There are many ways to create an income. Investing in dividend stocks is one option, buying treasuries for the yield, or perhaps purchasing a single premium immediate annuity are others. And then there is the possibility of buying a structured settlement.

What is a structured settlement?

When a person brings a lawsuit against another, say, for example, for an injury at work that has caused a permanent physical impairment, and wins his case, the judge is likely to award the plaintiff a settlement from the defendant. This settlement is most commonly a lump sum.

Let’s imagine that you have been awarded $1 million from a lawsuit against your ex-employer for an accident at work that has left without feeling in your left arm. You could, of course, take the million bucks and have done with it.

But you could also thrash out a deal to have your award paid in installments over a period of time. It’s possible to have a smaller lump sum followed by a series of regular payments, or a deferred payment, or maybe certain special provisions, such as payment for healthcare when needed. This is called a structured settlement.

Why opt for a structured settlement?

Plaintiffs choose to have a structured settlement rather than payment in one hit for a number of reasons:

First, a source of income could be guaranteed for life.

Second, the instalments of a structured settlement could be timed to coincide with an advantageous tax position, or to reduce taxes payable on any income created by investing the lump sum.

Third, if the plaintiff is a ‘spender’ the settlement could be paid in installments to stop the plaintiff from blowing his money.

Apart from these benefits, however, structured settlements do have certain disadvantages to the plaintiff. The main one is that, although they are flexible while they are being negotiated between lawyers, once they are have been signed off by all parties they are deemed to have been carved in stone. They can’t be broken, undone, or altered in any way. And this is where the investment opportunity presents itself.

You see, very often the recipient of a structured settlement decides that he wants a lump sum rather than the periodic payments under the settlement. It may be that he wants to buy or build a new house but is unable to borrow against the structured settlement. In such a case it may be possible for the structured settlement to be sold for a lump sum.

How to buy structured settlements

If you want to create a regular income, a structured settlement may be a better option than an annuity or other investment. The terms of the settlement may be favorable, and the yield paid better than can be received on other investments. It may be that the terms of the structured settlement coincide with your tax bracket moving down. Whatever the reason for investing in a structured settlement, there are some things that you must consider.  Doing so will help you to make a successful investment rather than one that causes you loss and heartache.

1)      Always work with an established broker. Make sure that he has experience of structured settlements, how they work and who to buy from.

2)      The broker, or you if going direct, should only deal with a structured finance settlement company that is a member of the National Structured Settlements Trade Association, and that also places settlements with private investors.

3)      Get several quotes, to ensure that you get the best deal

4)      Ensure you use the services of an attorney to protect your interests

This last point is particularly important. A good number of states have put in place laws that restrict the sale of structured settlements. This is because many lawmakers consider that once a structured settlement has been agreed for the benefit of the plaintiff and with the clauses that are acceptable to him, knowing that it cannot be altered in the future, then it should not be able to be sold, either: if the plaintiff wanted future flexibility, then his attorney should have advised him to accept the lump sum settlement.

On top of these restrictions, tax free structured settlements are restricted by federal law as to sale to a third party – the tax status cannot be freely transferred.

When a structured settlement is sold, it has to be assigned to the third party by the insurance companies that are paying any underlying annuities (most structured settlements are funded in this way). Many companies refuse to reassign structured settlements annuities.

If you want to purchase structured settlements, then an attorney will be able to ensure that such laws will not affect the legal status of your investments. The possibility of buying structured settlements and benefiting from their periodic payments may depend upon where you live and the terms of the underlying annuities.

Summary

If you adhere to the simple rules of buying structured settlements as outlined above, then the process of investing and benefiting from the regular periodic payments should be straightforward. As a way of creating income, structured settlements also enable you to diversify your income streams as well as benefiting from the spread of annuity providers often used to provide structured settlements payments.

The major risk is the legal risk: ensuring this is covered is the biggest step toward a successful, income producing investment.

Although some people believe economic status is overrated; many people want to know how much income you need to be considered part of the upper class. Poorer people typically earn less than $30,000 per year while lower middle class individuals have incomes estimated at ranging from $30,000-60,000.

Based on the testimonials of Dr. Leonard Beeghley, a leading socio-economist, upper class income is the 1% of Americans that earn more than $350,000 per year. The money doesn’t necessarily have to come from your daily job, as upper class individuals are also those who make money from dividends, trusts, royalties, and numerous other sources.

Individuals with incomes above $100,000 per year may be considered lower upper class. This means that they have a comfortable house in the suburbs, have one car, and are able to save for retirement but prefer to send their kids to public schools.  This type of lifestyle is considered a good life, although it’s not luxurious.

