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Put Option Pricing | Standard options are contracts for 100 shares. If the option is for $0.75/share and you are buying the contract for 100 shares the price would be $75 plus commission. Some brokers have mini options available which is a contract for 10 shares. I don't know if all brokers offer this option and it is not available on all stocks. The difference between the 1 week and 180 day price is based on anticipated price changes over the given time. Most people would expect more volatility over a 6 month period than a 1 week period thus the demand for a higher premium for the longer option. |
Should I try to negotiate a signing bonus? | You asked about a signing bonus and were told the conditions that would be required to get one. It does not appear that you will qualify, but you do have another option. Ask if you can start earlier. Some times they can't change the start date. They might have a contractual issue with the customer and the customer is setting the start date. Other times they are waiting for somebody else to retire or transfer. But ask. Tell them starting earlier speeds up the training process. For you it can make the transfer of insurance benefits sooner. Keep in mind it could be a few weeks before you get your first pay check. How were you planning on bridging the gap? |
What Did Benjamin Graham Mean by Earnings Stability in The Intelligent Investor? | Please note that the following Graham Rating below corresponds to five years: Earnings Stability (100% ⇒ 10 Years): 50.00% Benjamin Graham - once known as The Dean of Wall Street - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss. Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface). Graham's first recommended strategy - for casual investors - was to invest in Index stocks. For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them. For advanced investors, Graham described various "special situations". The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund. The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach. But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment. For example, given below are the actual Graham ratings for International Business Machines Corp (IBM), with no adjustments other than those for inflation. Defensive Graham investment requires that all ratings be 100% or more. Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%. International Business Machines Corp - Graham Ratings Sales | Size (100% ⇒ $500 Million): 18,558.60% Current Assets ÷ [2 x Current Liabilities]: 62.40% Net Current Assets ÷ Long Term Debt: 28.00% Earnings Stability (100% ⇒ 10 Years): 100.00% Dividend Record (100% ⇒ 20 Years): 100.00% Earnings Growth (100% ⇒ 30% Growth): 172.99% Graham Number ÷ Previous Close: 35.81% Not all stocks failing Graham's rules are necessarily bad investments. They may fall under "special situations". Graham's rules are also extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results. Even when stocks don't clear them, Graham's rules give a clear quantifiable measure of a stock's margin of safety. Thank you. |
Can the risk of investing in an asset be different for different investors? | Capping the upside while playing with unlimited downside is a less disciplined investment strategy vis-a-vis a stop-loss driven strategy. Whether it is less risky or high risky also depends on the fluctuations of the stock and not just long-term movements. For example, your stop losses might get triggered because of a momentary sharp decline in stock price due to a large volume transaction (esp more so in small-cap stocks). Although, the stock price might recover from the sudden price drop pretty soon causing a seemingly preventable loss. That being said, playing with stop losses is always considered a safer strategy. It may not increase your profits but can certainly cap your losses. |
Offer Price for my stock not shown on quote and a subsequent sale higher than my offer | Many exchanges trade the same securities. An order may be posted to a secondary exchange, but if the National Best Bid and Offer data provider malfunctions, only those with data feeds from that exchange will see it. Only the data provider for the primary exchange where a stock is listed provides the NBBO. Missing orders are very common with the NBBO data providers. NASDAQ's order consolidator has had many failures over the past few years, and the data provider's top executive has recently resigned. Brokers have no control over this system. A broker may be alerted to a malfunction by an accountholder, but a broker may only inform the relevant exchange and the relevant data provider. |
Can you deduct hobby expenses up to hobby income in Canada? | Yes, your business needs to be in the business of making money in order for you to deduct the expenses associated with it. I suppose in theory this could mean that if you take in $10,000 and spend $30,000 every year, you not only don't get a net deduction of $20,000 (your loss) but you have to pay tax on $10,000 (your revenue). However this is super fixable. Just only deduct $9500 of your expenses. Tada! Small profit.For all the gory details, including how they consider whether you have an expectation of profits, see http://www.cra-arc.gc.ca/E/pub/gl/p-176r/p-176r-e.html This "expectation of profit" rule appears to apply to things like "I sell home décor items (or home decorating advice) and therefore need to take several multi week trips to exotic vacation destinations every year and deduct them as business expenses." If you're doing woodworking or knitting in your home and selling on Etsy you don't particularly have any expenses. It's hard to imagine a scenario where you consistently sell for less than the cost of materials and then end up dinged on paying tax on revenue. |
Why is auto insurance ridiculously overpriced for those who drive few miles? | Not all miles carry the same amount of risk. A survey by Progressive indicated that accidents are most likely to occur within 5 miles of home, and 77% of accidents occur within 15 miles of home. Only 1% of accidents occurred 50 or more miles from home. That's from 2002, but it seems unlikely to have changed much. Since the miles closest to your home carry more risk, they cost more, and low-mileage discounts reflect that. There are per-mile insurance options in a few states which could save you money, but they do constant monitoring via that ODB2 telematics device, and other insurers offer discounts if you accept their monitoring either in perpetuity or for a limited period of time. Without monitoring, insurers don't know if that 4,000 miles of driving is spread into a few mid-day trips each week, or maybe you're doing all that driving from midnight to 4am on weekends (fatalities far more likely), or from 5-7pm during weekdays (accidents far more likely). Personally, I save ~10% by being a 'low-mileage' driver, and am currently in the middle of a 90-day monitoring, so might go lower, but given that accidents are far more likely close to home, 10% feels pretty significant and appropriate. |
What is the best way to determine if you should refinance a mortgage? | Yes, take the new rate, but instead of using the new 30 year term, calculate the payment as though the new mortgage were at the remaining term. 3 years into a 30? You calculate the payment as if the new mortgage were 27 years. This will tell you what you are really saving. Now, take that savings and divide into your closing costs if any. That will give you the break even. Will you be in the house that long? If you can find a no closing cost deal, it's worth it for even 1/8% savings. |
Can two or more people own 1 stock in the US? | A share of stock is an asset not much different than any other asset. If the share is being held in a joint account, it's being jointly owned. If the share is being held by a company with multiple owners then the share is owned by the various owners. If you're married and in a community property state, then it's technically owned by both parties. |
UK university student finance - should I use my sponsorship money to pay the debt? | Let me run some simplistic numbers, ignoring inflation. You have the opportunity to borrow up to 51K. What matters (and varies) is your postgraduation salary. Case 1 - you make 22K after graduation. You pay back 90 a year for 30 years, paying off at most 2700 of the loan. In this case, whether you borrow 2,800 or 28,000 makes no difference to the paying-off. You would do best to borrow as much as you possibly can, treating it as a grant. Case 2 - you make 100K after graduation. You pay back over 7K a year. If you borrowed the full 51, after 7 or 8 years it would be paid off (yeah, yeah, inflation, interest, but maybe that might make it 9 years.) In this case, the more you borrow the more you have to pay back, but you can easily pay it back, so you don't care. Invest your sponsorships and savings into something long term since you know you won't be needing to draw on them. Case 3 - you make 30K after graduation. Here, the payments you have to make actually impact how much disposable income you have. You pay back 810 a year, and over 30 years that's about 25K of principal. It will be less if you account for some (even most) of the payment going to interest, not principal. Anything you borrow above 25K (or the lower, more accurate amount) is "free". If you borrow substantially less than that (by using your sponsorship, savings, and summer job) you may be able to stop paying sooner than 30 years. But even if you borrow only 12K (or half the more accurate number), it will still be 15 years of payments. Running slightly more realistic versions of these calculations where your salary goes up, and you take interest into account, I think you will discover, for each possible salary path, a number that represents how much of your loan is really loan: everything above that is actually a grant you do not pay back. The less you are likely to make, the more of it is really grant. On top of that, it seems to me that no matter the loan/grant ratio, "borrow as much as you can from this rather bizarre source" appears to be the correct answer. In the cases where it's all loan, you have a lot of income and don't care much about this loan payment. Borrowing the whole 51K lets you invest all the money you get while you're a student, and you can use the returns on those investments to make the loan payments. |
How to exercise options when you they're worth more money than you have? [duplicate] | The fact that the option is deep in the money will be reflected in the market price of the option so you can just sell it at a profit. If there's a (n almost) guaranteed profit to be had, however, you can always find someone who will lend you the money to cover the exercise... they'll charge you interest, however! |
What does “no adjustments” mean? | In addition to the adjustment type in NL7's answer, there are a host of others. If there are any adjustments, form 8949 is required, if not, the gains can be separated into short and long-term and added together to be entered on Schedule D. Anything requiring an adjustment code in column F of the 8949 requires an entry in column G. Some other example entries for column F include: (see the 8949 instructions for a complete list) **A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. (from Pub17) |
Wash sale rule with dividend reinvestment | I was not able to find any authority for the opinion you suggest. Wash sale rules should, IMHO, apply. According to the regulations, you attribute the newly purchased shares to the oldest sold shares for the purposes of the calculation of the disallowed loss and cost basis. (c) Where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of. You can resort to the claim that you have not, in fact, entered into the contract within 30 days, but when you gave the instructions to reinvest dividends. I don't know if such a claim will hold, but to me it sounds reasonable. This is similar to the rules re short sales (in (g) there). In this case, wash sale rules will not apply (unless you instructed to reinvest dividends within the 30 days prior to the sale). But I'd ask a tax professional if such a claim would hold, talk to a EA/CPA licensed in your state. |
Is it a good idea to get an unsecured loan to pay off a credit card that won't lower a high rate? | nan |
Are COBRA premiums deductible when self-employed? | Here is a quote from the IRS website on this topic: You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. The insurance can also cover your child who was under age 27 at the end of 2011, even if the child was not your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child. A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. One of the following statements must be true. You were self-employed and had a net profit for the year reported on Schedule C (Form 1040), Profit or Loss From Business; Schedule C-EZ (Form 1040), Net Profit From Business; or Schedule F (Form 1040), Profit or Loss From Farming. You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., box 14, code A. You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. You received wages in 2011 from an S corporation in which you were a more-than-2% shareholder. Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual. For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business. For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business. Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. For more information, see Form 1040X, Amended U.S. Individual Income Tax Return. Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. Take the deduction on Form 1040, line 29. |
Are there alternatives to double currency account to manage payments in different currencies? | Cheaper and faster are usually mutually exclusive. If you want faster, nothing is faster than cash. I would recommend using an ATM to withdraw cash from your USD account as Florints and then use as appropriate. If you want cheaper, then the cheapest currency conversion commonly available is foreign exchange / transfer services like OFX / XE Trade / Transferwise. Turn around time on these can be as little as a business day or two but more commonly takes a few business days, but they typically offer the best currency exchange rates at the lowest cost. If you must make regular payments to 3rd parties, you can set these services up to send the converted currency to a 3rd party rather than back to your own account. |
Buying a multi-family home to rent part and live in the rest | A professional home inspection will clue you in on any problems you might be buying, so it's important in any real estate transaction. If the seller finances the loan, you need a lawyer. It might be a nice opportunity - being in the right place at the right time. You just have to investigate all angles. |
