus has been a bestselling car in North America since it was first introduced in 1986. Seniors have always gravitated to this full-size sedan. Recognizing the appeal of the Taurus to its older customers, Ford has continually added features over the years that make it easier and more comfortable for seniors to drive.

The 2019 Ford Taurus is equipped with a wide dashboard, seats designed to reduce fatigue and back strain, ambient lighting, and even a heated steering wheel for cold mornings. It also comes with keyless entry, cruise control, and safety features like forward collision and lane departure warnings. At about $28,000 a 2019 model is a little pricier, but certified pre-owned Ford Tauruses are also good and are available for less.

2019 is the last model year for the Ford Taurus presently, although 2019 new models are still on sale, as well as plenty of pre-owned vehicles.

5. Honda Odyssey

Perfect for retirees with a brood of grandchildren close by, the Honda Odyssey is among the top-rated minivans on the market. With seating for seven or eight people and a generous trunk room, the Odyssey is the ultimate people mover. It can comfortably fit the grandkids, family dog, and plenty of sports equipment. The mom-mobile works just as well as a grandmom-mobile. Or granddad.

Like the other vehicles on this list, the seats in the Odyssey are high and provide clear views in all directions. The van also has a large and comfortable cabin with ample room in the front, and its intuitive buttons and controls have been praised by automotive critics. Safety technology includes a blind spot detector in the side view mirrors, forward collision detection, and four-wheel anti-lock brakes for safe stopping.

The Odyssey is also notable for its engine and performance. What many people like most is that it doesn’t drive like a typical minivan. A 2020, basic model Honda Odyssey starts at about $30,800. 

The Bottom Line

Selecting any vehicle is a personal choice, and many factors will influence that choice. But for retirees and other seniors, it helps to know that certain brands and models of cars deliver features and functions designed to make driving enjoyable and safe for people who are advancing in years. Seniors should also take the time to test-drive all the cars they are considering to make sure that the one they choose is a good fit for their body and their driving style. Your height and whether you sit up or lean back when you drive can make a difference in rear-window visibility, for example.

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PepsiCo Beats on Earnings but Trades Under Death Cross

PepsiCo, Inc. (PEP) beat bottom-line estimates when it reported results on April 26, but the stock stayed below its semiannual pivot at $137.81. The stock subsequently fell below its quarterly pivot at $135.03 and its quarterly pivot at $135.03, but it held its 50-day simple moving average (SMA) at 129.40.

PepsiCo shares closed last week at $130.14, down 4.8% so far in 2020. The stock is in correction territory at 11.6% below its Feb. 18 high of $147.30 and is in bull market territory at 28.3% above its March 20 low of $101.42.

The company has a diversified menu of beverages and snacks, including Frito-Lay, Gatorade, Quaker, and Tropicana. PepsiCo has beaten earnings per share (EPS) estimates in the past five quarters. The company has an elevated P/E ratio of 23.54 with a favorable dividend yield of 2.89%, according to Macrotrends. 

The daily chart for PepsiCo

MetaStock XENITH

The daily chart for PepsiCo shows the stock above a golden cross that was confirmed on Aug. 16, 2018, when the 50-day SMA rose above the 200-day SMA to indicate that higher prices would follow. Holding the 200-day SMA between Sept. 5, 2018, and Jan. 30, 2019, provided a buying opportunity for the stock.

This provided the force for the stock to set its all-time intraday high of $147.20 on Feb. 18, 2020. This was a test of its annual risky level at $145.70 as an opportunity to reduce holdings. From this high, the stock cascaded below its semiannual pivot at $137.81 on March 6 and below its 200-day SMA the same day, providing the negative momentum to its March 20 low of $101.42.

The V-Shaped rebound was to its 200-day SMA and the quarterly pivot at $135.03 on April 14. The stock failed at its semiannual pivot at $137.81 and moved back below its quarterly pivot at $135.03 and its monthly pivot at $135.03. This is quite a volatile ride that investors could capture it they understand how to use my proprietary analytics and by reading the daily and weekly charts.

The Weekly Chart for PepsiCo

MetaStock XENITH

The weekly chart for PepsiCo is neutral, with the stock below its five-week modified moving average of $131.16. The stock is above its 200-week SMA, or reversion to the mean, at $117.39. The 12 x 3 x 3 weekly slow stochastic reading rose to 63.20 this week, up from 59.21 on April 24.

Trading strategy: Buy PepsiCo shares on weakness to the 200-week SMA at $117.39 and reduce holdings on strength to the quarterly, semiannual, and annual risky levels at $135.03, $137.81, and $145.70, respectively.

