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The Different Kinds of Income

The Different Kinds of Income

Income is the amount of money that a person or a business receives in exchange for providing a good or a service, or through investing capital. Income is used to fund day-to-day expenditures, as well as to save and invest for the future. However, not all income is the same. There are different kinds of income, depending on the source, the nature, and the taxation of the income. Here are some of the main types of income:

Earned Income

Earned income is the income that a person receives from working, either as an employee or as a self-employed individual. Examples of earned income include wages, salaries, tips, commissions, and business income. Earned income is usually the main source of income for most people, and it is subject to income tax and payroll tax (such as Social Security and Medicare tax) in most countries. This is often the kind of income that requires the most effort, but is also able to provide a bigger amount of earnings.

Passive Income

Passive income is the income that a person receives from sources that do not require active involvement or participation. Examples of passive income include interest, dividends, royalties, rent, capital gains, and income from certain businesses that do not require the owner’s direct involvement. Passive income is often considered a desirable source of income, as it can provide a steady and consistent cash flow without much effort or time. However, passive income is also subject to income tax, and sometimes at a higher rate than earned income. Passive income is also hard to build as it entails acquiring capital first. Earnings are also usually affected by how much capital is invested.

Portfolio Income

Portfolio income is a subset of passive income that a person receives from investing in financial assets, such as stocks, bonds, mutual funds, exchange-traded funds, and derivatives. Portfolio income mainly consists of interest, dividends, and capital gains. Portfolio income can provide a source of income that is independent of the performance of the economy or the labor market, and it can also offer diversification and risk reduction benefits. However, portfolio income can also be volatile and unpredictable, depending on the fluctuations of the financial markets. Moreover, portfolio income is subject to income tax, and sometimes to additional taxes, such as capital gains tax and dividend tax.

Residual Income

Residual income is another subset of passive income that a person receives from creating or owning something that continues to generate income after the initial work or investment is done. Examples of residual income include royalties from books, music, or patents, income from licensing a brand or a franchise, and income from network marketing or affiliate marketing. Residual income can provide a source of income that is scalable and sustainable, as it can grow over time and does not depend on the amount of work or input. However, residual income can also be challenging and competitive to create and maintain, as it requires creativity, innovation, and marketing skills. Furthermore, residual income is subject to income tax, and sometimes to additional taxes, such as self-employment tax.

Other Income

Other income is any income that does not fall into the above categories, or that is not derived from a regular or predictable source. Examples of other income include settlements, awards, bonuses, and others. Other income can provide a source of income that is unexpected and additional, as it can supplement the existing sources of income. However, other income can also be irregular and unreliable, as it can vary in frequency and amount. Additionally, other income is subject to income tax, and sometimes to additional taxes, such as gift tax and estate tax.

The Recommended Strategy

Earning from multiple income streams is important to help you achieve financial freedom. Ultimately you need to understand that different stages of your life will call for receiving more of a certain kind of income. For young people, earned income usually helps you build your wealth the fastest as you can make the most out of skills you learn. As you grow older, more and more of your income should come from more passive sources to ensure that you’ll fare well into your retirement years. 

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The Benefits of Using Digital Money

Digital money, is any form of money that exists only in digital form and can be transferred electronically. Examples of digital money include cryptocurrencies, such as Bitcoin and Ethereum, online payment systems,digital banks. Digital money has become increasingly popular in recent years, especially with the advent of the internet and mobile devices. But what are the benefits of using digital money over traditional forms of money, such as cash and bank cards? Here are some of the main advantages of digital money:

Convenience

One of the most obvious benefits of digital money is convenience. With digital money, you can make payments anytime and anywhere, as long as you have access to the internet and a compatible device. You do not need to carry cash or cards, which can be bulky, unsafe, or easily lost. You also do not need to worry about exchange rates, fees, or delays when making cross-border transactions. Digital money can be sent and received instantly, with minimal hassle and cost.

Security

Another benefit of digital money is security. Digital banks usually encrypt and protect customer accounts through various cryptographic techniques, such as public-key cryptography and digital signatures. This means that only the authorized parties can access and use the digital money. 

Inclusion

A third benefit of digital money is inclusion. Digital money can potentially provide access to financial services to millions of people who are unbanked or underbanked, especially in developing countries. According to the World Bank, about 1.7 billion adults do not have an account at a financial institution or a mobile money provider, and about 1.1 billion of them have a mobile phone. Digital money can enable these people to participate in the digital economy, by allowing them to store, send, and receive money, as well as access other financial products, such as loans, insurance, and savings. 

