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Why do grocery stores in the U.S. offer cash back so eagerly? | It doesn't cost them anything, they don't pay commission on you taking cash-back. But it brings customers to the stores because these customers would rather buy something and use cash-back to get cash, than go to an ATM and pay the ATM commission. |
How long should I keep my bills? | I'd imagine you want to keep the utility bills around to dispute any historical billing errors or anomalies for perhaps 6 months to a year. Beyond that, you always have the financial records of making the payments -- namely, your bank statements. So what benefit is there in keeping the paper receipts for utility payments around for longer than that? I say shred them, with extreme prejudice -- while wearing black Chuck Norris style. |
Why would you ever turn down a raise in salary? | I had a colleague turn down a raise once because he believed that female colleagues were already being paid well below his salary and it was unfair to further increase this gap. For very public figures raises are often declined as a form of leadership: showing that management is willing to forgo bonuses and salary increases as a form of solidarity with the employee population. Some leaders forgo a salary altogether (or take a $1/year salary). |
Prices go up and salary doesn't: where goes delta? | I expected a word or two on the price elasticity of demand here :) Andrey, Your question needs slight revision in its current form. Rising prices actually do not mean increased profitability for a company. The quantity they sell also pays a huge part and actually is correlated to the price at which they sell the goods (and other factors such as the price at which their competitor sells the goods etc., but we will ignore it for simplicity). The net profit of sales for any firm is equal to (Qty x Sale Price) - COGS - SG&A - taxes - other expenses where, COGS means cost of goods sold SG&A means sales, general and admin costs (e.g., cleaning the inventory storage area daily so that the goods stay fresh etc.) other expenses include any miscellaneous other costs that the firm incurs to make the sale. Now, if everything in that equation remains same (COGS, SG&A, taxes, and other expenditures), rising prices will only translate into a higher profit if the quantity does not fall by the same margin. Prices may also rise simply as a response to risking COGS, SG&A or other expenditures --the latter may be observed in inflationary environments. In such a case, the supplying firm can end up losing its profit margin if the quantity falls by more than the price rise. |
How much do big firms and investors affect the stock market? | The price of a company's stock at any given moment is established by a ratio of buyers to sellers. When the sellers outnumber the buyers at a given price, the stock price drops until there are enough people willing to buy the stock to balance the equation again. When there are more people wanting to purchase a stock at a given price than people willing to sell it, the stock price rises until there are enough sellers to balance things again. So given this, it's easy to see that a very large fund (or collection of very large funds) buying or selling could drive the price of a stock in one direction or another (because the sheer number of shares they trade can tip the balance one way or another). What's important to keep in mind though is that the ratio of buyers to sellers at any given moment is determined by "market sentiment" and speculation. People selling a stock think the price is going down, and people buying it think it's going up; and these beliefs are strongly influenced by news coverage and available information relating to the company. So in the case of your company in the example that would be expected to triple in value in the next year; if everyone agreed that this was correct then the stock would triple almost instantly. The only reason the stock doesn't reach this value instantly is that the market is split between people thinking this is going to happen and people who think it won't. Over time, news coverage and new information will cause one side to appear more correct than the other and the balance will shift to drive the price up or down. All this is to say that YES, large funds and their movements CAN influence a stock's trading value; BUT their movements are based upon the same news, information, analysis and sentiment as the rest of the market. Meaning that the price of a stock is much more closely tied to news and available information than day to day trading volumes. In short, buying good companies at good prices is just as "good" as it's ever been. Also keep in mind that the fact that YOU can buy and sell stocks without having a huge impact on price is an ADVANTAGE that you have. By slipping in or out at the right times in major market movements you can do things that a massive investment fund simply cannot. |