How to use my value levels and risky levels: The closing prices on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

The second quarter 2020 level was established based upon the March 31 close, and the monthly level for May was established based upon the April 30 close. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels remain in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. A reading above 90.00 is considered an “inflating parabolic bubble” formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered “too cheap to ignore,” which is typically followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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How KakaoTalk Makes Money

KakaoTalk is a popular messaging application that is used by many South Korean smartphone users. In 2014, KakaoTalk made headlines when it merged with Daum, Korea’s second-largest web portal. The new entity, named “Daum Kakao,” generated some $200 million a year in revenues. 

However, Kakao is not without its rivals. Across the strait of Korea, the Japanese mobile messaging market is dominated by Line (an app founded by Naver, South Korea’s largest search engine). While in the East, the Chinese arena is dominated by WeChat, an application with nearly a billion active monthly users.

Despite these possible contenders to its market share in Korea, KakaoTalk has been incredibly successful in monetizing itself through advertising, games, stickers, and various other ambitious enterprises. 

Key Takeaways

  • KakaoTalk is a major messaging app in South Korea, competing with notable apps like WeChat.
  • KakaoTalk generates some $200 million in revenues per year.
  • The company has a number of revenue streams, including advertising, games, stickers, and shopping.

Advertising 

According to official Daum Kakao investor presentations, much of the company’s revenues come from advertising. Mobile advertising in Korea has grown nicely over the years. In 2013, Kakao partnered with IGAWorks a mobile ad marketing company, to bring the ad platform adPOPcorn to KakaoTalk.

adPOPcorn will allow Kakao users (especially gamers) to earn incentives, such as in-game items, for click on ads. Kakao also makes advertising revenues through its KakaoStory, a “photo-centric SNS (social networking site), which allows sharing of photos videos and thoughts,” according to the company. Key features include photo editing, blogging, hashtags, and a news feed where ads can be displayed. 

Games

Launched in 2012, Kakao’s game publishing service has been an explosive driver of earnings growth. Despite its simple messaging origins, Kakao’s massive platform enabled developers to publish and distribute games to its millions of users, according to Statista.

The first game to become a run-away hit was developed by Match 4 and is considered to be the “Candy Crush Saga of Korea.” The game, known as “Anipang,” emulates its western counterpart not just in terms of game mechanics, but also its freemium-based model, generating hundreds of thousands of dollars in revenues a day.

Anipang’s success fueled an influx of titles on to the Kakao platform (and the Kakao coffers). Kakao generated over $100 million in gaming revenue last quarter.

Stickers

For those looking to simply take their messaging to the next level, Kakao also sells stickers and emojis available for purchase through Kakao’s own virtual currency, Chocos.

Stickers are incredibly lucrative in the world of messaging applications, as demonstrated by Kakao’s rival Line, whose sticker sales are responsible for 20 percent of its net sales, according to the company. While Kakao is not as reliant on sticker sales as the Japanese app maker, stickers, which are categorized with Kakao Music, Kakao Page, and Kakao payment services under the “Other” category.

Shopping, Music, and Others

Just like Line and WeChat, Kakao also offers its own e-commerce market place through Kakao Gift Shop and KakaoStyle. The former allows users to deliver gift coupons to one another through KakaoTalk, with offerings ranging from food and beverages to cosmetics and household items. The latter, which is the number one style app in Korea and features 100,000 browseable items and 160+ brands, allows users to share style opinions and information amongst friends while shopping.

Sharing coupons and shopping ideas are not the only things available on Kakao. The app launched its own version of Spotify in 2013. KakaoMusic enables users to create and share their own music room with their friends. Users can leave messages and comments and share sentiments and memories of each other’s rooms. For the entrepreneur, Kakao has also created KakaoPages, a fee-based mobile-optimized platform that gives users the opportunity to sell and market their original content in the form of text, images, audio, or video.

Then there is also BankWalletKakao, developed in partnership with the Korean Financial Telecommunications and Clearings Institute, as well as 16 Korean banks. This service facilitates bank transfers and allows users to make online payments using ATM cards. BankWallet is the second payment service application that Kakao has developed, the first being Kakao Pay (in 2014), which allows Kakao users to pay for e-commerce products and services through KakaoTalk.

The Bottom Line

Kakao, like Line and WeChat, aspires to be more than a mere messaging app. Based on its business developments, it appears Kakao has successfully introduced many monetizing platforms to generate tremendous revenue growth through its 48 million monthly active users. With its recent acquisition of the American app, Path, Kakao may be planning on expanding further outside of Korea (as Path enjoys immense popularity in Indonesia) and increasing its already impressive lineup of revenue-generating enterprises.  

