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Meaning / Definition of


Categories: Tax, Investing and Trading, Bonds and Treasuries, Accounting, Stocks,

Your return is the profit or loss you have on your investments, including income and change in value. Return can be expressed as a percentage and is calculated by adding the income and the change in value and then dividing by the initial principal or investment amount. You can find the annualized return by dividing the percentage return by the number of years you have held the investment. For example, if you bought a stock that paid no dividends at $25 a share and sold it for $30 a share, your return would be $5. If you bought on January 3, and sold it the following January 4, that would be a 20% annual percentage return, or the $5 return divided by your $25 investment. But if you held the stock for five years before selling for $30 a share, your annualized return would be 4%, because the 20% gain is divided by five years rather than one year.Percentage return and annual percentage return allow you to compare the return provided by different investments or investments you have held for different periods of time.

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Definition / Meaning of

Individual Retirement Arrangement (IRA)

Categories: Finance,

An individual retirement arrangement (IRA), which may be set up as either an account or an annuity, allows people with earned income to contribute to a tax-deferred traditional ira or a tax-free roth ira.Your contribution is a portion of your earnings, up to an annual cap, though it can't be more than you earn. The cap is $4,000 for 2006 and 2007, and $5,000 for 2008. If you are 50 or older, you can make an additional catch-up contribution of $1,000 a year.If you open a traditional ira, you usually can't withdraw without penalty before you turn 59 1/2 and you must begin minimum required distributions (MRDs) by April 1 of the year following the year you turn 70 1/2. income taxes figured at your regular rate are due on your earnings and on any contributions you deducted on your tax return in the year you made them.If you qualify for a roth ira because your modified adjusted gross income is less than the ceiling for your filing status, you make after-tax contributions but your withdrawals are free of federal income tax provided you're at least 59 1/2 and your account has been open at least five years. There are no required withdrawals from roth iras.

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