Does an index have a currency? | There's no need for an index to have a currency as its purpose is not to act as an asset but rather to signal investors about the performance of a collection of stocks. An index can be price-weighted, meaning that its value equals the (arithmetic) average of the prices of each stock in the index. With no stock splits, the return on this index is the same as the return on a portfolio composed of one share of each stock. If there is a stock split, however instead of dividing by the number of stocks, as you normally would when taking the arithmetic average, you divide it by the number that will make the value of the index pre-stock-split (arithmetic average) equal to the value post stock split. Then use that dividing number for all periods until a new stock split occurs. An index can be value-weighted, meaning that its changes in value track the percentage changes in total market capitalization of the stocks in the index. Price weighted indexes ignore for "firm size" and percentage changes in price weighted indexes are not robust to stock-splits. Value weighted indexes take "firm size" into account and are robust to stock-splits. DJIA is price-weighted. S&P 500 is value-weighted. |
Should I invest in the world's strongest currency instead of my home currency? | A currency that is strong right now is one that is expensive for you to buy. The perfect one would be a currency that is weak now but will get stronger; the worst currency is one that is strong today and gets weak. If a currency stays unchanged it doesn't matter whether it is weak or strong today as long as it doesn't get weaker / stronger. (While this advice is correct, it is useless for investing since you don't know which currencies will get weaker / stronger in the future). Investing in your own currency means less risk. Your local prices are usually not affected by currency change. If you safe for retirement and want to retire in a foreign country, you might consider in that country's currency. |
May 6, 2010 stock market decline/plunge: Why did it drop 9% in a few minutes? | Part of it was an Oops, but not all of it. There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. The drop in that stock's price was enough to trigger "sell" orders across the market. Source: http://www.msnbc.msn.com/id/36983596/ns/business-stocks_and_economy/ |
How to spend more? (AKA, how to avoid being a miser) | Do you plan a monthly budget at the beginning of each month? This might seem counter-intuitive, but hear me out. Doing a budget is, of course, critically important for those who struggle with having enough money to last the month. Having this written spending plan allows people struggling with finances to control their spending and funnel money into debt reduction or saving goals. However, budgeting can also help those with the opposite problem. There are some, like you perhaps, that have enough income and live frugally enough that they don't have to budget. Their money comes in, and they spend so little that the bank account grows automatically. It sounds like a good problem to have, but your finances are still out of control, just in a different way. Perhaps you are underspending simply because you don't know if you will have enough money to last or not. By making a spending plan, you set aside money each month for various categories in three broad areas: Since you have plenty of money coming in, generously fund these spending categories. As long as you have money in the categories when you go to the store, you can feel comfortable splurging a little, because you know that your other categories are funded and the money is there to pay those other bills. Create other categories, such as technology or home improvement, and when you need an app or have a home improvement project, you can confidently spend this money, as it has already been allocated for those purposes. If you are new to budgeting, software such as YNAB can make it much easier. |
What would be the signs of a bubble in silver? | The problem with commodities is that they don't produce income. With a stock or bond, even if you never sold it to anyone or it wasn't publicly traded, you know you can collect the money the company makes or collect interest. That's a quantifiable income from the security. By computing the present value of that income (cf. http://blog.ometer.com/2007/08/26/money-math/) you can have at least a rough sense of the value of the stock or bond investment. Commodities, on the other hand, eat income (insurance and storage). Their value comes from their practical uses e.g. in manufacturing (which eventually results in income for someone); and from psychological factors. The psychological factors are inherently unpredictable. Demand due to practical uses should keep up with inflation, since in principle the prices on whatever products you make from the commodity would keep up with inflation. But even here there's a danger, because it may be that over time some popular uses for a given commodity become obsolete. For example this commodity used to be a bigger deal than now, I guess: http://en.wikipedia.org/wiki/Frankincense. The reverse is also possible, that new uses for a commodity drive up demand and prices. To the extent that metals such as silver and gold bounce around wildly (much more so than inflation), I find it hard to believe the bouncing is mostly due to changes in uses of the metals. It seems far more likely that it's due to psychological factors and momentum traders. To me this makes metals a speculative investment, and identifying a bubble in metals is even harder than identifying one in income-producing assets that can more easily be valued. To identify a bubble you have to figure out what will go on in the minds of a horde of other people, and when. It seems safest for individual investors to just assume commodities are always in a bubble and stay away. The one arguable reason to own commodities is to treat them as a random bouncing number, which may enhance returns (as long as you rebalance) even if on average commodities don't make money over inflation. This is what people are saying when they suggest owning a small slice of commodities as part of an asset allocation. If you do this you have to be careful not to expect to make money on the commodities themselves, i.e. they are just something to sell some of (rebalance out of) whenever they've happened to go up a lot. |
