instruction
stringlengths 5
1.05k
| output
stringlengths 6
22.3k
| input
stringclasses 1
value |
|---|---|---|
what was the silk route | the silk route was a historic trade route that was used from the second century b c until the 14th century a d it stretched from asia to the mediterranean traversing china india persia arabia greece and italy it was called the silk route because of the silk trading that took place during that period this luxurious fabric originated in china which had a monopoly on its production until the secrets of its creation spread in addition to silk the route facilitated the trade of other fabrics spices grains fruits and vegetables animal hides wood and metalwork precious stones and other items of value in 2013 china announced plans to revive the silk route connecting it with more than 60 countries in asia europe africa and the middle east understanding the silk routethe silk route was not a single road but a network of land and sea paths that connected china and the far east with countries in europe and the middle east a series of trading posts and markets sprouted up along the route to enable the storage transport and exchange of goods it was also known as the silk road travelers used camel or horse caravans and stayed in guest houses or inns spaced one day s travel apart travelers along the silk route s maritime routes could stop at ports for fresh drinking water and trade opportunities archaeologists and geographers pursuing research have been the silk route s most modern travelers the opening of the silk route brought many products that would have a big impact on western history commodities that had their roots in china included gunpowder and paper these became some of the most traded goods between china and its western trading partners paper was especially important as it was key to the use of the printing press enabling the mass circulation of newspapers and books history of the silk routethe original silk route was established during the han dynasty by zhang quian a chinese official and diplomat during a diplomatic mission quian was captured and detained for 13 years on his first expedition before escaping and pursuing other routes from china to central asia the silk route was popular during the tang dynasty from 618 to 907 a d travelers could choose among a number of land and sea paths to reach their destination the routes evolved along with territorial boundaries and changes in national leadership the silk route was a means to exchange goods and share innovations it had a role in the development of science technology literature and the arts the silk route was traveled by buddhist and european monks and was instrumental in spreading buddhism christianity islam and hinduism across borders reviving the silk routein 2013 china began to officially restore the historic silk route under president xi jinping with a 900 billion strategy called one belt one road obor the project is intended to improve china s interconnectivity with more than 60 other countries in asia europe and east africa also known as the belt and road initiative bri it traverses numerous land and sea routes the silk road economic belt is primarily land based connecting china with central asia eastern europe and western europe while the 21st century maritime silk road is sea based connecting china s southern coast to the mediterranean africa southeast asia and central asia china views the venture as an important way to improve its domestic growth it also serves as a way to open up new trade markets for chinese goods giving the country the cheapest and easiest way to export materials and goods critics including malaysian prime minister mahathir mohamad say china is using the bri to lend to countries who may default as a way of getting economic or political concessions china has passed several milestones related to the obor including the signing of hundreds of deals since 2016 in january 2017 a new rail service using the east wind freight train was introduced from beijing to london along the historic route passing beneath the english channel to reach london the 16 to 18 day journey travels nearly 7 500 miles and allows freight shippers an alternative to slower water routes and expensive air routes other key obor routes go from china to 14 major european cities 1 | |
why did the original silk route disappear | the ancient silk route was disrupted in the year 1453 when the ottoman empire closed off trade with the west effectively separating east and west later exploration identified other sea routes that could be used more efficiently for east west trade 2 | |
what cities along the silk route can still be visited | dozens of cities that were important stops along the silk route can still be visited today a few are aleppo syria alexandria egypt granada spain hangzhou china tblisi georgia venice italy and zanzibar tanzania 3 | |
what was the online silk road | the online silk road was a black marketplace for anonymous money laundering and drug transactions among other illegal activities it was shut down by the fbi in 2013 and its founder is serving a life sentence illegal activities continue to thrive on the internet on the so called dark web the bottom linemore than 2 000 years ago the silk route was created allowing asians and europeans to trade goods and share knowledge and innovations today china has embarked on a 900 billion project to create a modern silk route that it hopes will kindle a new era of globalization 4 | |
what is a silo mentality | a silo mentality is a reluctance to share information with employees of different divisions in the same company this attitude is seen as reducing the organization s efficiency and at worst contributing to a damaged corporate culture understanding a silo mentalitythe term silo originally referred to storage containers for grain or missiles but it is now used as a metaphor for separate entities that stockpile information and effectively seal it in in business organizational silos refer to business divisions that operate independently and avoid sharing information it also refers to businesses whose departments have silo system applications in which information cannot be shared because of system limitations the silo mentality is generally seen as a top down issue arising from competition between senior managers the protective attitude toward information begins with management and is passed down to individual employees it also may be seen between individual employees who may hoard information for their benefit it is often found between employees of competing departments such as marketing and sales where some assigned duties overlap it s not always a matter of clashing egos a silo mentality can reflect a narrow vision the employees are so bogged down in their daily chores that they never see the bigger picture or see themselves as having a critical role in that bigger picture or they may be utterly unaware of the value to others of the information they re sitting on no matter what the reasons for it are a silo mentality exists because senior management allows it to exist managers of successful firms generally encourage the free flow of information between departments so that all aspects of the company can function effectively impact of a silo mentalitythe lack of cross departmental communication can negatively impact workflow as information is not passed freely across the organization this can leave some departments working with inaccurate or outdated information these and other operational inefficiencies resulting from silos also complicate how companies deliver value to customers and adversely affect profitability a silo mentality inevitably damages morale especially when employees become aware of the problem and are unable to do anything to change it special considerationsattitudes are difficult to change especially when self interest is at stake a writer for salesforce com suggests that the keys to dismantling silos are cooperation communication and collaboration 1some of the specific suggestions for management changes include | |
what is an organizational silo | the term organizational silo refers to business divisions that operate independently and avoid sharing information the term also refers to businesses with departments that have silo system applications in which information cannot be shared because of system limitations | |
where does the silo mentality begin | the silo mentality arises between | |
why is a silo mentality bad | a silo mentality reduces a business s efficiency and contributes to a damaged corporate culture it causes a lack of cross departmental communication that can negatively impact workflow as information is not passed freely across the organization thus leaving some departments working with inaccurate or out of date information the bottom linea silo mentality is an unwillingness to share information or knowledge between employees or across different departments within a company this commonly creates low morale negatively impacts workflows and ultimately adversely affects the customer experience by comparison successful firms encourage and facilitate free flowing information | |
what is a simple agreement for future tokens saft | a simple agreement for future tokens saft is an investment contract offered by cryptocurrency developers to accredited investors because safts are considered a security instrument they must be filed with the securities and exchange commission filing the contract does not register securities with the sec it merely announces that there is an agreement between the developers seeking funding and investors capital in exchange for tokens when certain development conditions are met understanding simple agreement for future tokens safts a saft is an investment contract they were created as a way to help new cryptocurrency ventures raise money without breaking financial regulations specifically regulations that govern when an investment is considered a security essentially it s designed as a way to receive funding while bypassing regulatory registration requirements it s important to understand that the tokens are generally not issued or functional at the time the contract is signed investors receive their tokens after the issuer achieves specific goals | |
when a company sells an investor a saft it is accepting funds from that investor but does not transfer a coin or token instead the investor receives documentation indicating that they will be given tokens if the project is successful | because cryptocurrency developers are unlikely to be well versed in securities law and may not have access to financial and legal counsel it can be easy for them to run afoul of regulations the development of saft creates a simple inexpensive framework that new ventures can use to raise funds while remaining legally compliant components of an saftsafts have specific language and definitions that must be included at a minimum in each contract both parties must sign the contract which is then submitted to the sec which posts it in edgar because of the language needed and the importance of what must be included in these contracts it is essential to have an attorney familiar with securities and contract law to help draft and oversee their preparation simple agreement for future tokens saft vs simple agreement for future equity safe a simple agreement for future equity safe allows investors who put cash into a startup to convert that stake into equity at a later date as long as specific conditions are met for example the company that received funds from the investor might specify in the contract that it must achieve specific financial goals before it issues the equity safts are the same developers use funds raised from the saft to develop the network and technology required to create a functional token they then provide these tokens to investors if conditions are met just like an safe an saft is a non debt financial instrument those who invest in an saft face the possibility of losing their money and having no recourse if the venture fails the contract only allows investors to take a financial stake in the venture meaning that they are exposed to the same enterprise risk as if they had invested in an safe | |
what is the difference between an safe and saft | an saft is an investment contract between investors who provide capital and developers who issue the tokens after specific conditions are met an safe is a contract where investors provide capital in exchange for equity in a company at a future date | |
is an saft a security | the simple agreement for future tokens is a written contract between the developers and purchasers it is considered a security instrument by the sec | |
what s the difference between a token warrant and an saft | a warrant is an investing instrument that gives the purchaser the right but not the obligation to purchase an underlying asset from the issuer at a specific price and date a token warrant is an instrument that gives the purchaser the right but no obligation to purchase cryptocurrency at a specified date and price from the issuer the bottom linea simple agreement for future tokens is a contract between a blockchain developer and a buyer who contributes a certain amount of capital for the promise of an equal amount of tokens when the project meets specific goals an saft is similar to an safe which is for equity safts are generally only available to accredited investors institutional investors or those with more than 1 million in net worth and more than 200 000 in annual income they can be risky investments because there are no guarantees that the company developing the token will succeed and no way for the investor to recoup any losses the comments opinions and analyses expressed on investopedia are for informational purposes only read our warranty and liability disclaimer for more info as of the date this article was written the author does not own cryptocurrency | |
what is simple interest | simple interest is an interest charge that borrowers pay lenders for a loan it is calculated using the principal only and does not include compounding interest simple interest relates not just to certain loans it s also the type of interest that banks pay customers on their savings accounts the formula to determine simple interest is an easy one just multiply the loan s principal amount by the annual interest rate by the term of the loan in years this type of interest usually applies to automobile loans or short term loans although some mortgages use this calculation method investopedia nez riazunderstanding simple interestinterest is the cost of borrowing money typically expressed as a percentage it amounts to a fee or charge that the borrower pays the lender for the financed sum simple interest is an easy way to look at the charge you ll pay for borrowing the interest rate is calculated against the principal amount and that amount never changes as long as you make payments on time neither compounding interest nor calculation of the interest rate against a growing total balance is involved that means you ll always pay less interest with a simple interest loan than a compound interest loan if the loan term is greater than one year many debt transactions involve a more complex calculation of interest than simple interest simple interest is better for borrowers because it doesn t account for compound interest on the other hand compound interest is a key to building wealth for investors simple interest formulathe formula for simple interest is straightforward simple interest p r n where p principal r interest rate n term of loan in years begin aligned text simple interest p times r times n textbf where p text principal r text interest rate n text term of loan in years end aligned simple interest p r nwhere p principalr interest raten term of loan in years example of simple interestas a reminder simple interest paid or received over a certain period is a fixed percentage of the principal amount that was borrowed or lent for example let s say that a student obtains a simple interest loan to pay for one year of college tuition the loan amount is 18 000 the annual interest rate on the loan is 6 the term of the loan is three years using the simple interest formula above the amount of simple interest on the student s loan is 18 000 0 06 3 3 240 begin aligned 18 000 times 0 06 times 3 3 240 end aligned 18 000 0 06 3 3 240 therefore the total amount of principal and interest paid to the lender is 18 000 3 240 21 240 begin aligned 18 000 3 240 21 240 end aligned 18 000 3 240 21 240 simple interest is similar to daily simple interest except that with the latter interest accrues daily and is added to your account balance also while loan balances on simple interest debt are reduced on the payment due date daily simple interest loan balances are reduced on the day payments are received 1 | |
what types of loans use simple interest | simple interest usually applies to automobile loans or short term personal loans in the u s most mortgages on an amortization schedule also involve simple interest although they can certainly feel like compound interest loans the compounding feel comes from varying principal payments that is the percentage of your mortgage payment that s actually going towards the loan itself not the interest the interest doesn t compound rather the principal payments do a 1 000 principal payment saves interest on that 1 000 and results in higher principal payments the next year and higher the following year and so on if you don t let the principal payments vary as in an interest only loan zero principal payment or by equalizing the principal payments the loan interest itself doesn t compound if you make partial payments to a simple interest loan the payment will be applied to interest first and any remainder will be used to reduce the principal lowering the interest rate shortening the loan term or prepaying principal also has a compounding effect for example take bi weekly mortgage payment plans biweekly plans generally help consumers pay off their mortgages early because the borrowers make two extra payments a year saving interest over the life of the loan by paying off the principal faster for a short term personal loan a personal loan calculator can be a great way to determine in advance an interest rate that s within your means for longer term loans this calculator may also be of help simple interest vs compound interestinterest can be either simple or compounded simple interest is based on the original principal amount of a loan or deposit compound interest on the other hand is based on the principal amount and the interest that accumulates on it in every period the more frequently interest is compounded quarterly monthly or even daily the greater the total amount of payments in the long run since simple interest is calculated only on the principal it is easier to determine than compound interest compound interest is often a factor in business transactions investments and financial products intended to extend for multiple periods or years typically simple interest is used for loans of a single period or less than a year the formula to determine compound interest involves the same variables as simple interest and is p 1 r n p begin aligned p times 1 r n p end aligned p 1 r n p let s say that you are borrowing 10 000 from bank a to finance an automobile purchase it s a simple interest loan with a rate of 5 and a term of 5 years the amount of interest that you ll owe is 10 000 05 5 2 500 begin aligned 10 000 times 05 times 5 2 500 end aligned 10 000 05 5 2 500 the total amount that you ll pay the lender will be 10 000 2 500 12 500 begin aligned 10 000 2 500 12 500 end aligned 10 000 2 500 12 500 this time you take out a compound interest loan from bank a the essential terms are the same a 10 000 loan 5 interest rate and term of five years in this case the amount of interest that you ll owe is 10 000 1 05 5 10 000 2 762 82 begin aligned 10 000 times 1 05 5 10 000 2 762 82 end aligned 10 000 1 05 5 10 000 2 762 82 the total amount that you ll pay the lender will be 12 762 82 if you d like to calculate a total value for principal and interest that will accrue over a particular period of time use this slightly more involved simple interest formula a p 1 rt a total accrued p the principal amount of money e g to be invested r interest rate per period t number of periods | |
why is simple interest simple | simple interest refers to the straightforward crediting of cash flows associated with some investment or deposit for instance 1 annual simple interest would credit 1 for every 100 invested year after year simple interest does not however take into account the power of compounding or interest on interest where after the first year the 1 would actually be earned on the 101 balance adding up to 1 01 the next year the 1 would be earned on 102 01 amounting to 1 02 and so one | |