Other economists don’t agree that you need $350,000 to be considered rich, however an amount of money that exceeds $200,000 per year is enough for a family to lead a more than comfortable lifestyle; this means having the chance to live in a big house, send the kids to private schools, have enough money to travel internationally, own at least 2 cars, and have no debt except a mortgage which will help them build equity.

Income is the most prominent indicator that reveals economic status.  People with public notoriety such as inventors, political figures, celebrities and so on, are considered part of the upper class because of their social status as well, not just because of their annual income.

Executives on the other hand, CEOs and business entrepreneurs are considered part of the upper class strictly because of their economic achievements. Still, lawyers, doctors, economists can also be considered wealthy as long as their annual income exceeds $200,000. In their case, experience, hard work, and commitment to their jobs are critical factors that contribute to their social ranking.

Millions of people are workaholics and believe in order to provide a good life for their families; at least one person must have a well-paid job. Those that have an upper class income that comes from a career usually work 12 or more hours a day either as lawyers or physicians. In spite of the hard work, the $200,000 plus they receive per year allows them to enjoy a comfortable existence.

Many people believe that by living in an upper class neighborhood they are considered upper middle class; this is not true. It’s all about the money, and you can choose to live in Brooklyn if you want but if you make $500,000 then you’re definitely upper class.  When you’re an average individual, education, work experience, and age can also contribute to your status but it cannot define it. A doctorate for example, in a certain field, comes with many years of experience, and that experience can bring you over $100,000 per year depending on your chosen profession.

There are two different types of upper class individuals: those who have “old” money and those who have “new” money. Old money refers to an inheritance while new money is usually earned in the last couple of years. Robert Gordon, a social science professor at North-Western University, says that a lot of people in are not fully aware of their social status considering their tax returns, monthly expenses, and average spending amount per month.

Basically, if you make $100,000 per year but you owe $50,000 of this money to the state and you cannot lead a comfortable life, it’s impossible to be included in the upper class.

An upper class salary exceeds $300,000 per year and those who are part of this category live in high-end cities. New York City, NY, Santa Barbara, Alpine, and Ross, CA are among some the wealthiest cities in the U.S with some of the most high-end neighborhoods and master-planned communities.

The upper class comprises of 1 to 3 percent of the population, and it holds roughly 25% of its wealth. These individuals give to charities and their wealth is either inherited or earned. A lot of people often ask themselves; if I win $1 million in the lottery, will I become upper class? In terms of money; the answer is YES.

However there’s more to wealth than meets the eye. And as we have all seen time and time again, it’s what you do with the million that determines if you will truly be a part of those considered to have an upper class income.

Every citizen wants to achieve the American dream, have a well-paid job and climb the social rank. However, only those that dream big and then follow up with action are able to do that. Some believe the nation’s economy is living proof that upper middle class status is achievable to anyone ambitious enough to go after it, but personally I’m not sure I believe that. What do you think?

It’s hard to be a success at the stock market and not know how to read stocks. It doesn’t matter if you are a fundamental investor or a technical investor; if you have anything to do with stocks, it is highly recommended that you learn how to take in various forms of data and intelligence about stocks and interpret what they mean for you and your portfolio.

Reading stocks doesn’t have to be complicated, either. Contrary to popular belief, you do not have to be an expert with indicators like Bollinger bands, MACD, or any other advanced metric. You simply have to know how to make sense of the information that is given to you and know what it means.

Here, I’ll give you an overview of how you can read stocks – especially how to make sense of the standard info you receive from a stock quote throughout the day.

The Anatomy of a Basic Stock Quote

If you turn on CNBC, or go to Google Finance, or use your trading platform, you’ll see a ticker scrolling by with the abbreviations of companies and numbers in various colors. These are abbreviated statements of the stock’s current price, and give you the first clue as to what the stock is doing in the market at that moment.

Let’s take a closer look at a quote.

The above quote is for Apple (AAPL), taken from Google Finance. Your screen will look different if you use something other than Google Finance, but all the basic information is the same.

The first thing to know is the spot price, which in this picture is 604.30. This is the value of the stock at this moment in time. It is expressed in “points”, so it would be 604 points, instead of 604 dollars. Below that is how many points the stock has risen or fallen. The number in parentheses is the percentage of the overall value that the stock has risen or fallen. When seeing how much the stock has risen or fallen, ignore the points number and look at the percentage; it provides you with a better perspective.