What assets would be valuable in a post-apocalyptic scenario? | I find these type of questions silly, but I'll bite: |
What is the purpose of the wash sale rule? | Overall the question is one of a political nature. However, this component can have objective answers: "What behavior is trying to be prevented?" There are mechanisms by which capital gains can be deferred (1031 like-kind exchange, or simply holding a long position for years) or eliminated by the estate step up in basis. With these available, mechanisms that enable basis-reduction are ripe for abuse. On the other hand, if this truly bothers you then if you meet the IRS qualifications of a day trader, you may elect to use "mark to market" accounting, eliminating this entirely as a concern. Special rules for traders of securities |
How to find out if a company has purchased government (or other) bonds? | This is in the balance sheet, but the info is not usually that detailed. It is safe to assume that at least some portion of the cash/cash equivalents will be in liquid bonds. You may find more specific details in the company SEC filings (annual reports etc). |
Why the volume disparity between NUGT and DUST? | NUGT and DUST both track GDX with triple leverage, but in opposite directions. GDX has been rising steadily throughout 2016, and certainly since over the last month. DUST experiences much higher volume when GDX is in a downward trend, as it was from 2013-2016. I think you'll see the same thing with DRIP and GUSH when oil has been moving steadily in one direction or the other. This is really a reflection of the herd mentality to jump in when things look like they're going a particular direction. |
What ETF best tracks the price of gasoline, or else crude oil? | UNG United States Natural Gas Fund Natural Gas USO United States Oil Fund West Texas Intermediate Crude Oil UGA United States Gasoline Fund Gasoline DBO PowerShares DB Oil Fund West Texas Intermediate Crude Oil UHN United States Heating Oil Fund Heating Oil I believe these are as close as you'd get. I'd avoid the double return flavors as they do not track well at all. Update - I understand James' issue. An unmanaged single commodity ETF (for which it's impractical to take delivery and store) is always going to lag the spot price rise over time. And therefore, the claims of the ETF issuer aside, these products will almost certain fail over time. As shown above, When my underlying asset rises 50%, and I see 24% return, I'm not happy. Gold doesn't have this effect as the ETF GLD just buys gold, you can't really do that with oil. |
Is there any circumstance in which it is necessary to mark extra payments on a loan as going to “principal and not interest”? | I would always presume that given a choice of doing what is in its own self interest verses in the customer's interest, a bank will ALWAYS do the former rather than the latter. Banks are in the business of making money, always presume that their policies, processes and contractual terms will be slanted to maximize their ability to make money. It's not being evil or anything, it's just business, they are under no obligation to be altruistic or do what's best for you at the expense of their profits. So, especially since it's not exactly a hardship, I would always make extra principal payments using a separate check and clearly mark it as an extra principal payment. |
What happens to my savings if my country defaults or restructures its debt? | Best thing to do is convert your money into something that will retain value. Currency is a symbol of wealth, and can be significantly devalued with inflation. Something such as Gold or Silver might not allow you to see huge benefit, but its perhaps the safest bet (gold in particular, as silver is more volatile), as mentioned above, yes you do pay a little above spot price and receive a little below spot when and if you sell, but current projections for both gold and silver suggest that you won't lose money at least. Safe bet. Suggesting it is a bad idea at this time is just silly, and goes against the majority of advisers out there. |
Why credit cards are sold through banks and not from Visa or MasterCard directly | Visa and Mastercard are not consumer-oriented companies. They do not consider individual consumers as their direct clients, and do not sell directly to them. Instead, their clients are financial institutions who participate in their networks (which is what they're selling). The institutions target the individual consumers (merchants and credit card holders). American Express, for example, has a different business model. AX doesn't only sell network services to financial institutions, but also services to individual consumers. You can get a AX credit card/merchant account directly with AX, or through their client bank. |