How can I understand why investors think a particular company should have a high PE ratio? | Does the company see itself expanding into new product lines or new territories? What is the current predicted growth for the company's earnings for the next 5 years? These would generally be where I'd look for growth in companies. In the case of Costco, there may be a perception of the company as being a "safe" company as the market capitalization for the stock is over $50 billion which is rather large. Thus, there is something to be said for Costco providing a dividend and may well weather the current market for an idea compared to holding funds in money markets that are paying nothing in some cases. There is also something to be said for looking at the industry and sector values that Costco is in where on Yahoo! Finance, I find the P/E for the industry and sector to be 35.05 and 28.47, respectively. Thus, Costco isn't as inflated as the other stocks in the same ballpark for another idea here. |
Buying from an aggressive salesperson | There are few main reasons I can think of that the salesperson would do this: A lot of people assume it's the 3rd option always. But if the person is reputable, it's most likely 1 or 2. You can't run a business doing option 3 for long without getting a reputation. |
Would I ever need credit card if my debit card is issued by MasterCard/Visa? | Car rental agencies typically accept only credit cards for the rental (you can pay at the end with debit, but the securing during the rental must be a credit card - or a high cash deposit). Hotel advance-bookings - even if many months in the future - will work fine with a credit card, but - as explained by others - on a debit card, it would directly affect your cash flow (you basically have to prepay instead of just leave the credit card number on file. The same is sometimes true for other advance booking, like cruises, tours, etc. |
What is the different between 2 :1 split and 1:1 split | The 1 for 1 split could be the case where a company is being split into two parts. The new part may be spun off, or sold to another company. Any time a company splits into two parts, the ratio of the resulting companies needs to be determined. |
Does it make sense to refinance a 30 year mortgage to 15 years? | You don't say what the time remaining on the current mortgage is, nor the expense of the refi. There are a number of traps when doing the math. Say you have 10 years left on a 6% mortgage, $200K balance. I offer you a 4% 30 year. No cost at all. A good-intentioned person would do some math as follows: Please look at this carefully. 6% vs 4%. But you're out of pocket far more on the 4% loan. ?? Which is better? The problem is that the comparison isn't apples to apples. What did I do? I took the remaining term and new rate. You see, so long as there are no prepayment penalties, this is the math to calculate the savings. Here, about $195/mo. That $195/mo is how you judge if the cost is worth it or the break-even time. $2000? Well, 10 months, then you are ahead. If you disclose the time remaining, I am happy to edit the answer to reflect your numbers, I'm just sharing the correct process for analysis. Disclosure - I recently did my last (?) refi to a 15yr fixed 3.5%. The bank let the HELOC stay. It's 2.5%, and rarely used. |
How do you get out of a Mutual Fund in your 401(k)? | The S&P top 5 - 401(k) usually comply with the DOL's suggestion to offer at least three distinct investment options with substantially different risk/return objectives. Typically a short term bond fund. Short term is a year or less and it will rarely have a negative year. A large cap fund, often the S&P index. A balanced fund, offering a mix. Last, the company's stock. This is a great way to put all your eggs in one basket, and when the company goes under, you have no job and no savings. My concern about your Microsoft remark is that you might not have the choice to manage you funds with such granularity. Will you get out of the S&P fund because you think this one stock or even one sector of the S&P is overvalued? And buy into what? The bond fund? If you have the skill to choose individual stocks, and the 401(k) doesn't offer a brokerage window (to trade on your own) then just invest your money outside the 401(k). But. If they offer a matching deposit, don't ignore that. |
Should I continue to invest in an S&P 500 index fund? | Your 5-8 year time frame is interesting because it is actually a two windows. When people are savings for retirement, they tell us how many years or decades they have until they reach retirement age. But they also imply that they are planning on spending decades withdrawing the money. But you wanting the money for a house in 5-8 years are needing the money more like somebody who is saving college money for a teenager. In fact your plan is similar in time frame as a 13 year old has for their college fund; start in 5 years but only have a 4 year spending window. Take the California 529 program: Beneficiary Age 13-14: Beneficiary Age 18+: The funding agreement provides a minimum guaranteed rate of return on the >amounts allocated to it by the Investment Portfolio. The minimum effective >annual interest rate will be neither less than 1% nor greater than 3% at >any time. So you plan of investing 100% in the S&P with your window is way too risky. You should only invest a portion of your down payment in equities, and be prepared to only be in that mode for a few years. Any drop in the market now hurts you, but one just before you need the funds would be devastating. |
Are Credit Cards a service to banks? | As i see it, with a debit card, they are taken kinda out of the game. They are not lending money, it seems really bad for them. Not exactly. It is true that they're not lending money, but they charge a hefty commission from the retailers for each swipe which is pure profit with almost no risk. One of the proposals considered (or maybe approved already, don't know) in Congress is to cap that hefty commission, which will really make the debit cards merely a service for the checking account holder, rather than a profit maker for the bank. On the other hand, it's definitely good for individuals. I disagree with that. Debit cards are easier to use than checks, but they provide much less protection than credit cards. Here's what I had to say on this a while ago, and seems like the community agrees. But, why do we really need a credit history to buy some of the more expensive stuff Because the system is broken. It rewards people in debt by giving them more opportunities to get into even more debts, while people who owe nothing to noone cannot get a credit when they do need one. With the current system the potential creditor can only asses the risk of someone who has debt already, they have no way of assessing risks of someone with no debts. To me, all this credit card system seems like an awfully nice way to make loads of money, backed by governments as well. Well, credit cards have nothing to do with it. It's the credit scores system that is broken. If we replace the "card" with "score" in your question - then yes, you're thinking correctly. That of course is true for the US, in other countries I have no knowledge on how the creditors assess the risks. |
Do I make money in the stock market from other people losing money? | There is one other factor that I haven't seen mentioned here. It's easy to assume that if you buy a stock, then someone else (another stock owner) must have sold it to you. This is not true however, because there are people called "market makers" whose basic job is to always be available to buy shares from those who wish to sell, and sell shares to those who wish to buy. They could be selling you shares they just bought from someone else, but they also could simply be issuing shares from the company itself, that have never been bought before. This is a super oversimplified explanation, but hopefully it illustrates my point. |
How does the Dow Jones Industrial Average (DJIA) divisor change to account for dividends? | The methodology for divisor changes is based on splits and composition changes. Dividends are ignored by the index. Side note - this is why, in my opinion, that any discussion of the Dow's change over a long term becomes meaningless. Ignoring even a 2% per year dividend has a significant impact over many decades. The divisor can be found at http://wsj.com/mdc/public/page/2_3022-djiahourly.html |
Am I liable for an auto accident if I'm a cosigner but not on the title, registration, or insurance policy? | It might be possible to sue you successfully if someone brought evidence that your brother was absolutely totally unsuitable to drive a car because of some character flaw, and without your financial help he wouldn't have been able to afford a car. So helping a brother to buy a car, if that brother is a drinking alcoholic, or has only a faked driver's license and you know it, that could get you into trouble. A not unsimilar situation: A rental car company could probably be sued successfully if they rented a car to someone who they knew (or maybe should have known) was disqualified from driving and that person caused an accident. |
Where are Bogleheadian World ETFs or Index funds? | Half VTI (Vanguard Total Stock Market ETF) and half VEU (Vanguard FTSE All-World ex-US ETF), and stop futzing. The US is roughly half the world market cap so this is like a total world equity index. Very low costs. VTI Expense ratio is 0.04% as of 04/27/2017. I don't know what you mean by RSG, but it could be either a waste processor or a gold miner. Either way it seems kind of speculative to hold even 10% of your wealth. |
Where are the non floated Groupon shares | Many people have criticized the Groupon IPO model because it doesn't make sense as an investment, unless you are an insider with cheap shares. Basically, you have: |
Is there a way to monitor when executives or leaders in a company sell off large holdings? | Exec Insiders have to file with the SEC and some sites like secform4.com track it. But many insiders have selling programs where the sell the same amount every month or quarter so you would have to do your homework to determine if there are real signals in the activity. |
What is the difference between speculating and investing? | I consider speculation to be a security purchase where the point is to sell it to someone for a higher price. Day-trading is completely speculative. I consider Investment to be a purchase you make for its underlying value. You are buying it at that price because you believe the present value of the future payments is higher than the price you are paying. I may sell an investment if a higher price is offered than I think it's worth, or if the business situation changes, but I don't plan on it. Hedging is a third type of security purchase, where you are decreasing your overall risk. If you are a hog farmer, selling hog futures on the CME is hedging, because it locks in the amount you get per hog, regardless of what the price of hogs does. Commodities markets only have hedgers and speculators. Investors don't make sense, it doesn't have an underlying value. |
How would bonds fare if interest rates rose? | 1. Interest rates What you should know is that the longer the "term" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest gains or losses. When a book or financial planner says to buy "bonds" with no other qualification, they almost always mean investment-grade intermediate-term bond funds (or for individual bonds, the equivalent would be a bond ladder averaging an intermediate term). If you want technical details, look at the "average duration" or "average maturity" of the bond fund; as a rough guide, if the duration is 10, then a 1% change in interest rates would be a 10% gain or loss on the fund. Another thing you can do is look at long-term (10 years or ideally longer) performance history on some short, intermediate, and long term bond index funds, and you can see how the long term funds bounced around more. Non-investment-grade bonds (aka junk bonds or high yield bonds) are more affected by factors other than interest rates, including some of the same factors (economic booms or recessions) that affect stocks. As a result, they aren't as good for diversifying a portfolio that otherwise consists of stocks. (Having stocks, investment grade bonds, and also a little bit in high-yield bonds can add diversification, though. Just don't replace your bond allocation with high-yield bonds.) A variety of "complicated" bonds exist (convertible bonds are an example) and these are tough to analyze. There are also "floating rate" bonds (bank loan funds), these have minimal interest rate sensitivity because the rate goes up to offset rate rises. These funds still have credit risks, in the credit crisis some of them lost a lot of money. 2. Diversification The purpose of diversification is risk control. Your non-bond funds will outperform in many years, but in other years (say the -37% S&P 500 drop in 2008) they may not. You will not know in advance which year you'll get. You get risk control in at least a few ways. There's also an academic Modern Portfolio Theory explanation for why you should diversify among risky assets (aka stocks), something like: for a given desired risk/return ratio, it's better to leverage up a diverse portfolio than to use a non-diverse portfolio, because risk that can be eliminated through diversification is not compensated by increased returns. The theory also goes that you should choose your diversification between risk assets and the risk-free asset according to your risk tolerance (i.e. select the highest return with tolerable risk). See http://en.wikipedia.org/wiki/Modern_portfolio_theory for excruciating detail. The translation of the MPT stuff to practical steps is typically, put as much in stock index funds as you can tolerate over your time horizon, and put the rest in (intermediate-term investment-grade) bond index funds. That's probably what your planner is asking you to do. My personal view, which is not the standard view, is that you should take as much risk as you need to take, not as much as you think you can tolerate: http://blog.ometer.com/2010/11/10/take-risks-in-life-for-savings-choose-a-balanced-fund/ But almost everyone else will say to do the 80/20 if you have decades to retirement and feel you can tolerate the risk, so my view that 60/40 is the max desirable allocation to stocks is not mainstream. Your planner's 80/20 advice is the standard advice. Before doing 100% stocks I'd give you at least a couple cautions: See also: |
Why is it rational to pay out a dividend? | The main reason, as far as I can see, is that the dividends are payments with which the shareholders may do what they want. Capital that the company has no use for does not make a significant positive return on investment, as you pointed out, yes the company could accrue interest, but that is not going to make the company large sums of cash. While the company may be great at making shoes - maybe even the best in the world - doesn't mean they are good investors. Sure they could dabble at using their capital to invest in other equities, but they don't, because they just want to focus on making shoes. If the dividend goes to the investors, they can do what they wish, be it reinvest in the company, or invest elsewhere. Other companies that may make good use of the capital, and create significant returns on it are one such example. That is the rational answer, beyond that, one of the main reasons is that people like the feeling of receiving dividends - it might not be the answer you are looking for, but many people prefer companies that pay dividends for no rational reason over companies which grow their asset value. |