The range is the price range over the current trading day. Below it is the range over the last 52 weeks. Below that number, you see something called the open. This number goes with a group of other numbers called the OHLC – open, high, low, and close:

• Open: The price at the beginning of the trading day
• High: The highest price the stock reached during the day
• Low: The lowest price reached during the day
• Close: The final price

Note that the close for one day and open for another day are not necessarily the same. Stocks can be traded after hours.

Volume

We’ll stop here and address a crucial element of any quote: volume. Volume is the number of shares that have been traded – bought or sold – throughout the day. You can glean a lot of useful information from analyzing volume.

For starters, a stock with low volume is thinly traded, which means it lacks liquidity. That means it can be hard to buy or sell. Likewise, a stock with higher-than-average trading means that the stock is very liquid, but can also be very volatile (meaning the price goes up or down relatively quickly and dramatically).

On its own, volume isn’t terribly useful. When coupled with price on a chart, though, it can be more useful. For example, churning is when higher-than-average volume is accompanied by a stock trading in a narrow price range. This means a lot of shares are changing hands, but the price isn’t corresponding appropriately.

Usually, this is the inverse of what typically happens, which is this saying: “Volume precedes price”. Spikes in volume represent higher interest in a stock, which usually precedes some change in price.

Price Metrics

The other data on the chart reveal very important metrics that are connected to the stock’s price.

The first is market capitalization. All you need to know about this is that the market cap represents the number of outstanding shares multiplied by the stock’s price. This gives you an indication of the rough “size” of a company.

The next one is a big one – the price-to-earnings (P/E) ratio. A P/E ratio is the stock’s price per share divided by the stock’s annual earnings per share (EPS).

A P/E ratio gives you some idea of how the market values a company’s stock. All other things considered equal, a stock with a higher P/E ratio than another, almost-identical stock with a lower P/E ratio will be considered a better investment. It’s important to compare a stock’s P/E ratio with the average P/E ratio for the industry in which it is in. If a stock’s P/E ratio is higher, it could be a growth stock – but if it is too high, it is very possible that the stock could be overvalued.

Similarly, a low P/E ratio is one indicator of a value stock, a sign that the company could be undervalued (when used with other indicators).

The next number is the dividend/yield. The dividend is the dollar amount per share that is distributed to stockholders on a quarterly to annual basis. The yield is the percentage of the entire annual dividend divided by the current share price. If the company delivered a total of $1 per share in dividends last year, and the stock’s current price is 10, then the yield will be 10%. (Most yields are much lower.) Most investors who aren’t interested in dividends or income stocks largely ignore this number.

The next number – EPS (earnings per share) – is a big one. This is calculated by taking the company’s net income for a quarter, subtracting any dividends paid on preferred stock, and dividing this number by the number of average outstanding shares over that period. For example, if the company brought in $30 million in income, paid out $5 million in preferred dividends, and had an average of 5 million shares outstanding, the EPS would be 5.

All other things being equal, a higher EPS is preferable to a lower one. This means that each share of stock is more productive in producing profit for the company.

EPS can be easily manipulated. But, it also is a driving force behind the market’s perspective of a stock. If a company routinely misses EPS estimates, its stock will suffer. If it hits or beats EPS estimates, the stock’s value will probably rise.

Beta and Institutional Ownership

The last two figures on the chart are ignored by some investors, but are taken into consideration by virtually every strong investor in the market.

Beta is a statistical value that indicates how volatile a stock is in relation to the market. The market has a beta of 1.0. If a stock’s beta is higher, then its price varies more than the market’s return. If a stock’s beta is lower, it varies less. In other words, AAPL’s beta is 1.21, which means its price will be 1.21 times more volatile than the market, on average. (If the market goes up by 1%, AAPL will go up by 1.21%).

If beta is negative, there is an inverse relationship. If the beta is -1.21, then AAPL will decrease by 1.21% for every 1% gain in the market.

The last figure is institutional ownership. This is the percentage of shares that are owned by institutions, which include financial organizations (like investment banks), endowments, pension funds, insurance companies, mutual funds, hedge funds, and other large, well-funded entities. There are two schools of thought about this. The first says that higher percentages of institutional ownership indicate “approval” of the stock from the market.

The second suggests that high percentages of institutional ownership leaves little room for individual investors to realize big gains, since, presumably, all the “big gains” would have already been earned.

By looking at all of these figures, you can become more adept at analyzing a stock and grasping the crucial bits of data and information about a stock so you can make a more informed choice. Good luck!

