This a term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investors' financial health. Short-term focus by the media on a financial topic can create excitement that does little to help investors make smart, long-term financial decisions, and in many cases clouds investors' decision-making ability.
Expanded media coverage, specifically the advent of 24-hour cable news networks and the internet and the tools it has provided the financial industry, has led to a large increase in financial porn.
Examples of financial porn include constant advertisements of easy-to-use trading-strategy products that purport to turn minimal investments into small fortunes, media coverage of the latest and greatest sector trends and magazines with front pages that claim to have the next 10-must-own mutual funds of next year. Many of these products and ideas expose investors to great risks posed by both the movement of the market and the risk of fraud.
Friday, February 8, 2008
Sunday, February 3, 2008
TERM OF THE WEEK:Negative Gearing
This refers to an act of borrowing money to buy an investment asset without receiving enough income from the investment to cover the interest expenses and other costs involved in maintaining it. Depending on the investor's home country, the shortfall between income earned and interest due can be deducted from current income taxes.
Negative gearing most often occurs in rental properties, where the rental income received is not enough to cover the interest costs on borrowings plus expenditures toward property maintenance and upkeep.
Negative gearing only becomes a profitable venture when the property is eventually sold, and a prerequisite is that property values are rising, not falling or holding steady.
Many investors who speculate this way will purposely seek out negative gearing for the tax deductions in the hope that they will make a profit when the property is sold for a capital gain.
Investors considering this type of arrangement need to have the financial stability to fund the shortfall out of pocket until the property are sold and the full profit can be reached.
Negative gearing most often occurs in rental properties, where the rental income received is not enough to cover the interest costs on borrowings plus expenditures toward property maintenance and upkeep.
Negative gearing only becomes a profitable venture when the property is eventually sold, and a prerequisite is that property values are rising, not falling or holding steady.
Many investors who speculate this way will purposely seek out negative gearing for the tax deductions in the hope that they will make a profit when the property is sold for a capital gain.
Investors considering this type of arrangement need to have the financial stability to fund the shortfall out of pocket until the property are sold and the full profit can be reached.
Subscribe to:
Posts (Atom)