FAQs
What is a Registered Investment Advisor (RIA)?
A Registered Investment Advisor (RIA) is an firm that provides investment advise for a fee and is registered with either the SEC (Securities Exchange Commission) or with a particular State. Large RIA’s must be registered with the SEC, while smaller RIA’s may only be registered at the State level. RIA’s often provide investment management and/or financial planning services. RIA’s act in a fiduciary capacity by law.
What is a Fiduciary?
A Fiduciary means that our Firm must act in the best interests of the client. We must put the client’s best interests ahead of our own interests when providing financial advice and investing your assets. .
How does your firm earn money?
Our Firm earns money by charging a fee based on Assets Under Management (AUM) to each client. The annual fee (but billed quarterly) is dependent upon which investment strategies we are using and the portfolio size. If your account grows, then our fee grows. If your account declines in value, then our fee declines as well. We feel this fee-based approach, helps align our Firm’s interest with our Client’s interests.
What is a Trust?
A Trust is legal structure used in Estate planning to distribute property to beneficiaries. It is useful to avoid having your assets pass through probate which delays your beneficiaries from receiving their inheritance. When you put your assets in a Trust, you can still direct the assets while you are living. There are two main types of Trusts – Revocable and Irrevocable. Revocable Trusts allows you to make changes to the Trust at any time. However, Irrevocable Trusts cannot be changed once they are established.
What's the difference between a Roth IRA and a traditional IRA?
A traditional IRA allows for tax-deductible contributions (subject to income limits), with withdrawals taxed as ordinary income in retirement. A Roth IRA uses after-tax contributions with tax-free withdrawals in retirement. The choice between them often depends on your current tax situation, expected future tax rates, and retirement timeline.
What is Asset Class diversification?
Asset Class diversification involves developing a portfolio involving multiple securities, companies, and asset types (Stocks, Bonds, and Cash) to reduce portfolio risk. No single stock, bond, or even asst class should be able to make or break a portfolio. Effective diversification means that investments will not all work (or fail) at the same time.
What is a Stock?
A Stock represents buying ownership in a company. The value of the Stock will fluctuate based on the performance and expectations of the company. If the company does well, the Stock price usually rises in value. However, the company has poor results, the Stock price usually declines in value.
What is a Bond?
A Bond is a loan that an investor makes to a company or government entity for a specific time frame. In return, the investor will receive periodic interest payments for loaning the money. At the end of the time frame (known as the Maturity Date), the investor will receive back the initial loan amount. Bonds usually are considered to be less volatile than Stocks.
What is a Call Option?
A Call Option is a financial contract that gives the buyer the right, but not the obligation, to buy a particular Stock at a specific price (Strike Price) by a specific date (Expiration Date). If the Stock price rises above the Strike Price at any point before the Expiration Date, the Call may be “exercised” and the investor will need to sell the Stock shares at the Strike Price. If the price of the Stock stays at or below the Strike Price, the Call expires and no action is taken. In either case, the investor who sells the Call Option gets to keep the Call Premium amount. One Call Option contract covers 100 shares of the underlying Stock.
What is a Put Option?
A Put Option is a financial contract that gives the buyer the right, but not the obligation, to sell a particular Stock at a specific price (Strike Price) by a specific date (Expiration Date). If the Stock price declines below the Strike Price at any point before the Expiration Date, the Put Option may be “exercised” to allow the Put buyer to sell the Stock shares at the Strike Price which is higher than the current price. In this scenario, the Put seller must buy the Stock at the Strike Price. If the price of the Stock stays at or above the Strike Price, the Put expires and no action is taken. In either case, the Put seller gets to keep the Put Premium amount. One Put Option contract covers 100 shares of the underlying Stock.
What is Covered Call Writing?
Covered Call Writing is a conservative option strategy that is used to help protect the downside, but also limits the upside of owned Stocks. When an investor writes (sells) a Call option, the investor will receive a payment known as Call Option Premium. In writing a Call, the investor agrees to sell a particular Stock for a specific price (Strike Price) by a specific date (Expiration Date). In Covered Call Writing, the Call writer owns the underlying Stock. Using this investment strategy, an investor may be able to generate an income stream from receiving Call Option Premium.