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Pfizer Beats Estimates, but Stock Is Below Risky Level

Pfizer Inc. (PFE) beat earnings per share (EPS) estimates when it reported results on April 28, but the stock ended last week below its monthly pivot for May at $38.23. The stock has a positive weekly chart and is trading above its 200-week simple moving average (SMA), or reversion to the mean, at $37.10.

The pharmaceutical giant is a component of the Dow Jones Industrial Average, and Pfizer stock is one of the Dogs of the Dow for 2020. Its P/E ratio is 13.23, with a dividend yield of 3.96%, according to Macrotrends.

Pfizer stock ended last week at $38.36, down 2.1% year to date and in correction territory at 17.5% below its 52-week high of $46.47 set on Dec. 4, 2019. The stock is also in bull market territory at 37.6% above its March 23 low of $27.88.

The daily chart for Pfizer 

Refinitiv XENITH

The daily chart for Pfizer shows the confirmation of a death cross on Aug. 7, 2019, when the 50-day SMA fell below the 200-day SMA to indicate that lower prices would follow. The stock crisscrossed the 200-day SMA between Dec. 16 and Jan. 18 before slumping to its March 23 low of $27.88.

On the rebound, Pfizer stock returned to its 200-day SMA on April 23, but it ended last week below its pivot for May at $38.23. The stock is well below its quarterly and semiannual risky levels at $42.33 and $43.08, respectively, with its annual risky level above the chart at $47.22. This week’s value level is at $34.14, and the stock is above its 200-day SMA at $36.75.

The weekly chart for Pfizer

Refinitiv XENITH

The weekly chart for Pfizer is positive, with the stock above its five-week modified moving average of $37.10. The stock is above its 200-week SMA, or reversion to the mean, at $35.65.

The 12 x 3 x 3 weekly slow stochastic reading rose to 60.32 last week, up from 49.34 on April 24. At the all-time intraday high of 46.47 set during the week of Dec. 7, 2018, this reading was above 90.00, putting the stock in an inflating parabolic bubble formation, and bubble always pop.

Trading strategy: Buy Pfizer shares on weakness to the 200-week SMA and 200-day SMA at $37.10 and $36.75. Reduce holdings on strength to the quarterly, semiannual, and annual risky levels at $42.33, $43.08, and $47.22, respectively.

How to use my value levels and risky levels: The closing prices on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.

The second quarter 2020 level was established based upon the March 31 close, and the monthly level for May was established based upon the April 30 close. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels remain in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. A reading above 90.00 is considered an “inflating parabolic bubble” formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered “too cheap to ignore,” which is typically followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

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Synthetic vs Physical ETFs

Exchange-traded funds (ETFs) are a cost-efficient way to access a variety of investment exposures and hence have gained much popularity among investors. To keep up with the demand for transparent, liquid, cost effective diversified investment products, new and advanced versions of ETFs have been developed over the years. With these innovations, ETFs have not only become more numerous and popular but also more complex! One such innovation is the synthetic ETF which is seen as a more exotic version of traditional ETFs.

Key Takeaways

  • Instead of holding the underlying security of the index it’s designed to track, a synthetic ETF tracks the index using other types of derivatives.
  • For investors who understand the risks involved, a synthetic ETF can be a very effective, cost-efficient, index-tracking tool.
  • Synthetic ETFs can act as a gateway for investors to gain exposure in markets that are hard to access

What is a Synthetic ETF?

First introduced in Europe in 2001, Synthetic ETFs are an interesting variant of traditional or physical ETFs. A synthetic ETF is designed to replicate the return of a selected index (e.g. S&P 500 or FTSE 100) just like any other ETF. But instead of holding the underlying securities or assets, they use financial engineering to achieve the desired results.

Synthetic ETFs use derivatives such as swaps to track the underlying index. The ETF provider enters into a deal with a counterparty (usually a bank) and the counterparty promises that the swap will return the value of the respective benchmark the ETF is tracking. Synthetic ETFs can be bought or sold like shares similar to traditional ETFs. The table below compares physical and synthetic ETF structures.

Physical ETFs

Synthetic ETFs

Underlying Holdings

Securities of the Index

Swaps and Collateral

Transparency

Transparent

 Hisctorically Low (but improvement seen)

Counterparty Risk

Limited

Existent (higher than physical ETFs)

Costs

Transactions Costs

Management Fees

Swap Costs

Management Fees

Risk & Return

For instance, according to Europe’s UCITS rules, a fund’s exposure to counterparties may not exceed a total of 10% of the fund’s net asset value. In order to comply with such regulations, ETF portfolio managers often enter into swap agreements that ‘reset’ as soon as the counterparty exposure reaches the stated limit.