Innovation

A fourth benefit of digital money is innovation. Digital money can foster innovation and creativity in various sectors and industries, by enabling new business models, products, and services. For example, digital money can facilitate group savings, micropayments, and remittances, which can support social and economic development. It is also this innovation that has allowed digital banks to be able to provide never before seen benefits, such as the high interest rates we’ve been seeing across various digital banks throughout the previous couple of years.

Conclusion

Digital money is a revolutionary form of money that has many benefits over traditional forms of money. Digital money is convenient, secure, inclusive, and innovative. It can offer more opportunities and choices to individuals, businesses, and society. However, digital money also comes with some challenges and risks, such as volatility, regulation, and education. It is important to be aware and informed of the advantages and disadvantages of digital money, and to use it responsibly and wisely. Feel free to check out our list of digital banks if you want to learn more about your options here in the Philippines.

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OFFICIAL: Investagrams Inc. and Union Bank of the Philippines Partner to Empower Filipino Investors to the Future of Finance

[Manila, Philippines] – Investagrams Inc. and Union Bank of the Philippines announced a strategic partnership last February 15, 2024, as a collaboration to support users for an upgraded and hassle-free investment and banking experience with the power of technology.

This pioneering partnership combines the future of banking and investing with UnionBank, consistently recognized as “Best Retail Bank” by prestigious banking award-giving institutions, and Investagrams Inc., as a leading social financial platform for Filipinos.

UnionBank constantly embraces technological innovation in banking with its dedication to being the Philippines’ leading digital bank and serving the users’ growing needs. With this, they have received constant recognition as one of the country’s top universal banks in terms of profitability and efficiency. 

Investagrams stands out as a premier social financial platform, dedicated to assisting Filipinos with their investment ventures by providing them with the essential tools and education. The platform offers its users analytical resources, informative content, market insights, trading tools, educational materials, and a social networking space tailored for traders and enthusiasts of the financial market.

Together, they hope to create the path toward the future of finance that maximizes the power of technology in providing optimal service, accessibility, and educational content for their users. 

Key Features 

This partnership’s initial step will integrate UnionBank’s credit card applications into the Investagrams platform to empower users towards greater flexibility and control over their investment journey. With this, users can easily learn about UnionBank’s current offers and apply for the card directly on the platform. This singular space provides a hassle-free experience for all their financial needs. 

UnionBank credit cards are known for their versatility and offers that allow cardholders to make financially savvy choices that optimize their spending with great rewards. Through their features on the platform, both companies hope to provide value and support in achieving the users’ investment goals. 

To cap off this collaboration, UnionBank and Investagrams held their contract signing at the UnionBank Office in Quezon City to forge their partnership and dedication towards empowering Filipinos in improving their financial well-being and leading the way to the future of the finance industry. 

You can view the products featured at https://www.investagrams.com/Home/?asset=credit-cards

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Pump and Dumps

Pump and dump schemes are fraudulent practices that involve artificially inflating the price of a stock or a cryptocurrency, and then selling it at a high profit. The perpetrators of these schemes usually have a large amount of the asset, which they acquired at a low price. They use various methods to create hype and demand for the asset, such as spreading false or misleading information, making exaggerated claims, or paying for positive reviews. They also use social media, online forums, chat groups, or newsletters to attract unsuspecting investors, who are lured by the promise of quick and easy returns. As more and more investors buy the asset, the price rises rapidly, creating a bubble. This is the pump phase of the scheme.

How They Work

Once the price reaches a certain level, the perpetrators start to sell their holdings, often in a coordinated manner. This causes the price to drop sharply, leaving the investors with worthless or devalued assets. This is the dump phase of the scheme. The perpetrators make a huge profit, while the investors suffer huge losses. Some investors may not even be able to sell their assets, as the market becomes illiquid or the trading platforms become inaccessible.

Pump and dump schemes are illegal and unethical, as they manipulate the market and defraud the investors. They also damage the reputation and credibility of the legitimate companies or projects that are involved. However, pump and dump schemes are difficult to detect and prevent, especially in the unregulated and decentralized markets of cryptocurrencies. Therefore, investors should be careful and vigilant, and avoid falling for these schemes.

Signs and Red Flags

  • The asset has a low market capitalization, low trading volume, or low liquidity, which makes it easier to manipulate.
  • The asset has a sudden and sharp increase in price, without any fundamental or technical reason.
  • The asset has a lot of hype and publicity, often from unknown or unreliable sources, such as social media influencers, celebrities, or self-proclaimed experts.
  • The asset has a lot of positive reviews, ratings, or testimonials, which may be fake or paid for.
  • The asset has a lot of pressure or urgency to buy, such as limited time offers, countdown timers, or scarcity claims.
  • The asset has a lot of promises or guarantees of high returns, low risks, or future potential, which may be unrealistic or unsubstantiated.

