What is an IPO, Anyway?*
An initial public offering (IPO) is the term used when a privately-held company offers stock for the first time. IPOs are more common among newer companies, but older privately-held companies may decide to "go public." A start-up company may use an IPO to raise capital to see it through a critical early development phase. On the other hand, a larger, more mature company may decide to use a stock offering to raise cash (rather than borrow) for expansion or to acquire a new business, particularly if existing debt levels make conventional borrowing difficult.
*Securities offered through Registered Representatives of MML Investor Services, Inc., member SIPC.
Copyright © 2002 Liberty Publishing, Inc. All rights reserved.
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What is “Basis”?
Basis is the starting point for determining gain upon the disposition of any asset. In its simplest form, basis is an owner's investment in the asset. For purchased property, starting basis is the original price paid. Basis can be increased (e.g., by making improvements to real property) or decreased (e.g., after a casualty loss reduces the value of an asset), and can change according to how it was acquired and the nature of the eventual disposition. For example, suppose you make a gift of some appreciated stock to your child. Your child will assume your original basis in the stock. On the other hand, let's say your child receives the same appreciated stock as part of his or her inheritance. In this case, the basis is adjusted to the fair market value (FMV) of the stock at the time of your death. This is commonly referred to as a "step-up" in basis.
*Securities offered through Registered Representatives of MML Investor Services, Inc., member SIPC.
Copyright © 2002 Liberty Publishing, Inc. All rights reserved.
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Taxes, Inflation & Your Investments*
Consider this: In 1992 you invested $10,000 in a company with a blue chip reputation. Assuming the stock had a 12% average annual return, your investment would have grown to approximately $31,000 in ten years! But, don’t be too quick to pat yourself on the back—you still need to factor taxes and inflation into the equation. First, capital gains taxes will reduce the value of your investment to about $26,848. And then, assuming a 3% annual rate of inflation, the after-tax value of your investment would be worth about $19,800 in 1992 dollars. Is there a moral to this story? There certainly is! As you map out and strategize your investment and savings goals, be sure to include taxes and inflation in your plans so you can realistically chart your course to financial success.
This is a hypothetical example and is not intended to represent any specific investments.
*Securities offered through Registered Representatives of MML Investor Services, Inc., member SIPC.
Copyright © 2002 Liberty Publishing, Inc. All rights reserved.
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Don't Overlook Investment Basics*
Many investors make systematic investing an integral part of their overall savings plan. One very popular and single investment technique is dollar cost averaging. You invest the same amount of money each month (or other interval) whether shares are going up or down in price. Over time, you may achieve a lower average cost per share compared to the share price for a lump sum investment, and you will establish a disciplined approach to investing. Dollar cost averaging does not assure a profit or protect against loss in a declining market. Systematic investment plans involve continuous investment in securities despite fluctuating prices. Therefore, you should consider your financial ability to you continue purchasing shares through periods of low price levels. Securities investments do not offer guaranteed returns and are not federally insured. Therefore, the value of your principal investment will fluctuate due to market conditions, so that your shares, when sold, may be worth more or less than their original cost.
*Securities offered through Registered Representatives of MML Investor Services, Inc., member SIPC.
Copyright © 2002 Liberty Publishing, Inc. All rights reserved.
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