The counterparty risk can further be limited by collateralizing and even over collateralizing the swap agreements. Regulators require the counterparty to post collateral in order to mitigate the counterparty risk. In case, the counterparty defaults on its obligation, the ETF provider will have a claim to the collateral, and thus the investors’ interest is not hurt. The investors are more protected from losses in the event of a counterparty default when there is a higher level of collateralization and more frequency of swap resets.

Though measures are taken to limit the counterparty risk (it’s more than in physical ETFs), investors should be compensated for being exposed to it for the attractiveness of such funds to remain intact! The compensation comes in the form of lower costs and lower tracking errors.

Synthetic ETFs are particularly very effective at tracking their respective underlying indices and usually have lower tracking errors especially in comparison to the physical funds. The total expense ratio (TER) is also much lower in the case of synthetic ETFs (some ETFs have claimed 0% TERs). Compared to a synthetic ETF, a physical ETF incurs larger transactional costs because of portfolio rebalancing and tracking errors between the ETF and benchmarks.

The Bottom Line

Synthetic ETFs come in handy for investors when it’s impossible or expensive to buy, hold, and sell the underlying investment in some other way. However, the fact that such ETFs involve counterparty risk cannot be ignored, and thus the reward has to be high enough to mitigate the risks undertaken.

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Best Roth IRA Accounts in May 2020

Roth IRAs and traditional IRAs are very similar, but they differ in how they are taxed. With a traditional IRA, contributions will be taxed upon the withdrawal of funds from the account. With a Roth IRA, you pay taxes on the contributions you place in the account and you do not pay a tax once you withdraw the money at the age 59 ½ or older. If you withdraw before the age of 59 ½ with either a traditional or Roth IRA, you are subject to an additional 10% tax for early withdrawals unless you qualify for an exception.

Both Roth IRAs and traditional IRAs provide tax-free growth of your contributions until you retire, which is why finding the right online broker to build your retirement wealth is crucial. The brokers and robo-advisors we selected have excellent retirement planning and reporting tools. We also looked at low or no annual fees for managing your IRA, so you can keep that money growing for your retirement.

Best Roth IRA Accounts in May 2020:

  • Fidelity Investments
  • Charles Schwab
  • Merrill Edge
  • Wealthfront
  • M1 Finance
  • Betterment

Fidelity Investments

Fidelity is improving its retirement planning tools intended to engage millennials with a game called Five Money Musts, which encourages new investors to get into the markets using exchange-traded funds. For those who are further down the road toward retirement, there are tools to help get organized as one’s retirement date approaches, including a clear explanation of how and when to take Social Security payments. Fidelity offers everything from managed accounts to self-service, and its robo-advisory, Fidelity Go, can be used for IRAs. 

Rolling an employer’s 401(k) balance into an IRA is a process that can be cumbersome and full of twisty passages, but Fidelity spells out the necessary steps clearly. Its retirement calculators and goal-setting tools are written in plain English and are easy to use.

Pros

  • Low transaction fees, plus terrific order-routing technology that lowers the cost of a transaction by seeking out price improvement.

  • Abundant online help, including a chatbot that can answer most customer queries.

  • A wide range of assets can be traded. With commission cuts, all ETFs trade for free.

Cons

  • The platform suffered some outages during heavy trading days, but Fidelity has been investing heavily in the infrastructure to keep this from happening in the future.

  • Automatic dividend reinvestment is set for the entire account; to change it for a particular security, you must call customer service.

  • Finding a particular tool or feature can be difficult due to the platform’s menu system.

Charles Schwab

Schwab offers a wide range of assets in which to invest, and excellent options trading tools. Its Retirement and Planning section of the web platform helps customers understand the types of accounts available, including how to roll over an old 401(k) to an IRA. You can go it alone or sign on with a professional advisor to guide you on your journey.

Schwab’s robo-advisory, Intelligent Portfolios, can be used with any kind of IRA, if you’d prefer to use its no-fee automated service. As retirement nears, Schwab’s site is full of ways to generate income safely up to your target date and beyond. The Retirement Income Quiz is worth taking just to see which areas of financial freedom you might want to study further.

Pros

  • No-cost robo-advisory, Schwab Intelligent Portfolios, is a good place to start investing for retirement.

  • All ETFs can be traded without incurring transaction fees.

  • ETF research center also has a screener for closed-end funds, which can be used to generate income in retirement.