Good Percentage Return on Equity? | Yes definitely Warren Buffet averaged returns of only around 21% throughout his 40 years in business. ROE of 23% is probably more than double the ROE of most companies , whats more as the saying goes its easier to grow sales from 1 million to 100 million than to grow sales from 100 million to 10 billion |
Why do Americans have to file taxes, even if their only source of income is from a regular job? | One of the reasons, apart from historical, is that different people have different tax liabilities which the employer may not be aware of. For example, in the US we don't pay taxes in source on investment income, and there are many credits and deductions that we can't take. So if I have a child and some interest income from my savings account - employer's withholding will not match my actual tax liability. There are credits for children, additional taxes for the interest, and the actual tax brackets vary based on my marital status and filing options I chose. So even the same family of two people married will pay different amounts in taxes if they chose to file separate tax returns for each, than if they chose to file jointly on one tax return. For anyone who've lived anywhere else, like you and me, this system is ridiculously complex and inefficient, but for Americans - that works. Mainly for the reason of not knowing anything better, and more importantly - not wanting to know. |
How to share income after marriage and kids? | My suggestion would be that you're looking at this the wrong way, though for good reasons. Once you are a family, you should - and, in most cases I've seen, will - think of things differently than you do now. Right now, your post above is written from a selfish perspective. Not to be insulting, and not implying selfish is a bad thing - I don't mean it negatively. But it is how you're defining this problem: from a self-interested, selfish point of view. "Fair" and "unfair" only have meaning from this point of view; something can only be unfair to you if you come from a self-centered viewpoint. Try to think of this from a family-centric viewpoint, and from your significant other's point of view. You're absolutely right to want both of you to be independent financially as far as is possible; but think about what that means from all three points of view (your family's, yours, and hers)? Exactly what it means will depend on the two of you separately and together, but I would encourage you to start with a few basics that make it likely you'll find a common ground: First of all, ensure your significant other has a retirement account of her own that is funded as well as yours is. This will both make life easier if you split up, and give her a safety net if something happens to you than if you have all of the retirement savings. I don't know how your country manages pensions or retirement accounts, but figure out how to get her into something that is as close to equal to yours as possible. Make sure both of you have similar quality credit histories. You should both have credit cards in your own names (or be true joint owners of the accounts, not just authorized users, where that is possible), and both be on the mortgage/etc. when possible. This is a common issue for women whose spouse dies young and who have no credit history. (Thanks @KateGregory for reminding me on this one) Beyond that, work out how much your budget allows for in spending money for the two of you, and split that equally. This spending money (i.e., "fun money" or money you can do whatever you like with) is what is fundamentally important in terms of financial independence: if you control most of the extra money, then you're the one who ultimately has control over much (vacations, eating out, etc.) and things will be strained. This money should be equal - whether it is literally apportioned directly (each of you has 200 a month in an account) or simply budgeted for with a common account is up to you, whatever works best for your personal habits; separate accounts works well for many here to keep things honest. When that money is accounted for, whatever it is, split the rest of the bills up so that she pays some of them from her income. If she wants to be independent, some of that is being in the habit of paying bills on time. One of you paying all of the bills is not optimal since it means the other will not build good habits. For example, my wife pays the warehouse club credit card and the cell phone bill, while I pay the gas/electric utilities. Whatever doesn't go to spending money and doesn't go to the bills she's personally responsible for or you're responsible for (from your paycheck) should go to a joint account. That joint account should pay the larger bills - mortgage/rent, in particular - and common household expenses, and both of you should have visibility on it. For example, our mortgage, day-care costs, major credit card (which includes most of our groceries and other household expenses) come from that joint account. This kind of system, where you each have equal money to spend and each have some household responsibilities, seems the most reasonable to me: it incurs the least friction over money, assuming everyone sticks to their budgeted amounts, and prevents one party from being able to hold power over another. It's a system that seems likely to be best for the family as a unit. It's not "fair" from a self-centered point of view, but is quite fair from a family-centered point of view, and that is the right point of view when you are a family, in my opinion. I'll emphasize here also that it is important that no one party hold the power, and this is set up to avoid that, but it's also important that you not use your earning power as a major arguing point in this system. You're not "funding her lifestyle" or anything like that: you're supporting your family, just as she is. If she were earning more than you, would you cut your hours and stay at home? Trick question, as it happens; regardless of your answer to that question, you're still at the same point: both of you are doing the thing you're best suited for (or, the thing you prefer). You're both supporting the family, just in different ways, and suggesting that your contribution is more valuable than hers is a great way to head down the road to divorce: it's also just plain incorrect. My wife and I are in almost the identical situation - 2 kids, she works part time in the biological sciences while spending plenty of time with the kids, I'm a programmer outearning her significantly - and I can tell you that I'd more than happily switch roles if she were the bread earner, and would feel just as satisfied if not more doing so. And, I can imagine myself in that position, so I can also imagine how I'd feel in that position as far as how I value my contribution. |
Reconciling transactions reimbursing myself for expenses as self-employed (UK) | For anyone that's curious, I had a number of chats with Quickbooks who recommended I import only the relevant business transactions from my personal account & personal credit card in order to lower the tax liability. This way money "paid" from the business account to myself rightly shows up as a transfer and not as income. This means when generating a tax report, it calculates the correct rate of tax to be paid based on income minus allowable expenses, regardless which account they came from. |
How much is inflation? | Nobel laureate economist, Paul Krugman, wrote a piece many moons ago about economic expansion and money supply. As an illustration of how money supply affects the economy, he used the example of a baby-sitting co-op. While simplistic, it provides an easy to grasp notion of how printing money and restricting it (e.g. by pegging the currency to gold reserves) can affect the economy. Here is an excerpt from his webpage ( http://web.mit.edu/krugman/www/howfast.html ): "With the decline of the traditional extended family, in which relatives were available to take care of children at need, many parents in the United States have sought alternative arrangements. A popular scheme is the baby-sitting coop, in which a group of parents agree to help each other out on a reciprocal basis, with each parent serving both as baby-sitter and baby-sittee. Any such coop requires rules that ensure that all members do their fair share. One natural answer, at least to people accustomed to a market economy, is to use some kind of token or marker system: parents "earn" tokens by babysitting, then in turn hand over these tokens when their own children are minded by others. For example, a recently formed coop in Western Massachusetts uses Popsicle sticks, each representing one hour of babysitting. When a new parent enters the coop, he or she receives an initial allocation of ten sticks. This system is self-regulating, in the sense that it automatically ensures that over any length of time a parent will put in more or less the same amount of time that he or she receives. It turns out, however, that establishing such a token system is not enough to make a coop work properly. It is also necessary to get the number of tokens per member more or less right. To see why, suppose that there were very few tokens in circulation. Parents will want on average to hold some reserve of tokens - enough to deal with the possibility that they may want to go out a few times before they have a chance to babysit themselves and earn more tokens. Any individual parent can, of course, try to accumulate more tokens by babysitting more and going out less. But what happens if almost everyone is trying to accumulate tokens - as they will be if there are very few in circulation? One parent's decision to go out is another's opportunity to babysit. So if everyone in the coop is trying to add to his or her reserve of tokens, there will be very few opportunities to babysit. This in turn will make people even more reluctant to go out, and use up their precious token reserves; and the level of activity in the coop may decline to a disappointingly low level. The solution to this problem is, of course, simply to issue more Popsicle sticks. But not too many - because an excess of popsicle sticks can pose an equally severe problem. Suppose that almost everyone in the coop has more sticks than they need; then they will be eager to go out, but reluctant to babysit. It will therefore become hard to find babysitters - and since opportunities to use popsicle sticks will become rare, people will become even less willing to spend time and effort earning them. Too many tokens in circulation, then, can be just as destructive as too few." -- Paul Krugman, 1997 (accessed webpage 2010). |
Restricting a check from being deposited via cell phone | I agree with you that smartphone deposits make you more vulnerable to a variety of issues. Checks are completely insecure, since anyone with your routing/account number can create a check, and individuals are less likely to shred or otherwise secure the check properly. Ways to control this risk are: |
What is the incentive for a bank to refinance a mortgage at a lower rate? | Banks make money on load origination fees. The "points" you pay or closing costs are the primary benefit to the banks. A vast majority of the time risks associated with the mortgage are sold to another party. FYI, the same is true with investment banks. In general, the transaction costs (which are ignored by modern finance theory) are the main thing running the incentives for the industry. |
Relative merits of Petrobras as an investment | Could be risky, consider that some of their assets in Bolivia were nationalized. |
Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | Traditionally, the Dow Jones Industrial Average (DJIA) was only comprised of stocks that were traded on the New York Stock exchange. Neither Apple (AAPL) nor Google (GOOG) are traded on the New York Stock Exchange but instead are traded on NASDAQ. All NASDAQ tickers are four characters long and all NYSE tickers are only three or less characters long (e.g. IBM or T (AT&T)). However in 1999, MSFT became the first NASDAQ stock to be included in the DJIA. Given that AAPL now has the largest market capitalization of any company in U.S. history, I think it is likely if they retain that position, that they would eventually be let into the DOW club too, perhaps, ironically, even supplanting Microsoft. |
Short term parking of a large inheritance? | The person who told you "no-load funds" had the right idea. Since you are risk-averse, you tend to want a "value" fund; that is, it's not likely to grow in value (that would be a "growth" fund), but it isn't like to fall either. To pick an example more-or-less at random, Fidelity Blue Chip Value Fund "usually" returns around 8% a year, which in your case would have meant about $20,000 every year -- but it's lost 4.35% in the last year. I like Fidelity, as a brokerage as well as a fund-manager. Their brokers are salaried, so they have no incentive to push load funds or other things that make them, but not you, money. For intermediate investors like you and me, they seem like a good choice. Be careful of "short term". Most funds have some small penalty if you sell within 90 days. Carve off whatever amount you think you might need and keep that in your cash account. And a piece of personal advice: don't be too risk-averse. You don't need this money. For you, the cost of losing it completely is exactly equal as the benefit of doubling it. You can afford to be aggressive. Think of it this way: the expected return of a no-load fund is around 5%-7%. For a savings account, the return is within rounding error of zero. Do you spend that much, $15,000, on anything in your life right now? Any recreation or hobby or activity. Maybe your rent or your tuition. Why spend it for a vague sense of "safety", when you are in no danger of losing anything that you need? |