How to Stay Safe

To avoid becoming a victim of a pump and dump scheme, investors should do their own research and due diligence before investing in any asset. While it is possible to trade and profit from meteoric rises in price, it takes a lot of skill and experience to do so consistently. So if you’re a beginner, it might be best to stay with liquid and safe stocks until you’re ready to dabble into the high-risk side of trading.

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The Financial Market’s Ebbs and Flow

Financial markets are dynamic and complex systems that reflect the collective behavior of millions of investors, traders, and speculators. They are influenced by a multitude of factors, such as economic conditions, political events, corporate news, and others. As a result, financial markets are constantly changing and evolving, exhibiting patterns of ebbs and flows.

Cycles

One of the most common and observable patterns in financial markets is the cycle. A cycle is a periodic fluctuation of prices or activity around a long-term trend. Cycles can occur at different time scales, ranging from minutes to decades. This can affect different segments of the market, such as stocks, bonds, commodities, or currencies.

The most familiar type of cycle is the business cycle, which is the recurring expansion and contraction of the economy. The business cycle affects the profitability and growth of companies, which in turn affects their stock prices. Typically, the business cycle has four phases: expansion, peak, contraction, and trough.

The duration and magnitude of each phase of the business cycle can vary depending on the nature and severity of the shocks that affect the economy. For example, the global financial crisis of 2008-2009 triggered a prolonged contraction. It was followed by a slow and uneven recovery. The COVID-19 pandemic of 2020-2021 caused a sudden and sharp contraction, followed by a rapid and strong recovery.

Another type of cycle is the seasonal cycle

This is the regular variation of prices or activity due to the changes in weather, holidays, or other calendar events. Seasonal cycles can affect the demand and supply of certain goods and services, which in turn affects their prices. For example, the price of oil tends to rise in the winter, as the demand for heating increases. The price of gold tends to rise in the fall, as the demand for jewelry increases.

Seasonal cycles can also affect the behavior and mood of investors, which in turn affects the stock market. For example, the January effect is the tendency of stocks to perform better in January than in other months. This happens as investors buy stocks that they sold in December for tax purposes. The Halloween effect is the tendency of stocks to perform better from November to April than from May to October. Investors tend to avoid the summer months, which are historically more volatile.

A third type of cycle is the psychological cycle

This is the fluctuation of prices or activity due to the changes in the emotions and expectations of investors. Psychological cycles can create feedback loops that amplify or dampen the movements of the market. For example, the herd mentality is the tendency of investors to follow the crowd, either buying or selling stocks based on what others are doing. The fear and greed index is a measure of the emotions of investors, ranging from 0 (extreme fear) to 100 (extreme greed).

Psychological cycles can also create anomalies and inefficiencies in the market, which can be exploited by savvy investors. For example, the value premium is the tendency of undervalued stocks to outperform overvalued stocks, as investors tend to overreact to bad news and underreact to good news. The momentum effect is the tendency of stocks that have performed well in the past to continue to perform well in the future, as investors tend to extrapolate past trends.

More than just long-term trends

The financial markets will also often have shorter term patterns. After never ending rallies, you’ll often see prices start to go back down or stagnate at the top for a while. This is an inherent trait of price action and is necessary to keep long-term trends healthy. Weak hands need to be purged through the consolidation so that shareholders are limited to those who believe in the inherent business of the stock and are willing to hold for the long run.

The markets are subject to various cycles that affect their performance and behavior. Understanding these cycles can help investors to identify opportunities and risks, and to adapt their strategies accordingly. However, cycles are not always predictable or consistent, and they can be disrupted or altered by unexpected events or factors. Therefore, investors should also be flexible and vigilant, and diversify their portfolios to reduce their exposure to market fluctuations.

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Reddit Files for an IPO

Reddit, the popular social media platform that hosts millions of online communities and discussions, has filed publicly for an initial public offering (IPO) on the New York Stock Exchange (NYSE) under the ticker symbol $RDDT. The company, which was founded in 2005 and has more than 73 million daily active users, plans to raise up to $1.5 billion in its IPO, according to its S-1 filing.