Merrill Edge

Merrill Edge’s educational offerings are based on investing experience, life stage, life events, and retirement, guiding clients with articles, videos and webinars, and online courses. Almost all of the tools available take a long-term look ahead with a huge focus on retirement planning, so having an IRA here makes a lot of sense. 

Merrill’s Portfolio Story feature is a terrific tool for retirement planning and investing for goals. It’s personalized to each customer and displays your asset allocation and your progress towards your goal in an inviting layout. You can drill down for more information about a particular holding using Merrill’s Stock Story feature, which also provides details on a company’s environmental, social and governance (ESG) ratings. A hypothetical trade calculator projects how a trade could impact your entire portfolio. 

Merrill has made a huge investment in its mobile apps, reflecting the number of customers who access its services using smartphones and tablets. The mobile apps also include a wealth of guidance and retirement planning content.

Pros

  • Personalized portfolio analysis.

  •  Top notch retirement planning and life stage planning tools.

  • Customizable news feed with content from more than 35 providers.

Cons

  • Complex options trading is limited

  • Self-directed investors may get annoyed by the seemingly constant push towards hiring a financial advisor.

Wealthfront

Wealthfront allows you to open traditional IRAs, Roth IRAs, SEP IRAs, and 401(k) rollovers along with a variety of taxable accounts. Goal planning and tracking are where Wealthfront shines. Your dashboard shows all of your assets and liabilities, giving you a quick visual check-in on the likelihood of attaining your goals. As you make life changes, such as a new job, a spouse, having or adopting a child, or buying a house, your Wealthfront plans adjust accordingly. 

Wealthfront’s use of third-party data makes it incredibly useful for all sorts of planning—not just retirement—and you may find yourself running scenarios far beyond your long-term investment needs. You can even figure out how long you can take a sabbatical from work and travel, while still making your other goals work.

Wealthfont appears to be making a strong move to integrate all of its money services in a single platform with its Self-Driving Money concept, where you deposit your pay into the platform and it handles your finances for you. This service isn’t up and running yet, but it is a primary focus for the company as part of the next major launch. As a step in this direction, Wealthfront launched a Roth IRA converter that automates the process of moving funds from a traditional IRA into a Roth IRA account.

Pros

  • Wealthfront provides terrific financial planning that helps you see the big picture.

  • The robo-advisor’s goal-setting assistance goes in-depth for large goals, such as home purchases and college savings.

  • If you have multiple goals in addition to retirement, Wealthfront’s Path tool shows you the trade-offs you’ll face prioritizing one over the other.

Cons

  • Wealthfront offers no online chat for customers or prospective customers.

  • Portfolios under $100,000 are not customizable beyond risk settings.

  • Larger retirement accounts with Wealthfront may contain more expensive mutual funds as an additional type of diversification.

M1 Finance

M1 Finance offers a unique combination of automated investing with a high level of customization, allowing clients to create a portfolio tailored to their exact specifications. You can create portfolios containing low-cost ETFs or use individual stocks—or both. M1’s target customer has a long-term focus and experience with using a traditional online brokerage to invest in stocks and ETFs. M1 is offering these potential clients a lower-cost alternative that allows fractional share transactions and a large amount of control over the portfolio contents. This is the key difference between M1 and many other offerings, as you often are giving up much of the control in exchange for the portfolio management services. 

With M1, you can choose one of more than 80 expert portfolios or build your own. You can also build pies—M1’s name for the circular charts showing asset mixes in a portfolio—made out of other pies and keep them all balanced to your specifications. Overall, M1 is offering a remarkably flexible platform that includes stock and ETF screeners to help with investment selection. This type of tool and the approach behind it are still rare in the robo-advisory world. 

M1 doesn’t brand itself as an advisory service; rather, it is an automated investing platform designed to take care of the ongoing management of the portfolio you create. This is a do-it-yourself investing platform, and it expects you to know what you are doing and why. As such, M1 doesn’t have many tools for setting goals beyond several dozen articles about retirement savings. This may be jarring to investors expecting more hand-holding, but intermediate investors may welcome the lack of distractions standing in the way of actual portfolio creation. Its offerings have resonated with many investors though—in February 2020, M1 announced that it had crossed the $1 billion threshold of assets under management.

Pros

  • M1 allows you to trade fractional shares so you are fully invested.

  • M1 charges zero trading fees or asset management fees.

  • There are a variety of ways to go about portfolio building, including more than 80 “expert” portfolios you can follow for the purpose of mimicking.

Cons

  • The way M1 places trades puts transaction timing out of your control. This will be an issue if you are taking a trading approach to your IRA.