American living abroad and not working for an American company - tax reporting and bank accounts | The IRS taxes worldwide income of its citizens and green card holders. Generally, for those Americans genuinely living/working overseas the IRS takes the somewhat reasonable position of being in "2nd place" tax-wise. That is, you are expected to pay taxes in the country you are living in, and these taxes can reduce the tax you would have owed in the USA. Unfortunately, all of this has to be documented and tax returns are still required every year. Your European friends may find this quite surprising as I've heard, for instance, that France will not tax you if you go live and work in Germany. A foreign company operating in a foreign country under foreign law is not typically required to give you a W-2, 1099, or any of the forms you are used to. Indeed, you should be paying taxes in the place where you live and work, which is probably somewhat different than the USA. Keep all these records as they may be useful for your USA taxes as well. You are required to total up what you were paid in Euros and convert them to US$. This will go on the income section of a 1040. You should be paying taxes in the EU country where you live. You can also total those up and convert to US$. This may be useful for a foreign tax credit. If you are living in the EU long term, like over 330 days/year or you have your home and family there, then you might qualify for a very large exemption from your income for US tax purposes, called the Foreign Earned Income Exclusion. This is explained in IRS Publication 54. The purpose of this is primarily to avoid double taxation. FBAR is a serious thing. In past years, the FBAR form went to a Financial Crimes unit in Detroit, not the regular IRS address. Also, getting an extension to file taxes does not extend the deadline for the FBAR. Some rich people have paid multi-million dollar fines over FBAR and not paying taxes on foreign accounts. I've heard you can get a $10,000 FBAR penalty for inadvertent, non-willful violations so be sure to send those in and it goes up from there to $250k or half the value of the account, whichever is more. You also need to know about whether you need to do FATCA reporting with your 1040. There are indeed, a lot of obnoxious things you need to know about that came into existence over the years and are still on the law books -- because of the perpetual 'arms race' between the government and would be cheaters, non-payers and their advisors. http://www.irs.gov/publications/p54/ http://americansabroad.org/ |
How can I find ISIN numbers for stock options? | Because an equity option can be constructed at essentially any price by two willing counterparties on an exchange, there are not enough ISINs to represent the entire (i.e. infinite) option chain for even a single stock on a single expiration date. As a result, ISINs are not generated for each individual possible options contract. Instead the ISIN is used only to refer to the "underlying" symbol, and a separate formula is used to refer to the specific option contract for that symbol: So that code you pasted is not an ISIN but rather the standard US equity option naming scheme that you need to provide in addition to the ISIN when talking to your broker. Note that ISINs and formulas for referring to option contracts in other countries can behave quite differently. Also, there are many countries and markets that don't need ISINs because the products in question only exist on a single exchange. In those cases the exchange is pretty much free to make up whatever ID scheme it wants. P.S. Now I'm curious how option chains are identified for strike prices above $99,999. I looked up the only stock I can think of that trades above that price (BRK.A), but it doesn't seem to have an option chain (or at least Google doesn't show it) ... |
Purchase same stock twice | how does the trading company know which one I want to sell? It doesn't need to know. You just sell one. From taxation point of view depending on the country / tax jurisdiction, it can be only be FIFO or specific stock. |
what are the benefits of setting up an education trust fund for children? | Well, first off, if your children are NZ citizens, they can borrow money at 0% interest for tertiary education and I don't see any benefit to not taking free money. A saving account is your money, and will accrue a little bit of interest and you will pay tax on that. A family trust (I hope this is what you mean by trust fund) is a separate financial entity that can be set up to own assets for the benefit of multiple people. For example, if you have a rental property or business and you want the income divided between your children, rather than coming to you, or if you have a bach you want to keep in the family after you die. |
How are mortgage payments decided? [duplicate] | It's so that your total mortgage payment stays the same every month. Obviously, the interest due each month decreases over time, as part of the principal is paid off each month, and so if the proportion of interest and principal repayments were to stay the same then your first payment would be very large and your last payment would be almost nothing. |
How does a online only bank protect itself against fraud? | Much of what you're asking will not be disclosed for obvious security reasons, so don't be surprised when call center people say they "don't know". They may actually not know, but even if they did, they'd be fired if they were to say anything. Nothing could be a touchier subject than online security for the financial institutions. I don't know of reliable sources for the data you're asking about, and I don't know the banks or other firms would release it. For a bank to talk about its incidence rates of fraud would be unusual, because none of these institutions wants to appear "less safe" than their competitors. If there's any information out there then it's going to be pretty vague. None of these institutions wants the "bad guys" to know what their degree of success is against one bank versus any other. I hope that makes sense. The smaller banks usually piggyback their data on the networks of the larger financial institutions, so they are as secure (as a general rule) as the larger banks' networks they're running on. Also, your transactions on your credit cards are not generally handled directly by your bank anyway, unless it's one of the big heavyweights like Chase or Bank of America. All transactions run through merchant processors, who act as intermediaries between merchants and the banks, and those guys are pretty damned good at security. I've met some of the programmers, and they're impressive to me (I've been a programmer for 35 years and can't put a finger on these guys!). Most banks require that you must provide proof of identity when opening an account, and that ID must me the standards of the "USA Real ID Act". Here's an excerpt from the Department of Homeland Security website on what Real ID is: Passed by Congress in 2005, the REAL ID Act enacted the 9/11 Commission’s recommendation that the Federal Government “set standards for the issuance of sources of identification, such as driver's licenses.” The Act established minimum security standards for state-issued driver’s licenses and identification cards and prohibits Federal agencies from accepting for official purposes licenses and identification cards from states that do not meet these standards. States have made considerable progress in meeting this key recommendation of the 9/11 Commission and every state has a more secure driver’s license today than before the passage of the Act. In order for banks to qualify for FDIC protection, they must comply with the Real ID standards when opening accounts. As with any business (especially online), the most effective way to minimize fraud is vigilant monitoring of data. Banks and other online financial entities have become very adept at pattern analysis and simply knowing where and what to look for when dealing with their customers. There are certainly sophisticated measures which are kept carefully out of the public eye for doing this, and obviously they're good at it. They have to be, right? There's no way to completely eliminate fraud -- too much incentive exists for the "bad guys" to not constantly search for new ways to run their schemes, and the good guys will always be at the disadvantage, because there's no way to anticipate everything anyone might come up with. Just look at online viruses and malware. Your antivirus software can only deal with what it knows about, and the bad guys are always coming up with some new variant that gets past the filters until the antivirus maker learns of it and comes up with a way to deal with it. Your question's a good one to ponder, and I wouldn't want to be the chief of internet security for a bank or online institution, because I'd lay awake at night pondering when the call's going to come that we finally ran out of luck! (grin) I hope this was helpful. Good luck! |
Is there a good rule of thumb for how much I should have set aside as emergency cash? | I think this varies considerably depending on your situation. I've heard people say 6 month's living expenses, and I know Suze Orman recommended bumping that to 8 months in our current economy. My husband and I have no children, lots of student loan debts, but we pay off our credit cards in full each month and are working to save up for a house. We've talked through a few different what-if scenarios. If one of us were to lose our job, we have savings to cover the difference between our reduced income and paying the bills for 6 or 8 months while the other person regained employment. If both of us were to lose our jobs simultaneously, our savings wouldn't hold us over for more than 3 or 4 months, but if that were to happen, we would likely take advantage of the opportunity to relocate closer to our families, and possibly even move in to my parent's house for a short time. With no children and no mortgage, our commitments are few, so I don't feel the need to have a very large emergency cash fund, especially with student loans to pay off. Think through a few scenarios for your life and see what you would need. Take into consideration expenses to break a rental lease, cell phone contract, or other commitments. Then, start saving toward your goal. Also see answers to a similar question here. |
How can one identify institutional accumulation of a particular stock using price and volume data? | A couple ways, but its not a guarantee. You have to have special charts. Instead of each tick being 1 min, 5 min, or whatever, it is a set number of trades. Say 2000. Since retail investors only buy and sell in small amounts, there will be small volume per tick. An institutional investor, however, would have a much much higher trade lot size, even if using an algo. Thus, large volume spikes in such a chart would signal institutional activity over retail. Similarly, daily charts showing average trade size can help you pick out when institutional activity is highest, as they have much larger trade sizes. You could also learn how the algos work and look for evidence one is being used. ie every time price hits VWAP a large sell order goes through would indicate an institutional investor is selling, especially if it happens multiple times in a row. |
Why is the stock market rising after Trump's attack on the TPP? | Everything is worth what its purchaser will pay for it - Publilius Syrus It could be that, despite predictions from experts to the contrary, investors believe that renegotiating trade deals will have a positive affect on the economy, despite the upheaval uncertainty, and risk that it brings. Keep in mind that, as Pete B points out, this is part of a bigger post-election trend many people refer to as the "trump rally," which is a factor of more than one policy. Whether or not these policies will actually result in an a more robust economy, investors seem to be betting that it will. |
Why would you ever turn down a raise in salary? | If you have children in a university institution, then your annual salary is reported via financial aid forms. The small raise could be the difference between full tuition covered and only half tuition covered. |
How do banks lose money on foreclosures? | Someone has to hand out cash to the seller. Even if no physical money changes hands (and I've bought a house; I can tell you a LOT of money changes hands at closing in at least the form of a personal check), and regardless of exactly how the bank accounts for the actual disbursement of the loan, the net result is that the buyer has cash that they give the seller, and are now in debt to the bank for least that amount (but, they now have a house). Now, the bank probably didn't have that money just sitting in its vault. Money sitting in a vault is money that is not making more money for the bank; therefore most banks keep only fractionally more than the percentage of deposit balances that they are required to keep by the Feds. There are also restrictions on what depositors' money can be spent on, and loans are not one of them; the model of taking in money in savings accounts and then loaning it out is what caused the savings and loan collapse in the 80s. So, to get the money, it turns to investors; the bank sells bonds, putting itself in debt to bond holders, then takes that money and loans it out at a higher rate, covering the interest on the bond and making itself a tidy profit for its own shareholders. Banks lose money on defaults in two ways. First, they lose all future interest payments that would have been made on the loan. Technically, this isn't "revenue" until the interest is calculated for each month and "accrues" on the loan; therefore, it doesn't show on the balance sheet one way or the other. However, the holders of those bonds will expect a return, and the banks no longer have the mortgage payment to cover the coupon payments that they themselves have to pay bondholders, creating cash flow problems. The second, and far more real and damaging, way that banks lose money on a foreclosure is the loss of collateral value. A bank virtually never offers an unsecured "signature loan" for a house (certainly not at the advertised 3-4% interest rates). They want something to back up the loan, so if you disappear off the face of the earth they have a clear claim to something that can help them recover their money. Usually, that's the house itself; if you default, they get the house from you and sell it to recover their money. Now, a major cause of foreclosure is economic downturn, like the one we had in 2009 and are still recovering from. When the economy goes in the crapper, a lot of things we generally consider "stores of value" lose that value, because the value of the whatzit (any whatzit, really) is based on what someone else would pay to have it. When fewer people are looking to buy that whatzit, demand drops, bringing prices with it. Homes and real estate are one of the real big-ticket items subject to this loss of value; when the average Joe doesn't know whether he'll have a job tomorrow, he doesn't go house-hunting. This average Joe may even be looking to sell an extra parcel of land or an income property for cash, increasing supply, further decreasing prices. Economic downturn can often increase crime and decrease local government spending on upkeep of public lands (as well as homeowners' upkeep of their own property). By the "broken window" effect, this makes the neighborhood even less desirable in a vicious cycle. What made this current recession a double-whammy for mortgage lenders is that it was caused, in large part, by a housing bubble; cheap money for houses made housing prices balloon rapidly, and then