AG is an abbreviation of Aktiengesellschaft, which is a German term for a public limited company. This type of company shares are offered to the general public and traded on a public stock exchange. Shareholders’ liability is limited to their investment. The shareholders are not responsible for the company’s debts, and their assets are protected in case the company becomes insolvent.
Key Takeaways
Aktiengesellschaft is a German term used for publicly traded corporations on German stock exchanges.
Abbreviated as “AG”, these letters follow the name of such public limited liability companies.
Companies that are designated as AG fall under increased regulatory oversight and must satisfy several initial and ongoing requirements to maintain its status as such.
Understanding Aktiengesellschaft
Aktiengesellschaft is a German term made up of words meaning share and corporation. An AG is a business owned by shareholders which may be traded on a stock marketplace. Shareholders exercise power over controlling policies at regularly scheduled general meetings. The managing board decides on all operational matters, and the supervisory board carries them out.
German companies that are publicly traded are designated as such by the letters ‘AG’ after the company name. ‘AG’ is an abbreviation for the German word Aktiengesellschaft, which literally translates to ‘stock corporation’ or ‘shares corporation’ in English. AG companies trade publicly on stock exchanges with the majority of companies trading on the DAX.
Some of the largest German AG corporations include its automotive manufacturers:
Establishing an AG
Setting up an AG requires five or more members. An Aktiengesellschaft (AG) is subject to the Stock Corporation Act. This act involves share capital of approximately $56,000, with at least half paid at registration. The business owner will enlist the services of an attorney or bank in preparing documentation for registration.
The Aktiengesellschaft’s name will come from the enterprise’s purpose and contains the word Aktiengesellschaft in its title. The articles of association include the corporation’s name, registered office, share capital, each shareholder’s contribution, and details regarding the shares. A court or notary will authenticate the articles of association.
The required capital is deposited into a banking account, and the notarized documents and signed application submitted to the Commercial Registry Office. The AG will become a legal entity within seven days if all materials are in order. The Office will issue a certificate of registration, and publish news of the establishment in the Swiss Official Gazette of Commerce.
AG Oversight
An AG has a managing board of one or more members appointed by and reporting to, the supervisory board of three or more members. An Aktiengesellschaft (AG) with a share capital of $3 million or more has two or more managing board members. An AG employing over 500 workers will have employee representatives occupying one-third of the supervisory board. If the employee number exceeds 2,000, employee representatives will fill half of the board. Also, the articles of association may limit the number of members.
Auditors check the corporation’s financial documents. Meeting three or more of the following conditions for two or more years in a row requires an ordinary company audit: the company has more than 50 full-time employees; revenues exceed $2 million, or the balance sheet exceeds $100,000.
GMbH vs. AG
GmbH is another common business extension primarily known for its use in Germany. Like most countries, Germany has two distinct classifications for companies: publicly traded and privately held. While AG refers to public companies, the acronym ‘GmbH’ is used to designate certain private entities and is written after a company’s name. The letters stand for Gesellschaft mit beschränkter Haftung which translated literally, means a ‘company with limited liability.’
Altcoins are generally defined as all cryptocurrencies other than Bitcoin (BTC). However, some people consider altcoins to be all crytocurrencies other than Bitcoin and Ethereum (ETH) because most cryptocurrencies are forked from one of the two. Some altcoins use different consensus mechanisms to validate transactions and open new blocks, or attempt to distinguish themselves from Bitcoin and Ethereum by providing new or additional capabilities or purposes.
Most altcoins are designed and released by developers who have a different vision or use for their tokens or cryptocurrency. Learn more about altcoins and what makes them different from Bitcoin.
Key Takeaways
The term altcoin refers to all cryptocurrencies other than Bitcoin (and for some people, Ethereum).
There are tens of thousands of altcoins on the market.
Altcoins come in several types based on what they were designed for.
The future value of altcoins is impossible to predict, but if the blockchain they were designed for continues to be used and developed, the altcoins will continue to exist.
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Understanding Altcoins
“Altcoin” is a combination of the two words “alternative” and “coin.” It is generally used to include all cryptocurrencies and tokens that are not Bitcoin. Altcoins belong to the blockchains they were explicitly designed for. Many are forks—a splitting of a blockchain that is not compatible with the original chain—from Bitcoin and Ethereum. These forks generally have more than one reason for occurring. Most of the time, a group of developers disagree with others and leave to make their own coin.