How does a financial advisor choose debt funds and equity funds for us? | A financial advisor is a service professional. It is his/her job to do things for you that you could do for yourself, but you're either too busy to do it yourself (and you want to pay somebody else), or you'd rather not. Just like some people hire tax preparers, or maids, or people to change their oil, or re-roof their houses. Me, I choose to self-manage. I get some advise from Fidelity and Vanguard. But we hired somebody this year to re-roof our house and someone else to paint it. |
What factors go into choosing residency? | A couple of thoughts. Tax benefits are the usual reasons to decide on one residency or another. International tax law is complex, and it's probably best to consult a professional. Certainly without knowing which the other country is I would not want to hazard a guess. If he is really not going to be taxed on the other country, residing there would seem sensible. But... In Canada residency for tax purposes is established for an entire year. If you are resident for more than six months your salary for the year is taxable. Conversely if you are present for less than six months you are not taxable. (This may have changed - it's been twenty years since I did this.) The other issue is healthcare. If you are not resident in Ontario you are not eligible for free healthcare, I believe. He might have to purchase supplemental insurance if he returns occasionally. |
Why do some stocks have trading halts and what causes them? | The company may have put a trading halt due to many reasons, most of the time it is because the company is about to release some news to the market. To stop speculation driving the price up or down, it puts a halt on trading until it can get all the information together and release it to the market. This could be news about an earnings update, a purchase of other businesses, a merger with another business, or a takeover bid, just to name a few. |
Making your first million… is easy! (??) | Easy. Start with 2 millions and lose only one. Jokes aside, if you want a million USD, you should be asking yourself how you can produce products or services worth $5 millions. (expect the extra to be eaten up by taxes, marketing, sales, workforce...) If by investment you mean making risky bets on the stock market, you might have a better time going to Las Vegas. On the other hand, if by investment you mean finding something that will produce $$$ and getting involved, it's a different matter. |
Will getting a new credit card and closing another affect my credit? | I once called Amex to cancel a card with an annual fee. Instead, they were able to give me a different card with no fee. They were happy to do it. Of course, Amex has fantastic customer service, while Capital One is not known for it. But, its worth a five minute call, and you will retain your good score. |
Should I get cash from credit card at 0% for 8 months and put it on loans? | Do you know how many people end up with an 18-21% rate on their credit card? They started off with low teaser rates. There was an article about it recently on Yahoo. Mainly this comes from a lack of discipline, or an unforeseen emergency. However, lets assume, that you are a bit uncommon and have iron discipline. It comes down to a math question. What is the rate on your student loan? I am going to assume 6%, and lets say that you are now paying interest. So there is 7 months between now an then, you would pay $140 (4000 * .06/12 * 7) in interest if you left it on the student loan. Typically there is not really a free lunch with the zero percent interest rate CC. They often charge a 3% balance transfer fee, so you would pay that on the entire amount, about $120. Is it worth the $20? I would say not. However, those simple calculations are not really correct. Since you would have to pay the CC $588.6/month to take care of this, you have to shrink the balance on the student loan to do a true apples to apples comparison. So doing a little loan amortization, you can retire $4000 on the student loan only paying $583/month, and paying a total of $80.40 in interest. So it would cost you money to do what you are suggesting if there is a 3% transfer fee. Even if there is no transfer fee, you only save about $80 in interest. If it was me, I would direct my energy in other areas, like trying to bring in more money to make this student loan go away ASAP. Oh and GO STEELERS! |
If you buy something and sell it later on the same day, how do you calculate 'investment'? | Nothing wrong with the other answers, but here's a "trick" to hopefully make it totally transparent. Imagine that you're not the one implementing this business plan, but someone else is. Let's call this other person your asset manager. So on the first day, you give your asset manager $9. He takes this and generates $1 profit from it, recovering the $9 which he then reinvests to generate $1 profit every day. From your perspective, you just gave him $9. At the end of the year, he gives you $365 in addition to your original investment of $9 (in real life he'd take the fees of course, or perhaps he's been lending out the money he's been accumulating and taking the interest from that as pay for his services). So your return on investment is 365 / 9 * 100 % > 4000 %, as claimed by your source. |
How can I calculate interest portion of income when selling a stock? | Their interest expense was $17M. Where you see $5.14/sh in Key Statistics, any daily interest received is more than canceled out by the expense paid at the same time. I understand your concern, but this company is not "sitting on cash" as are Apple, Google, etc. Short term rates are well below 1%, 1yr tbill looks like about .2%. So strictly speaking, each share might have 1 cent interest you need to concern yourself with. Disclaimer to other readers - This has nothing to do with taxes. OP is asking about a specific part of the company cash flow. His worst case is $1 per 100 shares. |
