Lauren Hua

What are franked dividends?

Franked dividends are dividends which have a tax credit. The company has already paid tax so when it pays the shareholder a dividend, a tax credit is given to the shareholder. Franked and unfranked dividends can make a significant difference on the after-tax income the shareholder receives. Why were franked dividends introduced? Franked dividends were introduced in Australia in 1987 to avoid double taxation. Companies were already paying a corporate tax rate of 30% on their earnings and distributing their …

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What are interest rate sensitive stocks?

It is beneficial to know what stocks are affected by different macroeconomic circumstances. This is so portfolios can be managed to take advantage of the change in environment. Last week we discussed defensive and cyclical stocks, this week we discuss interest rate sensitive sectors. Definition Interest rate sensitive stocks are stocks which react to interest rate movements more than the others in the market. A discounted cash flow is used to calculate a present value of the stock or to …

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Cyclical stocks vs defensive stocks

Understanding the differences between cyclical and defensive stocks can be advantageous to an investor. There will be times where share markets tend to rotate from one sector to another. Being able to identify the differences between a cyclical and defensive could make a difference in the performance of the portfolio. Definitions of cyclical stocks and defensive stocks Cyclical stocks are stocks which have stock price performances linked to the economic environment. When the economy is doing well then cyclical stocks …

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What is the difference between LICs and Managed Funds?

Two products which are available in the market for investors are LICs (listed investment companies) and managed funds. These two products are very similar but they also have their differences. In this article we discuss the definitions and differences of both. What is an LIC (listed investment company) Listed investment companies (LIC) are publicly listed companies with the main objective to actively manage money and outperform a benchmark. Investors can purchase these LICs on the stock exchange. When investors purchase …

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What does speculative trading mean?

Speculative trading is a strategy which is high risk but can generate high reward. This differs to investing where asset classes are bought and held long term. Speculative traders may only hold the asset for a short period of time and sell the position once the speculator thinks it time to crystalise profits. Definition Speculative traders take high risk positions in assets which have the potential to generate very high returns. These investments also have the probability of generating very …

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