The Personal Finance Geek

A national credit rating is a rating given to a country by a credit rating agency. It is a measure of the country's ability to repay its debts. The rating is based on a number of factors, including the country's economic stability, its political stability, and its history of repaying its debts. There are three main credit rating agencies giving countries ratings, just like there are 3 (different) agencies in the US that give people ratings: Standard & Poor's, Moody's, and Fitch. Each agency has its own rating scale, but the ratings generally range from AAA (the highest rating) to D (the lowest rating). You may have seen in the news that the US's rating just got downgraded from AAA to AA, which sent the markets tumbling down 2-4%. This is because the US is generally so well-trusted that, when its credit rating does change, the change triggers a shock in the US and global economies. A country's credit rating is important because it affects the interest rates t...

The Rule of 72 is a simple way to estimate how long it will take for money to double at a given interest rate. To use the rule, divide 72 by the interest rate. The result is the number of years it will take for your money to double. For example, if you invest money at a 6% interest rate, it will take about 12 years to double (72 / 6 = 12). The Rule of 72 is a quick and easy way to get a general idea of how long it will take for your money to grow. However, it is important to note that it is just an estimate. The actual time it takes for your money to double may be longer or shorter than the number of years you get using the Rule of 72. This is because the Rule of 72 does not take into account compounding, which is when you earn interest on your interest. If you want to get a more accurate estimate of how long it will take for your money to double, you can use a compound interest calculator. A compound interest calculator will take into account the interest rate, the number of years you...

An ETF, or exchange-traded fund, is a type of investment fund that tracks an index, such as the S&P 500. ETFs trade like stocks on an exchange, which means you can buy and sell them just like you would any other stock. ETFs offer a number of advantages over other types of investments, including: Diversification: ETFs allow you to invest in a basket of assets, which can help to reduce your risk. Low costs: ETFs typically have lower fees than mutual funds. Transparency: ETFs are required to disclose their holdings daily, which gives you more information about what you're investing in. Tax efficiency: ETFs are generally more tax-efficient than mutual funds. To invest in ETFs, you'll need to open an account with a brokerage firm that offers ETF trading. Once you have an account, you can place an order to buy or sell ETFs just like you would any other stock. When choosing ETFs, it's important to consider the following factors: The index the ETF tracks: Make sure you und...

  A few weeks ago, I put out a post explaining the basics of Fedspeak , the cryptic language the Fed members use to signal to each other, to banks, and to the general public what they intend to do in the near future, and then to actually put those plans into action when they make official announcements of those plans. In that explainer, I mentioned two terms that are so important to what the Fed does as an institution, and to us, ordinary Americans, that I decided to write a more detailed explainer, about those two terms specifically: the difference between quantitative easing and tightening.  Quantitative easing (QE) and quantitative tightening (QT) are two monetary policy tools that central banks use to influence the money supply and interest rates. QE involves buying assets from banks and other financial institutions, while QT involves selling assets. QE is used to stimulate the economy when it is in a recession. By buying assets, central banks inject money into the economy...

  When you buy shares in a company, you become a shareholder. As a shareholder, you have the right to vote on major decisions that affect the company. This includes things like electing the board of directors, approving mergers and acquisitions, and setting executive compensation. Voting is one of the most important ways that shareholders can have a say in how a company is run. By voting, you can help to ensure that the company is managed in a way that is in the best interests of all shareholders. If you are a new investor, it is important to understand your voting rights. You can find information about voting in the company's proxy statement, which is sent to shareholders before each annual meeting. Your online brokerage portal will let you know when the issues have come up that will be voted on at the meeting, and they’ll probably include a secure link to the questions to be voted on, which you, as an investor which the brokerage knows has some share in the company that wants to ...

A quarterly earnings call is a conference call that publicly traded companies hold to discuss their financial results for the previous quarter. The call is typically hosted by the company's CEO and CFO, who answer questions from analysts and investors about the company's performance. Earnings calls are important because they provide investors with an opportunity to get insights into a company's financial health and future prospects. The calls can also be used by companies to manage investor expectations and build relationships with the investment community. If you're new to the stock market, it can be helpful to listen to a few earnings calls to get a sense of what they're like. You can find transcripts of earnings calls on the websites of many publicly traded companies. Here are a few things to keep in mind when listening to an earnings call: The CEO and CFO will typically start the call by providing an overview of the company's performance for the quarter. The...