Investment for beginners in the United Kingdom | I'm in the US as well, but some basic things are still the same. You need to trade through a broker, but the need for a full service broker is no longer necessary. You may be able to get by with a web based brokerage that charges less fees. If you are nervous, look for a big name, and avoid a fly by night company. Stick with non-exotic investments. don't do options, or futures or Forex. You may even want to skip shares all together and see if UK offers something akin to an index fund which tracks broad markets (like the whole of the FTSE 100 or the S&P 500) as a whole. |
Is it accurate to say that if I was to trade something, my probability of success can't be worse than random? | In theory, in a perfect world, what you state is almost true. Apart from transaction fees, if you assume that the market is perfectly efficient (ie: public information is immediately reflected in a perfect reflection of future share value, in all share prices when the information becomes available), then in theory any transaction you would choose to take is opposed by a reasonable person who is not taking advantage of you, just moving their position around. This would make any and all transactions completely reasonable from a cost-benefit perspective. ie: if the future value of all dividends to be paid by Apple [ie: the value of holding a share in Apple] exactly matches Apple's share price of $1,000, then buying a share for $1,000 is an even trade. Selling a share for $1,000 is also an even trade. Now in a perfectly efficient market, which we have assumed, then there is no edge to valuing a company using your own methods. If you take Apple's financial statements / press releases / reported information, and if you apply modern financial theory to evaluate the future dividends from Apple, you should get the same $1,000 share price that the market has already arrived at. So in this example, why wouldn't you just throw darts at a printout of the S&P 500 and invest in whatever it lands on? Because, even if the 'perfectly efficient market' agrees on the true value of something, different investments have different characteristics. As an example, consider a simple comparison of corporate bonds: Corporations make bond offerings to the public, allowing individual investors to effectively lend money to the corporation, for a future benefit. For simplicity, assume a bond with a 'face value' (the amount to be repaid to the investor on maturity) of $1,000 has these 3 defining characteristics: (1) The price [What the investor pays to acquire it]; (2) Interest payments [how much, if any, the corporation will pay to the investor before maturity, and when those payments will be made]; and (3) a bond rating [which is a third party assessment of how risky the bond is, based on the 'health' of the corporation]. Now if the bond rating agency is perfect in its risk assessment, and if the price of all bond's is fair, then why does it matter who you loan your money to? It matters because different people want different things out of their investments. If you are waiting to make a down payment on a house next year, then you don't want risk - you want to be certain that you will get your cash back, even if it means lower returns. So, even though a high-risk bond may be perfectly priced, it should only be bought by someone willing to bear that risk. If you are retired, and you need your bonds to pay you interest regularly as your sole source of income, then of course a zero-coupon bond [one that pays no interest] is not helpful to you. If you are young, and have a long time to invest, then you may want risk, because you have time to overcome losses and you want to get the most return possible. In addition, taxes are not universal between all investors. Some people benefit from things that would be tax-heavy to their neighbors. For example in Canada, there is a 'dividend tax credit' which reduces the taxes owing on dividends received by a corporation. This credit exists to prevent 'double-taxation', because otherwise the corporation would pay its ~30% of tax, and then a wealthy investor would pay another ~45% of tax. Due to the mechanics of how the credit is calculated, however, someone who makes less money, gets an even lower tax bill than they normally would. This means that someone making under the top tax bracket in Canada, has a tax benefit by receiving dividends. This means that while 2 stocks may be both fairly priced, if one pays dividends and the other doesn't [ie: if the other company instead reinvests more heavily in future projects, creating even more value for shareholders down the road], then someone in the bottom tax brackets may want the dividend paying stock more than the other. In conclusion: Picking investments yourself does require some knowledge to prevent yourself from making a 'bad buy'; this is because the market is not perfectly efficient. As well, specific market mechanics make some trades more costly than they should be in theory; consider for example transaction fees and tax mechanics. Finally, even if you assume that all of the above is irrelevant as a theoretical idea, different investors still have different needs. Just because $1,000,000 is the 'fair' price for a factory in your home town, doesn't mean you might as well convert your retirement savings to buy it as your sole asset. |
