What Is a Savings Account?

what is a savings account?...This is best summed up by John Gower of NerdWallet:

Savings 101: What is a Savings Account?

by John Gower

The basics

A savings account is likely the simplest type of bank account available to consumers. It allows consumers to store excess cash in a secure location (an insured bank or credit union) all while earning interest on the balance.

Cash stored in a savings account is less liquid, or accessible, than in a checking account but more so than cash stored in a CD (Certificate of Deposit).  The Federal Reserve Board’s Regulation D mandates that a depositor may make no more than six transfers/withdrawals out of a savings account per month. This includes transfers to other linked accounts at the same bank. A violation of this rule typically leads to a fee, and repeated violations may lead to account closure.

Savings rates

Arguably the most important consideration when choosing a savings account is finding the best savings interest rate. After all, earning interest is a primary function of the account.

Since a savings account is more liquid than a CD, banks will typically offer a lower rate than with a CD (which requires locking in funds for a specified period of time). In most cases, CDs also maintain the same interest rate for the duration of the term. Not so for savings accounts. Savings yields may fluctuate over time, subject to a variety of economic forces as well as the interests of the bank itself. This can be a positive for savers, in the case of rising interest rates, but can also disappoint for account holders experiencing a decline in yield.

Where to bank

Consider these three types of financial institutions when researching a savings account:

Banks

The biggest banks often seem appealing due to their abundance of branches, well-known brands, and variety of services, but they also tend to offer very low rates on savings accounts.

Credit unions

Credit unions tend to offer higher rates than banks for share accounts (their term for a basic savings account). You may need to meet certain membership requirements to join, however.

Online/internet banks

As a whole, high yield savings accounts at online banks maintain the best rates. The primary drawback is that, unlike a traditional brick-and-mortar bank or credit union, you can’t simply walk into a local branch for assistance.

https://www.nerdwallet.com/blog/banking/savings-101-savings-account/

https://www.nerdwallet.com/blog/author/john/

Implied Opening on Indices (Market Sentiment).

When you turn your TV (or app being it is 2015) to CNBC, Bloomberg, FOX Business, etc. in the mornings you will see numbers for implied opening as it pertains to the indices.

Implied opening is simply the deviation between future value and fair value:  Future Value - Fair Value = Implied Opening. The futures market (future value) is open 24/7 and therefore futures will usually not be price aligned with the fair value as fair value represent the trading of the actual (cash index) indices during pre-market. Once the opening bell rings and consequent liquidity picks-up, the indices factor in the futures market and vice versa.

And for the analytic types that does imply there are arbitrage opportunities that institutional investors seek to capitalize upon. However, transactions cost(s) must be taken in to consideration, which reduces or nullifies profits. "As soon as the index futures price premium, or discount to fair value, covers their transaction costs (clearing, settlement, commissions and expected market impact) plus a small profit margin, the computers jump in, either selling index futures and buying the underlying stocks if futures trade at a premium, or the reverse if futures trade at a discount." ( http://www.investopedia.com/articles/active-trading/070113/using-index-futures-predict-future.asp#ixzz3d44JV6Ll )

What Is a Point?

When you watch shows on Bloomberg TV or you watch shows on CNBC you will hear the term "point(s)" in reference to investments. Please do not be intimidated by such wall street jargon/gibberish.



Primary use of the term point(s):

As it pertains to stocks, point = $1 change in value (The most common use of the term point(s))




Other uses of the term points(s):

As it pertains to stock indices, point = $1 change in value or $100 change in value
As it pertains to bonds, point =1% change in face value
As it pertains to bonds and derivatives, "basis" point = .01% change in value
As it pertains to forex, "basis" point aka pip(s) = $.0001 change in currency pair.
As it pertains to real estate mortgage, point = origination fee in which 1 point is 1% of loan and is difference between mortgage rate and prime interest rate

What Is Share Class?

DEFINITION
"A designation applied to a specified type of security such as common stock or mutual fund units. Companies that have more than one class of common stock usually identify a given class with alphabetic markers, such as "Class A" shares and "Class B" shares. Different share classes within the same entity typically confer different rights on their owners.