which will pay out more over time simple or compound interest | compound interest will always pay more after the first payment period suppose you borrow 10 000 at a 10 annual interest rate with the principal and interest due as a lump sum in three years using a simple interest calculation 10 of the principal balance gets added to your repayment amount during each of the three years that comes out to 1 000 per year which totals 3 000 in interest over the life of the loan at repayment then the amount due is 13 000 now suppose you take out the same loan with the same terms but the interest is compounded annually when the loan is due instead of owing 13 000 you end up owing 13 310 while you may not consider 310 a huge difference this example is only a three year loan compound interest piles up and becomes oppressive with longer loan terms | |
what are some financial instruments that use simple interest | most coupon paying bonds utilize simple interest so do most personal loans including student loans and auto loans and home mortgages | |
what are some financial instruments that use compound interest | most bank deposit accounts credit cards and some lines of credit will tend to use compound interest the bottom linesimple interest is the interest charge on borrowing that s calculated using an original principal amount only and an interest rate that never changes it does not involve compounding where borrowers end up paying interest on principal and interest that grows over multiple payment periods simple interest can be advantageous for borrowers because of its relatively lower cost of money however bear in mind that because of its simple calculation it gives only a basic idea of cost that may not account for other charges fees that a loan may include | |
what is a simple moving average sma | a simple moving average sma calculates the average price of an asset usually using closing prices during a specified period of days understanding simple moving average sma a simple moving average sma is an arithmetic moving average calculated by adding recent prices and then dividing that figure by the number of time periods in the calculation average for example one could add the closing price of a security for a number of time periods and then divide this total by that same number of periods short term averages respond quickly to changes in the price of the underlying security while long term averages are slower to react there are other types of moving averages including the exponential moving average ema and the weighted moving average wma investopedia sabrina jiangthe formula for sma is sma a 1 a 2 a n n where a n the price of an asset at period n n the number of total periods begin aligned text sma dfrac a 1 a 2 a n n textbf where a n text the price of an asset at period n n text the number of total periods end aligned sma na1 a2 an where an the price of an asset at period nn the number of total periods for example this is how you would calculate the simple moving average of a security with the following closing prices over a 15 day period week one 5 days 20 22 24 25 23week two 5 days 26 28 26 29 27week three 5 days 28 30 27 29 2820 22 24 25 23 26 28 26 29 27 28 30 27 29 28 392392 15 26 13the 15 day simple moving average for this security would be 26 13 a 10 day moving average would average out the closing prices only the most recent 10 days rather than using all 15 each day when the stock market closes there is a new most recent closing price this replaces the oldest one being used and a new up to date moving average is calculated a 50 day moving average would use 50 days worth of data to compute the average price on a rolling basis a simple moving average is customizable because it can be calculated for different numbers of time periods this is done by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods which gives the average price of the security over the time period a simple moving average smooths out volatility and makes it easier to view the price trend of a security if the simple moving average points up this means that the security s price is increasing if it is pointing down it means that the security s price is decreasing the longer the time frame for the moving average the smoother the simple moving average a shorter term moving average is more volatile but its reading is closer to the source data one of the most popular simple moving averages is the 200 day sma however there is a danger to following the crowd as the wall street journal explains since thousands of traders base their strategies around the 200 day sma there is a chance that these predictions could become self fulfilling and limit price movements special considerationsmoving averages are an important analytical tool used to identify current price trends and the potential for a change in an established trend the simplest use of an sma in technical analysis is using it to quickly determine if an asset is in an uptrend or downtrend another popular albeit slightly more complex analytical use is to compare a pair of simple moving averages with each covering different time frames if a shorter term simple moving average is above a longer term average an uptrend is expected on the other hand if the long term average is above a shorter term average then a downtrend might be the expected outcome two popular trading patterns that use simple moving averages include the death cross and a golden cross a death cross occurs when the 50 day sma crosses below the 200 day sma this is considered a bearish signal indicating that further losses are in store the golden cross occurs when a short term sma breaks above a long term sma reinforced by high trading volumes this can signal further gains are in store simple moving average vs exponential moving averagein contrasting an exponential moving average ema and a simple moving average the major difference is the sensitivity each one shows to changes in the data used in its calculation more specifically the ema gives a higher weighting to recent prices while the sma assigns an equal weighting to all values the two averages are similar because they are interpreted in the same manner and are both commonly used by technical traders to smooth out price fluctuations since emas place a higher weighting on recent data than on older data they are more reactive to the latest price changes than smas are which makes the results from emas more timely and explains why the ema is the preferred average among many traders investopedia michela buttignollimitations of simple moving averageit is unclear whether or not more emphasis should be placed on the most recent days in the time period or on more distant data many traders believe that new data will better reflect the current trend the security is moving with at the same time other traders feel that privileging certain dates over others will bias the trend therefore the sma may rely too heavily on outdated data since it treats the 10th or 200th day s impact the same as the first or second day s similarly the sma relies wholly on historical data many people including some economists believe that markets are efficient this is known as the efficient market hypothesis it holds that current market prices already reflect all available information if markets are indeed efficient using historical data should tell us nothing about the future direction of asset prices there are some economic and financial thinkers who support this hypothesis and plenty of others who oppose it | |
how are simple moving averages used in technical analysis | traders use simple moving averages smas to chart the long term trajectory of a stock or other security while ignoring the noise of day to day price movements this allows traders to compare medium and long term trends over a larger time horizon for example if the 50 day sma of a security falls below its 200 day sma this is usually interpreted as a bearish death cross pattern and a signal of further declines the opposite pattern the golden cross indicates potential for a market rally | |
how do you calculate a simple moving average | to calculate a simple moving average the sum of the prices within a time period is divided by the number of prices for instance consider shares of tesla closed at 10 11 12 11 14 over a five day period the simple moving average of tesla s shares for this 5 day period would equal 10 11 12 11 14 divided by 5 which equals 11 6 | |
what is the difference between a simple moving average and an exponential moving average | while a simple moving average gives equal weight to each of the values within a time period an exponential moving average places greater weight on recent prices exponential moving averages are typically seen as a more timely indicator of a price trend and because of this many traders prefer using this over a simple moving average common short term exponential moving averages include the 12 day and 26 day the 50 day and 200 day exponential moving averages are used to indicate long term trends | |
what is a simple random sample | a simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen a simple random sample is meant to be an unbiased representation of a group investopedia madelyn goodnightunderstanding a simple random sampleresearchers can create a simple random sample using a couple of methods with a lottery method each member of the population is assigned a number after which numbers are selected at random an example of a simple random sample would be the names of 25 employees being chosen out of a hat from a company of 250 employees in this case the population is all 250 employees and the sample is random because each employee has an equal chance of being chosen random sampling is used in science to conduct randomized control tests or for blinded experiments the example in which the names of 25 employees out of 250 are chosen out of a hat is an example of the lottery method at work each of the 250 employees would be assigned a number between one and 250 after which 25 of those numbers would be chosen at random because individuals who make up the subset of the larger group are chosen at random each individual in the large population set has the same probability of being selected in most cases this creates a balanced subset that carries the greatest potential for representing the larger group as a whole a manual lottery method can be quite onerous for larger populations selecting a random sample from a large population usually requires a computer generated process the same methodology as the lottery method is used only the number assignments and subsequent selections are performed by computers not humans with a simple random sample there has to be room for error represented by a plus and minus variance sampling error for example if in a high school of 1 000 students a survey is taken to determine how many students are left handed random sampling can determine that eight out of the 100 sampled are left handed the conclusion would then be that 8 of the student population of the high school are left handed when in fact the global average would be closer to 10 the same is true regardless of the subject matter a survey on the percentage of the student population that has green eyes or a physical disability would result in a mathematical probability based on a simple random survey but always with a plus or minus variance the only way to have a 100 accuracy rate would be to survey all 1 000 students which while possible would be impractical although simple random sampling is intended to be an unbiased approach to surveying sample selection bias can occur when a sample set of the larger population is not inclusive enough representation of the full population is skewed and requires additional sampling techniques | |
how to conduct a simple random sample | the simple random sampling process entails six steps each performed in sequential order the origin of statistical analysis is to determine the population base this is the group for which you wish to learn more confirm a hypothesis or determine a statistical outcome this step is to simply identify what that population base is and ensure that the group will adequately cover the outcome you are trying to ascertain example you want to learn how the stocks of the largest companies in the united states have performed over the past 20 years your population would be the largest companies in the united states as determined by the s p 500 before picking the units within a population we need to determine how many to select this sample size may be constrained by the amount of time capital rationing or other resources available to analyze the sample however be mindful to pick a sample size large enough to be genuinely representative of the population in the example above there are constraints in analyzing the performance for every stock in the s p 500 so we only want to analyze a subset of this population example your sample size will be 20 companies from the s p 500 in our example the items within the population are easy to determine as they ve already been identified for us i e the companies listed within the s p 500 however imagine analyzing the students currently enrolled at a university or food products being sold at a grocery store this step entails crafting the entire list of all items within your population example using exchange information you copy the companies comprising the s p 500 into an excel spreadsheet the simple random sample process calls for every unit within the population to receive an unrelated numerical value this is often assigned based on how the data may be filtered for example you could assign the numbers one to 500 to the companies based on market cap alphabetical order or company formation date how the values are assigned isn t relevant all that matters is that each value is sequential and has an equal chance of being selected example you assign the numbers one through 500 to the companies in the s p 500 based on alphabetical order of the current ceo with the first company receiving the value one and the last company receiving the value 500 in step 2 we chose 20 as the number of items we wanted to analyze within our population we now randomly select 20 number values out of the 500 there are multiple ways to do this as discussed later in this article example using the random number table you select the numbers 2 7 17 67 68 75 77 87 92 101 145 201 222 232 311 333 376 401 478 and 489 each of the random variables selected in the prior step corresponds to an item within our population the group sample is selected by identifying which random values were chosen and which population items those values match example your sample consists of the companies that correspond to the values chosen in step 5 random sampling techniquesthere is no single method for determining the random values to be selected in step 5 the analyst can t choose completely random numbers on their own as there may be factors influencing their decision for example the analyst s wedding anniversary may be the 24th so they may consciously or subconsciously pick the random value 24 instead the analyst may choose one of the following methods | |
when pulling together a sample consider getting assistance from a colleague or an independent person they may be able to identify biases or discrepancies of which you may not be aware | simple random vs other sampling methodsa simple random sample is used to represent the entire data population a stratified random sample divides the population into smaller groups known as strata based on shared characteristics unlike simple random samples stratified random samples are used with populations that can be easily broken into different subgroups or subsets these groups are based on certain criteria then elements from each are randomly chosen in proportion to the group s size versus the population in our example above s p 500 companies could have subsets defined by type of industry or geographical region of the company s headquarters this method of sampling means there will be selections from each different group the size of which is based on its proportion to the entire population researchers must ensure that the strata do not overlap every point in the population must only belong to one stratum because they should be mutually exclusive overlapping strata would increase the likelihood that some data are included thus skewing the sample systematic sampling entails selecting a single random variable that determines the internal how the population items are selected for example if the number 37 was chosen the 37th company on the list sorted by last name of the ceo would be selected by the sample then the 74th i e the next 37th and the 111st i e the next 37th after that would be added as well simple random sampling does not have a starting point therefore there is the risk that the population items selected at random may cluster in our example there may be an abundance of ceos with a last name that starts with the letter f systematic sampling strives to even further reduce bias by ensuring that these clusters do not happen cluster sampling can occur as a one stage or two stage cluster in the former items within a population are put into comparable groupings using our example companies are grouped by year formed then sampling occurs within these clusters two stage cluster sampling occurs when clusters are formed through random selection the population is not clustered with other similar items sample items are then randomly selected within each cluster simple random sampling does not cluster any population sets though it may be a simpler clustering especially two stage clustering can enhance the randomness of sample items in addition cluster sampling may provide a deeper analysis on a specific snapshot of a population which may or may not enhance the analysis advantages and disadvantages of simple random sampleswhile simple random samples are easy to use they do come with key disadvantages that can render the data useless ease of use represents the biggest advantage of simple random sampling unlike more complicated sampling methods such as stratified random sampling and probability sampling no need exists to divide the population into subpopulations or take any other additional steps before selecting members of the population at random a simple random sample is meant to be an unbiased representation of a group it is considered a fair way to select a sample from a larger population as every member of the population has an equal chance of getting selected therefore it has less chance of sampling bias a sampling error can occur with a simple random sample if the sample does not end up accurately reflecting the population it is supposed to represent for example in a simple random sample of 25 employees it would be possible to draw 25 men even if the population consisted of 125 women 125 men and 125 nonbinary people for this reason simple random sampling is more commonly used when the researcher knows little about the population if the researcher knows more it would be better to use a different sampling technique such as stratified random sampling which helps to account for the differences within the population such as age race or gender other disadvantages include the fact that for sampling from large populations the process can be time consuming and costly compared with other methods researchers may find that a project not worth the endeavor of its cost benefit analysis does not generate positive results as every unit has to be assigned an identifying or sequential number prior to the selection process this task may be difficult based on the method of data collection or size of the data set each item within a population has an equal chance of being selected there is less of a chance of sampling bias as every item is randomly selected it is easy and convenient for data sets already listed or digitally stored incomplete population demographics may exclude certain groups from being sampled random selection means the sample may not be truly representative of the population depending on the data set size and format random sampling may be a time intensive process | |
why is a simple random sample simple | no easier method exists to extract a research sample from a larger population than simple random sampling selecting enough subjects completely at random from the larger population also yields a sample that can be representative of the group being studied | |