Reddit is one of the most influential and controversial websites on the internet, known for its vibrant and diverse user-generated content, ranging from news, memes, videos, games, politics, science, and more. The company has also been at the center of some of the most notable events and movements in recent years, such as the GameStop stock frenzy, the Capitol riot, the Black Lives Matter protests, and the Covid-19 pandemic.

Reddit’s business model is based on advertising, premium subscriptions, and data licensing. The company reported a revenue of $804 million in 2023, up 21% from $667 million in 2022, and a net loss of $91 million. The company also said that it expects to grow its revenue by expanding its advertising products, increasing its user base and engagement, and developing new revenue streams, such as e-commerce, live streaming, and podcasts.

One of the key aspects of Reddit’s growth strategy is its investment in artificial intelligence (AI), both internally and externally. The company said that it plans to use AI to improve its content moderation, personalization, recommendation, and search capabilities, as well as to create new products and features that enhance the user experience. The company also said that it has signed data licensing deals with several AI companies, such as Google and OpenAI, to allow them to use Reddit’s vast and unique archive of human conversation for AI training and research purposes.

Another interesting fact about Reddit’s IPO is that one of its major shareholders is Sam Altman, the CEO of OpenAI, a prominent AI research organization that is backed by Elon Musk, Microsoft, and others. Altman, who is also a co-founder of Y Combinator, the influential start-up accelerator that incubated Reddit, holds 8.7% of Reddit’s outstanding shares, including 789,456 Class A shares and 11.4 million Class B shares. Altman was also briefly the interim CEO of Reddit in 2014, after the resignation of Yishan Wong.

Reddit’s IPO is expected to be one of the most anticipated and watched events in the tech industry this year, as it will test the market appetite for a social media company that has a loyal and passionate user base, but also faces significant challenges and risks, such as content moderation, user privacy, regulatory scrutiny, and competition. Reddit’s valuation in the IPO is still unknown, but the company has been advised to consider a valuation of at least $5 billion, according to Bloomberg. The company could begin marketing its shares as soon as March.

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How to Prepare for Earnings Season

Earnings season is the period when most publicly traded companies report their financial results for the previous quarter. It usually occurs in January, April, July, and October, and can have a significant impact on the stock market. Earnings season can be a great opportunity for investors to gain insights into the performance and outlook of different companies and sectors, as well as to identify potential winners and losers. However, earnings season can also be a challenging and volatile time, as the market reacts to the news and expectations of various earnings reports. Therefore, it is important for investors to prepare for earnings season in advance, and to have a clear strategy and plan for how to trade during this time. Here are some tips on how to prepare for earnings season in the stock market.

1. Do your research

Before earnings season begins, it is advisable to do some research on the companies and sectors that you are interested in or invested in. You should review their previous earnings reports, analyst estimates, guidance, and any recent news or developments that could affect their performance. You should also compare their performance and valuation with their peers and the industry average, and look for any competitive advantages or disadvantages that they have. By doing your research, you will have a better understanding of what to expect from each company, and what factors could drive their earnings results.

2. Set your goals and expectations

Based on your research, you should set your goals and expectations for each company and sector that you are following or trading. You should have a realistic and reasonable range of outcomes that you anticipate, and a corresponding action plan for each scenario. For example, you could have a target price, a stop-loss level, and a profit-taking point for each stock that you own or plan to buy or sell. You should also have a clear idea of how much risk you are willing to take, and how much capital you are willing to allocate to each trade. By setting your goals and expectations, you will have a framework and a discipline for making your trading decisions.

3. Watch the market sentiment and trends

During earnings season, it is also important to watch the market sentiment and trends, as they can influence the direction and magnitude of the earnings reactions. You should pay attention to the overall market mood, the sector rotation, the earnings surprises and disappointments, and the analyst revisions and commentary. You should also look for any patterns or anomalies in the earnings reactions, such as whether the market is rewarding or punishing certain types of earnings results, or whether there are any discrepancies between the earnings quality and the stock price movements. By watching the market sentiment and trends, you will be able to adapt to the changing market conditions and spot any opportunities or risks that may arise.

4. Be flexible and nimble

Finally, during earnings season, it is essential to be flexible and nimble, as the market can be unpredictable and volatile. You should be prepared to adjust your strategy and plan according to the actual earnings results and the market reactions. Be ready to act quickly and decisively, as the earnings reactions can be short-lived and fade away quickly. Avoid being too emotional or stubborn, and be willing to admit your mistakes and cut your losses if necessary. You should also avoid being too greedy or fearful, and be able to take your profits and move on to the next opportunity. By being flexible and nimble, you will be able to capitalize on the earnings season and maximize your returns.

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