when the money became more expensive (such as in sub-prime ARMs), a lot of those loans, which should never have been signed off on by either side, went belly-up. Between the loss of home value (a lot of which will likely turn out to be permanent; that's the problem with a bubble, things never recover to their peak) and the adjustment of interest rates on mortgages to terms that will actually pay off the loan, many homeowners found themselves so far underwater (and sinking fast) that the best financial move for them was to walk away from the whole thing and try again in seven years. Now the bank's in a quandary. They have this loan they'll never see repaid in cash, and they have this home that's worth maybe 75% of the mortgage's outstanding balance (if they're lucky; some homes in extremely "distressed" areas like Detroit are currently trading for 30-40% of what they sold for just before the bubble burst). Multiply that by, say, 100,000 distressed homes with similar declines in value, and you're talking about tens of billions of dollars in losses. On top of that, the guarantor (basically the bank's insurance company against these types of losses) is now in financial trouble themselves, because they took on so many contracts for debt that turned out to be bad (AIG, Fannie/Freddie); they may very well declare bankruptcy and leave the bank holding the bag. Even if the guarantor remains solvent (as they did thanks to generous taxpayer bailouts), the bank's swap contract with the guarantor usually requires them to sell the house, thus realizing the loss between what they paid and what they finally got back, before the guarantor will pay out. But nobody's buying houses anymore, because prices are on their way down; the only people who'd buy a house now versus a year from now (or two or three years) are the people who have no choice, and if you have no choice you're probably in a financial situation that would mean you'd never be approved for the loan anyway. In order to get rid of them, the bank has to sell them at auction for pennies on the dollar. That further increases the supply of cheap homes and further drives down prices, making even the nicer homes the bank's willing to keep on the books worth less (there's a reason these distresed homes were called "toxic assets"; they're poisonous to the banks whether they keep or sell them). Meanwhile, all this price depression is now affecting the people who did everything right; even people who bought their homes years before the bubble even formed are watching years of equity-building go down the crapper. That's to say nothing of the people with prime credit who bought at just the wrong time, when the bubble was at its peak. Even without an adjusting ARM to contend with, these guys are still facing the fact that they paid top dollar for a house that likely will not be worth its purchase price again in their lifetime. Even with a fixed mortgage rate, they'll be underwater, effectively losing their entire payment to the bank as if it were rent, for much longer than it would take to have this entire mess completely behind them if they just walked away from the whole thing, moved back into an apartment and waited it out. So, these guys decide on a "strategic default"; give the bank the house (which doesn't cover the outstanding balance of course) and if they sue, file bankruptcy. That really makes the banks nervous; if people who did everything right are considering the hell of foreclosure and bankruptcy to be preferable to their current state of affairs, the bank's main threat keeping people in their homes is hollow. That makes them very reluctant to sign new mortgages, because the risk of default is now much less certain. Now people who do want houses in this market can't buy them, further reducing demand, further decreasing prices... You get the idea. That's the housing collapse in a nutshell, and what banks and our free market have been working through for the past five years, with only the glimmer of a turnaround picking up home sales. |
Is 6% too high to trade stocks on margin? | 6% isn't "too high" in terms of market rates at the moment, however it's a very subjective question whether it's too high for you. The real question to determine is if paying 6%, can you make more than 6% return (to cover the costs plus your profit)? As for a rule of thumb, there's none I know of, however your best bet is to take the time to model it in Excel (not difficult). It's different for each portfolio or investment. Something with a high standard deviation of returns is already high risk, adding margin to it only makes it worse. So, long story short is that, "it depends". |
Using stock markets in Europe, how can I buy commodities / resources, to diversify my portfolio? | I recommend avoiding trading directly in commodities futures and options. If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio. Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges. If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt. ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs. The LSE ETC FAQ specifically mentions "ETF Securities" by name, and addresses questions such as how/where they are regulated, what happens to investments if "ETF Securities" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence. |
Fractional Reserve Banking and Insolvency | It certainly is possible for a run on the bank to drive it into insolvency. And yes, if the bank makes some bad loans, it can magnify the problem. Generally, this does not happen, though. Remember that banks usually have lots of customers, and people are depositing money and making mortgage payments every day, so there is usually enough on-hand to cover average banking withdrawl activity, regardless of any bad loans they have outstanding. Banks have lots of historical data to know what the average withdrawl demands are for a given day. They also have risk models to predict the likelihood of their loans going into default. A bank will generally use this information to strike a healthy balance between profit-making activity (e.g. issuing loans), and satisfying its account holders. In the event of a major withdrawl demand, there are some protections in place to guard against insolvency. There are regulations that specify a Reserve Requirement. The bank must keep a certain amount of money on hand, so they can't take huge risks by loaning out too much money all at once. Regulators can tweak this requirement over time to reflect the current economic situation. If a bank does run into trouble, it can take out a short-term loan. Either from another bank, or from the central bank (e.g. the US Federal Reserve). Banks don't want to pay interest on loans any more than you do, so if they are regularly borrowing money, they will adjust thier cash reserves accordingly. If all else fails and the bank can't meet its obligations (e.g. the Fed loan fell through), the bank has an insurance policy to make sure the account holders get paid. In the US, this is what the FDIC is for. Worst case, the bank goes under, but your money is safe. These protections have worked pretty well for many decades. However, during the recent financial crisis, all three of these protections were under heavy strain. So, one of the things banking regulators did was to put the major banks through stress tests to make sure they could handle several bad financial events without collapsing. These tests showed that some banks didn't have enough money in reserve. (Not long after, banks started to increase fees and credit card rates to raise this additional capital.) Keep in mind that if banks were unable to use the deposited money (loan it out, invest it, etc), the current financial landscape would change considerably. |
What does it mean to invest in potatoes? | comments discuss investing in potato futures. Learn / ready about commodity trading or commodity futures. An investopedia article How To Invest In Commodities is a good start. There are quite a few commodities offered for normal trade or as futures. Potatos may not be offered on quite a few exchanges. Found some here Investing in commodities is fraught with quite a bit of risk, some like you have already pointed out. Of course you can't eat all and have to sell. |
Creating a Limited company while still fully employed | Can I apply for limited company now, while fully time employed, and not take any business until I get a contract? Some employment contracts may include non-compete clauses or similar which expressly forbid you engaging in other employment or becoming self-employed while simultaneously working for your current employer. You may want to check this out before making any moves to register as a limited company. You may forfeit long-term benefits (such as a pension) you have built up at your present employer if they catch wind of a conflict of interest. As noted in an earlier answer, the setup process for a limited company is extremely simple in the UK, so there is no reason you need to take these steps in advance of leaving your current employment. During my resignation period scout for contracts... Should I wait weeks before actually deciding to search for contracts? Depending on the type of IT work you intend to be contracting for, you may find yourself shut out from major work if you are not VAT registered. It is a requirement to register for VAT when you breach certain earnings limits (see HMRC's website) but you can voluntarily register with HMRC before these limits if you wish. Being VAT registered increases your bookkeeping and oversight requirements, which makes you appear more attractive to larger enterprises / corporations than a non-VAT registered firm. It also suggests some degree of stability and a plan to stick around for the long haul. This might be a catch-22 situation - if you want to get noticed and land the sizable contracts, you will almost certainly require a VAT registration regardless of your overall yearly earnings. It would be advisable to engage the services of a professional advisor before becoming VAT registered, but this and the subsequent professional advice you may require for putting in VAT claims may not be a fee you wish to pay upfront if you are only attracting a small volume of work. |
Is the Canadian Securities Course (CSC) enough to get started in the finance industry in Canada? | Wikipedia says "The Canadian Securities Course (CSC) offered by the Canadian Securities Institute (CSI) is the initial course required for becoming licensed to work within the Canadian securities industry (outside Quebec) as a securities dealer or securities agent." Src: Candian Securities Course EfficientMarket Canada adds " You require it and further courses for other jobs in the investment industry. Generally some work experience is also required. All of this is governed by various self-regulatory agencies. The material in the course is strong on money making products, and fairly weak on material that would actually protect a consumer from harm. Passing the course is very little indication that you understand what's important about investing, for example, you won't be taught much of anything about the theory of investment, or the markets, or things like the efficient market hypothesis." Src: EfficientMarket.ca on the CSC So it appears that the CSC is necessary to work as certain types of financial agencies. That being said, I doubt it will be enough to get your foot in the door. This seems more like a prerequisite rather than a true qualification, so you'll be competing with MBAs/Finance students and other people who either have experience or training in the financial industry. I'd recommend you look into the Chartered Financial Analyst (CFA) certification as that will provide you with a rigorous knowledge of financial theory as well as asset management, which seems more appropriate for what you'd like to do. From there you'll have to network like crazy and leverage your experience to get in at a Canadian financial firm and eventually wealth management. So yes, I suppose a CSC is a good first step but more will certainly be required and I doubt it will be enough to land you a full time position. Another important factor is age - nobody expects undergrads to have extensive certifications or experience, but it's harder for a 35 year old to enter a new industry, especially finance. |
U.S. stock sales- tax on sale for NR Canadian | If you're a non resident then you owe no capital gains tax to Canada. Most banks won't let you make trades if you're a non-resident. They may not have your correct address on file so they don't realize this. This is not tax law but just OSC (or equivalent) regulations. You do have to fill out paperwork for withholding tax on OAS/CPP payments. This is something you probably already do but here's a link . It's complicated and depends on the country you live in. Of course you may owe tax in Thailand, I don't know their laws. |
How do I find an ideal single fund to invest all my money in? | Though a fan of ETFs (esp. high volume commission-free ones) recently a single, new fund VQT appeared on my radar of interest. It's based on dynamic hedging that has sort of build-in diversification and adapts to the market climate, pulling in and out varying amounts from cash, the S&P 500 and volatility futures based on VIX. I've been Long VQT and it's followed the S&P500 during good times, though not at far, but crucially disconnected with much milder losses when the general market was nose diving. You can lookup and compare to SPY at http://finance.google.com Not trying to give investment advice, in case that upsets some rules. |
I'm in Australia. What should I look for in an online stock broker, for trading mostly on the ASX? | OptionsXpress is good. I have used them for many years to trade stocks mainly (writing Covered calls and trading volatility). You set the account up through OptionsXpress Australia, and then fund the account from one of your accounts in Australia (I just use my Bank of Queensland account). The currency conversion will be something to watch (AUD to USD). The rates are low, but one of the best features is "virtual trading". It allows you to give yourself virtual funds to practice. You can then experiment with stop-losses and all other features. Perhaps other platforms have this, but I am yet to see it... anyway, if you want to trade in US stocks you are going to need to switch to USD anyway. ASX never moves enough for my interests. Regards, SB |
I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save? | This solution obviously wouldn't work for everyone, and is contingent on the circumstances of your parents' finances with regards to their house, but... Have you considered buying your parents' house? This way your parents' desire for you to get a house as an investment would be satisfied, they wouldn't have to worry about losing their home, and you might even be able to work out a financing/rent deal that is beneficial to everyone involved. There are definitely fewer costs going this route anyway, for instance, your parents won't have any marketing costs associated with selling the house and could pass this savings along to you. Also, having lived in the house for a large part of your life you will also know what you are getting in to. |
