Category / Investing


Debunking 401k Theory

Step Brothers

If you have a 401(k) retirement savings plan and you’re like the rest of working Americans, it’s highly likely that you don’t plan on touching that money until well, retirement. With social security increasingly becoming an unreliable source of income for many people, the younger generation is putting a lot of stock in their 401(k) savings.

Television gurus like Suze Orman and Jean Chatzky all preach the message that it’s a heinous crime to withdraw money early from your 401(k). But what if Suze Orman is wrong? Can it actually be smarter to cash in some of your retirement well before you will ever retire? If you have consumer debt, the answer is….yes!

How 401(k) plans work

Let’s quickly review how employer-sponsored 401(k) plans work. Employees are given the opportunity to elect to have a portion (usually no more than fifteen percent) of their pre-tax wages set aside in an investment account. In short, you get the benefit of saving money while deferring taxes.

Generally, the company will match part or all of the employee’s contribution to their 401(k), or offer a profit-sharing contribution to the plan. Because the nature of a 401(k) is that it’s an investment account, it can and usually will grow significantly over time. All 401(k) earnings (interest, capital gains, or dividends) are tax deferred, culminating in the blessed occasion when you turn 59 ½ and can withdraw funds without any penalties beyond regular income tax.

The good and the bad news

So why do all the gurus tell you not to withdraw early? It’s not because you can’t; it’s because the government imposes severe penalties to the tune of extremely high taxation whenever you withdraw early. Many 401(k) plans also allow withdrawals in the form of loans you eventually have to pay back with interest. Oftentimes, you can end up paying taxes twice over when you withdraw from your 401(k) early.

Is there really any good reason to withdraw early from your 401(k)? Absolutely, definitely, and yes. You will never hear the famous financial gurus tell you this, but sometimes waiting until you retire is quite simply too long. The number one reason to withdraw early from your 401(k) is to pay off debt.

Early withdrawal can save you money

For a person with thousands of dollars worth of personal loans that are growing at a very high interest rate, cashing out part of a 401(k) might be just the solution.

With interest rates on the rise, consumer loans and bad debt can quickly drain a person’s cash flow. Sure, early withdrawal from your 401(k) will get you tax penalties. But if the trade off is that you can move toward being debt-free and freeing up cash flow, tax penalties are a small price to pay for financial freedom

Consider the long term impact

It’s important to do long term cost analysis before choosing to withdraw early from your 401(k). If you’re in a situation where you’re only able to pay the minimum due on a high interest, high balance credit card, the long term consequences of not paying off that credit card can have a far greater impact on your finances than losing a few thousand dollars in taxes from your 401(k). For people who aren’t facing any type of hardship or significant debt burden, early withdrawal most likely isn’t the best solution.

Only you truly know your own financial circumstances. Do your own research and absorb as much knowledge as you can. Besides, it’s always possible that by the time you’re 59 ½ years old, you’ll be dead. I like to leave on a positive note so here’s a smiley face :)


Using Letters of Credit

Letters of credit are used for the purpose of substituting a customer’s credit for that of the banks. This transaction provides the ability to facilitate a trade. Letters of credit are often used for international trading, where a seller lives in one country and the buyer lives in another. There are essentially two types of letters of credit – the commercial letters of credit and the standby letters of credit. The primary payment used for a transaction is the commercial letters of credit and the standby letters of credit are considered as the secondary payment option.

Commercial Letters of Credit 

A commercial letter of credit has been used for hundreds of years as a way to facilitate payments for international trading. As the global economy is continuing to evolve, the letters of credit will continue to be used. 

The governing agency of commercial letters of credit is the International Chamber of Commerce Uniform Customs. The provisions and definitions of the documents are binding for all parties that are involved in the transaction. 

The document is a contract agreement between the bank that issues it and one of their customers. The letter of credit authorises the confirming bank to make the payment. A customer will request that the issuing bank open the letter of credit and the bank will commit to honour the drawings that are made through the credit. Typically, the provider of the service or goods will be the beneficiary. Simply put, the issuing bank is replacing their customer as the payer. Letters of credit act as a guarantee for suppliersand an international finance corporationcan routinely issue these.