  • Accounts with less than $20 and no trading activity for 90 days are charged a fee.

  • M1 does not employ financial advisors and offers very little help for setting financial goals. You also cannot consolidate external accounts for planning purposes.

Betterment

There are several ways to use Betterment: you can sync all of your financial accounts to get an overall picture of your assets without investing, you can invest in one of their portfolios, or you can create a Flexible Portfolio with some of your own specifications. Portfolios are rebalanced when necessary rather than on a set schedule. Betterment is very much a goal-based platform, and there are many planning tools available to users along with plenty of advice. You can attach a specific investing goal to each portfolio, which can be invested in different strategies. Funds for longer-term goals like saving for retirement can be allocated to one of the higher-risk portfolios, while shorter-term goals, such as funding a down payment on a house, can be allocated to the lower-risk ones. 

Betterment has very easy-to-follow steps for setting a goal, and each one can be monitored separately. The asset allocation is displayed in a ring, with equities in shades of green and fixed income in shades of blue. If you’re falling behind on meeting your retirement goals, Betterment will encourage you to put more aside. This can be a helpful prompt, particularly for young investors who may not yet feel the urgency to save for their retirement.

Pros

  • Betterment’s IRA account set up is quick and easy, and portfolios are fully transparent prior to funding.

  • You can sync external retirement accounts to your Betterment retirement goal to view your overall progress with ease.

  • Betterment makes it easy to change portfolio risk or switch to a different type of portfolio.

Why You Should Consider a Roth IRA

Roth IRAs are fantastic investment vehicles. This is because they are heavily advantaged against taxes. Here are some reasons that a Roth IRA can be a great opportunity:

Who Are Roth IRAs Best For?

Roth IRAs are best for those whose modified adjusted gross income (MAGI) is under the limit for 2020 ($124,000 if single and $206,000 if married), and for those who believe that they will be in a higher tax bracket when they retire than they are now.

Regardless, it’s always beneficial to have your retirement savings tax-diversified. Note that singles with MAGIs between $124,000 and $139,000 ($196,000 and $206,000 for those married filing jointly) can make reduced contributions to a Roth IRA.

Tax diversification means having a variety of retirement accounts with the goal of maximizing withdrawals without pushing yourself into a higher tax bracket. Here’s how it works: When you can withdraw penalty-free money from your retirement accounts starting at age 59 ½, you withdraw from your traditional IRA savings just up to the limit of the next tax bracket. You can then take additional savings out of your Roth IRA, as it does not add to your taxable income because it was already taxed when it was first contributed. This lets you keep your taxable income low while being able to take a larger sum out of your retirement accounts.

How Do You Qualify for a Roth IRA?

  • If single: must have a modified adjusted gross income under $139,000 to contribute, but contributions are reduced starting at $124,000.
  • If married filing jointly: modified adjusted gross income must be less than $206,000, with phaseout starting at $196,000.

How Much Can I Contribute to a Roth IRA?

For 2019 and 2020, you can contribute a maximum of $6,000 ($7,000 if you’re 50 or older by the end of the year) or your taxable compensation for the year, if it’s below the permitted number.

How Does a Roth IRA Grow?

A retirement account—whether it is a traditional IRA, Roth IRA, or 401(k)—builds up as you contribute to the account. These accounts also grow over time due to compounding interest. Compounding means that every year your contributions earn interest, your balance increases. The following year, you earn interest on the increased balance. As a result, the total amount of interest earned increases each year, even if you are no longer contributing to your account.

In addition to interest-bearing accounts, retirement money, including funds in your Roth IRA, can be invested in the markets. These funds could be placed into stocks, ETFs, mutual funds, and a number of other financial assets. When these assets go up in value, they can significantly grow the value of your retirement account.

Compare to Similar Investment Accounts

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The offers that appear in this table are from partnerships from which Investopedia receives compensation.

Methodology

Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of six months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on their platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting over 3,000 data points that we weighed into our star scoring system.

In addition, every broker we surveyed was required to fill out a 320-point survey about all aspects of their platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of their platforms at our offices.

Our team of industry experts, led by Theresa W. Carey, conducted our reviews and developed this best-in-industry methodology for ranking online investing platforms for users at all levels. Click here to read our full methodology.

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Best Options Trading Platforms for May 2020

We recognize that we all are living through a particularly volatile time as we deal with this global crisis, and financial markets have also seen unprecedented change, impacting all investors. Our mission has always been to help people make the most informed decisions about how, when and where to invest. Given recent market volatility, and the changes in the online brokerage industry, we are more committed than ever to providing our readers with unbiased and expert reviews of the top investing platforms for investors of all levels, for every kind of market.