Is a “total stock market” index fund diverse enough alone? | Good idea to stay only with VTI if you are 30. For 50, I recommend: 65% VTI 15% VOO 10% VXUS 10% BND |
Lump sum annuity distribution — do I owe estate tax? | If you are the beneficiary of an annuity, you might receive a single-sum distribution when the annuity owner dies. The amount of this death benefit might be the current cash value of the annuity or some other amount based upon contract riders that the owner purchased. The tax on death benefits depends on a number of factors. Death benefits are taxed as normal income. Unlike other investments, the named beneficiary of a non-qualified annuity does not get a step-up in tax basis to the date of death. However, that doesn't mean the beneficiary will have to pay taxes on the full amount. Because the purchaser of the annuity made the investment with after-tax dollars, only the amount attributable to investment income is taxed, but it will be taxed as ordinary income and not enjoy any special capital gains treatment. When there is a death benefit that exceeds the value of the account, that additional amount is also taxed as ordinary income. Taxes on annuities depend on several circumstances: For more information on distribution of inherited annuities and taxes - go to Annuities HQ-- http://www.annuitieshq.com/articles/distribution-options-inherited-annuity/ they go into details that could help you even more. One thing that Annuities HQ points out is if you take the lump sum payout, you may be pushed into a higher tax bracket. Along with doing research I would also contact a financial advisor! |
Which credit card is friendliest to merchants? | Merchants that accept American Express should have decided that the extra costs are worth the increased business (many business travelers only have an Amex Corporate Card). To complain about people actually using it after they've explicitly decided to accept it is a sign that they made the wrong decision, or that they are very short-sighted. No one is forcing them to take a particular card. |
What are the costs to establish an LLC and to maintain it? | I'll answer in general terms, since I'm not familiar with the price ranges in Florida. The LLC formation costs $125 (state fee). In addition you'll need a registered agent. Registered agent could be your CPA/EA/bookkeeper/property manager/local friend, or you can pay firms specializing in providing registration and agents services such as NorthWestern or LegalZoom (there are many others). You'll need to pay an annual fee of ~$140 in Florida. If you are using someone to do the formation, they'll charge more (usually the on-line services are cheaper than a local CPA or attorney, by $100-$300). Bookkeeping will probably be charged by the hour, but some bookkeepers charge flat fees for small accounts. Per hour would be probably in the range of $40-$80. You'll have to pay taxes - both in Florida (where the property is) and on the Federal level to the IRS. You'll be paying them as a non-Resident individual. Your CPA/EA will charge you anywhere between $150 to $500 for that (if they charge more - run away, unless there's some specific complication that requires extra costs). You will need a ITIN for that, your CPA/EA can help you get one or you can apply yourself. Be careful with all those people selling cr@p about organizing in Delaware/Wyoming/Nevada (like CQM in his answer). Organizing in a state other than where the properties are located (or off-shore) won't save you a dime, and not only that - it will add to the costs. Because you'll have to pay to the state where you organized (CQM mentioned Wyoming - $50/year), keep registered agent in the state of organization (+$99) and also do all the things I've described above about Florida - as a "Foreign" (out of state) entity, which may mean higher fees. It won't save you any taxes as well, because you pay taxes to the state from which you derive income, which is Florida, either way. Remember that what you call LLC in Italy may be in fact a "Corporation" as defined in the US, and there's a huge difference. You should probably not put a real-estate property in a Corporation in the US. You must get a legal advice from a (Florida) lawyer ($0-$500/hr consultation), and a tax advice from a (Florida) CPA/EA ($0-$200/hr consultation). Do not consider anything I write here as a legal or tax advice, because it is not. You need a professional to help you because as an Italian, you don't know how things work exactly and relying on rumours and half-truths that you may find and get over the Internet may end up costing you significantly in damages. Also, talk to a reliable real estate agent and property manager before making any purchases. |
I spend too much money. How can I get on the path to a frugal lifestyle? | Gail Vaz-Oxlade from the television show Til Debt Do Us Part has a great interactive budget worksheet that helps you set up a "jar" or envelope system for each month based on your income and fixed expenses. We have used this successfully in the past. What we found most useful was, as others have said, writing everything down, keeping receipts, and thus being accountable and aware of our spending. |