Many altcoins are used within their respective blockchains to accomplish something, such as ether, which is used in Ethereum to pay transaction fees. Some developers have created forks of Bitcoin and re-emerged as an attempt to compete with Bitcoin as a payment method, such as Bitcoin Cash.
Others fork and advertise themselves as a way to raise funds for specific projects. For example, the token Bananacoin forked from Ethereum and emerged in 2017 as a way to raise funds for a banana plantation in Laos that claimed to grow organic bananas.
Dogecoin, the popular meme coin, was apparently created as somewhat of a joke. It forked from Litecoin, which itself forked from Bitcoin in 2011. Whatever the intent behind its creation, it was still designed to be a digital payment method.
Altcoins attempt to improve upon the perceived limitations of whichever cryptocurrency and blockchain they are forked from or competing with. The first altcoin was Litecoin, forked from the Bitcoin blockchain in 2011. Litecoin uses a different proof-of-work (PoW) consensus mechanism than Bitcoin, called Scrypt (pronounced es-crypt), which is less energy-intensive and quicker than Bitcoin’s SHA-256 PoW consensus mechanism.
Ether is another altcoin. However, it did not fork from Bitcoin. It was designed by Vitalik Buterin, Dr. Gavin Wood, and a few others to support Ethereum, the world’s largest blockchain-based scalable virtual machine. Ether (ETH) is used to pay network participants for the transaction validation work their machines do.
Types of Altcoins
Altcoins come in various flavors and categories. Here’s a brief summary of some of the types of altcoins and what they are intended to be used for.
It is possible for an altcoin to fall into more than one category, such as TerraUSD, which is a stablecoin and utility token.
Payment Token
As the name implies, payment tokens are designed to be used as currency—to exchange value between parties. Bitcoin is the prime example of a payment token.
Stablecoins
Cryptocurrency trading and use have been marked by volatility since launch. Stablecoins aim to reduce this overall volatility by pegging their value to a basket of goods, such as fiat currencies, precious metals, or other cryptocurrencies. The basket is meant to act as a reserve to redeem holders if the cryptocurrency fails or faces problems. Price fluctuations for stablecoins are not meant to exceed a narrow range.
Notable stablecoins include Tether’s USDT, MakerDAO’s DAI, and the USD Coin (USDC). In March 2021, payment processing giant Visa Inc. (V) announced that it would begin settling some transactions on its network in USDC over the Ethereum blockchain, with plans to roll out further stablecoin settlement capacity later in 2021.
Security Tokens
Security tokens are tokenized assets offered on stock markets. Tokenization is the transfer of value from an asset to a token, which is then made available to investors. Any asset can be tokenized, such as real estate or stocks. For this to work, the asset must be secured and held. Otherwise, the tokens are worthless because they wouldn’t represent anything. Security tokens are regulated by the Securities and Exchange Commission because they are designed to act as securities.
In 2021, the Bitcoin wallet firm Exodus successfully completed a Securities and Exchange Commission-qualified Reg A+ token offering, allowing for $75 million shares of common stock to be converted to tokens on the Algorand blockchain. This was a historic event because it was the first digital asset security to offer equity in a United States-based issuer.
Utility Tokens
Utility tokens are used to provide services within a network. For example, they might be used to purchase services, pay network fees, or redeem rewards. Filecoin, which is used to buy storage space on a network and secure the information, is an example of a utility token.
Ether (ETH) is also a utility token. It is designed to be used in the Ethereum blockchain and virtual machine to pay for transactions. The stable coin USTerra uses utility tokens to attempt to maintain its peg to the dollar—which it lost on May 11, 2022—by minting and burning two utility tokens to create downward or upward pressure on its price.
Utility tokens can be purchased on exchanges and held, but they are meant to be used in the blockchain network to keep it functioning.
Meme Coins
As their name suggests, meme coins are inspired by a joke or a silly take on other well-known cryptocurrencies. They typically gain popularity in a short period of time, often hyped online by prominent influencers or investors attempting to exploit short-term gains.
Many refer to the sharp run-up in this type of altcoins during April and May 2021 as “meme coin season,” with hundreds of these cryptocurrencies posting enormous percentage gains based on pure speculation.