Options trading has become extremely popular with retail investors since the turn of the 21st century. Our best options brokers have a wealth of tools that help you measure and manage risk as you determine which trades to place. They also include valuable education that helps you grow in sophistication as an options trader.

Best Online Brokers for Options Trading in May 2020:

  • tastyworks: Best Options Trading Platform
  • tastyworks: Best Broker for Advanced Options Traders
  • tastyworks: Best Broker for Mobile Options Traders
  • E*TRADE: Best Broker for Beginning Options Traders
  • eOption: Best Broker for Low-Cost Options Trading

Best Options Trading Platform, Best for Advanced Options Trades, and Best for Mobile Options Traders: tastyworks

Tastyworks says that more than 90% of the trades placed by its customers are derivatives, so they naturally spend their time designing a lot of tools specifically for options and futures traders. Everything is designed to help traders evaluate volatility and the probability of profit. Tastyworks’ entire platform is geared towards making decisions and taking action. Tastyworks opened its virtual doors in 2017, so it isn’t saddled with legacy systems that bog down many of the older online brokers. This has helped it tremendously in keeping the options trading experience to the essentials. Tastyworks’ executions are fast and the costs are low, with commissions capped for opening orders for options on equities and futures at $10 per leg. 

Watchlists are a key component of the tastyworks platform, and they are the same on mobile, web, and download. The look and feel of the mobile platform is very similar to the desktop versions, though you’ll find price wheels and ways to define trades that minimize the possibility of making a mistake. As you build a position from a chart or from a volatility screener, a trade ticket is built for you. There’s also a video viewer embedded so you can keep an eye on the tastytrade network. Though a newcomer to options trading might be initially uncomfortable, those who understand the basic concepts will appreciate the content, features, and focus apparent throughout tastyworks’ platforms.

Pros

  • All of the tools you’ll need for analyzing and trading derivatives are built into the platforms.

  • The charting capabilities are uniquely tuned for the options trader. If you have multiple positions on a particular underlying, you can analyze the risk profiles of the combined position.

  • There are hours of original video from tastytrade every weekday, offering up-to-the-minute trading ideas, plus a huge library of pre-recorded videos and shows.

Cons

  • Newcomers to trading and investing may be overwhelmed by tastyworks at first.

  • There is no fixed income trading (outside of ETFs that contain bonds) for those who want to allocate some of their assets to a more conservative asset class.

  • Any additional portfolio analysis beyond profit and loss requires setting up a login on a separate site, The Quiet Foundation, which is also part of the tastytrade empire.

Best for Beginning Options Traders: E*TRADE

New options traders need some help in understanding how trading derivatives can help improve portfolio returns. E*TRADE’s more advanced platforms are elegantly designed and guide you along the way. When you graduate to options and derivatives, the Power E*TRADE website and mobile app can help you learn. The Power E*TRADE site and app can be set up to put the functions you use most often front and center so you don’t have to dig around for them. The platform has all the features inherited from E*TRADE’s acquisition of OptionsHouse technology, which includes a wealth of helpful educational resources for the developing options trader. Watchlists are integrated across E*TRADE’s platforms, and the full range of tradable assets is accessible on the mobile apps. The workflow is very smooth on the mobile apps. We also found that using Power E*TRADE on a tablet is quite pleasant.

Pros

  • Mobile apps are extremely well laid-out and easy to use and are among the most comprehensive and extensive apps tested.

  • Spectral Analysis on Power E*TRADE is a visually stunning tool that helps you visualize maximum profit and loss for an options strategy and understand your risk metrics

  • You can test strategies using the paper trading capabilities of E*TRADE Pro’s desktop platform, which uses delayed data so you won’t think you’re placing real trades.

  • On all platforms, you’ll find a ubiquitous trade ticket with streaming real-time data.

Cons

  • Tiered commission schedule for options trades, charging $0.65 per contract for less frequent traders and $0.50 for those who place more than 30 options trades per quarter.

  • Investors who would like direct access to international markets or to trade foreign currencies should look elsewhere.

  • You cannot consolidate your externally-held accounts to form a complete picture of your net worth on E*TRADE.

Best for Low-Cost Options Trading: eOption

eOption charges $1.99 per leg for options trades, but the per-contract fee is significantly lower than its competitors, making it great for heavy options traders. eOption also offers commission-free stock and ETF trading so those who are options-oriented traders but also want access to other assets at a low cost will have no issues here. Clearing and exchange fees, typically a fraction of a penny per share, are spelled out on the order confirmation screen and are passed through to customers. eOption also scored highly for its relatively low margin rates.