what are some drawbacks of a simple random sample | among the disadvantages of this technique are difficulty gaining access to respondents that can be drawn from the larger population greater time greater costs and the fact that bias can still occur under certain circumstances | |
what is a stratified random sample | a stratified random sample first divides the population into smaller groups or strata based on shared characteristics therefore a stratified sampling strategy will ensure that members from each subgroup are included in the data analysis stratified sampling is used to highlight differences between groups in a population as opposed to simple random sampling which treats all members of a population as equal with an equal likelihood of being sampled | |
how are random samples used | using simple random sampling allows researchers to make generalizations about a specific population and leave out any bias using statistical techniques inferences and predictions can be made about the population without having to survey or collect data from every individual in that population the bottom linesimple random sampling is the most basic form of analyzing a population allowing every item within it to have the same probability of being selected there are also more complicated sampling methods that attempt to correct for possible shortcomings in the simple method however they don t match the ease of simple random sampling for smaller populations | |
what is a simplified employee pension sep | a simplified employee pension sep is an individual retirement account ira that an employer or a self employed person can establish the employer is allowed a tax deduction for contributions made to a sep ira and makes contributions to each eligible employee s plan on a discretionary basis 1additionally under the setting every community up for retirement enhancement secure act enacted on dec 20 2019 small employers get a tax credit to offset the costs of starting a 401 k plan or simple ira with automatic enrollment 2 that s on top of the start up credit they already receive 3sep iras often have higher annual contribution limits than standard iras 4 in a sense they re a cross between a traditional ira and a 401 k like the latter they can receive employer contributions and like the former contributions are vested immediately 5investopedia xiaojie liu | |
how a simplified employee pension sep works | a sep ira is an attractive option for many business owners because it does not come with many of the start up and operating costs of most conventional employer sponsored retirement plans many employers also set up a sep ira to contribute to their own retirement at higher levels than a traditional ira allows small organizations favor sep iras because of eligibility requirements for contributors including a minimum age of 21 at least three years of employment and a 750 compensation minimum for 2024 in addition a sep ira allows employers to skip contributions during years when business is down 61sep iras are treated like traditional iras for tax purposes and allow the same investment options the same transfer and rollover rules that apply to traditional iras also apply to sep iras when an employer makes a contribution to a sep ira account it receives a tax deduction for the amount contributed additionally the business is not locked into an annual contribution requirement decisions about whether to contribute and how much can change each year 71 there is however an upper limit which is 69 000 in 2024 6the employer is not responsible for making investment decisions instead the ira trustee determines eligible investments and the individual employee account owners make specific investment decisions 1 the trustee also deposits contributions sends annual statements and files all required documents with the irs 8contributions to sep iras are immediately 100 vested and the ira owner directs the investments an eligible employee including the business owner who participates in their employer s sep plan must establish a traditional ira to which the employer will deposit sep contributions 9some financial institutions require the traditional ira to be labeled as a sep ira before they will allow the account to receive sep contributions others might allow sep contributions to be deposited to a traditional ira regardless of whether the ira is labeled as a sep ira contributions to a sep ira are immediately 100 vested and account owners must choose their investments themselves from a list provided by the account trustee sep ira contribution limitscontributions made by employers cannot exceed the lesser of 25 of an employee s compensation or 69 000 in 2024 67 as with a traditional ira withdrawals from sep iras in retirement are taxed as ordinary income 10 | |
when a business is a sole proprietorship the employee owner pays themselves wages and may also make a sep contribution which is limited to 25 of wages or profits minus the sep contribution 7 for a particular contribution rate cr the reduced rate is cr 1 cr for a 25 contribution rate this yields a 20 reduced rate 11 | because the funding vehicle for a sep plan is a traditional ira sep contributions once deposited become traditional ira assets and are subject to many of the traditional ira rules including the following in addition to the documents required for establishing a sep plan discussed later each sep ira must meet the documentation requirements for a traditional ira 7sep ira rulessep iras were primarily designed to encourage retirement benefits among businesses that would otherwise not set up employer sponsored plans any small business can establish them including sole proprietors partnerships and corporations including s corporations 87as for participants too high an income can be a limitation the 2024 eligible compensation limit is 345 000 6 however unlike qualified retirement plans the sep does not allow participants including the business owner to borrow up to the lesser of 50 or 50 000 of their vested balance 12specific employees may be excluded by their employer from participating in a sep ira even if they would otherwise be eligible based on the plan s rules for example workers covered in a union collective bargaining agreement for retirement benefits can be excluded employees who are nonresidents can also be excluded as long as they do not receive u s wages or other service compensation from the employer 13sep contributions and earnings are held in sep iras and can be withdrawn at any time subject to the general limitations imposed on traditional iras a withdrawal is taxable in the year received if a participant makes a withdrawal before age 59 generally a 10 additional tax applies 10sep contributions and earnings may be rolled over to other iras and retirement plans tax free 141 additionally sep contributions and earnings must eventually be distributed following the ira required minimum distribution rules 15sep ira vs solo 401 k a sep ira and a solo 401 k also known as an individual 401 k are both retirement accounts that allow employer contributions however they have two main differences the first is that although both accounts have the same maximum contribution limit 69 000 in 2024 you can contribute the maximum to a solo 401 k at a lower income level than a sep ira in 2024 individuals making 154 000 or more could reach the maximum for a solo 401 k sep ira owners however needed to make 276 000 or more to get the same amount second you can take a loan against the solo 401 k which is not allowed with a sep ira 12if you are a small business owner with employees and a sep ira plan you must contribute as much to their plans as yours 1a sep ira however is somewhat easier to set up and maintain a solo 401 k requires its owner to be more involved in its administrative responsibilities and it can also generate higher fees than a sep ira sep ira vs traditional ira vs roth irathere are important differences between these three retirement accounts with a traditional ira you contribute tax free money reducing your tax bill in the year you make the contribution however when you withdraw funds in retirement they are taxed as ordinary income and you are required to make distributions once you reach the age of 73 up from 72 and 70 in previous years 1617 this makes it best for people who expect to be in a lower tax bracket when they retire a roth ira reverses the process you have already paid income tax on the money you contribute so withdrawals in retirement are tax free 16 this makes a roth ira better for people who expect to be in a higher tax bracket in retirement in addition there are no required minimum distributions from a roth ira so if you don t need the money you can just let it sit there and pass the account on to your heirs a sep ira is available to any employer including self employed persons it allows employer contributions which traditional and roth iras do not and all contributions to it are tax free meaning that distributions in retirement will be taxed as ordinary income the maximum contribution limit for a sep ira is considerably higher than that for either a traditional or roth ira employers can get a tax deduction for their contribution which means that when the self employed person is both employer and employee they can get that tax deduction sep iras were invented as a way to help small businesses provide employer sponsored retirement plans to their employees and owners frequently asked questions faqs | |
how does a sep ira work | a sep ira allows small business owners to set up contributions to their own accounts and those of their employees | |
what is the benefit of a sep ira | sep iras allow the holders to reduce taxable income and take advantage of compounding interest on tax deferred contributions sep iras also have higher contribution limits than other iras | |
what is the difference between a sep ira and a traditional ira | the most significant difference is the contribution limit in 2024 a traditional ira allows for a 7 000 total annual amount with a 1 000 catch up contribution for those over 50 18 you can contribute up to 69 000 in 2024 to a sep ira the bottom linea sep ira is a retirement plan option for small business owners and qualified employees it has higher contribution and income limits than other retirement plans to set one up small business owners must choose a plan provider and make contributions if they have employees they are required to contribute to their plans equally | |
what is a sinking fund | a sinking fund is a fund containing money set aside or saved to pay off a debt or bond a company that issues debt will need to pay that debt off in the future and the sinking fund helps to soften the hardship of a large outlay of revenue a sinking fund is established so the company can contribute to the fund in the years leading up to the bond s maturity investopedia joules garciaunderstanding a sinking funda sinking fund helps companies that have floated debt in the form of bonds to gradually save money and avoid a large lump sum payment at maturity some bonds are issued with the attachment of a sinking fund feature the prospectus for a bond of this type will identify the dates that the issuer has the option to redeem the bond early using the sinking fund while the sinking fund helps companies ensure they have enough funds set aside to pay off their debt in some cases they may also use the funds to repurchase preferred shares or outstanding bonds benefits of a sinking funda sinking fund adds an element of safety to a corporate bond issue for investors since there will be funds set aside to pay off the bonds at maturity there s less likelihood of default on the money owed at maturity in other words the amount owed at maturity is substantially less if a sinking fund is established as a result a sinking fund helps investors have some protection in the event of the company s bankruptcy or default a sinking fund also helps a company allay concerns of default risk and as a result attract more investors for their bond issuance since a sinking fund adds an element of security and lowers default risk the interest rates on the bonds are usually lower as a result the company is usually seen as creditworthy which can lead to positive credit ratings for its debt good credit ratings increase the demand for a company s bonds from investors which is particularly helpful if a company needs to issue additional debt or bonds in the future lower debt servicing costs due to lower interest rates can improve cash flow and profitability over the years if the company is performing well investors are more likely to invest in their bonds leading to increased demand and the likelihood the company could raise additional capital if needed callable bondsif the bonds issued are callable it means the company can retire or pay off a portion of the bonds early using the sinking fund when it makes financial sense the bonds are embedded with a call option giving the issuer the right to call or buy back the bonds 1the prospectus of the bond issue can provide details of the callable feature including the timing in which the bonds can be called specific price levels as well as the number of bonds that are callable typically only a portion of the bonds issued are callable and the callable bonds are chosen at random using their serial numbers a callable is typically called at an amount slightly above par value and those called earlier have a higher call value for example a bond callable at a price of 102 pays the investor 1 020 for each 1 000 in face value yet stipulations might state that the price goes down to 101 after a year 2if interest rates decline after the bond s issue the company can issue new debt at a lower interest rate than the callable bond the company uses the proceeds from the second issue to pay off the callable bonds by exercising the call feature as a result the company has refinanced its debt by paying off the higher yielding callable bonds with the newly issued debt at a lower interest rate also if interest rates decrease which would result in higher bond prices the face value of the bonds would be lower than current market prices in this case the bonds could be called by the company that redeems the bonds from investors at face value the investors would lose some of their interest payments resulting in less long term income other types of sinking fundssinking funds may be used to buy back preferred stock preferred stock usually pays a more attractive dividend than common equity shares a company could set aside cash deposits to be used as a sinking fund to retire preferred stock in some cases the stock can have a call option attached to it meaning the company has the right to repurchase the stock at a predetermined price business accounting of sinking fundsa sinking fund is typically listed as a noncurrent asset or long term asset on a company s balance sheet and is often included in the listing for long term investments or other investments companies that are capital intensive usually issue long term bonds to fund purchases of new plant and equipment oil and gas companies are capital intensive because they require a significant amount of capital or money to fund long term operations such as oil rigs and drilling equipment example of a sinking fundlet s say for example that exxonmobil corp xom issued 20 billion in long term debt in the form of bonds interest payments were to be paid semiannually to bondholders the company established a sinking fund whereby 4 billion must be paid to the fund each year to be used to pay down debt by year three exxonmobil had paid off 12 billion of the 20 billion in long term debt the company could have opted not to establish a sinking fund but it would have had to pay out 20 billion from profit cash or retained earnings in year five to pay off the debt the company would have also had to pay five years of interest payments on all of the debt if economic conditions had deteriorated or the price of oil collapsed exxon might have had a cash shortfall due to lower revenues and not being able to meet its debt payment paying the debt early via a sinking fund saves a company interest expense and prevents the company from being put in financial difficulties in the long term if economic or financial conditions worsen also the sinking fund allows exxonmobil the option to borrow more money if needed in our example above let s say by year three the company needed to issue another bond for additional capital since only 8 billion of the 20 billion in original debt remains it would likely be able to borrow more capital since the company has had such a solid track record of paying off its debt early | |
is a sinking fund a current asset | a sinking fund is not a current asset it is listed as an asset on a balance sheet but it is not used as a source of working capital so cannot be considered a current asset a current asset is any asset that can be converted to cash within a year | |
what is the difference between a sinking fund and an emergency fund | a sinking fund is used for a very specific purpose to pay down debt or a bond an emergency fund is a general reserve fund that can be used for a variety of emergencies that may come up even though an emergency fund is used for a specific purpose emergencies it has a different function than a sinking fund | |
what are the disadvantages of a sinking fund | the disadvantage of a sinking fund is that it limits the availability of cash on hand for a business this limited cash reduces the ability to invest and therefore earn a return it can be argued that this is not necessarily a disadvantage as the money in a sinking fund is used to pay off the debt that was raised to facilitate the needs of the business so a sinking fund is just a measure to prudently manage finances the bottom linesinking funds are a method for corporations to pay off debt setting aside money to pay off debts is a prudent financial decision for companies to manage their obligations when debt comes due companies that don t may struggle to find the capital to make good on their outstanding debt obligations | |
what is six sigma | six sigma is a set of techniques and tools used to improve business processes it was introduced in 1986 by engineer bill smith while working at motorola six sigma practitioners use statistics financial analysis and project management to identify and reduce defects and errors minimize variation and increase quality and efficiency the five phases of the six sigma method known as dmaic are defining measuring analyzing improving and controlling understanding six sigmasix sigma is based on the idea that all business processes can be measured and optimized the term six sigma originated in manufacturing as a means of quality control six sigma quality is achieved when long term defect levels are below 3 4 defects per million opportunities dpmo six sigma has since evolved into a more general business concept focusing on meeting customer requirements improving customer retention and improving and sustaining business products and services among its best known proponents was the longtime general electric ceo jack welch six sigma certification programs confer belt rankings similar to those in the martial arts ranging from white belt to black belt the 5 steps of six sigmathe six sigma method uses a step by step approach called dmaic an acronym that stands for define measure analyze improve and control according to six sigma adherents a business may solve any seemingly unsolvable problem by following these five steps a team of people led by a six sigma expert chooses a process to focus on and defines the problem it wishes to solve the team measures the initial performance of the process creating a benchmark and pinpoints a list of inputs that may be hindering performance next the team analyzes the process by isolating each input or potential reason for any failures and testing it as the possible root of the problem the team works from there to implement changes that will improve system performance the group adds controls to the process to ensure it does not regress and become ineffective once again | |