An initial coin offering (ICO) is the cryptocurrency industry’s equivalent of an initial public offering (IPO). A company looking to raise money to create a new coin, app, or service launches an ICO to raise funds.
Governance Tokens
Governance tokens allow holders certain rights within a blockchain, such as voting for changes to protocols or having a say in decisions of a decentralized autonomous organization (DAO). Because they are generally native to a private blockchain and used for blockchain purposes, they are utility tokens but have come to be accepted as a separate type because of their purpose.
Pros and Cons of Altcoins
Cons
Lower popularity and smaller market cap
Less liquid than Bitcoin
Difficult to determine use cases
Many altcoins are scams or lost developer and community interest
Pros of Altcoins Explained
Altcoins are “improved versions” of the cryptocurrency they derived from because they aim to plug perceived shortcomings.
Altcoins with more utility have a better chance of surviving because they have uses, such as Ethereum’s ether.
Investors can choose from a wide variety of altcoins that perform different functions in the crypto economy.
Cons of Altcoin Explained
Altcoins have a smaller investment market compared to Bitcoin. Bitcoin has generally hovered around 40% of the global cryptocurrency market since May of 2021.
The altcoin market is characterized by fewer investors and less activity, resulting in thin liquidity.
It is not always easy to distinguish between different altcoins and their respective use cases, making investment decisions even more complicated and confusing.
There are several “dead” altcoins that ended up sinking investor dollars.
Future of Altcoins
Discussions about the future for altcoins and cryptocurrencies have a precedent in the circumstances that led to a federally issued dollar in the 19th century. Various forms of local currencies circulated in the United States. Each had unique characteristics and was backed by a different instrument.
Local banks were also issuing currency, in some cases backed by fictitious reserves. That diversity of currencies and financial instruments parallels the current situation in altcoin markets. There are thousands of altcoins available in the markets today, each one claiming to serve a different purpose and market.
The current state of affairs in the altcoin markets is unlikely to consolidate into a single cryptocurrency. But it is also likely that a majority of the thousands of altcoins listed in crypto markets will not survive. The altcoin market will likely coalesce around a bunch of altcoins—those with strong utility, use cases, and a solid blockchain purpose—which will dominate the markets.
If you’re looking to diversify within the cryptocurrency market, altcoins can be less expensive than Bitcoin. However, the cryptocurrency market, regardless of the type of coin, is young and volatile. Cryptocurrency is still finding its role in the global economy, so it’s best to approach all cryptocurrencies cautiously.
What Is the Best Altcoin to Invest in?
The best altcoin to invest in depends on your financial situation, goals, risk tolerance, and the market’s circumstances. It’s best to speak to a financial advisor to help you decide which one is best for you.
What Are the Top 3 Altcoins?
By market cpacity, the top three altcoins are Ethereum, USD Coin, Tether (USDT).
Is It Better to Invest in Bitcoin or Altcoins?
Which cryptocurrency is better is a subjective argument based on an investor’s financial circumstances, investing goals, risk tolerance, and beliefs. You should talk to a professional financial advisor about investing in cryptocurrency before buying any.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions.
Welcome to itho.eu.org, a website first made dedicated to the free resources on the internet and all people supporting it. This website is finally considered to be up, though I will still work on perfecting the contents.
Now I am proud to say the we had finished a prototype project to create a topic/meaning-based index for qur’an translation. The prototype project is available at tafsir.itho.eu.org (in Bahasa) and tafsir.itho.eu.org/en (in English)
As a professional Investment Manager, I will constantly post Daily Analysis on IDX (Indonesia Stock Exchange) and will try to add more articles related to Investments and Stock Exchange.
Disclaimer: Stocktrading is not a fixed and secured income, buy at your own risk. But do feel free to buy me a cup of tea if you make a good profit following my analysis. 🙂
The after-tax real rate of return is the actual financial benefit of an investment after accounting for the effects of inflation and taxes. It is a more accurate measure of an investor’s net earnings after income taxes have been paid and the rate of inflation has been adjusted for. Both of these factors must be accounted for because they impact the gains an investor receives. This can be contrasted with the gross rate of return and the nominal rate of return of an investment.