Pros

  • eOption offers great value for frequent options traders.

  • The browser-based eOption Trader platform is easy to use.

  • Newsletter subscribers can auto-trade their alerts.

Other Options Considerations

The commission structure for options trades tends to be more complicated than its equivalent for stock trades. Until the commission cuts that swept the industry in the fall of 2019, most brokers charged a fee for each leg of an options spread plus a commission per contract being traded. The per-leg fees, which made 2- and 4-legged spreads expensive, have been eliminated industry-wide, for the most part. We are also seeing some brokers place caps on commissions charged for certain trading scenarios. 

Investors with fairly large portfolios can also take advantage of portfolio margining at some brokers. This is a practice that assesses the total risk inherent in a portfolio that contains stocks and derivatives. Investors with large portfolios can use portfolio margining to reduce the size of the margin loan. 

What Kind of Options Trader Are You?

The first and most important piece of information to consider before selecting an options trading account is what kind of trader you are. What is your trading style and risk appetite? Which tools would you like to have handy?

If you’re just getting started with options trading, the quality of education and help offered by your broker is important. Frequent traders and those who trade a large number of contracts will be more sensitive to commissions and fees, so check out your prospective broker’s charges and make sure you understand them.

Compare to Similar Investment Accounts

×

The offers that appear in this table are from partnerships from which Investopedia receives compensation.

Methodology

Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on its platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting thousands of data points that we weighed into our star-scoring system.

In addition, every broker we surveyed was required to fill out an extensive survey about all aspects of its platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of its platforms at our offices.

Our best options brokers have a wealth of tools that help you measure and manage risk as you determine which trades to place. These brokers include valuable education that helps you grow in sophistication as an options trader. Investors with fairly large portfolios can take advantage of portfolio margining at certain brokers, a practice that assesses the total risk inherent in a portfolio that contains stocks and derivatives, and can reduce the size of your margin loan.

Our team of industry experts, led by Theresa W. Carey, conducted our reviews and developed this best-in-industry methodology for ranking online investing platforms for users at all levels. Click here to read our full methodology.

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When Are Mutual Fund Orders Executed?

When Are Mutual Fund Orders Executed?

Whether you are buying or selling shares in a fund, mutual fund trades are executed once per day, after market close, at 4 p.m. Eastern Time; they are typically posted by 6 p.m. Trade orders can be entered through a broker, a brokerage, an advisor, or directly through the mutual fund.

However, they are executed by the fund company rather than traded on the secondary market—as are other instruments, such as stocks and exchange-traded funds (ETFs).

Key Takeaways

  • Mutual fund orders are executed once per day, after the market close at 4 p.m. Eastern time.
  • Orders can be placed to either buy or sell and can be made through a brokerage, advisor, or directly through the mutual fund.
  • The shares of mutual funds are very liquid, easily tradeable, and can be bought or sold on any day the market is open.
  • An order will be executed at the next available net asset value (NAV), which is determined after the market close each trading day.
  • When thinking about price, investors need to take into account the fees and sales loads associated with funds.

Understanding When Mutual Fund Orders Are Executed

Trading and Settlement

Some brokerages and fund companies require orders to be placed earlier than the market close, while others allow same-day execution right up to the market close.

Fees mutual fund investors must pay include loads, paid to a broker or advisor when certain types of funds or bought or sold; transaction fees, charged every time the investor buys or sells a fund; and expense ratios, percentages that reflect the fees paid to the fund company to manage and operate the fund.

Calculating Price

The price paid for the shares purchased—also the amount received for the shares redeemed—is based upon the new NAV, combined with any purchase or redemption loads or fees that are due.

The NAV is calculated daily after the market close in order to determine the closing market value of all the combined securities held by the fund, minus the fund’s liabilities. That figure is then divided by the total number of shares outstanding for the fund, which results in the NAV per share for that day. Buy and sell orders for that day are then executed using that NAV.

Mutual fund expense ratios vary based on the fund class. As per Morningstar, 1.00% is the average for actively-managed large-cap stock funds, 1.10% is the average for mid-cap stock funds, and 1.20% is the average for small-cap stock funds; a passively-managed S&P 500 index fund has an average expense ratio of 0.15%; bond funds have an average expense ratio of 0.75%.

In addition to the NAV, investors need to take into consideration the various fees or sales loads associated with mutual funds, such as front loads (commissions), deferred sales charges due upon redemption, short-term transaction and redemption fees, exchange fees, and account fees.

Such fees reduce the NAV per share price received for redemptions and are added to the NAV purchase price when buying shares.

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