what is lean six sigma | lean six sigma is a team focused managerial approach that seeks to improve performance by eliminating waste and defects while boosting the standardization of work it combines six sigma methods and tools and the lean manufacturing lean enterprise philosophy striving to reduce the waste of physical resources time effort and talent while assuring quality in production and organizational processes any use of resources that does not create value for the end customer is considered a waste and should be eliminated 1six sigma certification and belt rankingsindividuals can obtain six sigma certification to attest to their understanding of the process and their skills in implementing it these certifications are awarded through a belt system similar to karate training the belt levels are 2people with black belts can become masters and champions someone with a master black belt is considered an expert and strong leader with excellent problem solving skills a champion is a lean six sigma leader trained in maximizing profits through the elimination of waste and defects 2these certifications and the courses required to obtain them are offered by a variety of companies and educational institutions and can differ from one to another real world examples of six sigmasix sigma is used by many companies local governments and other institutions here are two examples of how six sigma improved operational efficiency saved money and increased customer satisfaction microsoft msft is one of the largest software producers in the world it used six sigma to help eradicate defects in its systems and data centers and systematically reduce it infrastructure failures the company first established standards for all of its hardware and software to create a baseline measurement for detecting defects it then used root cause analysis including collecting data from past high priority incidents server failures and recommendations from product group members and customers to pinpoint potential problem areas 3large amounts of data were collected on a daily and weekly basis from various servers the incidents were prioritized based on how severely the defects affected the business and the company s underlying services data analysis and reporting identified the specific defects after which remediation steps for each defect were established as a result of six sigma microsoft says it improved the availability of its servers boosted productivity and increased customer satisfaction ventura county california credited the use of lean six sigma for a savings of 33 million the county government began to use the program in 2008 and has trained more than 5 000 employees in the methodology the county says the savings are due in part to the introduction of more efficient new systems and the elimination of unnecessary but time consuming steps from its prior processes 4for example the vc star newspaper reported in 2019 that the county saved 51 000 with an appointments system that reduced labor costs and rates for maintenance of county vehicles and almost 400 000 annually by implementing a new system to track employee leaves of absence 4 | |
how can you get six sigma certification | you can receive six sigma certification through private companies associations and some colleges keep in mind though that there is no single governing body that standardizes the curriculum this means that courses can vary based on where you take them can you get six sigma certification online yes many of the universities and organizations that offer six sigma certification have both classroom and online offerings | |
what is the basic difference between six sigma and lean six sigma | lean six sigma uses the six sigma methodology define measure analyze improve control with the specific goal of eliminating waste in a company s or other organization s processes or use or materials that is making it leaner it derives in part from the principles of lean manufacturing the bottom linesix sigma has become a widely used quality improvement methodology in both the private and public sectors anyone who wishes to learn it can take courses that lead to various levels of certification | |
what is skewness | skewness is the degree of asymmetry observed in a probability distribution when data points on a bell curve are not distributed symmetrically to the left and right sides of the median the bell curve is skewed distributions can be positive and right skewed or negative and left skewed a normal distribution exhibits zero skewness investopedia theresa chiechitypes of skewsnegative or left skewed refers to a longer or fatter tail on the left side of the distribution while positive or right skewed refers to a longer or fatter tail on the right these two skews show the direction or weight of the distribution the three probability distributions below are right skewed to an increasing degree the mean of positively skewed data will be greater than the median in a left skewed distribution the mean of negatively skewed data will be less than the median a right skewed or positive distribution means its tail is more pronounced on the right side than on the left since the distribution is positive the assumption is that its value is positive as such most of the values end up left of the mean this means that the most extreme values are on the right side negative or left skewed means the tail is more pronounced on the left rather than the right most values are found on the right side of the mean in negative skewness as such the most extreme values are found further to the left a zero skew means the data graph is symmetrical and reveals a normal data distribution regardless of how long or fat the distribution tails are measuring skewnesstwo methods to measure skewness include pearson s first and second coefficients of skewness pearson s first coefficient of skewness or pearson mode skewness subtracts the mode from the mean and divides the difference by the standard deviation pearson s second coefficient of skewness or pearson median skewness subtracts the median from the mean multiplies the difference by three and divides the product by the standard deviation s k 1 x m o s s k 2 3 x m d s where s k 1 pearson s first coefficient of skewness and s k 2 the second s the standard deviation for the sample x is the mean value m o the modal mode value m d is the median value begin aligned qquad qquad qquad quad frac sk 1 frac bar x mo s sk 2 frac 3 x md s textbf where sk 1 text pearson s first coefficient of skewness and sk 2 qquad quad text the second s text the standard deviation for the sample bar x text is the mean value mo text the modal mode value md text is the median value end aligned sk2 s3 x md sk1 sx mo where sk1 pearson s first coefficient of skewness and sk2 the seconds the standard deviation for the samplex is the mean valuemo the modal mode valuemd is the median value pearson s first coefficient of skewness is used if the data exhibit a strong mode pearson s second coefficient may be preferable if the data have a weak mode or multiple modes as it does not rely on mode as a measure of central tendency skewness tells you where the outliers occur although it doesn t tell you how many outliers occur | |
what does skewness tell investors | investors note skewness when judging a return distribution because it like kurtosis considers the extremes of the data set rather than focusing solely on the average short and medium term investors look at extremes because they are less likely to hold a position long enough to be confident that the average will work out investors commonly use standard deviation to predict future returns but the standard deviation assumes a normal distribution as few return distributions appear normal skewness is a better measure to base performance predictions skewness risk is the increased risk of turning up a data point of high skewness in a skewed distribution many financial models that attempt to predict the future performance of an asset assume a normal distribution if the data are skewed this model will always underestimate skewness risk in its predictions the more skewed the data the less accurate this financial model will be image by julie bang investopedia 2020 | |
what is skin in the game | skin in the game is a phrase made popular by renowned investor warren buffett referring to a situation in which high ranking insiders use their own money to buy stock in the company they are running the saying is particularly common in business finance and gambling and is also used in politics understanding skin in the gamein business and financing the term skin in the game is used to refer to owners or principals having a significant stake in an investment vehicle such as shares of a company in which outside investors are solicited to invest in this phrase skin is a figure of speech for the person or money involved and game is the metaphor for actions on the field of play under discussion it is not unheard of for an executive to receive stock as compensation or to exercise stock options to buy a stock at a discount what is less common is for an executive to risk their own money in the company that they work in when an executive puts skin in the game it is seen as a sign of good faith or a show of confidence in the future of the company and it is seen as a positive sign by outside investors if principals or owners have also invested their own money in the investment vehicle then prospective and existing investors will translate this move as a vote of confidence skin in the game or insider ownership also conveys to investors that the company will likely put its best foot forward to generate returns for its investors the idea behind executives putting their skin in the game is to ensure that corporations are managed by like minded individuals who share a stake in the company executives can talk all they want but the best vote of confidence is putting one s own money on the line just like outside investors limitations of skin in the gamehowever some limitations exist when owners and senior management executives are asked to invest their own money in a security many banks and other financial institutions bar employees from having any skin where client capital is managed the restriction addresses the issue of front running which is when an executive enters a trade with inside or non public information just before an event or announcement to gain an economic advantage there are also restrictions on commingled funds which is the pooling of resources or the mixing of both private funds and corporate resources into the company s stock or bonds there are some instances when the executives must remain objective in their decision making and are barred from investing in the company s they manage disclosure requirements for skin in the gamethe securities and exchange commission sec requires that funds annually disclose how much money each portfolio manager has invested in the fund using this public information proponents argue that finding fund managers who put their money where their mouths are can be a reliable way to identify fund managers who could be expected to beat the market over the long run proponents of skin in the game argue that capital commitment is the single most important way to align the interests of investors and managers the sec also requires companies to report on insider ownership or trades of a company s securities 2 the reports are required because trades by executives directors and officers can impact the price of the company s stock there are various types of forms that the executives must file with the sec investors can access and use these insider ownership reports to make a more informed decision as to whether to invest or not invest in the company real world example of skin in the gameif investors want to see a ceo that has skin in the game with their company there are few better examples than elon musk elon musk is the chief executive officer ceo of tesla inc below is a portion of the sec filing showing the number of tesla shares owned by its ceo musk owned more than 227 million shares of tesla per his latest schedule 13g filing for dec 31 2021 3 | |
what is slippage | slippage refers to the difference between the expected price of a trade and the price at which the trade is executed slippage can occur at any time but is most prevalent during periods of higher volatility when market orders are used it can also occur when a large order is executed but there isn t enough volume at the chosen price to maintain the current bid ask spread | |
how does slippage work | slippage does not denote a negative or positive movement because any difference between the intended execution price and actual execution price qualifies as slippage when an order is executed the security is purchased or sold at the most favorable price offered by an exchange or other market maker this can produce results that are more favorable equal to or less favorable than the intended execution price the final execution price vs the intended execution price can be categorized as positive slippage no slippage or negative slippage market prices can change quickly allowing slippage to occur during the delay between a trade being ordered and when it is completed the term is used in many market venues but definitions are identical however slippage tends to occur in different circumstances for each venue while a limit order prevents negative slippage it carries the inherent risk of the trade not being executed if the price does not return to the limit level this risk increases in situations where market fluctuations occur more quickly significantly limiting the amount of time for a trade to be completed at the intended execution price investors can avoid negative slippage by placing limit orders example of slippageone of the more common ways that slippage occurs is as a result of an abrupt change in the bid ask spread a market order may get executed at a less or more favorable price than originally intended when this happens with negative slippage the ask has increased in a long trade or the bid has decreased in a short trade with positive slippage the ask has decreased in a long trade or the bid has increased in a short trade market participants can protect themselves from slippage by placing limit orders and avoiding market orders for example say apple s bid ask prices are posted as 183 50 183 53 on the broker interface a market order for 100 shares is placed with the intention the order gets filled at 183 53 however micro second transactions by computerized programs lift the bid ask spread to 183 54 183 57 before the order is filled the order is then filled at 183 57 incurring 0 04 per share or 4 00 per 100 shares negative slippage slippage and the forex marketforex slippage occurs when a market order is executed or a stop loss closes the position at a different rate than set in the order many traders and investors use stop loss orders to limit potential loss an alternative approach is to use option contracts to limit your exposure to downside losses during fast moving and consolidating markets slippage is more likely to occur in the forex market when volatility is high perhaps due to news events or during times when the currency pair is trading outside peak market hours in both situations reputable forex dealers will execute the trade at the next best price ways to reduce the impact of slippageslippage is a part of investing although there are some ways to avoid it or limit its impact slippage usually occurs when markets are volatile or liquidity is lacking so timing and the type of security you re trading can play a big roletrade in calm momentsthe less volatility in the market the less chance you have of getting caught out by slippage if you want to limit slippage don t invest around the time of major economic announcements or important updates relating to a security you wish to trade such as an earnings report these types of events can move markets significantly and lead prices to jump around place limit orders insteadmarket orders are transactions to be executed as quickly as possible whereas limit orders are orders that will only go through at a specified price or better if you place a limit order you can avoid negative slippage however there is also the risk that the order doesn t get executed some platforms allow investors to place an order while specifying the maximum amount of slippage they are willing to accept in percentage terms | |
what does slippage mean in crypto | slippage can happen with all asset classes with crypto it s perhaps more likely as the market for digital currencies tends to be more volatile and in certain cases less liquid | |
what is a 2 slippage | some brokers allow investors to specify a maximum slippage tolerance 2 slippage means an order being executed at 2 more or less than the expected price for example if you placed an order for shares in a company when they were trading at 100 and ended up paying 102 per share you would have 2 negative slippage | |
is positive slippage good | yes positive slippage is good it means you got a better price than expected the bottom lineslippage when the executed price of a trade is different from the requested price is a part of investing bid ask spreads may change in the time it takes for an order to be fulfilled this can occur across all market venues including equities bonds currencies and futures and is more common when markets are volatile or less liquid generally slippage can be minimalized by trading in markets where there s lots of liquidity and little price movement and it can also work in investors favor slippage can be positive or negative positive slippage means the investor getting a better price than expected while negative slippage means the opposite | |
what are small and midsize enterprises smes | small and midsize enterprises smes are businesses that maintain revenues assets or a number of employees below a certain threshold each country has its own definition of what constitutes a small and midsize enterprise certain size criteria must be met and occasionally the industry in which the company operates is taken into account as well image by sabrina jiang investopedia 2020 | |
what is the role of smes in an economy | though small smes play an important role in an economy they outnumber large firms employ vast numbers of people and are generally entrepreneurial in nature helping to shape innovation 12small and midsize enterprises can exist in almost any industry but are more likely to reside within industries requiring fewer employees and smaller up front capital investments common types of smes include legal firms dental offices restaurants and bars smes are segregated from large multinational companies because they fundamentally operate differently large complex firms may require advanced enterprise resource planning erp systems for accounting supply chain management and financial reporting and interconnectivity across offices around the world or deeper organizational processes 3 smes on the other hand may require fewer systems given their narrower scope of operations small and midsize enterprises smes around the worldin the united states the small business administration sba classifies a small business according to its ownership structure number of employees earnings and industry 4 for example in manufacturing an sme is a firm with 500 or fewer employees 5 in contrast businesses that mine copper ore and nickel ore can have up to 1 400 employees and still be identified as smes 6 the u s distinctly classifies companies with fewer than 10 employees as a micro business | |