Explanations on credit cards in Canada | Is my understanding okay ? If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. Which is where the credit card company can add fees so you pay more and they make more money. Don't forget that in the credit case, you are borrowing money rather than using your own. Another thing that bothers me is that the credit card apparently has a rather low credit limit. If I wanted to buy something that costs $2500 but only have a credit limit of $1500, can I make a preemptive wire from my check account to the VISA account to avoid facing the limit ? If so, what is the point for the customer of having two accounts (and two cards for that matter...) ? If you were the credit card company, do you believe people should be given large limits first? There are prepaid credit cards where you could put a dollar amount on and it would reject if the balance gets low enough. Iridium Prepaid MasterCard would be an example here that I received one last year as I was involved in the floods in my area and needed access to government assistance which was given this way. Part of the point of building up a credit history is that this is part of how one can get the credit limits increased on cards so that one can have a higher limit after demonstrating that they will pay it back and otherwise the system could be abused. There may be a risk that if you prepay onto a credit card and then want to take back the money that there may be fees involved in the transaction. Generally, with credit cards the company makes money on the fees involved for transactions which may come from merchants or yourself as a cash advance on a credit card will be charged interest right away while if you buy merchandise in a store there may not be the interest charged right away. |
How can I avoid international wire fees or currency transfer fees? | Several possibilities come to mind: Several online currency-exchange brokers (such as xe.com and HiFx) offer very good exchange rates and no wire transfer fees (beyond what your own bank might charge you). Get French and American accounts at banks that are part of the Global ATM alliance: BNP Paribas in France and Bank of America in the USA. This will eliminate the ATM fee. Get an account at a bank that has branches in both countries. I've used HSBC for this purpose. |
Double-entry bookkeeping: When selling an asset, does the money come from, Equity or Income? | There are basically two approaches, based on how detailed you want to be in your own personal accounting: Obviously the more like a business or like "real" accounting you want to be, the more complex you can make it, but in general I find that the purpose of personal accounting is (1) to track what I own, and (2) to ensure I have documented anything I need to for tax purposes, and as long as you're meeting those goals any reasonable approach is workable. |
What size “nest egg” should my husband and I have, and by what age? | There are three numbers that matter in that calculation: 1) How much do you expect per month from in pension/social security/or other retirement programs? 2) At what age will each of you retire? 3) How long will each of you live? 4) What will your annual expenses be when you retire? Unfortunately #3 is the most important of the three and the hardest to know with any certainty. |
What did John Templeton mean when he said that the four most dangerous words in investing are: ‘this time it’s different'? | There's an elephant in the room that no one is addressing: Suckers. Usually when there's a bubble, many people are fully aware that its a bubble. "This time its different" is a sales pitch to the outsiders. It the dotcom boom for example a lot of people knew that the P/E was ridiculous but bought objectively valueless tech stocks with the idea of unloading them later to even bigger fools. People view it like the children's game musical chairs: as long as I'm not standing when the music ends some other sucker gets left holding the bag. But once you get that first hit of easy money, its sooo tempting to keep playing the game. Sometimes, if it lasts long enough, you start to drink your own kool-aid: gee maybe it really is different this time. The best way to win a crooked game is not to play*. *Just in case someone thinks I'm advising against the stock market in general, I'm not: I'm advocating not buying stocks that you know are worthless with the hope of unloading them on some other sucker. |
Multi-user, non-US personal finance and budget software | My wife and I have been ridiculously happy with YNAB. It's not "online," but syncs across our phones & computers using Dropbox. It supposedly supports different locales and currencies, but I have never needed to try that out. |
How and Should I Invest (As a college 18 year old with minimal living expenses)? | You have great intentions, and a great future. As far as investing goes, you're a bit early. Unless your parents or other benefactor is going to pay every dime of your expenses, you'll have costs you need to address. $1000 is the start of a nice emergency fund, but not yet enough to consider investing for the long term. If you continue to work, it's not tough to burn through $200/wk especially when you are in college and have more financial responsibility. |
Why do financial institutions charge so much to convert currency? | Perhaps it's the terminology "fee" that makes it a little confusing. I'm not sure whether it's due legislation or if it's tradition but banks and money changers in my country don't charge "fees". Instead they advertise separate prices for buying and selling money. For example they'd normally advertise: USD, we buy: 4.50, we sell: 4.65. It's a business. Just like selling cars or lemonade selling money only makes sense if you sell it at a higher price than what you bought it for. Regardless of what you call it it's the profit margin for the seller. |