Why invest for the long-term rather than buy and sell for quick, big gains? | The stock market's principal justification is matching investors with investment opportunities. That's only reasonably feasible with long-term investments. High frequency traders are not interested in investments, they are interested in buying cheap and selling expensive. Holding reasonably robust shares for longer binds their capital which is one reason the faster-paced business of dealing with options is popular instead. So their main manner of operation is leeching off actually occuring investments by letting the investors pay more than the recipients of the investments receive. By now, the majority of stock market business is indirect and tries guessing where the money goes rather than where the business goes. For one thing, this leads to the stock market's evaluations being largely inflated over the actual underlying committed deals happening. And as the commitment to an investment becomes rare, the market becomes more volatile and instable: it's money running in circles. Fast trading is about running in front of where the money goes, anticipating the market. But if there is no actual market to anticipate, only people running before the imagination of other people running before money, the net payout converges to zero as the ratio of serious actual investments in tangible targets declines. By and large, high frequency trading converges to a Ponzi scheme, and you try being among the winners of such a scheme. But there are a whole lot of people competing here, and essentially the net payoff is close to zero due to the large volumes in circulation as opposed to what ends up in actual tangible investments. It's a completely different game with different rules riding on the original idea of a stock market. So you have to figure out what your money should be doing according to your plans. |
Zero volatility stocks in intraday trading in India | you need to use easy programming language to imply onto a scan where you enter Scan all stocks display if volume < (less than) 100 |
What's the smartest way to invest money gifted to a child? | CDs pay less than the going rate so that the banks can earn money. Investing is risky right now due to the inaction of the Fed. Try your independent life insurance agent. You could get endowment life insurance. It would pay out at age 21. If you decide to invest it yourself try to buy a stable equity fund. My 'bedrock' fund is PGF. It pays dividends each month and is currently yealding 5.5% per year. Scottrade has a facility to automatically reinvest the dividend each month at no commission. http://www.marketwatch.com/investing/Fund/PGF?CountryCode=US |
Online tutorials for calculating DCF (Discounted Cash Flow)? | Here's a link to an online calculator employing the Discounted Cash Flow method: Discounted Cash Flows Calculator. Description: This calculator finds the fair value of a stock investment the theoretically correct way, as the present value of future earnings. You can find company earnings via the box below. [...] They also provide a link to the following relevant article: Investment Valuation: A Little Theory. Excerpt: A company is valuable to stockholders for the same reason that a bond is valuable to bondholders: both are expected to generate cash for years into the future. Company profits are more volatile than bond coupons, but as an investor your task is the same in both cases: make a reasonable prediction about future earnings, and then "discount" them by calculating how much they are worth today. (And then you don't buy unless you can get a purchase price that's less than the sum of these present values, to make sure ownership will be worth the headache.) [...] |
What variety of hedges are there against index funds of U.S. based stocks? | Even though "when the U.S. sneezes Canada catches a cold", I would suggest considering a look at Canadian government bonds as both a currency hedge, and for the safety of principal — of course, in terms of CAD, not USD. We like to boast that Canada fared relatively better (PDF) during the economic crisis than many other advanced economies, and our government debt is often rated higher than U.S. government debt. That being said, as a Canadian, I am biased. For what it's worth, here's the more general strategy: Recognize that you will be accepting some currency risk (in addition to the sovereign risks) in such an approach. Consistent with your ETF approach, there do exist a class of "international treasury bond" ETFs, holding short-term foreign government bonds, but their holdings won't necessarily match the criteria I laid out – although they'll have wider diversification than if you invested in specific countries separately. |
Terminology: What are the labels associated with a share called? | If the first one is literally a company name, then 'company name' is fine. However, companies can issue shares more than once, and those shares might be traded separately, so you could have 'Google ordinary', 'Google preference', 'Google ordinary issue B'. Seeing the name spelled out in full like this isn't as common as just the company name, but I'd normally see it referred to as 'display name'. The second one is 'symbol', 'ticker', 'ID', and others. Globally, there are many incompatible ways of referring to a stock, depending on where it's listed (companies can have dual listings, and different exchanges have different conventions), and who's referring to it (Bloomberg and Reuters have different sets of IDs, with no predictable mapping between them). So there's no one shorthand name, and the word you use depends on the context. However, 'symbol' or 'ticker' is normally fine. |
Where can I invest my retirement savings money, where it is safer than stocks? | This is a very open ended question with no concrete answer as it depends on your personal situation. However, for starters I would suggest picking up a copy of The Investment Answer. It's a very light read, less than 100 pages, but it has some amazingly simple yet very concrete advice on investing and answers a lot of common questions (like yours). |
How can I withdraw money from my LLC? | What you're asking about is called a "distribution" when it comes to an LLC. It's basically you paying yourself some or all of the proceeds of the business, depending on how you're set up. You can pay yourself distributions on a regular schedule, say monthly, or you can do it at the end of the year. Whatever you do in this regard, what you take out as distributions is reported on your personal income tax as taxable income. LLCs in the U.S. use pass-through taxation (unless you intentionally elect to have the LLC treated as a corporation for tax purposes, which some people do), so whatever the principals receive in distribution is personally taxable. Keep in mind that you'll have to pay ALL of the taxes normally covered by an employer, such as self-employment tax (usually about 15%), social security tax, and so on. This is in addition to income tax, so remember that. I hope this helps. Good luck! |
Is there any way to pay online in a country with no international banking system | According to Paypal, they support transactions in Ethiopia: https://www.paypal.com/webapps/mpp/country-worldwide https://developer.paypal.com/docs/classic/api/country_codes/ However those appear to be limited to transferring money out of the country. (link) There is an article here (link) which talks about how to transfer money from paypal back to your bank in Ethiopia. It sounds like you have to set up a US bank account, withdraw the funds to that then somehow transfer the money from their to your bank. NOTE: I have no relationship to any of the sites above, nor do I know if the information is accurate or the trustworthiness of those businesses. |
Working for recruiter on W-2 vs. working for client on 1099? | The tax savings of being 1099 can be significant. It depends on your salary, and what you can deduct. You may want to consult with an accountant. The social security tax, for the self employed, is 12.4% of profit not on revenue. If you can write off more than half of the income as expenses then you could be paying less than a w-2 employee. Also you might make a higher salary as a 1099, it is rare the offer the same compensation for a W-2 as a 1099 as the former has higher expenses for the employer. It is hard to know without actual numbers, actual expected expense deductions and so forth. Which is why I would suggest consulting with an accountant. You may want to talk to one in the state where he will be working rather than where you live now. |
How can I build up my credit history when I have nearly none | You're going to have a huge problem getting approved for anything as long as you have an unpaid bill on your report. Pay it and make sure its reported as paid in full - ASAP. Once that settled, your credit will start to improve slowly. Can't do anything about that, it will take time. You can make the situation improve a bit faster by lending money to yourself and having it reported regularly on your report. How? Easy. Get a secured credit card. What does it mean? You put X amount of money in a CD and the bank will issue you a credit card secured by that CD. Your credit line will be based on the amount in that CD, and you'll probably pay some fees to the bank for the service (~$20-50/year, shop around). You might get lucky and find a secured card without fees, if you look hard enough. Secured cards are reported as revolving credit (just as any other credit card) and are easy to get because the bank doesn't take the risk - you do. If you default on your payments - your CD goes to cover the debt, and the card gets cancelled. But make absolutely sure that you do not default. Charge between 10% and 30% of the credit limit each month, not more. Pay the balance shown on your credit card statement in full every month and by the due date shown on your monthly statement. It will take a while, but you would typically start noticing the improvement within ~6-12 months. Stop applying for stuff. Not store cards, not car loans, you're not going to get anything, and will just keep dragging your scores down. Each time you have a pull on your report, the score goes down. A lot of pulls, frequent pulls - the score goes down a lot. Lenders can see when one is desperate, and no-one wants to lend money to desperate people. Optimally lenders want to lend money to people who doesn't need loans, but in order to keep the business running they'll settle for slightly less - people who don't usually need loans, and pay the loans they do have on time. You fail on both, as you're desperate for a loan and you have unpaid bills on your report. |
What one bit of financial advice do you wish you could've given yourself five years ago? | I wish I had learned my lesson from the dot com bubble before I took a piece of the housing bubble. |
For very high-net worth individuals, does it make sense to not have insurance? | Indeed, there is conservation of money. If the insurance companies have those big buildings and television commercials and CEOs, then that money comes from only one place: the insurance premiums of customers. To say insurance is a good deal is either The benefit and cost of insurance for most: Indeed, of all the answers here, James Turner's is best. If you can't afford to lose something, it is vital to insure it. Ideally insurance would be a non-profit operation to best cover this. Such that people would as a whole lose nothing. Theoretically it could even be slightly for profit by making wise investment decisions, and benefiting from the future value of money by beating inflation. But they don't (see this writeup for slightly dated information on health, and this Wikipedia article for more direction). But even if you are taking an average loss (by using a profit-making insurance company), by taking insurance you avoid the situation where you're crippled by a catastrophe. You are paying a fee to hedge your losses. Like James said, insure what you cannot afford to lose. But realize you're going into a situation where the overall net is an average loss of between 10-50% of your money, on average. Basically you're playing the lottery, except your net losses mostly go to fund the company and the CEOs rather than nominally support education. But you sounded like you understood those ideas well, so... Can you self insure? As others noted, yes, there is the option of self insurance in most places. Even even often when insurance is considered as required. For example, in the US, basically car insurance coverage is required. But generally you are legally able to self insure to cover this requirement: The cost of self insuring: There is one cost to self-insure: time. It takes time to research the laws, time to to satisfy those requirements, and then time to find/setup all the care providers (doctors, mechanics, lawyers, etc). When is it worth it? First, again, you must satisfy the prerequisite: you are able to financially handle the loss of the topic under consideration. At a commenter's request, here is an attempt to better spell out this requirement (though it doesn't appear pertinent to the question asked, it is indeed very important not to mistakenly assume you satisfy this requirement). Can you comfortably cover the level of insurance you would otherwise be taking out. $50,000/$100,000/$50,000 is a common reasonable insurance level, so that would be $200,000. Basically, have enough money to cover the loss of your car, your possible injury expenses, and most importantly the damage and medical of anyone else you hit. You would need to have that value available, optimally in your accounts. Alternatively, you could weigh it against your assets, such that if you had low accounts but a paid off $200,000 house, you could conceivably sell your property and still be able to survive financially afterwards. However, it is indeed dangerous to make this assumption, as there may be additional costs and troubles in selling assets, and you may fail to recognize how precious the property is to you. Having at least double or triple in property you'd be willing to part with might be a more comfortable number. Again, the main idea is: can you afford to lose the insured value tomorrow? Though you hope it wouldn't happen, if someone came and took $200,000+ of yours tomorrow, would you be able to adjust to it relatively easily? If the answer is yes, you've satisfied this requirement. In many states it's easier to understand whether you can meet this requirement: it instead becomes can you take out the liability bond required. If you've met that requirement, then it comes down to the time you'd lose versus the savings you'd gain. To get a fair idea, you'll need: The premium you would pay to purchase the insurance: Since you are likely losing 10-50% of your premiums, it should be fair to make a rough estimate of value lost by using 25% for most purposes (especially given that this still ignores the future value/opportunity cost of your money, which could often be 5-10% if invested well) The value of your time: You must properly identify either: A rough estimate of how much time it will take you to research the legal requirements and meet them, and then to research/handle the subsequent needs that come up which the insurance would take care of in an average year. So try to balance those typical years where you wouldn't have a lot of work to do with a year where you'd need to call repair mechanics or find health practitioners. Perhaps aim high, research/calling usually takes more time than we think. Is this calculation positive? Your estimated net annual benefit (or cost) from self insuring is: 0.25 * (Insurance Premium Per Year) - (Estimated Value of Your Time)*(Estimated Hours Of Work\Research to Self-Insure Per Year) This is a rough estimate. But if the result is quite positive (and you can afford to cover the hit the insurance would otherwise cover), you're likely better off self-insuring. If the result is quite negative (or you can't cover the possible costs insurance would cover), you're probably better off buying insurance. Finally, indeed there are still a few other factors on each side to consider... Most often those additional pluses and minuses probably are smaller than the primary cost/benefits spelt out earlier. But if you're rich enough to have the money, you're in a situation where you can likely sacrifice a little income to have your peace of mind. So there's certainly a lot to consider in it. But if you're a self starter, I believe you're right that you'll find it's more worthwhile to self-insure if you indeed have the resources. |