when it comes to tax reporting the internal revenue service irs does not categorize businesses into smes instead it separates small businesses and self employed individuals into one group and midsize to large businesses into another the irs classifies small businesses as companies with assets of 10 million or less and large businesses as those with more than 10 million in assets 78 | the sba office of advocacy reported almost 33 2 million small businesses in the u s as of march 2023 of these 82 did not have any employees within the u s economy small businesses comprise 99 9 of all firms 99 7 of all firms with paid employees and 97 3 of exporters 9in the united states smes are disproportionally owned by white males highlighting the lack of access to financial and entrepreneurial resources across races and genders for example a march 2023 report by the sba found only 19 6 of employer firms were owned by minorities and only 21 7 of employer firms owned by women 10the canadian government issues canadian industry statistics that define each type of business based on the number of employees it has 11in 2023 businesses with fewer than 100 employees accounted for 97 9 of all employer businesses in canada small and micro businesses employed 10 9 million individuals more than 62 of the total employed workforce 12the european union eu offers definitions of what constitutes a small size company as well small size enterprises are companies with fewer than 50 employees and medium size enterprises are ones with fewer than 250 employees in addition to small and midsize companies there are micro companies which employ up to 10 employees 13as is the case in other countries smes represent 99 of all businesses within the eu smes employ an estimated 100 million individuals and generate more than half of the european union s gross domestic product gdp 14china s system of classifying the size of chinese companies is complex in general companies are defined based on their operating revenue number of employees or total assets the following examples highlight these classifications under the five year plan from 2021 to 2025 china plans to invest heavily in its small and midsize enterprises the country is expected to cultivate 1 million smes and 100 000 smes that feature innovation during this time according to the department of industry and information technology 16in developing countries such as kenya and india small and midsize enterprises go by the acronym msme short for micro small and medium size enterprises regardless of criteria countries share the commonality of separating businesses according to size or structure 1718many people in emerging economies find work in small and midsize enterprises smes contribute roughly 50 of total employment and 40 of gdp in these countries according to the organisation for economic co operation and development oced the world bank estimates that a majority of formal jobs in emerging markets seven out of 10 jobs are generated by smes however these small businesses often face greater financing challenges compared to their developed country counterparts the world bank estimates that msmes in developing countries have unmet financing needs in excess of 5 trillion every year 19the importance of small and midsize enterprises smes a plethora of data demonstrates the massive economic impact that smes have on a country s economy specific to the united states smes play a vital role in the success of the nation s economy by contributing in a variety of ways 2021small businesses also have distinct advantages over larger companies estimated number of smes in the united states according to the office of the united states trade representative 22 | |
what incentives are available to smes | u s smes can gain access to education programs and coaching help from the small business administration these insights are meant to help owners make their businesses grow and survive as well as target high risk areas and boost tax compliance life as a small and midsize enterprise isn t always easy these businesses generally struggle to attract capital to fund their endeavors and often have difficulty paying taxes and meeting regulatory compliance obligations governments recognize the importance of smes to their economies and regularly offer incentives including favorable tax treatment and better access to loans to help keep smes in business types of loans include 23sme loans through the sba can range from 500 to 5 5 million 23the small business administration also provides funding to specific small business investment companies sbics these sbics can then use their expertise to invest private funds in small businesses sbics can invest debt equity or a combination of both to garner consideration from an sbic for funding a business must meet the following universal requirements at a minimum 24 | |
what does sme mean | sme stands for small or midsize enterprise as opposed to multinational conglomerates with locations around the world smes are much smaller businesses that create a majority of jobs across the world economy | |
what is an example of an sme | in 1971 a company called starbucks opened its first store in seattle s historic pike place market 25 at the time it might have been able to claim to be an sme but with starbucks locations now all over the world the company can no longer make that claim that option has passed to other coffee shops such as lighthouse roasters an independent and locally owned coffee roaster with a single address in seattle lighthouse roasters is considered an sme 26 | |
how many employees are employed by small to midsize businesses | according to the u s census bureau employer firms with fewer than 500 workers accounted for 45 9 of private sector payrolls in 2021 while companies with fewer than 100 employees accounted for 32 4 27 | |
what is the definition of a small to midsize business | there is no set definition of a small to midsize business and it varies by country in the united states the definition can also vary by industry note that gartner the information technology it consulting service describes small businesses as those with fewer than 100 employees and midsize businesses as those with 100 to 999 employees 28 | |
what is the percentage of small to midsize businesses in the united states | the most recent u s census data for smes found that there were 6 3 million employer firms in the u s in 2021 firms with fewer than 500 employees made up 99 7 of those businesses companies with fewer than 100 employees made up 98 3 27the bottom linesmall and midsize enterprises play a vital part in many economies around the world their innovation flexibility creativity efficiency and locality all play a part in making them successful through conscious consumer behavior government assistance and reliance on their communities smes have established themselves as an important part of the broader economy | |
what is the small business administration sba | the small business administration sba is a u s government agency designed to bolster and promote the economy by assisting the country s small businesses established in 1953 the sba s primary function is to counsel individuals who want to start and grow their own businesses it provides a series of tools on its website to assist new and existing small business owners 1 the agency is headed by an administrator and deputy administrator and also has a chief counsel for advocacy and inspector general all of whom are confirmed by the senate 2 the sba has at least one office in every state the district of columbia and various american territories 3understanding the sbathe sba offers substantial educational information with a specific focus on assisting small businesses to develop and grow as noted above the agency has numerous tools for businesses that can be accessed on its website including a small business planner and additional training programs according to its website the sba provides the following services to small businesses 45the agency has helped countless small businesses across the country get access to loans loan guarantees contracts and other services isabella casillas guzman is the administrator of the sba prior to holding this office she served as the director of california s office of the small business advocate 6the sba loan programthe loan programs offered through the sba are among the agency s most visible offerings and they come with longer repayment periods for small businesses the agency doesn t actually issue loans itself with the exception of disaster relief loans instead loans are backed or guaranteed by the sba and issued directly by lenders that meet the agency s guidelines 7loans backed by the sba include small businesses qualify for loans more easily when they are guaranteed by the sba the agency also allows entrepreneurs to make lower payments for a longer period of time despite numerous attempts to do away with the sba entirely many political officials and offices continue to support it the sba s ability to offer loans was also significantly strengthened by the american recovery and reinvestment act arra of 2009 and the small business jobs act of 2010 the sba has local offices throughout the united states and associated territories that provide more personalized special events for small business owners these offices provide in person one on one counseling services that include instruction on writing a business plan and assistance with small business loans | |
how the sba can help you start your business | the sba has many resources available for people who want to start their own small businesses if you have an idea for a business this section highlights some of these resources which can take you from start to finish this section of the website outlines steps and provides resources related to the development of your business these include conducting relevant market research developing a business plan and funding you can also learn about what you need to do to choose 12the sba also provides key information about what you need to register your company as well as how to get the appropriate tax documents permits and licenses you can also find out what you need to open a business bank account 12launching your business is just as important as starting it which is why you ll find some of the same resources from the section above seeping into this one for instance choosing your location will depend a lot on local zoning ordinances and laws it will also affect the kind of incentives and taxes that apply to your organization 13the sba s website has more information on these topics and also provides information on business insurance which is a very important part of safeguarding your interests 13 it helps protect your business from any unforeseen losses that take place during normal operations | |
how the sba can help you manage and grow your business | the agency doesn t just help people start and launch their own businesses it also has resources available to help manage and grow them you can learn valuable tips and tricks on how to manage your finances hire employees and pay taxes other important information includes staying compliant how tos for purchasing assets and marketing and sales strategies 14because cybersecurity is a key threat to many businesses the sba also provides some common sense tips to stay safe this section can help business owners spot some of the most common scams such as malware and ransomware and understand and assess their risk they can also use some of the agency s best practices to avoid cyber attacks and access sba training and events 15this section also deals with hiring people with disabilities what to do when you must close your business and how to recover from disasters 14it isn t enough just to learn how to start and run your business which is why the sba also has resources to help you grow some of the aids in this section cover how to access additional funding how to expand and what to expect from mergers and acquisitions m a 16part of the sba s mandate is to guarantee a certain percentage of federal contracts to small business owners as such the agency encourages businesses to become federal contractors and has an easy registration process 17 you can also get the resources you need to improve your bottom line via connecting with partners to help export your products and services 16you ll also find useful information about different types of businesses such as those owned by women native americans veterans minorities and members of the lgbtq community as well as rural businesses 16the history of the sbathe sba was established by president dwight eisenhower when he signed the small business act in the summer of 1953 it replaced the reconstruction finance corporation rfc which was created under president herbert hoover in 1932 after the great depression the mandate of the newly formed sba was to aid and protect the country s small businesses and ensure that they received a fair portion of government contracts and surplus property sales 1the sba has had a rocky history in 1996 the agency was under threat of being eliminated by the house of representatives 18 however the agency survived this threat and went on to receive a record budget in 2000 19 there was also a lot of resistance to its loan program which led to repeated cuts between 2001 and 2004 that s when certain sba expenditures were frozen altogether 20small business owners were among some of the hardest hit during the covid 19 pandemic the sba helped these owners providing them with two different types of funding 21 | |
what does the small business administration sba do | the small business administration sba is a u s government agency that provides assistance to small business owners it has a series of tools available for new and existing entrepreneurs its goals include providing business owners with access to capital developing entrepreneurial spirit reserving contracting dollars for certain business owners and advocating on behalf of small business owners | |
where does the sba get its funding | the sba receives an annual budget approved by the federal government this money goes toward salaries grant and loan programs and administrative costs keep in mind that the sba doesn t actually provide loans to small businesses instead the majority of loans issued to small business owners through sba programs are guaranteed by the agency and issued by approved financial institutions and other lenders this source of capital helps individuals start and grow their businesses who qualifies for an sba grant the sba generally doesn t issue grants but it does provide grants to certain organizations that promote business ownership in their communities these include nonprofit organizations organizations that provide their communities with training and funding known as resource partners and educational organizations grants are not provided to owners who want to expand an existing business or to startups 2324the bottom linethe sba is the federal government s main resource for nurturing the growth of small businesses in the u s it not only provides loans mostly through third parties to help start or grow your business it also offers plenty of programs designed to increase your knowledge and expertise in keeping your business healthy from how to pay taxes to marketing and sales to cybersecurity and more the sba doesn t normally issue any grants except for a few that go to organizations many of them nonprofit that promote entrepreneurship in their communities it also advocates on behalf of small business owners local offices exist in all 50 states the district of columbia and american territories during the covid 19 pandemic the sba provided crucial financial support through both loans and grants to the small business community which was gravely impacted by the crisis | |
what is a small cap stock | a small cap stock is a stock from a public company whose total market value or market capitalization is about 250 million to 2 billion the precise figures vary small cap stock investors are generally looking for up and coming young companies that are growing fast that is they re looking for the large cap stocks of the future 1understanding small cap stocksthe cap in small cap stands for capitalization the term in its entirety is market capitalization this is the market s current estimate of the total dollar value of a company s outstanding shares to calculate a company s market capitalization multiply its current share price by the number of outstanding shares classifications such as large cap or small cap are approximations that change over time furthermore the precise definition of small cap stocks versus large cap stocks may vary among brokers one misconception about small cap stocks is that they are startups or brand new companies in reality many small cap stocks are of companies that are well established businesses with strong track records and great financials and because they are smaller small cap stock share prices have a greater chance of growth small cap stock vs large cap stockas a rule small cap stock companies offer investors more room for growth but also bring greater risk and volatility than large cap stock companies a large cap offering has a market capitalization of 10 billion or higher for large cap stock companies such as general electric ge and coca cola co ko aggressive growth may be in the rear view mirror such companies offer investors stability and dividends but rarely fast growth 1that said whether smaller or larger companies perform better over time varies on many factors for example large cap stock companies dominated during the tech bubble of the 1990s as investors gravitated toward stocks such as microsoft msft cisco csco and aol time warner after the bubble burst in march 2000 small cap stock companies became the better performers as many of the large caps hemorrhaged value in the crash 2one advantage of investing in small cap stocks is the opportunity to beat institutional investors many mutual funds have internal rules that restrict them from buying small cap stock companies in addition the investment company act of 1940 prohibits mutual funds from owning more than 10 of a company s voting stock this makes it difficult for mutual funds to build a meaningful position in small cap stocks 3a stock smaller than a small cap is known as a micro cap that is a publicly traded company with a market capitalization of less than 250 million 1small cap stock vs mid cap stockinvestors who want the best of both worlds might consider mid cap stocks which have market capitalizations between 2 billion and 10 billion historically these companies can offer more stability than small cap stock companies yet confer more growth potential than large cap stock companies 1however for self directed investors spending the time to sift through small caps to find a diamond in the rough can prove to be time well spent even in our data rich world great small cap investments fly under investors radars because they get little coverage from analysts small cap stock vs penny stockshares in both small cap stocks and penny stocks have lower market value than large or mid cap stocks penny stocks have small market capitalizations so they could be considered small cap stocks however there are specific characteristics that make a stock a penny stock which not all small cap stocks share penny stocks have share prices lower than 5 some are traded on the new york stock exchange most though are traded directly known as over the counter or through pink sheets rather than through a stock exchange 4penny stocks are considered high risk investments due to their unlike a penny stock small cap stocks can have a share price of 5 and higher they are categorized based on their market capitalization advantages and disadvantages of small cap stockspotential for growthlower share pricevariety of businessesless popularvolatile priceshigh riskless available informationlow liquidity | |
how to invest in small cap stocks | if you have the time and the knowledge necessary to research individual small cap stocks you can invest in individual companies their stock can be purchased through a brokerage account before investing in a company you ll want to investigate its if researching individual small cap stocks is too time consuming or seems too risky you can also buy small cap mutual funds or exchange traded funds etfs these might track broad small cap indexes specific industries within the small cap market or investment goals like value or growth small cap stock indexesmany brokerages offer small cap stock index funds either as mutual funds or as etfs to track the u s small cap market depending on the brokerage you use you could for example invest in the vanguard small cap index fund vsmx or the fidelity small cap index fund fssnx however there are two main small cap indexes that are used as benchmarks for the small cap equities market the russell 2000 is a small cap stock market index composed of the 2 000 smallest companies in the russell 3000 the index is frequently used as a benchmark for measuring the performance of small cap stock mutual funds it is managed by london s ftse russell group because it tracks such a broad share of the small cap market the russell 2000 is used by many mutual funds and etfs it is heavily weighted by financials industrials and healthcare 5the s p smallcap 600 index was established by standard poor s the creator of the s p 500 it uses a capitalization weighted index to broadly track the performance of small cap stocks on the u s equities market it includes 600 companies and represents close to 3 of the u s market unlike many other small cap benchmarks the s p 600 has an earnings requirement which is used to ensure the quality of the stocks included and hedge against volatility to be included a company must have a market capitalization between 1 billion and 6 7 billion 6it must also | |
are small cap stocks a good investment | small cap stocks can be a good investment they typically have the potential for growth much larger than large cap stocks blue chip companies so if an investor gets in at a good price they may see a good return small cap stocks are more risky and volatile than the stocks of larger more established companies so investors must take extra care in their analysis before making any investment decisions | |