Letter of Credit Elements 

1. Issuing bank undertakes a payment on behalf of the applicant in order to pay the seller a set amount of money

2. If specified, documents that represent the goods that are supplied are presented within the specified time frame

3. Documents have to meet the terms and conditions as set out in the letter of credit document

4. The documents have to be presented in a place that is specified. 


If the beneficiary provides the necessary documents as evidence as stated in the letters of credit, he/she is entitled to payment. Letters of credit are distinct and separate documents from the sales contract that it is based on. The parties will deal with documents and not with goods and the issuing bank cannot be held liable for the contract that has been set between the customer and the beneficiary. The obligation of the bank is to inspect the documents in order toensure that they meet the terms and conditions that were set for the credit. If the bank finds that the conditions have been met it will issue the payment as directed.

Characteristics of the Letter of Credit 

Typically a letter of credit will be negotiable. The bank that issues the letter will be obligated to pay the beneficiary, as well as the bank that is nominated by the beneficiary. The instrument can be passed between parties in the same manner as money exchanging hands. In order for the letter to be negotiable there will need to be a clause that states there is an unconditional promise to make a payment on demand or within a specified time. 

When creating a letter of credit the parties may choose to make it irrevocable or revocable. Revocable letters can be changed at any time for any reason, without notification from the issuing bank. This type of letter may not be confirmed. 

If the letter is irrevocable it cannot be changed unless all parties agree. This type of letter is insurance for the beneficiary, stating that if the correct documents are presented payment will be made. 


Financial market trading can save you from being poor

Since the financial market trading became open to individuals, nobody should complain about being poor or not having a source of income. The top financial advisors at Wilkins Finance confirms that it is a very promising investment front, even to those who think they are poor and they cannot get any decent job to sustain their bills.

Financial market trading is the ultimate solution to being poor. It has great rewards despite the risks involved. In actual sense, some of the richest people in the world have investments in the financial markets trading.

No academic qualifications are required

Firstly, to invest in the financial markets, you don’t have to have any academic qualification. Financial markets trading is not a formal employment and you will not have a boss who is always at your neck to make sure that you have done your job as stipulated and at times even quarrelling you for nothing, just because he/she woke up on a wrong foot. In financial markets trading, you actually become the boss.

Even the poorest academician can invest in the financial markets trading. There is absolutely nowhere you will be required to provide your academic qualifications or have to attend an interview for you to be allowed to start trading. The only thing that will be required of you is probably your proof of residence when you are registering with your broker and this is all for the security of your funds. And this is just because the broker will need the exact information to avoid other people from accessing your account and withdrawing your funds.

Actually, nowadays you even don’t have to know how to analyse the markets. You can use the services of managed account or even choose to use automated trading. And even if you decide to trade on your own there are always trading tools like the technical indicators which you can use for your aid to analyse the markets or even sign up with a signal provider to provide you with trading signals.

You trade from where you feel comfortable trading

Another interesting thing with financial market trading is that you will never have to catch a bus or trading every morning to go to your place of work. You don’t need to burn the fare every morning. You can actually wake up take your simple breakfast and start trading from the comfort of your bed.

You don’t have to have a modern office to become successful in trading. No! All you need is a computer or a smartphone if you cannot afford a computer and an internet connection. Actually, you can go to the public library if you cannot afford a laptop or a smartphone or even to subscribe to an internet connection. You can use the services of the public library (internet and computers) and once you have earned a few coins, you can go ahead and purchase your own computer or smartphone and subscribe for an internet connection so that you can enjoy the comfort of your home when trading.

You don’t have to be rich to start trading

There is a common misconception that trading is for the select few. Those who own billions in their bank account. But that is not true!

The only thing that you will have to do is to get a broker who allows a very minimum initial deposit and make sure they are regulated to ensure that your funds are safe. It is not like in the early days when financial market trading was for the elite few and big financial institutions like banks which could afford billions.

Actually, there are brokers who allow even as little as a cent with their cent account. With the cent account, you can deposit even $0.001 which is a cent. So, money is not a limitation o start trading. You can start trading with the little that you have and with good risk management practices, you can earn a decent income from your financial markets analysis. Once you have a good trading strategy and you become disciplined, then you can be guaranteed of making good money trading.