Mortgage or not? | Short answer: No. Longer answer: The only reason to move would be to get out of the condo and into a SFR of equal cost because condos can be quite difficult to sell and you don't really want that potential burden later on. Moving is expensive though and you can't afford to spend more when you are already living on the financial edge. Speaking of living on the edge, that's a recipe for disaster. I make, ratio-wise, a similar sort of income. Even accounting for the generous college tuition, you should be able to save at least $20K per year...at a bare minimum. And if you were careful, I figure you should be able to save $40K/year. You need to figure out where you are dumping all of your money and cut WAY back on spending and focus entirely on saving money. 1) Stop eating out. Make your own meals. I average about $2 per meal per person - no junk food. Eating out is 6 to 30 times as expensive as making meals at home. Do the math: $10 * 2 people * number of times you eat out per week * 52 ($1,040 per year for each time/week!) vs $2 * 2 people * 21 (3 meals per day) * 52 ($4,368 per year for both of you...maximum). Now I know some meals are more expensive to prepare, but the math is not unrealistic - I spend about $140 per month on groceries and make the bulk of my own food. Eating out is sticker shock for me. The food I prepare is nutritionally balanced and complete. Now I'm not a complete health-nut. I love the occasional deep-fried treat or hamburger, but those are "once every couple of months" sort of things, which makes them special. 2) Stop going to Starbucks or wherever you habitually go. It takes fuel to get there. It's also expensive when you get there. Bring your own drink if you are hanging out with friends. 3) Drop golf. Or whatever expensive sport you are sinking money into. Invest in some cheap running clothes and focus on cardio-based workouts. Heart health is more important than anything else. If you can't live without your sport, then find an alternate sport that is "equal"-ish in challenge but a ton cheaper to play. For example, if you like playing golf, play discgolf instead (most cities have courses) - there's no cost beyond a couple of discs and the challenge is still there. 4) Drop entertainment. Movies at the theater are expensive. Drop your cable subscription (you are getting financially raped for $1,500/year). Get a Netflix subscription and find shows via free online streaming services. Buy some dominoes, card games, and a couple of classic board games. Keep entertainment simple and cheap. 5) Drop your cell phone's data plan. Republic Wireless is the only decent cellular provider and even their $12/month plan is living a luxury lifestyle. If you spend more than $10/month/person for phone service, you are spending too much. 6) Stop driving everywhere. Gas is expensive. Cars are expensive. If you have more than two cars, sell the extras. If your car is worth more than $20,000, sell it and get something cheaper. 7) Stop drinking alcohol. Alcohol impairs mental functions, is addictive, smells terrible, and is ridiculously expensive. There's no actual need to consume it either. By the way, don't go and make major financial changes without the wife's sign-off. Finances are the #1 reason for divorce. So get her "OK" on this stuff. Hopefully you already knew that. The above are just some common financial pitfalls where people sink thousands and thousand of dollars and gain nothing. You can still have a full and complete life with just a minimum of the above. There is no excuse for living on the edge financially. Your story is one I'm going to share with those who give me the same excuse because they are "poor". You are "I want to punch you in the face" wealthy and you spend every last penny because you think that's how money works. You are wrong. One final piece of advice: Find a financial adviser. It is clear to me that you've been managing money wrong your whole life. A financial adviser will look at your situation and help you far more than someone on the Internet ever can. If you attend a church, many churches have the excellent Crown Financial Ministries program available which teaches sound financial management principles. The education system doesn't show people how to manage money, but that's not an excuse either. Once you dig yourself out of the financial hole you've dug for yourself, you can pass the knowledge on how to correctly manage money onto other people. |
Why are US target retirement funds weighted so heavily towards US stocks? | A target date fund is NOT a world market index. There is no requirement that it be weighted based on the weights of the various world stock markets. If anything, historically (since the invention of target date funds), a 2:1 ratio is actually pretty low. 6:1 is, or was, probably more common. Just a token amount to non-US investments. |
Events that cause major movement in forex? | Trading Speeches can be difficult, 1 comment can be bullish then next phrase bearish. However language algorithms can process the tone of the entire message before you can read the first word or have even finished downloading the text of the statement. The biggest news is the 1st Friday of the month, the non-farm payrolls out of the USA. You used to be able to get the news before the price moved, but high-frequency algos changed all that, essentially the exchanges get quote stuffed, so good luck unless you are using a bucketshop. Better to wait for a pull back from the initial reaction if the numbers are good, otherwise you will get a fill at the peak. If the numbers are a big deviation from expectations then you can just jump in. Back in 2006 the Bank of England raised interest rates when it wasn't expected and the GBPUSD flew 500 pips. This Forex calendar has charts of every news release, so you can see what to expected based on what has happened in the past with a certain bit of economic news. http://www.fasteconomicnews.com/fx_calendar.aspx |
Freelancer in India working for Swiss Company | As you are earning an income by working in India, you are required to pay tax in India. If you contract is of freelance, then the income earned by you has to be self declared and taxes paid accordingly. There are some expenses one can claim, a CA should be able to guide you. Not sure why the Swiss comapny is paying taxes?. Are they depositing this with Income Tax, India, do they have a TAN Number. If yes, then you don't need to pay tax. But you need to get a statement from your company showing the tax paid on behalf of you. You can also verify the tax paid on your behalf via "http://incometaxindia.gov.in/26ASTaxCreditStatement.asp" you cna register. Alternatively if you have a Bank Account in India with a PAN card on their records, most Banks provide a link to directly see |
What are good games to play to teach young children about saving money? | We play Cash Flow and Cashflow for Kids by Robert Kiyosaki. Our kids love it. |
What's “wrong” with taking money from your own business? | It's wrong in several situations: One, the business owner counts this as a business expense, which it is not, and therefore reduces the company's profit and taxes. That would be tax avoidance and probably criminal. Two, someone who is not the sole owner counts this as a business expense, which it is not, reduces the company's profit and when profits are shared, the company pays out less money to the other owners. That's probably fraud. Third, if the owner or owners of a limited liability company draw out lots of money from the company with the intent that the company should go bankrupt with tons of debt that the owners are not going to pay, while keeping the money they siphoned off for themselves. That would probably bankruptcy fraud. Apart from being wrong, there is the obvious risk that you lose control over your company's and your own expenses, and might be in for a nasty surprise if the company has to pay out money and there's nothing left. That would be ordinary stupidity. If you have to tell your employees that you can't pay their salaries but offer them to admire your brand new Ferrari, that's something I'd consider deeply unethical. |
Exercising an option without paying for the underlying | As other answers state, selling the options contracts to the market is a definite way out, and probably the best in most cases. If you're determined to exercise your options (or there's not enough liquidity to reasonably sell your contracts to the market), then you could plan ahead and exercise smaller number of contracts at a time and sell the resulting position in the underlying, which will give you funds to exercise some more contracts and sell the underlying. If you think you're going down this path, however, make sure that you take into account your broker's rules for settlement. You may need to start the exercise / sell cycle before the option's expiration date. |
Offered a job: Should I go as consultant / independent contractor, or employee? | Your comment to James is telling and can help us lead you in the right direction: My work and lifestyle will be the same either way, as I said. This is all about how it goes "on the books." [emphasis mine] As an independent consultant myself, when I hear something like "the work will be the same either way", I think: "Here thar be dragons!". Let me explain: If you go the independent contractor route, then you better act like one. The IRS (and the CRA, for Canadians) doesn't take lightly to people claiming to be independent contractors when they operate in fact like employees. Since you're not going to be behaving any different whether you are an employee or a contractor, (and assuming you'll be acting more like an employee, i.e. exclusive, etc.), then the IRS may later make a determination that you are in fact an employee, even if you choose to go "on the books" as an independent contractor. If that happens, then you may find yourself retroactively denied many tax benefits you'd have claimed; and owe penalties and interest too. Furthermore, your employer may be liable for additional withholding taxes, benefits, etc. after such a finding. So for those reasons, you should consider being an employee. You will avoid the potential headache I outlined above, as well as the additional paperwork etc. of being a contractor. If on the other hand you had said you wanted to maintain some flexibility to moonlight with other clients, build your own product on the side, choose what projects you work on (or don't), maybe hire subcontractors, etc. then I'd have supported the independent contractor idea. But, just on the basis of the tax characteristics only I'd say forget about it. On the financial side, I can tell you that I wouldn't have become a consultant if not for the ability to make more money in gross terms (i.e. before tax and expenses.) That is: your top line revenues ought to be higher in order to be able to offset many of the additional expenses you'd incur as an independent. IMHO, the tax benefits alone wouldn't make up for the difference. One final thing to look at is Form SS-8 mentioned at the IRS link below. If you're not sure what status to choose, the IRS can actually help you. But be prepared to wait... and wait... :-/ Additional Resources: |
What are the marks of poor investment advice? | My "bad advice detector" gets tingled by the following: |
Should I invest in a Health Insurance +1 policy from my Employer? | If I read your figures correctly, then the cost difference is negligible. ($1.84 difference) The main determining factor, I'd think, would be the coverage. Do you get more, or less, coverage now than you would if you went together on the same plan? You'd both be covered, but what is the cap? Plans, and employer contributions, change all the time. How is business in both of your companies? Are you likely to get cut? Are you able to get back into a plan at each of your employers if you quit the plan for a while? These rules may be unpleasant surprises if, say, your wife cancels her plan, goes on yours, and you lose your job. She may not be able to get back into her insurance immediately, or possibly not at all. A spouse losing a job isn't a "qualifying life event" the way marriage, birth of a child, divorce, etc., is. |
Stock trading models that use fundamental analysis, e.g. PEG ratios? | One idea: If you came up with a model to calculate a "fair price range" for a stock, then any time the market price were to go below the range it could be a buy signal, and above the range it could be a sell signal. There are many ways to do stock valuation using fundamental analysis tools and ratios: dividend discount model, PEG, etc. See Wikipedia - Stock valuation. And while many of the inputs to such a "fair price range" calculation might only change once per quarter, market prices and peer/sector statistics move more frequently or at different times and could generate signals to buy/sell the stock even if its own inputs to the calculation remain static over the period. For multinationals that have a lot of assets and income denominated in other currencies, foreign exchange rates provide another set of interesting inputs. I also think it's important to recognize that with fundamental analysis, there will be extended periods when there are no buy signals for a stock, because the stocks of many popular, profitable companies never go "on sale", except perhaps during a panic. Moreover, during a bull market and especially during a bubble, there may be very few stocks worth buying. Fundamental analysis is designed to prevent one from overpaying for a stock, so even if there is interesting volume and price movement for the stock, there should still be no signal if that action happens well beyond the stock's fair price. (Otherwise, it isn't fundamental analysis — it's technical analysis.) Whereas technical analysis can, by definition, generate far more signals because it largely ignores the fundamentals, which can make even an overvalued stock's movement interesting enough to generate signals. |