which is better small cap or mid cap | whether small cap stocks or mid cap stocks are better depends on the specific company any company with good fundamentals a strong business strategy smart leadership and a competitive edge can be a good investment whether they are a small or mid sized company small cap stocks have more growth potential than mid cap stocks so investors may see a better return however small cap stocks are also more risky and volatile than mid cap stocks so the loss potential is greater | |
is small cap good for the long term | yes small cap stocks can be good for the long term if you can invest in a small cap stock that has good fundamentals and an overall healthy analysis the stock will most likely grow over the long term if you can invest before a bull run on the market and hold the stock for the long term then you could see a strong financial return the bottom linesmall cap stocks are the stocks of companies whose market capitalization is roughly between 250 million and 2 billion these companies are attractive investment opportunities for investors as they have the potential for significant growth with the possibility of becoming large cap stock companies 1because there is more upside than a large cap stock investors do take on more risk but on the bright side small cap stocks have better opportunities for larger growth investors should carefully evaluate companies with a smaller market cap to determine if there is growth potential before making any investment decision in the hopes of a future windfall | |
what is smart beta | smart beta investing combines the benefits of passive investing and the advantages of active investing strategies the goal of smart beta is to obtain alpha lower risk or increase diversification at a cost lower than traditional active management and marginally higher than straight index investing it seeks the best construction of an optimally diversified portfolio in effect smart beta is a combination of efficient market hypothesis and value investing the smart beta investment approach applies to popular asset classes such as equities fixed income commodities and multi asset classes economist harry markowitz first theorized smart beta via his work on modern portfolio theory smart beta explainedsmart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization based indices smart beta emphasizes capturing investment factors or market inefficiencies in a rules based and transparent way the increased popularity of smart beta is linked to a desire for portfolio risk management and diversification along factor dimensions as well as seeking to enhance risk adjusted returns above cap weighted indices smart beta strategies seek to passively follow indices while also considering alternative weighting schemes such as volatility liquidity quality value size and momentum that s because smart beta strategies are implemented like typical index strategies in that the index rules are set and transparent these funds don t track standard indices such as the s p 500 or the nasdaq 100 index but instead focus on areas of the market that offer an opportunity for exploitation janiecbros getty imagesselecting smart beta strategiesthere is no single approach to developing a smart beta investment strategy as the goals for investors can be different based on their needs though some managers are prescriptive in identifying smart beta ideas that are value creating and economically intuitive equity smart beta seeks to address inefficiencies created by market capitalization weighted benchmarks funds may take a thematic approach to manage this risk by focusing on mispricing created by investors seeking short term gains for example managers may also choose to create or follow an index that weights investments according to fundamentals such as earnings or book value rather than market capitalization alternatively managers may use a risk weighted approach to smart beta that involves the establishment of an index based upon assumptions of future volatility for instance this may involve an analysis of historical performance and the correlation between an investment s risk relative to its return the manager must evaluate how many assumptions they are willing to build into the index and can approach the index by assuming a combination of different correlations smart beta popularityalthough smart beta funds typically attract higher fees than their vanilla counterparts they continue to remain popular with investors as of february 2019 77 new smart beta exchange traded funds etfs launched which accounts for roughly a third of all etfs that came to market in the past year according to factset data as reported by etf com smart beta funds also attracted a more significant increase in assets under management aum over the period growing at 10 9 compared to 4 3 for vanilla funds in total smart beta funds command 880 billion in total cumulative assets up from 616 billion in 2016 example of smart beta fundsthe following three etfs each use a different smart beta strategy seeking value growth and dividend appreciation respectively the vanguard value index fund etf shares etf vtv tracks the crsp us large cap value index its benchmark determines value using several fundamental ratios including price to book p b forward price to earnings forward p e historical p e dividend to price and price to sales the fund has 77 25 billion in aum as of april 2019 with net assets of 42 73 billion as of april 2019 the ishares russell 1000 growth etf iwf seeks to provide similar returns to the russell 1000 growth index the underlying selects components based on three fundamental factors price to book medium term growth forecasts and sales per share growth the vanguard dividend appreciation index fund etf shares vig aims to return similar investment results to the nasdaq us dividend achievers select index the fund selects firms that have increased their dividend payments for the past 10 years and market cap weights its holdings as of april 2019 vig has aum of 40 94 billion | |
what is a smart beta etf | a smart beta etf is an exchange traded fund etf that uses a rules based system for selecting investments to be included in the fund portfolio an exchange traded fund or etf is a fund that tracks an index such as the s p 500 smart beta etfs build on traditional etfs and tailor the components of the fund s holdings based on predetermined financial metrics weighting strategiesstocks that make up exchange traded funds vary depending on the rules established at the fund s inception and different weightings are assigned for each stock in a fund weighting means a fund might have more shares of one stock versus another based on an underlying aspect etfs might track a stock index that contains only bank stocks large companies or technology stocks market cap weighting is one of the most common methods in selecting how many shares of a company s stock comprise an index or fund a company is chosen based on its market capitalization or share price multiplied by the number of outstanding shares a company with many outstanding shares that experienced a high rise in stock price will weigh heavily in a market cap index smart beta doesn t employ the typical cap weighted index strategy but looks at factors specific to a particular company or industry a smart beta etf might choose companies that only exhibit certain behaviors or metrics like earnings growth the extent to which the stock moves up or down or profitability each etf employs rules that are part of an overall systematic approach to picking stocks to be included in the fund 1smart beta etfs screen and weigh securities based on factors other than market capitalization types of smart beta etfsa smart beta etf may screen its holdings based on a company s dividend growth dividends are distributions paid to shareholders from the company s earnings as a reward for investing in the company companies that pay dividends tend to be large well established and profitable risk weighted approaches account for the expected volatility in stocks funds might limit the holdings to low volatility stocks to reduce risk in the fund volatility is a measure of how much a security s price fluctuates there are many types of smart beta etf strategies including passive and active managementsmart beta etfs use a combination of passive and active investing active investing employs an investment manager to choose stocks for a portfolio an actively managed fund buys and sells stocks based on fundamental metrics like earnings or financial ratios a fund is when it tracks an index without having an investment manager choose the stocks a fund might track all the stocks in the s p 500 so that it mimics or tracks each move the s p makes passive funds tend to have lower fees smart beta strategies are a blend of active and passive investing the management is passive since it follows an index but considers alternative factors and actively chooses stocks or investments from within the index a smart beta fund that tracks the s p 500 index would not select every stock on the index instead it might choose only those that exhibit a specific behavior such as a percentage of revenue growth 2benefits of smart beta etfsmany smart beta etfs are designed to increase portfolio returns maximize dividends and lower portfolio risks equally weighted indexing is considered one of the benefits of smart beta strategies this parameter removes the emphasis on stocks in the index with the largest market cap weightings if the largest stocks or holdings underperform they will have a sizable impact on the performance of the index relative to the smallest components of the index smart beta is not a passive strategy like the traditional market capitalization weighted index funds while many smart beta etfs have higher expense ratios than passive index products they are less expensive than most actively managed funds 1smart beta etfs are a common choice for investors hoping to maximize their income and returns while allowing for the potential to minimize risk risks of smart beta etfssmart beta etfs are a relatively new method of investing and exhibit low trading volumes low trading volume or liquidity means investors cannot sell or exit their positions trading costs can be high to re establish the original index weighting this price increase comes from the fund purchasing stocks to be included as a result the fees charged for smart beta might be lower than actively managed funds but the savings might not be significant 1smart beta etfs can underperform traditional indexes such as the s p 500 since they must be consistently readjusted to the index holdings are added and sold based on the rules of the fund since smart beta etfs have so many variables to consider trading them can be more difficult than trading with traditional indexes making the prices of smart beta etfs vary from the fund s underlying value smart beta is a blend of active and passive investing following an index but also considering alternative factors smart beta etfs rely less on market cap weightings to avoid one stock overly influencing an etf s value these funds have lower fees than actively managed funds smart beta etfs allow for flexibility in choosing holdings and their behaviors including risk based approaches some smart beta etfs can be expensive since stocks have to be bought and sold to meet the fund s rules smart beta funds can underperform the passive indexes since they are traded continuously versus a buy and hold strategy trading volume can be low leading to difficulty buying and selling the funds smart beta etfs typically have higher fees than passively index based funds example of a smart beta fundthe vanguard dividend appreciation index fund etf shares vig is a smart beta etf that tracks an index of stocks that pay dividends the fund chooses companies from the s p u s dividend growers index the smart beta strategy is fundamentally weighted and includes the stocks of companies that exhibit a record of increasing dividends over time and hold the stocks in the index in approximately the same proportions as their weightings in the index the expenses ratio is 0 06 and has companies from several industries including | |
what is the difference between market cap weighted etf and a smart beta etf | most major indexes like the s p 500 and the russell 1000 index are market cap weighted with the largest companies having the largest weight index smart beta employs strategies that include equal weighting fundamental weighting minimum variance and low volatility | |
why do investors choose smart beta etfs | investors may not consider over or underweighting stocks in a portfolio as the best strategy they may prefer an etf that weighs both small cap and large cap stocks equally or an etf that follows a low volatility strategy | |
what is a smart contract | a smart contract is a self executing program that automates the actions required in a blockchain transaction once completed the transactions are trackable and irreversible the best way to envision a smart contract is to think of a vending machine when you insert the correct amount of money and push an item s button the program the smart contract activates the machine to dispense your chosen item smart contracts permit trusted transactions and agreements to be carried out among disparate anonymous parties without the need for a central authority legal system or external enforcement mechanism while blockchain technology has come to be thought of primarily as the foundation for bitcoin it has evolved far beyond underpinning a virtual currency investopedia laura porterhistory of smart contractssmart contracts were first proposed in 1994 by nick szabo an american computer scientist who conceptualized a virtual currency called bit gold in 1998 10 years before bitcoin was introduced szabo is often rumored to be the real satoshi nakamoto the anonymous bitcoin inventor which he has denied szabo defined smart contracts as computerized transaction protocols that execute the terms of a contract 1 he wanted to extend the functionality of electronic transaction methods such as pos points of sale to the digital realm in his paper szabo also proposed the execution of a contract for synthetic assets such as combining derivatives and bonds szabo wrote these new securities are formed by combining securities such as bonds and derivatives options and futures in a wide variety of ways very complex term structures for payments can now be built into standardized contracts and traded with low transaction costs due to computerized analysis of these complex term structures 1smart contracts do not contain the legal language or even the terms of a contract between two parties they are scripts that contain functions module imports and other programming that automate the actions between two parties many of szabo s predictions in the paper came true in ways preceding blockchain technology for example derivatives trading is now mostly conducted through computer networks using complex term structures smart contract usesbecause smart contracts execute agreements they can be used for many different purposes one of the simplest uses is ensuring transactions between two parties occur such as the purchase and delivery of goods for example a manufacturer needing raw materials can set up payments using smart contracts and the supplier can set up shipments then depending on the agreement between the two businesses the funds could be transferred automatically to the supplier upon shipment or delivery it s important to understand that the connections between blockchain transactions and real world transfers are still being developed for instance if you use some ether to order an item from a retailer that uses an e commerce blockchain that can communicate with ethereum it must still be packed up and shipped by a person in this case a smart contract would likely transfer your cryptocurrency to the retailer and initiate another script that notifies the shipping department of a sale real estate transactions stock and commodity trading lending corporate governance supply chain dispute resolution and healthcare are only a few examples where smart contracts are theorized to have use smart contract pros and consthe primary benefit of smart contracts is similar to the benefit of blockchain technology they remove the need for third parties other benefits of this technology are some of the downfalls of smart contracts are | |
what is an example of a smart contract | the simplest example of a smart contract is a transaction between a consumer and a business where a sale is made the smart contract could execute the customer s payment and initiate the business s shipment process | |
what is the point of a smart contract | the purpose of smart contracts is to further remove the need for a trusted third party to conduct actions between parties that do not trust each other | |
what are the four major parts of a smart contract | it depends on the blockchain and how it is programmed generally speaking smart contracts have state variables data functions what can be done events messages in and out and modifiers special rules for specific users some may have additional elements depending on what they are designed to do the bottom linesmart contracts are code written into a blockchain that executes the actions two parties agree to outside the chain by automating these actions the need for an intermediary or trust between the parties is removed the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info | |
what is smart money | smart money is the capital that is being controlled by institutional investors market mavens central banks funds and other financial professionals smart money was originally a gambling term that referred to the wagers made by gamblers with a track record of success understanding smart moneysmart money is cash invested or wagered by those considered experienced well informed in the know or all three there is little empirical evidence to support the notion that smart money investments perform better than non smart money investments however such influxes of cash influence many speculation methods the term smart money comes from gamblers who had a deep knowledge of the sport they were betting on or insider knowledge that the public was unable to tap into the investing world is similar the populace perceives that the smart money is invested by those with a fuller understanding of the market or information that a regular investor cannot access as such the smart money is considered to have a much better chance of success when the trading patterns of institutional investors diverge from retail investors smart money also refers to the collective force of big money that can move markets in this context the central bank is the force behind smart money and individual traders are riding the coattails of the smart money in the context of gambling smart money refers to those who earn a living on their bets many gamblers use historical mathematical algorithms to decide how much and on what to wager identifying smart moneyto identify smart money one should look for the following signs knowing how to spot smart money does not mean one should refrain from conducting their own research and analysis before making any investment decisions tracking smart moneythere are several ways to track smart money in the financial markets some methods include the scale of smart moneyinvestors with large followings such as warren buffett are considered smart money investors but the scale of their activities is not always taken into account when the cash reserves at buffett s company berkshire hathaway accumulate and are not invested this is definitely a sign that buffett does not see many value opportunities in the market however buffett functions on a different scale a 25 000 investment is not too significant in a billion dollar portfolio buffett s smart money acquires companies rather than takes a position institutional investors of buffett s size need scale for overall portfolio impact therefore even when the smart money is out of value picks in the current market conditions it does not mean that opportunities particularly for modestly sized stocks are absent | |
what is the typical transaction size of smart money | smart money transactions can range from tens of millions to hundreds of millions or even billions of dollars these investors often are able to negotiate favorable terms and access to exclusive investment opportunities due to their size and expertise who is considered smart money institutional investors hedge funds private equity firms high net worth individuals hnwis corporate executives and board members of large companies are all considered smart money | |
