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Meaning / Definition of

CollegeSure CD

Categories: Finance,

CollegeSure CDs are certificates of deposit designed to let you prepay future college costs at today's rates, plus a premium based on the child's age and the amount you invest.The CDs, which are issued by the College savings bank of Princeton (NJ), pay annual interest rates linked to increases in an index of average college costs and are available with terms from one to twenty-two years.While these CDs are insured by the federal deposit insurance corporation (FDIC), the interest they pay is taxable, unless you own them within a coverdell education savings account (ESA), participating state 529 plan, or roth ira. With the roth ira option, the account must be open for at least five years and you must be at least 59 1/2 to qualify for tax-free withdrawals. CollegeSure CDs are sold in whole or partial units. At maturity, each whole unit is guaranteed to pay the average cost of one year of tuition, fees, and room and board at a four-year private college. If you decide to purchase only a partial unit, it will be worth only that portion of the average yearly college cost at maturity. If the intended beneficiary decides not to go to college, you can get the entire principal and interest calculated at the guaranteed rate back when the CD matures and use it for any purpose.However, if you choose to cash in the CD before its maturity date, you'll owe a penalty of 10% of the principal during the first three years of its term. The penalty drops to 5% for the remaining years of the CD's term, except for the last year, which carries a 1% penalty.

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Definition / Meaning of

Direct Investment

Categories: Stocks,

You can make a direct investment in a company's stock through dividend reinvestment plans (DRIPs) and direct purchase plans (DPPs). If a company in which you own stock offers a DRIP, you have the opportunity to re-invest cash dividends and capital gains distributions in more stock automatically each time they are paid. In the case of DPPs, also known as direct stock purchase plans (DSPs), companies can sell their stock directly to investors without using a brokerage firm as intermediary.Direct investment also refers to long-term investments in limited partnerships that invest in real estate, leased equipment, and energy exploration and development. In this type of investment, you become part owner of the hard assets of the enterprise.You realize income from your investment by receiving a portion of the business's profits, for example, from rents, contractual leasing payments, or oil sales. In some cases you realize capital gains at the end of the investment term, if the business sells its assets.These DPPs are largely nontraded and have no formal secondary markets. This means you will often have to hold the investment for terms of eight years or more, with no guarantee that any of the income or capital gains will materialize. Many people make direct investments because there can be significant tax benefits, such as tax deferral and tax abatement, depending on the investment.

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