When would one actually want to use a market order instead of a limit order? | Firstly what are you trading that you could lose more than you put in? If you are simply trading stocks you will not lose more than you put in, unless you are trading on margin. A limit order is basically that, a limit on the maximum price you want your buy order bought at or the minimum price you want your sell order sold at. If you can't be glued to the screen all day when you place a limit order, and the market moves the opposite way, you may miss out on your order being executed. Even if you can be in front of the screen all day, you then have to decide if you want to chase the market of miss out on your purchase or sale. For example, if a stock is trading at $10.10 and you put a limit buy order to buy 1000 shares at or below $10.00 and the price keeps moving up to $10.20, then $10.30 and then $10.50, until it closes the day at $11.00. You then have the choice during the day to miss out on buying the shares or to increase your limit order in order to buy at a higher price. Sometime if the stock is not very liquid, i.e. it does not trade very often and has low volume, the price may hit $10.00 and you may only have part of your order executed, say 500 out of your 1000 shares were bought. This may mean that you may have to increase the price of your remaining order or be happy with only buying 500 shares instead of 1000. The same can happen when you are selling (but in reverse obviously). With market order, however, you are placing a buy order to buy at the next bid price in the depth or a sell order to sell at the next offer price in the depth. See the market depth table below: Note that this price depth table is taken before market open so it seems that the stock is somewhat illiquid with a large gap between the first and second prices in the buyers (bid) prices. When the market opened this gap is closed, as WBC is a major Australian bank and is quite liquid. (the table is for demonstration purposes only). If we pretend that the market was currently open and saw the current market depth for WBC as above, you could decide to place a limit sell order to sell 1000 shares at say $29.91. You would sell 100 shares straight away but your remaining 900 sell order will remain at the top of the Sellers list. If other Buyers come in at $29.91 you may get your whole sale completed, however, if no other Buyers place orders above $29.80 and other Sellers come into the market with sell orders below $29.91, your remaining order may never be executed. If instead you placed a market sell order you would immediately sell 100 shares at $29.91 and the remaining 900 shares at $29.80. (so you would be $99 or just over 0.3% worse off than if you were able to sell the full 1000 shares at $29.91). The question is how low would you have had to lower your limit order price if the price for WBC kept on falling and you had to sell that day? There are risks with whichever type of order you use. You need to determine what the purpose of your order is. Is it to get in or out of the market as soon as possible with the possibility of giving a little bit back to the market? Or is it to get the price you want no matter how long it takes you? That is you are willing to miss out on buying the shares (can miss out on a good buy if the price keeps rising for weeks or months or even years) or you are willing to miss out on selling them right now and can wait for the price to come back up to the price you were willing to sell at (where you may miss out on selling the shares at a good price and they keep on falling and you give back all your profits and more). Just before the onset of the GFC I sold some shares (which I had bought a few years earlier at $3.40) through a market order for $5.96. It had traded just above $6 a few days earlier, but if instead of a market order I had placed a limit order to sell at $6.00 or more I would have missed out on the sale. The price never went back up to $6 or above, and the following week it started dropping very quickly. It is now trading at about $1.30 and has never gone back above $2.00 (5.5 years later). So to me placing a limit order in this case was very risky. |
How can I transfer and consolidate my 401k's and other options? | Every plan administrator has their own procedures for rollovers. In any case, you would start by browsing their website or calling them seeking information on rollover. You will need to arrange it with both your current and prior administrators. Usually the administrator will send the money directly to your current plan provider, keeping you out of the chain and minimizing any risks of tax complications. It may happen, though, that they have to send the check to you. In that case you will have a limited amount of time to provide it to your current plan. |
Why would a company care about the price of its own shares in the stock market? | Why do companies exist? Well, the corporate charter describes why the company exists. Usually the purpose is to enrich the shareholders. The owners of a company want to make money, in other words. There are a number of ways that a shareholder can make money off a stock: As such, maintaining the stock price and dividend payouts are generally the number one concern for any company in the long term. Most of the company's business is going to be directed towards making the company more valuable for a future buyout, or more valuable in terms of what it can pay its shareholders directly. Note that the company doesn't always need to be worried about the specifics of the day-to-day moves of the stock. If it keeps the finances in line - solid profits, margins, earnings growth and the like - and can credibly tell people that it's generally a valuable business, it can usually shrug off any medium-term blips as market craziness. Some companies are more explicitly long-term about things than others (e.g. Berkshire Hathaway basically tells people that it doesn't care all that much about what happens in the short term). Of course, companies are abstractions, and they're run by people. To make the people running the company worry about the stock price, you give them stock. Or stock options, or something like that. A major executive at a big company is likely to have a significant amount of stock. If the company does well, he does well; if it does poorly, he does poorly. Despite a few limitations, this is really a powerful incentive. If a company is losing a lot of money, or if its profits are falling so it's just losing a lot of its value as a business, the owners (stockholders) tend to get upset, and may vote in new management, or launch some sort of shareholder lawsuit. And, as previously noted, to raise funds, a company can also issue new shares to the market as a secondary offering as well (and they can issue fewer shares if the price is high - meaning that whatever the company is worth afterward, the existing owners own proportionally more of it). |
How can I save money on a gym / fitness membership? New Year's Resolution is to get in shape - but on the cheap! | Shop around for Gym January is a great time to look because that's when most people join and the gyms are competing for your business. Also, look beyond the monthly dues. Many gyms will give free personal training sessions when you sign up - a necessity if you are serious about getting in shape! My gym offered a one time fee for 3 years. It cost around $600 which comes out to under $17 a month. Not bad for a new modern state of the art gym. |
Why does a stock price drop as soon an I purchase several thousand shares at market price? | You might consider learning how the "matching" or "pairing" system in the market operates. The actual exchange only happens when both a buyer and a seller overlap their respect quotes. Sometimes orders "go to market" for a particular volume. Eg get me 10,000 Microsoft shares now. which means that the price starts at the current lowest seller, and works up the price list until the volume is met. Like all market it trades, it has it's advantages, and it's dangers. If you are confident Microsoft is going to bull, you want those shares now, confident you'll recoup the cost. Where if you put in a priced order, you might get only none or some shares. Same as when you sell. If you see the price (which is the price of the last completed "successful" trade. and think "I'm going to sell 1000 shares". then you give the order to the market (or broker), and then the same as what happened as before. the highest bidder gets as much as they asked for, if there's still shares left over, they go to the next bidder, and so on down the price... and the last completed "successful" trade is when your last sale is made at the lowest price of your batch. If you're selling, and selling 100,000 shares. And the highest bidder wants 1,000,000 shares you'll only see the price drop to that guys bid. Why will it drop (off the quoted price?). Because the quoted price is the LAST sale, clearly if there's someone still with an open bid on the market...then either he wants more shares than were available (the price stays same), or his bid wasn't as high as the last bid (so when you sale goes through, it will be at the price he's offering). Which is why being able to see the price queues is important on large traders. It is also why it can be important put stops and limits on your trades, een through you can still get gapped if you're unlucky. However putting prices ("Open Orders" vs "(at)Market Orders") can mean that you're sitting there waiting for a bounce/spike while the action is all going on without you). safer but not as much gain (maybe ;) ) that's the excitement of the market, for every option there's advantages...and risks... (eg missing out) There are also issues with stock movement, shadowing, and stop hunting, which can influence the price. But the stuff in the long paragraphs is the technical reasons. |
Is investing into real estate a good move for a risk-averse person at the moment | If you live and work in the euro-zone, then even after a "crash" all of your income and most of your expenses will still be in euros. The only portion of your worth you need to worry about protecting is the portion you intend to spend on goods from outside the euro-zone (i.e. imports). In that case, you may want to consider parking some of your money in short-term government bonds issued by other countries, such as the UK, Switzerland, and USA (or wherever else your favorite goods tend to come from). If the euro actually "massively devalues" (an extremely unlikely scenario), then you can expect foreign goods to cost a lot more than they do now. Inflation might also pick up, so you might also want to purchase some OATis. |
How to calculate the rate of return on selling a stock? | Simple math. Take the sale proceeds (after trade expenses) and divide by cost. Subtract 1, and this is your return. For example, buy at 80, sell at 100, 100/80 = 1.25, your return is 25%. To annualize this return, multiply by 365 over the days you were in that stock. If the above stock were held for 3 months, you would have an annualized return of 100%. There's an alternative way to annualize, in the same example above take the days invested and dive into 365, here you get 4. I suggested that 25% x 4 = 100%. Others will ask why I don't say 1.25^4 = 2.44 so the return is 144%/yr. (in other words, compound the return, 1.25x1.25x...) A single day trade, noon to noon the next day returning just 1%, would multiply to 365% over a year, ignoring the fact there are about 250 trading days. But 1.01^365 is 37.78 or a 3678% return. For long periods, the compounding makes sense of course, the 8%/yr I hope to see should double my money in 9 years, not 12, but taking the short term trades and compounding creates odd results of little value. |
Differences in conditions on shares to private vs. public shareholders? | Shares sold to private investors are sold using private contracts and do not adhere to the same level of strict regulations as publicly traded shares. You may have different classes of shares in the company with different strings attached to them, depending on the deals made with the investors at the time. Since public cannot negotiate, the IPO prospectus is in fact the investment contract between the company and the public, and the requirements to what the company can put there are much stricter than private sales. Bob may not be able to sell his "special" stocks on the public exchange, as the IPO specifies which class of stock is being listed for trading, and Bob's is not the same class. He can sell it on the OTC market, which is less regulated, and then the buyer has to do his due diligence. Yes, OTC-sold stocks may have strings attached to them (for example a buy back option at a preset time and price). |
Changed from job that had a 401K, and the new one doesn't. How do I answer when filing? | If you had a retirement plan at any time in 2013 you are considered covered by an plan. Are You Covered by an Employer's Retirement Plan? You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a: Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year; IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year. Box 13 on the Form W-2 you receive from your employer should contain a check in the “Retirement plan” box if you are covered. If you are still not certain, check with your (or your spouse’s) employer. The limits on the amount you can deduct don’t affect the amount you can contribute. However, you can never deduct more than you actually contribute. Additional Resources: Publication 590, Individual Retirement Arrangements (IRAs) |
How do I tell the Canada Revenue Agency that they're sending someone else's documents to my address? | Maybe just put all his correspondence back in the Post Box and mark it "Wrong address"? Precisely. Without opening. Just tell the postman that that person doesn't live there and have it returned to sender. The Revenue will figure it out. Most definitely do not accept any certified or registered mail not addressed to you personally. |
Will ADR owner enjoy same benefit as common shares holders | One other issue you may face is when the company announces poor financial results and begins to tank, you will not be able to sell until the US market open and could incur a lot of pain. |
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