what are the characteristics of smart money | smart money investors are often highly analytical and research driven using a variety of tools and resources to analyze the financial markets and identify investment opportunities they often have a long term investment horizon and focus on building portfolios that would generate consistent returns over time also smart money investors often have a disciplined approach to investing with a clear investment criteria and a process for evaluating investment opportunities the bottom linesmart money refers to investments made by experienced investors such as institutional investors hedge funds or private equity firms with a proven track record of success in the financial markets these investors typically have access to significant resources and deep understanding of the markets and they often focus on sectors or industries with strong growth potential to track smart money investors can analyze data sources such as cftc filings volume analysis insider trading reports 13f filings news analysis and market sentiment analysis while identifying smart money can provide valuable insights it is important to conduct thorough research and analysis before making any investment decisions | |
what is the smoot hawley tariff act | the smoot hawley tariff act of 1930 raised u s import duties with the goal of protecting american farmers and other industries from foreign competition the smoot hawley tariff act is now widely blamed for worsening the severity of the great depression in the u s and around the world formally called the united states tariff act of 1930 the law is commonly referred to as the smoot hawley tariff or the hawley smoot tariff it was sponsored by sen reed owen smoot r utah and rep willis chatman hawley r ore understanding the smoot hawley tariff actthe smoot hawley tariff act enacted in june 1930 added about 20 to the united states already high import duties on foreign agricultural products and manufactured goods the fordney mccumber act of 1922 previously raised the average import tax on foreign goods to about 40 the initial focus of the smoot hawley legislation was to increase protection for u s farmers who were struggling to compete with agricultural imports from overseas particularly from europe soon lobbyists for other sectors of american industry began demanding similar protection for their own products effect of the great crash of 1929the first effort to pass the bill failed stymied by moderate senate republicans early in 1929 however with the stock market crash that year the appeal of protectionist and isolationist sentiments increased the bill passed by a narrow margin of 44 to 42 in the senate but it sailed through the house of representatives with a vote of 222 to 153 president herbert hoover signed the act into law on june 17 1930 despite widespread opposition that included a petition signed by more than 1 000 economists urging him to veto it the official u s senate website calls smoot hawley among the most catastrophic acts in congressional history hoover optimistically noted that he had the authority under the act to increase or decrease specific tariffs by as much as 50 allowing him to expedite prompt and effective action if grievances develop a global reactiongrievances developed almost immediately the tariff increases in smoot hawley strained the economies of countries already suffering from the great depression and the costs of rebuilding after world war i one notable loser in the trade wars was germany which was already struggling to repay war reparations to the u s and other nations that emerged victorious from the war as the nobel prize winning m i t economist paul a samuelson noted in his widely used textbook economics cynics were delighted at the spectacle of a country trying to collect debts from abroad and at the same time shutting out the import goods that could alone have provided the payment for those debts the amount of international trade declined worldwide between 1929 and 1934 partly due to the smoot hawley tariff act of 1930 soon 25 countries retaliated by increasing their own tariffs as a result international trade declined drastically resulting in a worldwide decline of 66 between 1929 and 1934 both u s exports and imports dropped substantially a change in directionin the 1932 elections president hoover was defeated by franklin d roosevelt and both smoot and hawley lost their seats in congress on taking office president roosevelt began working to reduce the tariffs congress passed the reciprocal trade agreements act in 1934 that law transferred the authority for tariff policy to the white house authorizing the president to negotiate with foreign heads of state for lower tariffs at both ends over the following decades the united states steadily encouraged international trade by taking a lead role in the general agreement on tariffs and trade gatt the north american free trade agreement nafta and the world trade organization wto to this day economists differ on the extent to which the smoot hawley act worsened the great depression some say its effect was minimal because international trade was then a relatively minor part of the u s economy but no one seems to think it was a good idea the official u s senate website refers to smoot hawley as among the most catastrophic acts in congressional history | |
what was the purpose of the smoot hawley tariff of 1930 | the smoot hawley tariff act of 1930 was enacted to protect u s farmers from foreign competition by increasing tariffs on certain foreign goods it was also purposed to offer protections to other industries from foreign competitors did the smoot hawley tariff act cause the great depression the smoot hawley tariff act did not cause the great depression however it worsened conditions during that time the act increased tariffs which further stressed struggling nations including those in debt to the u s and caused other nations to retaliate by imposing their own tariffs as a result international trade decreased significantly | |
what did investors fear as a result of the smoot hawley tariff act | investors feared that the smoot hawley tariff act would cause prices to fall their fears became reality prompting many to sell shares in record breaking numbers | |
how did european countries react to the smoot hawley tariff act | european nations greatly disfavored the hawley smoot tariff the hawley smoot tariff prompted these countries to impose their own tariffs on foreign goods especially those from the united states these retaliation tariffs crippled international trade and worsened conditions during the great depression the bottom linethe smoot hawley tariff act was a law that raised duties on agricultural imports resulting in economically severe consequences when enacted in 1930 it added about 20 to the u s already high import duties on farm products other nations responded to smoot hawley by raising their own tariffs on american goods sending trade down and exacerbating the great depression | |
what is a smurf | a smurf is a colloquial term for a money launderer who seeks to evade scrutiny from government agencies by breaking up large transactions into a set of smaller transactions that are each below the reporting threshold smurfing is an illegal activity that can have serious consequences current bank regulations require banks or other financial institutions to report cash transactions exceeding 10 000 or any others they deem suspicious on a suspicious activity report sar athima tongloom getty imagesunderstanding smurfingsmurfing involves depositing illegally gained money into multiple bank accounts for under the radar transfer in the near future to prevent money laundering by criminals involved in illegal activities such as drugs and extortion countries such as the united states and canada require a currency transaction report to be filed by a financial institution handling any transaction exceeding 10 000 in cash to evade these reporting requirements criminal groups might attempt to cover their tracks by splitting their cash into multiple smaller deposits and dividing them between a number of geographically dispersed accounts this is a form of structuring transactions to avoid regulatory detection shortly after the 9 11 terrorist attacks the usa patriot act expanded anti money laundering measures by allowing investigative tools designed for organized crime and drug trafficking prevention to be used in terrorist investigations and making reporting of transactions of 10 000 or more mandatory | |
how a smurf works | smurfing takes place in three stages placement layering and integration in the placement stage the criminal is relieved of guarding large amounts of illegally obtained cash by placing it into the financial system for example a smurf may pack cash in a suitcase and smuggle it to another country for gambling buying international currency or other reasons during the layering stage illicit money is separated from its source by a sophisticated layering of financial transactions that obscures the audit trail and breaks the link to the original crime for example a smurf may move funds electronically from one country to another then divide the money into investments placed in advanced financial options or overseas markets the integration stage is when the money is returned to the criminal although there are numerous ways of getting the money back funds must appear to come from a legitimate source and the process must not draw attention for example valuables such as property artwork jewelry or high end automobiles may be purchased and given to the criminal example of smurfingone way criminals move money internationally is known as cuckoo smurfing suppose that a new york criminal owes a london criminal 9 000 and a london merchant owes a new york supplier 9 000 the london merchant and the new york supplier do not know the funds were never directly transferred all they know is that the london merchant paid 9 000 and the new york supplier received 9 000 however if caught the london banker could face serious consequences another common method is structuring transactions with a group of accomplices each with their own bank accounts for example a person might have 50 000 to send abroad which would ordinarily trigger a currency transaction report and call attention to the source of their income in order to avoid a ctr that person could have ten accomplices make bank transfers of 5 000 each even if the money is legally sourced the act of dividing the transaction to avoid being reported is itself a crime there is no general law against handling large sums of money however the act of structuring transactions to evade federal reporting limits is a serious crime even if the money is legally sourced smurf faqsthe name smurf appears to be borrowed from illicit methamphetamine manufacturers in order to accumulate regulated precursor chemicals drug manufacturers will often send accomplices to make multiple purchases at multiple locations without exceeding the legal purchasing limits in finance smurfing refers to the practice of avoiding regulatory scrutiny by dividing a large sum of money into multiple smaller transactions sometimes divided into multiple different accounts smurfing is a form of money laundering which may allow criminal groups to move illegally acquired money into the regulated financial system unrelated to financial smurfing in cybersecurity smurfing refers to a distributed denial of service attack in which multiple servers are tricked into communicating with the target all at once although each contact is small the cumulative effect is to make the target s network unusable | |
what is a social audit | a social audit is a formal review of a company s endeavors procedures and code of conduct regarding social responsibility and the company s impact on society a social audit is an assessment of how well the company is achieving its goals or benchmarks for social responsibility understanding a social auditideally companies aim to strike a balance between profitability and social responsibility a social audit is an internal examination of how a particular business is affecting society the audit helps companies to determine if they re meeting their objectives which may include measurable goals and benchmarks a social audit serves as a way for a business to see if the actions being taken are being positively or negatively received and relates that information to the company s overall public image in the era of corporate social responsibility corporations are often expected to deliver value to consumers and shareholders as well as meet environmental and social standards social audits can help companies create improve and maintain a positive public relations image for many companies a good public perception helps foster a positive image of the company and ultimately reduce negative impacts on earnings from bad press items examined in a social auditthe scope of a social audit can vary and be wide ranging the assessment can include social and public responsibility but also employee treatment some of the guidelines and topics that comprise a social audit include the following there is no standard for the items included in a social audit social audits are optional which means that companies can choose whether to release the results publicly or only use them internally the flexibility surrounding social audits allow companies the ability to expand or contract the scope based on their goals while one company might wish to understand the impact it has on a particular town or city other companies might choose to expand the range of the audit to include an entire state country or throughout the globe example of a social auditsalesforce com crm is a fortune 500 company and one of the largest enterprise software companies in the u s as part of its social audit and assessment the company has strived to use 100 renewable energy globally the company lists its findings including an annual stakeholder impact report on its website below is a portion of the report from 2017 by continuously striving to meet and exceed their social responsibility benchmarks companies can improve their public perception over time social audits help companies achieve a balance between profits and ethics according to the company s website salesforce was one of the first cloud companies to commit to powering all data center operations with renewable energy 1 below is a graph from the company s stakeholder report showing where the company stands in its goal of 100 renewable energy use of social audit findingssince social audits are voluntary any release of the findings to the general public is also voluntary while positive results might be disclosed negative results might be kept internal and used to identify potential improvements that can make the results of the next social audit more favorable for example a company might find out through its assessment that the company was not adequately involved in charitable activities within the community as a result company executives could enact initiatives with measurable goals designed to increase community involvement the activities could be monitored and analyzed during the next social audit by continuously striving to meet and exceed its social responsibility benchmarks the company can improve its public perception over time in short social audits help companies achieve a balance between profits and ethics | |
what is social economics | social economics is a social science and a branch of economics that focuses on the relationship between social behavior and economics social economics is also referred to as socioeconomics social economics is primarily concerned with the interplay between social processes and economic activity within a society social economics may attempt to explain how a particular social group or socioeconomic class behaves within a society including their actions as consumers understanding social economicstheories of social economics sometimes diverge from conventional economic theories they may consider factors that are outside the focus of mainstream economics including the effect of the environment and ecology on consumption and wealth social economists frequently study the different economic choices by people in different socioeconomic classes a socioeconomic class is a group of people with similar characteristics these characteristics can include social and economic standing level of education current profession and ethnic background or heritage 1different socioeconomic classes may have different priorities regarding how they direct their funds or they may be unable to afford certain goods or services due to their income limitations these goods or services can include access to more advanced or complete medical care educational opportunities and the ability to buy food that meets specific nutritional guidelines two perspectives of social economicsthere are two broad perspectives in social economics though opposite in their approach they can be thought of as complementary the first pioneered by nobelist gary becker applies the basic theoretical and applied tools of neoclassical microeconomics to areas of human behavior that are not traditionally considered part of the economic sciences such as crime and punishment drug abuse marriage and family decisions 2the second perspective applies the ideas of other social sciences such as sociology psychology and identity group studies to subjects of an economic nature like consumer behavior or labor markets these practitioners of social economics use history current events politics and other social sciences to predict social trends that could potentially impact the economy this strand of social economics is the primary focus of this article in addition to income socioeconomic status is also related to factors like education family structure occupation and membership of certain ethnic minority groups impact of social economicsaccording to the american psychological association socioeconomic factors may reveal inequalities surrounding wealth education or status these background factors may play a role in a person s life decisions such as their career or family choices some of these socioeconomic relationships are explained below there are strong correlations between socioeconomic status and family structure as well as other outcomes such as parenting practices and childhood development single parent households are more likely to be low income and low income households are more likely to suffer from domestic violence and child neglect these disparities also manifest in worse health outcomes later in life 3children with lower socioeconomic status tend to enter school with lower levels of reading and linguistic development as well as lower social skills in later years these deficiencies may manifest themselves in lower levels of academic success and ultimately in lower incomes when they reach adulthood 4there are strong correlations between socioeconomic status and membership in indigenous or other ethnic minorities particularly those that have historically suffered from discrimination membership of some ethnic minority groups may correlate to higher levels of unemployment or substance abuse as well as poorer mental and physical health 5although interpersonal violence can occur at any socioeconomic level people from lower socioeconomic backgrounds tend to have greater exposure to violence especially in their formative years exposure to violence can negatively affect a person s academic and employment outcomes and domestic violence is also a major cause of homelessness 6example of social economicsan individual s socioeconomic status can significantly impact their educational attainment and financial security an individual from an affluent social class will likely have a greater opportunity to achieve higher education and may be expected to pursue such a goal while those from low income families generally do not have the same opportunities available to them for example low income families may not be able to pay for their children s participation in team sports music lessons or private tutoring which can propel them toward achieving a prosperous future as well as provide them with growing confidence to take on more challenges also these children may attend overcrowded schools where education is underfunded or understaffed completing higher education is more likely to increase their income potential as well as provide opportunities to interact with people of similar or more advanced social standing and build beneficial social networks in contrast higher education may not be attainable for an individual existing at or below the poverty level many studies have revealed that young children from families existing at or below the poverty level develop academic skills slower than children from affluent social classes a lower socioeconomic status is also related to poor cognitive development language memory socioemotional processing and consequently poor income and health in adulthood 4 | |