Key Takeaways
The after-tax real rate of return takes into consideration inflation and taxes to determine the true profit or loss of an investment.
The opposite of the after-tax real rate of return is the nominal rate of return, which only looks at gross returns.
Tax-advantaged investments, such as Roth IRAs and municipal bonds, will see less of a discrepancy between nominal rates of return and after-tax rates of return.
Understanding the After-Tax Real Rate of Return
Over the course of a year, an investor might earn a nominal rate of return of 12% on his stock investment, but the real rate of return, the money he gets to put in his pocket at the end of the day, will be less than 12%. Inflation might have been 3% for the year, knocking his real rate of return down to 9%. And since he sold his stock at a profit, he will have to pay taxes on those profits, taking another, say 2%, off his return, for an after-tax real rate of return of 7%.
The commission he paid to buy and sell the stock also diminishes his return. Thus, in order to truly grow their nest eggs over time, investors must focus on the after-tax real rate of return, not the nominal return.
The after-tax real rate of return is a more accurate measure of investment earnings and usually differs significantly from an investment’s nominal (gross) rate of return, or its return before fees, inflation, and taxes. However, investments in tax-advantaged securities, such as municipal bonds and inflation-protected securities, such as Treasury inflation protected securities (TIPS), as well as investments held in tax-advantaged accounts, such as Roth IRAs, will show less discrepancy between nominal returns and after-tax real rates of return.
Tip
The difference between the nominal return and the after-tax real rate of return isn’t likely to be as great on tax-advantaged accounts like Roth IRAs as it is on other investments.
Example of the After-Tax Real Rate of Return
Let’s be more specific about how the after-tax real rate of return is determined. The return is calculated first of all by determining the after-tax return before inflation, which is calculated as Nominal Return x (1 – tax rate). For example, consider an investor whose nominal return on his equity investment is 17% and his applicable tax rate is 15%. His after-tax return is, therefore: 0.17×(1−0.15)=0.1445=14.45%
Let’s assume that the inflation rate during this period is 2.5%. To calculate the real rate of return after tax, divide 1 plus the after-tax return by 1 plus the inflation rate, then subtract 1. Dividing by inflation reflects the fact that a dollar in hand today is worth more than a dollar in hand tomorrow. In other words, future dollars have less purchasing power than today’s dollars.
Following our example, the after-tax real rate of return is:
(1+0.025)(1+0.1445)−1=1.1166−1=0.1166=11.66%
That figure is quite a bit lower than the 17% gross return received on the investment. As long as the real rate of return after taxes is positive, however, an investor will be ahead of inflation. If it’s negative, the return will not be sufficient to sustain an investor’s standard of living in the future.
What Is the Difference Between the After-Tax Real Rate of Return and the Nominal Rate of Return?
The after-tax real rate of return is figured after accounting for fees, inflation, and tax rates. The nominal return is simply the gross rate of return before considering any outside factors that impact an investment’s actual performance.
Is the After-Tax Real Rate of Return Better Than the Nominal Rate of Return?
Your after-tax real rate of return will give you the actual benefit of the investment and whether it is sufficient to sustain your standard of living in the future, because it takes into account your fees, tax rate, and inflation.
Both figures are useful tools to analyze an investment’s performance. If you are comparing two investments, it would be important to use the same figure for both.
My Nominal Rate of Return Is 12%, Inflation is 8.5%, and My Applicable Tax Rate Is 15%. What Is My After-Tax Real Rate of Return?
Your after-tax real rate of return is calculated by, first, figuring your after-tax pre-inflation rate of return, which is calculated as Nominal Return x (1 – tax rate). That would be 0.12 x (1 – 0.15) = .102 = 10.2%
To calculate the after-tax real rate of return, divide 1 plus the figure above by 1 plus the inflation rate. That would be [(1 + .102) / (1 + .085) – 1 ] = 1.0157 – 1 = .0157 = 1.57% after-tax real rate of return. As you can see, the high inflation rate has a substantial impact on the after-tax real rate of return for your investment.
The Bottom Line
When you are assessing the value of your investments, it’s important to look at not just your nominal rate of return but also the after-tax real rate of return, which takes into account the taxes you’ll owe and inflation’s effect. The after-tax real rate of return can tell you if your nest egg investments will allow you to maintain your standard of living in the future.
