ALL ABOUT FINANCE

Photo credit from New York Public Library   Author: Andrew Lee About 3 minutes read. You may hear of Rule 72 , or Compound interest, or other name like Time Value , Discounted Cash Flow or Future Value  in various articles, websites, or forums. What do they really mean? Here, I hope a simple explanation could easily help you understand how "rate" could work for you or against you without a complex calculator or spreadsheet. In other word, you can simply process the numbers in your mind in seconds. We all know when you get a loan (e.g. mortgage, personal line credit, HELOC/home equity loan, etc.), there is an annual (could also be daily, monthly, etc.) interest rate. When you look at investments, usually there are a hypothetical rate of return the investor would expect. The effect of the rate is actually compounded in most cases. Another type is what so called " simple interest " which the interest is calculated based on the principle at the end of the term, but not...

Photo by Precondo CA on Unsplash Author: Andrew Lee About 2 minutes read Maybe you heard of points  (a.k.a. Discount Points , Mortgage Points ) when applying for a conventional loan on a house or a property. Generally speaking, when you Buy Points , you are buying down the mortgage interest  rate/loan rate. But have you ever looked into "points" and what does it really mean besides of buying down the loan rate? I hope this article can provide some value and insights for your due-diligence and do some calculations whether it makes sense for your situation. When it comes to buying points, you can request your lender (for conventional loan) to provide a list or comparison so you know how much you are paying to buy down points and how long to break-even since you are paying an amount upfront to lower your loan rate. It will take awhile on your monthly savings to cover this upfront cost. The following example uses a loan amount of $600,000 with a 30 years fixed 3.5% loan rate ...

Photo by Susan Yin on Unsplash Author: Andrew Lee About 3 minutes read. You may heard about DCA, aka Dollar Cost Averaging . This is the basic concept to spread risk across a period of time to smooth out the risk (swing up and down in the market) to lower the unit cost. Here is a simple illustration to show how investments are spread out into several lots over a certain period of time, just for those that hate numbers 😆, the fix invested amount over 9 purchases fluctuate according to the stock market price of that day. You can see the purchased share # as the blue bar. The red line is the market price fluctuating on a daily basis, and the orange line is the average cost of share over time (accumulative). This is the tabular view of the above chart. It is a strategy to mitigate timing risk. However, it is not the only method. You could combine with other strategies such as the candle sticks, moving average (MACD), Fibonacci retracements, RSI (Relative Strength Index), or even as simple...