what s more school systems in communities that are primarily populated by those at or below the poverty level are often underresourced which negatively impacts students academic progress and outcomes poor academic skills and progress combined with high dropout rates can impact children s academic achievement in the long term | social economics and monetary fiscal policythe government has a substantial impact on social economics through its monetary and fiscal policies fiscal and monetary policies directly impact social welfare by influencing employment levels income distribution and access to essential services the policies set forth by governments naturally aim to improve social welfare thereby being tied to social economics monetary and fiscal policies can play a significant role in tackling inequality by redistributing resources as well for instance progressive taxation and targeted social spending are fiscal measures aimed at reducing income inequality another example is monetary policies that prioritize full employment which can narrow income inequality though these policies may not be specifically targeted at certain demographics there may be indirect benefits had by different social economic classes consider how larger families are economically impacted differently due to refundable tax credits in this case government policy is striving to promote certain economic activity by specific demographics social economics and gender wage gapthe gender pay gap is closely related to social economics the gender pay gap reflects underlying structural inequalities in the labor market which perpetuates unequal access to opportunities and resources social economics can relate to how gender norms and stereotypes influence labor markets for example social economics relates to hiring practices promotion opportunities and wage setting women may be pegged for specific roles as opposed to different roles historically occupied by men certain bias may also influence their performance evaluation gender disparities in earnings contribute to broader income inequality within society thus perpetuating economic cycles and trends this is further driven when considering other demographics as well research by the pew research center revealed black and hispanic women earned 70 or 65 as much as white men respectively 7 therefore there is a cyclical process where individuals have economic tendencies that perpetuate future economic tendencies | |
what are examples of socioeconomic factors | in addition to income socioeconomic status also includes other factors such as educational levels financial security environmental factors and subjective perceptions of social status and class 1 | |
what is socioeconomic well being | socioeconomic well being means the mix of social and economic factors that produce the best outcomes for a person s health and well being although a high income is not strictly necessary a sufficient level of financial security is a significant factor in mental and physical health as well as educational outcomes | |
how do you calculate socioeconomic status | there are three key measures for determining someone s socioeconomic status according to the national committee on vital and health statistics income education and occupation in addition the american psychological association also recommends considerations of family size since the number of earners and dependents in a household has a strong impact on the family s financial security one may also consider subjective factors such as occupational prestige or a person s subjective perceptions of social class 8 | |
what income is considered low socioeconomic status | although income is not the only element in someone s sociological status it is an important measure of a person s ability to obtain better health and educational outcomes in the united states the department of housing and urban development hud gauges income levels as a percentage of the area median income ami a family earning less than 80 of the ami is considered low income and a family earning less than 50 of the ami is considered very low income these categories are used to allocate housing vouchers and other assistance 9the bottom linesocial economics is a branch of economics that examines at the relationship between social factors and economics frequently social economists study the economic choices of different socioeconomic groups these can be defined by a variety of characteristics including by social or economic standing level of education current profession and ethnic background or heritage such factors can significantly impact one s educational attainment and financial security as a field of study social economics looks at the interplay between social processes and economic activity and can reveal broader inequalities in society | |
what is a social enterprise | a social enterprise or social business is a business designed to achieve specific social objectives as its primary purpose social enterprises strive to maximize profits while also maximizing positive impacts on society and the environment the profits generated are primarily used to fund social programs social enterprises often focus on benefiting marginalized or economically disadvantaged groups by permanently improving their socioeconomic conditions 1understanding social enterprisesthe concept of a social enterprise was developed in the u k in the late 1970s as an alternative to traditional commercial enterprise 4 social enterprises exist at the intersection of the private and volunteer sectors balancing financial activities with social goals such as providing housing for low income families or offering job training funding comes primarily from selling goods and services to consumers with additional support through grants because profit maximization isn t the primary goal a social enterprise operates differently than a standard company however generating revenue is still essential for sustainability distinguishing them from traditional charities that rely solely on external funding sustainable revenue differentiates a social enterprise from a traditional charity that relies on outside funding to fulfill its social mission this goal doesn t mean social enterprises can t be profitable instead it s simply that their priority is to reinvest profits into their social mission rather than fund payouts to shareholders the organisation for economic co operation and development oecd identifies social enterprises as being highly participatory with stakeholders actively involved and a minimum number of paid employees 5social enterprise vs social entrepreneurshipa social enterprise isn t to be confused with social entrepreneurship social enterprises are businesses formed to fulfill a business purpose and solve societal needs through commercial activities in contrast social entrepreneurs develop solutions to social and environmental problems using existing business techniques and strategies social entrepreneurs seek innovative ways to drive change whereas social enterprises fulfill a business purpose and solve societal needs through their commercial activities social entrepreneurship is a rapidly growing field that garners attention from various sectors including media public officials universities and prominent social organizations like ashoka and the schwab and skoll foundations 6 its appeal stems from the inspiring stories of individuals who have created solutions to various social and environmental problems similar to business entrepreneurs but with a focus on societal impact one prominent social entrepreneur is bill drayton founder and current chair of ashoka an organization dedicated to identifying and supporting social entrepreneurs worldwide 7examples of a social enterprisemany social enterprises successfully maximize improvements in social well being here are some notable examples these are just a few examples of how social enterprises can drive significant social and environmental impact while still operating a sustainable business special considerationssocial enterprise employees come from many backgrounds but priority is given to those from at risk communities this includes long term underemployed workers who have often been informally paid in the past social enterprise opportunities may seek to provide a living wage which is typically above the minimum wage in most cities some social enterprises may specifically seek to hire individuals from at risk groups as part of their mission | |
what are examples of social enterprise | social enterprises are usually a blend of private and volunteer sectors a credit union a coffee shop that sells fair trade beans and hires candidates from at risk communities or a neighborhood food co op are all examples of social enterprises examples include navy federal credit union warby parker grameen bank and radicle | |
how can i start a social enterprise | if you own a business you could partner with a nonprofit food pantry if applicable or other charitable organizations and donate your time money or products if you re starting from scratch the first step is to identify a problem and your solution explain your action plan to potential funders and make sure you have experts to support and validate your endeavor | |
how can i get hired to work for a social enterprise | you can start by researching organizations that match your values and skills networking with professionals in the field and gaining relevant experience through volunteering you can tailor your resume to highlight your passion for social impact and apply for jobs on specific job boards and the organizations websites finally you can prepare for interviews by understanding the mission and values of the social enterprise and showing how your skills align with their goals 13the bottom linesocial enterprises aim to achieve social goals as their primary purpose they balance financial profitability with positive societal and environmental impacts reinvesting profits into social programs instead of distributing them to shareholders this approach helps address unmet needs and may improve conditions for marginalized groups social enterprises like warby parker toms radicle and grameen bank demonstrate that businesses can successfully address social and environmental issues while remaining financially sustainable | |
what is a social entrepreneur | a social entrepreneur is a person who pursues novel applications that have the potential to solve community based problems these individuals are willing to take on the risk and effort to create positive changes in society through their initiatives social entrepreneurs may believe that this practice is a way to connect you to your life s purpose help others find theirs and make a difference in the world all while eking out a living widespread use of ethical practices such as impact investing conscious consumerism and corporate social responsibility programs facilitates the success of social entrepreneurs investopedia nono floresunderstanding social entrepreneurswhile most entrepreneurs are motivated by the potential to earn a profit the profit motive does not prevent the ordinary entrepreneur from having a positive impact on society in his book the wealth of nations the economist adam smith explained it is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but from their regard to their own self interest 1smith believed that when individuals pursued their own best interests they would be guided toward decisions that benefited others the baker for example wants to earn a living to support their family to accomplish this they produce a product bread which feeds and nourishes hundreds of people 2a social entrepreneur might also seek to address imbalances in such availability the root causes behind such social problems or the social stigma associated with being a resident of such communities the main goal of a social entrepreneur is not to earn a profit rather a social entrepreneur seeks to implement widespread improvements in society however a social entrepreneur must still be financially savvy to succeed in their cause types of social entrepreneursa community social entrepreneur prioritizes the needs of a small geographical region usually the community they live in this type of social entrepreneur is less concerned about the specific nature of their endeavor the primary purpose of their entrepreneurship is to benefit their local area this type of social entrepreneur often builds strong relationships in their community taking advantage of relationships to leverage how resources flow within their town community members local organizations and the community social entrepreneur work together to make sure the needs of the community are met and partnerships that make sense are created non profit social entrepreneurs are the more common type of social entrepreneur where the entity has a broadly stated goal that benefits someone but not necessarily their direct community with the introduction of remote or online social entrepreneurship it is now easier to create entities with broader mission driven purposes non profit social enterprises usually operate very similarly to a business the primary difference is that the net profits of the non profit enterprise are often returned back to the entity for further development of the program instead of there being investors to make money a non profit social entrepreneur strives to spend as much money as it can towards its mission as a start up non profit social enterprise grows it often shifts into becoming a transformational social entrepreneur as local non profits grow so can their mission a transformational social entrepreneur looks to scale an operation from a single program to benefit various areas for example consider the broad reach of goodwill what started as a small non profit social enterprise transformed into a much richer broader entity with many more rules and regulations sometimes social entrepreneur endeavors aren t limited by borders or geography sometimes people may try to solve overarching social concepts such as poverty depression or lack of living conditions usually the social entrepreneur may try to solve an issue in a specific region however these deep rooted issues are often not specific to a region many of the solutions discovered in one area may be attributable to another these types of organizations easily have the greatest reach for example consider the breadth of the bill melinda gates foundation their endeavors to find vaccinations for various diseases impacting those around the world are a clear example of global social enterprises social entrepreneurship continually evolves what may be a local communal non profit one year may model into a global social enterprise the next 6 p s of social entrepreneurial enterprisesas social entrepreneurs embark on turning their ideas into successes they often work through the following six areas each of these categories has different resources roadblocks or stages a social entrepreneur must often encounter most social entrepreneurs start their endeavors by identifying what people they want to benefit sometimes this is the people in their specific geographical region other times this is people within a certain demographic i e people with low income without a clear definition of who the social entrepreneur wants to serve they will face difficulty in appropriately defining the scope of their enterprise this puts the yet to be created entity at risk of not having a clear vision social entrepreneurs try to fix problems more specifically social entrepreneurs identify a problem that the people in the previous section face usually during the brainstorming phase of an entity the social entrepreneur will link the two together for example social entrepreneurs may try to defeat homelessness in their region a social entrepreneur in this situation tries to help certain people low income individuals with a problem lack of available housing with the people and problems identified a social entrepreneur must devise a plan to solve the problem social entrepreneurs not only strive to create a business plan to operate an entity but they must also determine how this type of entity will receive funding and remain financially sustainable the social entrepreneur must also evaluate how external parties can help it achieve its social goals one of the largest challenges for a social entrepreneur is a lack of available resources to tackle the problem they wish to solve whether that means not enough money not enough specialized knowledge or external forces that cannot be controlled social entrepreneurs face many constraints this means they must prioritize what they try to solve how they go about operating and what expansion looks like because resources are limited social entrepreneurs often test out solutions in small markets before expanding this means creating prototype products services or processes it also tests out how different funding and resources can help it achieve its goals though this stage may not foster trust in those who have provided an upfront investment with the social entrepreneur other upfront investors may appreciate seeing a minimum viable product or prototype with the test case down social entrepreneurs identify what went well and what didn t go well it often surveys those who helped put the solution together as well as those receiving the benefit this last step closes the full loop of activity though a social entrepreneur should periodically evaluate each aspect and continually monitor for ways to better make their social change social entrepreneur vs other social conceptssocial entrepreneurship is related to socially responsible investing sri and environmental social and governance esg investing sri is the practice of investing money in companies and funds that have positive social impacts sri has also grown in popularity in recent years socially responsible investors will often eschew investments in companies that produce or sell addictive substances like alcohol gambling and tobacco they may also seek out companies that are engaged in social justice environmental sustainability and alternative energy or clean technology efforts socially conscious investors screen potential new investments for environmental social and governance esg criteria this set of standards considers how a company performs as a steward of nature how it manages relationships with employees suppliers customers and the communities where it operates and how it treats its company s leadership compensates its executives and approaches audits internal controls and shareholder rights according to ziprecruiter the average annual salary as of may 2024 for a social entrepreneur was just above 40 000 per year 3examples of social entrepreneurshipthe introduction of freshwater services through the construction of new wells is another example of social entrepreneurship a social entrepreneur may have the goal of providing access to communities that lack stable utilities of their own in the modern era social entrepreneurship is often combined with technology assets for example bringing high speed internet connectivity to remote communities so that school age children have more access to information and knowledge resources another example is microfinance institutions that provide banking services to unemployed or low income individuals or groups who otherwise would have no other access to financial services the development of mobile apps that speak to the needs of a particular community is another way social entrepreneurship is expressed this can include giving individuals ways to alert their city administrations to problems such as burst water mains downed power lines or patterns of repeated traffic accidents there are also apps created to report infractions committed by city officials or even law enforcement that can help give a voice to the community through technology other examples of social entrepreneurship include educational programs and helping children orphaned by epidemic disease all of these efforts are intended to address unmet needs within communities that have been overlooked or not granted access to services products or basic essentials available in more developed communities |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.