Term Of The Day (Investment Related)

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' C& Y/ X# E- M9 B1. The economic costs that a business incurs through its
operations to earn revenue. In order to maximize profits,
& `/ q+ }* M# p$ Sbusinesses must attempt to reduce expenses without also cutting
into revenues. Because expenses are such an important indicator
5 c; T/ c1 t) @# O% Q/ \( Zof a business's operations, there are specific accounting rules
! h1 N3 f7 h1 i: b; {0 jon expense recognition.

1 H# t7 \  N& `% }. |5 z/ p2. Money spent or costs incurred that are tax-deductible and
6 _- i& g* X' H5 D( ereduce taxable income.

A type of credit card issued to people with substandard credit scores or limited credit histories. These cards will typically carry much higher interest rates than credit cards granted to prime borrowers; they also come with extra fees and lower credit limits.

2 l) J' E( n9 L  h: _! h! `8 nSubprime credit cards are issued by both major issuers and smaller financial institutions that focus only on subprime lending.

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The costs involved with a company paying increased health-care
/ A2 m  m4 m$ R! \% Ofees and other benefit-related costs for its current employees
and retired pensioners. It is believed that escalating legacy
costs can be a very large contributing factor towards limiting
* b* t# {4 X$ G* h+ {a company's competitiveness.

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4 C- X4 U! Z6 N" sAn exchange-traded fund (ETF) that is constructed by using
various derivatives for the purpose of profiting from a decline
+ ?: z( v6 A0 Tin the value of an underlying benchmark. Investing in these
ETFs is similar to holding various short positions, or using
+ X" A7 D5 S* F! Ma combination of advanced investment strategies to profit
  {3 c: E; S/ N" g' K( zfrom falling prices.

Also known as a "bear ETF".

What Does it Mean?
A tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public.

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A market hypothesis stating that investors and traders react
disproportionately to new information about a given security.
. |' O9 n9 I+ ]* B2 {2 Y! IThis will cause the security's price to change dramatically,
- v; y0 F. U) @+ K! ~% n  Uso that the price will not fully reflect the security's true
- I* N3 ~" A) D: _value immediately following the event. Typically, the price
6 a2 l* p. z; c5 k$ t8 ?% Tswing from overreaction is not long lasting, as the stock
+ }6 a1 V9 _! L- j! dprice will tend to return back to its true value over time.
1 Y- @7 X. a; C2 _
The overreaction hypothesis is not consistent with the
4 c3 R0 r* X7 H1 xefficient market hypothesis.

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/ R+ ^1 S  V  WSelling securities at a loss to offset a capital gains tax
) ]1 p) A3 I5 U& l+ w6 A7 kliability. Tax gain/loss harvesting is typically used to limit
the recognition of short-term capital gains, which are normally
taxed at higher federal income tax rates than long-term capital
gains.
3 @7 W2 Z8 Q/ R( Z9 D
Also known as "tax-loss selling".

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A tax credit that can't reduce the amount of tax owed to less
9 u1 |" G0 y  u# a1 Rthan zero. If the credit were able to reduce the amount of tax
owed to less than zero, the taxpayer would be entitled to a
payment from the government.

Also referred to as a "wastable tax credit."

A merger, a sale or an agreement in which one party in the deal presents the other party with very attractive terms and conditions. The terms of a sweetheart deal are usually so lucrative that it is difficult to justify turning the offer down.

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A type of retirement savings contribution that allows people
over 50 to make additional contributions to their 401(k)s
* n6 G$ i) ?# l+ J( [) j9 \6 V" tand/or individual retirement accounts. The Economic Growth
and Tax Relief Reconciliation Act of 2001 (EGTRRA) created
* v/ [0 c  i$ o! r1 t# Cthis provision so that older individuals would be able to set
* i  c/ O- G$ v0 o; p9 ?9 l' zaside enough savings for retirement.