Big banks and credit unions are both financial institutions that offer a variety of services, such as checking and savings accounts, loans, and credit cards. However, there are some key differences between the two types of institutions. Big banks are for-profit businesses that are owned by shareholders. They are regulated by the federal government, but they are not subject to the same restrictions as credit unions. Big banks typically have a wider range of products and services than credit unions, and they offer more convenient hours and locations. However, they also tend to charge higher fees. Credit unions are non-profit financial cooperatives that are owned by their members. They are regulated by the National Credit Union Administration (NCUA), which is a federal agency. Credit unions typically have fewer products and services than big banks, but they offer lower fees and better interest rates on loans and savings accounts. Credit unions are also more likely to offer community-based...

Junk fees are hidden or excessive fees that banks, credit card companies, and other financial institutions charge their customers. These fees can add up over time and can make it difficult to manage your finances. Some common types of junk fees include: Account maintenance fees ATM fees Late payment fees Overdraft fees Foreign transaction fees The US government has taken some steps to regulate junk fees, but there is still more work to be done. In 2010, the Consumer Financial Protection Bureau (CFPB) was created to protect consumers from unfair, deceptive, and abusive financial practices. The CFPB has taken action against banks and credit card companies that have charged excessive junk fees. In 2020, the CFPB proposed a rule that would require banks to provide consumers with more information about the fees they charge. The rule would also require banks to get consumers' permission before charging them certain fees. There are a few things you can do to protect yourself from junk fee...

Currency exchange rates are the prices of one currency in terms of another. For example, let’s consider the rates between the dollar and the euro, or the euro and the dollar.  1 Euro  = 1.11 Dollars, so 1 Dollar = 0.90 Euros. Note that 1 / 0.9 is 1.11, or that 1 / 1.11 is 0.9, so the rates are symmetrical.  Currency exchange rates are important because they affect the cost of goods and services that are bought and sold internationally. For example, if the exchange rate between the US dollar and the euro goes up, then it will cost more US dollars to buy euros. This means that US goods and services will be more expensive for Europeans, and European goods and services will be cheaper for Americans. Currency exchange rates are also important for businesses that operate internationally. When a business sells goods or services in a foreign country, it needs to convert the foreign currency into its own currency in order to get paid. The exchange rate will affect how much money t...

  Investment time horizon is the length of time you plan to invest your money. It is important to consider your investment time horizon when choosing investments, as different investments are suited for different time horizons. For example, if you are investing for a short-term goal, such as buying a car in the next few years, you will want to choose investments that are relatively safe and have a low risk of losing money. On the other hand, if you are investing for a long-term goal, such as retirement, you can afford to take on more risk in order to potentially earn a higher return. Here are some general guidelines for choosing investments based on your investment time horizon: Short-term investments: For short-term investments, you will want to choose investments that are relatively safe and have a low risk of losing money. Some good options for short-term investments include savings accounts, CDs, and money market funds. Intermediate-term investments: For intermediate-term inves...

A bubble is a situation in which the price of an asset rises rapidly and far beyond its intrinsic value, usually fueled by speculation. Bubbles can occur in any market, but they are most common in financial markets, such as the stock market or the housing market. In the late 1990s and early 2000s, tech stocks were all the rage, before they crashed in 2001-02, in the “dot com bubble.” In 2007-08, it was very easy to borrow money, and so banks gave out mortgages that were much too expensive to people who could not afford the payments-- this was the cause of the “subprime mortgage crisis,” or the “housing bubble” of the time. There are a number of factors that can contribute to the formation of a bubble. One common factor is a period of economic growth or prosperity, which can lead to increased confidence and optimism among investors. This can lead to a rise in demand for assets, which can push prices up even higher. Another factor that can contribute to a bubble is easy access to credit....