INVESTOPEDIA EXPLAINS
For example, a public company may offer two classes of common stock outstanding: Class A common stock and Class B common stock. This dual-class structure is typically decided on when a company first goes public and issues stock in the primary market.

For example, a private company that is undertaking an initial public offering (IPO) may choose to issue Class A shares to its new investors, while the original owners of the company receive Class B shares. In this case, the Class B shares would typically have enhanced voting rights. A dual-class structure such as this would be used if the original owners of the company wanted to sell the majority of their ownership stake in the firm, but still maintain majority voting rights.

As an investor, it's important to know what class of shares you are buying when you purchase common stock in a public company. "
( http://www.investopedia.com/terms/s/share_class.asp )




Real World Example From Google:

" Why bother? The new Class C shares have no voting rights. The Class A shares have one vote each, but collectively those votes are dwarfed by the 10-votes-per-share Class B shares. Those shares, which do not trade in the public market, are owned by Google insiders, who will also get Class C shares in the distribution.

As originally proposed by the company, the move would have made it easy for Google’s founders, Larry Page and Sergey Brin, and the chairman, Eric E. Schmidt, to cash in a large part of their holdings without giving up their voting control. But that ability has been limited after the company settled a class action suit filed by angry (Class A) shareholders, and reached agreements with the three top officials to limit their sales.

In essence, for every share of Class C they sell, they must also convert one Class B share into Class A. Presumably they will sell that share as well. So their voting rights will fall as they would have under the old structure, when they would have converted Class B shares into Class A shares before selling them.

But Google is expected to issue primarily Class C shares in the future, for acquisitions and in grants of share options. So the total number of votes will not be rising, and that will delay the day when the company’s leaders lose voting control of the company. Currently they own less than 16 percent of the company’s shares, and have 61 percent of the votes. "
( http://economix.blogs.nytimes.com/2014/04/02/the-many-classes-of-google-stock/?_r=0 )

What Is a CD?

"Sold by banks, certificates of deposit (better known as CDs) are low-risk –- and relatively low-return — investments suitable for cash you don’t need for months or years. If you leave the money alone during the investment period (known as the “term” or “duration”), the bank will pay you an interest rate slightly higher than what you would have earned in a money market or checking account. All gains from CDs are taxable as income, unless they are in a tax-deferred (IRA) or tax-free (Roth IRA) account.

CDs are among the safest investment a persona can make. The interest rate is determined ahead of time, and you’re guaranteed to get back what you put in, plus interest once the CD matures. What’s more, if the bank goes belly up, your deposit is probably insured by the FDIC for up to $250,000.

Here are the most common types of CDs:

• Traditional CD: You receive a fixed interest rate over a specific period of time. When that term ends, you can withdraw your money or roll it into another CD. Withdrawing before maturity can result in a hefty penalty.

• Bump-Up CD: This kind of account allows you to swap your CD’s interest rate for a higher one if rates on new CDs of similar duration rise during your investment period. Most institutions that offer this type of CD let you bump up once during the term of your CD and keep the interest rate for the remainder of the original CDs term.

• Liquid CD — This kind of account allows you to withdraw part of your deposit without paying a penalty. The interest rate on this CD usually is a little lower than others, but the rate is still higher than the rate in a money market account.

• Zero-coupon CD — This kind of CD does not pay out annual interest, and instead re-invests the payments so you earn interest on a higher total deposit. The interest rate offered is slightly higher than other CDs, but you’ll owe taxes on the re-invested interest.

• Callable CD — A bank that issues this kind of CD can recall it after a set period, returning your deposit plus any interest owed. Banks do this when interest rates fall significantly below the rate initially offered. To make this type of CD attractive, banks typically pay a higher interest rate. These accounts are typically offered through brokerages.

• Brokered CD — This term refers to any CD offered by a brokerage. Brokerages have access to thousands of banks’ CD offerings, including online banks. Brokered CDs will generally carry a higher rate of interest from online and smaller banks because they’re competing nationally for depositors’ dollars. However, you’ll pay a fee to purchase the account. " 

( http://guides.wsj.com/personal-finance/banking/what-is-a-certificate-of-deposit-cd/ )