Forex: the Trading Option That’s Taken the World by Storm

Forex or foreign exchange is the process of buying and selling currency. The simplest way to think of forex (or FX as it is sometimes known) is to think of a travel agent. When you go on holiday you buy the currency of the country you’re going to and sell the currency of the country you’re in. Essentially, you’re trading currency and this is very similar to forex trading.

What is Forex?

The forex market is one of the most liquid financial markets in the world and the daily volume of trade is around $4 trillion. This is because currencies have to be traded constantly in order for business to be conducted between countries. There’s no central forex location due to the global nature of the markets and its size means that it cannot be influenced by a single person or company. Realistically, it can only be shaped by world events.

Buying, Selling and Exchange Rates

Forex trading involves the simultaneous buying of one currency and the selling of another. Each transaction has to happen in a pair and each currency has an abbreviation e.g. EUR for the euro. The ability to trade these currencies stems from the fact that the value of both currencies in the pair is constantly changing.

In forex, any exchange rate between currency pairs are labelled as the bid price and the ask price. The difference between these two prices is known as ‘the spread’ and this is how your forex broker will make its money. As with any business, prices will vary between brokers, so shop around to make sure that you get the best deal.

Points and Pips


In order to turn a profit, you have to know exactly how spreads are measured. So, let’s look at an example:

If USD/EUR has a bid price of 1.400 and an ask price of 1.403 then the spread is three points or, as they’re known in the world of forex, three ‘pips’. A ‘pip’ is the smallest denomination that a currency can move by and this is the same for all currencies the world over.

How Often Can You Trade?

Due to the fact that the forex market is global and doesn’t have a central base, you can trade whenever you want from anywhere in the world. The forex market does not open at weekends, however, and this is the only time that you cannot place a bet. Just think of it being open 24 hours a day, 5 days a week. This means that you can trade at practically any time you want.

So, Why Invest in Forex?

If you regularly keep up with the news and follow the latest financial announcements then you have the opportunity to make a profit from forex. There’s no experience required and you can start from scratch whenever. Try watching some educational videos on trading basics to learn more and, if you think that forex is right for you, find yourself a broker and start investing. 


Top Tips for Your Binary Options Trading Strategy

Trading in binary options is much simpler than trading in forex, stocks, or even futures. However, this doesn’t mean that it can be done without a proper strategy. Trading in binary options without a strategy is a shortcut to losing all your seed money. This is why you should ensure that you have a good binary options trading strategy and get a good broke such as ETX Capital. Here are some tips.

Invest Conservatively

It’s very easy to get carried away with binary options trading. When you only have to decide if the prices of a stock, currency, or commodity will go up or down, it can seem very simple. This false simplicity can result in you trading with more money than is wise.

There’s only one way to get around this danger and that is to make sure that your investments are conservative in nature. Moreover, no binary options trading strategy is completely flawless. Most strategies stop working in certain situations. Unless your trading model is conservative, this can lead to massive losses.

Use Technical and Fundamental Factors Both

Binary option traders often choose strategies that depend either on technical factors or on fundamental factors. While these types of strategies do work, they aren’t as effective as strategies that take into account both, fundamental and technical factors.

Both these types of factors affect financial instruments. As a result, unless you check the daily intraday reports and fundamental news, you’ll never have the complete picture of the market.

Focus and Diversify At the Same Time

There are two ways through which you can trade in binary options. The first is to focus on one or few financial units and the other is to widen your purview to play with numerous units.

The first method will allow you to learn everything there is to know about a small set of financial instruments. However, the second method will automatically reduce your risks through diversification.

Neither method is better than the other. However, making a strategy that utilises both can be better than each of them alone. This means that you start by focusing on one or two instruments but diversify after you have relative expertise in them.

Test Before You Try

No one has so much money that they can waste it on an untested strategy. Deploying a strategy in the market without testing it can lead to significant losses. This is why you should make it a point to thoroughly test your binary options strategy before deploying it in the live market with real money.