When it comes to the market, there is one cold, stark reality: any investment is a risky one. Granted, you could choose to invest solely in U.S. Treasurys, which are the world’s safest investment, but that certainly won’t make you rich or provide fully for your retirement.

The truth is, if you want a decent return, you will have to deal with a bit of risk. There is a spectrum of risk and return for various assets in the market. On one end, you have stocks, options, and futures, which offer the highest returns (typically) with some of the highest risk. On the other end, you have U.S. Treasurys and other government bonds, which are backed by the full faith and credit of the United States of America but offer small returns.

Mutual funds can be placed at virtually any place along the spectrum, all based on the riskiness of the underlying asset that the fund represents. Stock mutual funds are riskier than bond mutual funds, for example. To say that a mutual fund is ’safe’, then, is not necessarily true. When compared to just buying individual stocks, though, most mutual funds do not carry as much risk.

To find the best mutual fund investments for safety, then, you have to know a bit about the underlying assets that funds represent, what risk and return they carry, and how you can find these mutual funds and make use of the min your portfolio.

Assessing Mutual Fund Types

Stock Mutual Funds

The most popular type of mutual fund is a stock mutual fund or equity mutual fund. These funds contain shares of many different stocks. Even within this category, there is a spectrum. A stock fund that invests in just one sector carries more risk than a fund that invests in, say, five different sectors (because the risk is spread out). A stock fund that invests in solid, large-cap, blue-chip companies carries less risk than a fund that invests in smaller, less well-known, and less stable companies.

One way to find safer stock funds is to find funds that invest in stocks with low beta. Beta, or the beta coefficient, is a number that determines how volatile the stock is compared to the rest of the market. A stock with a beta of 1.0 is in equilibrium with the market; it fluctuates in price roughly the same as the market does. A stock with a low beta, then, is considered less risky because it is less volatile. Its price does not rise – or fall – nearly as much as other stocks. Also, if the stock’s beta is positive, it appreciates when the market does; if it is negative, its performance is opposite that of the market.

Bond Mutual Funds

Another type is a bond mutual fund. This type invests in bonds, which are basically IOUs from corporations and governments that come with a given interest rate and a price due to the holder of the bond when the bond matures. Bonds are typically negatively correlated with stocks. In other words, when stocks are performing well, bonds usually aren’t; when bonds are strong, stocks are weak.

A bond mutual fund contains several different bonds. The Oppenheimer Champion Income Fund A (OPCHX) is an example of a bond mutual fund. This particular fund holds corporate bonds and foreign bonds in addition to a small amount of stocks, cash, and other assets.

You can use some of the same measures to determine the risk of a bond mutual fund. For example, the beta of OPCHX is -0.42. This means that the bond generally performs opposite of the market’s performance, and does not fluctuate as much as the market does.

You can also use something called a fixed-income style box. This is a chart created by Morningstar that gives you an at-a-glance idea of a bond’s risk and return. The style chart for OPCHX is here; it is the black-and-white, nine-square box in the middle of the page. You can see that the sensitivity of the bond to interest rates is moderate (bonds are sensitive to interest rates, which is a key risk), and that the quality of the bonds held by the fund are low. The lower the quality (as determined by the bond’s rating), the higher the return – and risk.

Money Market Funds

Finally, you can find money market funds, funds that invest in the money markets that contain corporate and government debt securities. These include U.S. Treasurys (Notes, Bills, and Bonds), which are the safest investment assets in the world. As you can imagine, money market funds generally are the safest mutual fund investments you can make, primarily because most government, municipal, and corporate bonds, bills, notes, and other debt obligations are pretty sound.

For example, the Vanguard Prime Money Market Fund (VMMXX) is a money market fund that invests in 471 holdings. Close to 33% of these holdings – or 155 holdings – are U.S. Treasury Bills. Close to 8.5% is invested in corporate paper, which are generally very sound and relatively free from default (usually you see corporate paper from reputable corporations, not unstable ones).

Returns aren’t great; since VMMXX’s inception in 1976, it has returned just 5.75%. It’s 10-year return is 1.91%, which is higher than the average of 1.46%. But, the risk is far lower than other assets, too.

What are the Safest Mutual Funds?

Most in the field will tell you that the safest mutual funds you can find are money market funds, primarily those that invest heavily in U.S. Government debt. No one anticipates that the United States will ever default and go bankrupt, and virtually everyone assumes that American credit will be relatively strong for the foreseeable future. That is why countries continually purchase billions of dollars worth of federal debt; they anticipate a return that is virtually guaranteed.

You can benefit from this by turning to money market funds for a safe, (relatively) risk-free investment.