I cosigned for a friend who is not paying the payment | If the bank is calling your employer, the federal Fair Debt Collection Practices Act (FDCPA) limits where and when debt collectors can contact consumer debtors. In many cases, debt collectors that contact debtors at work are violating the FDCPA. http://www.nolo.com/legal-encyclopedia/a-debt-collector-calling-me-work-is-allowed.html |
How can OTC scams affect you? | Am I being absurd? No. Should I be worrying? Yes. If I sell in the morning, I've only lost a couple hundred dollars, and learned a valuable lesson. Is there any reason to believe it won't be that simple? If you're lucky, you'll be able to dump your stocks to someone like you who'll be punching himself in the face tomorrow night. If not - you're stuck. You may end up selling them to your broker as worthless. You might have become a victim of a "pump and dump" fraud. Those are hard to identify in real-time, but after been burned like that myself (for much lesser amounts than you though), I avoid any "penny" stocks that go up for no apparent (and verifiable) reason. In fact, I avoid them altogether. |
Smartest Place to Put Tax Refund | Congratulations on your graduation and salary. You are in a great career field (I know from experience.) As a background, I would feel pretty confident in your salary as demand for SE is pretty high right now. During my career there were times that demand was pretty to very low. Somehow I survived 2001 & 2002, but 2003 was a pretty rough year for me. Here is what I would do if I were you. Paying off the smallest loans first gives you some great "wind in the sails", and encourages you to keep going. I really like this approach despite being not the most mathematically efficient. I'd reduce my car loan payment back to $200/mo. and put that as the last one to pay off. With the tax refund, and any money left over, I pay off the student loans smallest to largest. I would also consider reducing your savings to something around the 1K->2k range, and use that to pay down debt. If you use your tax refund, and some of the savings you'd have like 34K left to pay off. Could you do that in like 14 months? I think you could depending on your other expenses. No more than 18 months, and if you really worked hard and picked up some work on the side maybe a year. That is what I would do. |
Co-signer deceased | Co-signing is not the same as owning. If your elderly lady didn't make any payments on the loan, and isn't on the ownership of the car, and there was no agreement that you would pay her anything, then you do not owe either her or her daughter any money. Also the loan is not affecting the daughter's credit, and the mother's credit is irrelevant (since she is dead). However you should be aware that the finance company will want to know about the demise of the mother, since they can no longer make a claim against her if you default. I would start by approaching the loan company, telling them about the mother's death, and asking to refinance in your name only. If you've really been keeping up the payments well this could be OK with them. If not I would find someone else who is prepared to co-sign a new loan with you, and still refinance. Then just tell the daughter that the loan her mother co-signed for has been discharged, and there is nothing for her to worry about. |
Judge market efficiency from raw price action | The shortest-hand yet most reliable metric is daily volume / total shares outstanding. A security with a high turnover rate will be more efficient than a lower one, ceteris paribus. The practical impacts are tighter spread and lower average percentage change between trades. A security with a spread of 0% and an average change of 0% between trades is perfectly efficient. |
When an insider discloses a stock trade are they required to execute? | They are not required to fulfill the trade that they have intended to execute. They are able to cancel or modify the trade at any point. Example: This is how insiders are able to manipulate the price of shares through there buying and selling intentions. A CEO would be able to disclose a buy order for a month from now, or whatever time period is required. This would most likely increase the price of the stock as investors would see this as a good sign of company performance. Up until the point when the buy order is scheduled to execute the CEO can then cancel the order and create a new sell order. Since the stock is high in price, his new order is likely to make him money based on the manipulation from his trading intentions. I am not an expert on the subject and only know as much as I do through personal research. Here is an interesting article about this kind of insider trading and manipulation:http://dealbook.nytimes.com/2012/12/10/the-fine-line-between-legal-and-illegal-insider-trading/?_r=0 |
Official Bank Check | The legal department at the Bank left me a message telling me that the bank check was paid & the recipient got the funds. Call up the bank and find out who the recipient was. Generally it can only be cashed by the person whose name is on it - the original business partner to whom it was intended. It is unlikely to be cashed by the attorney, unless he misrepresented the facts to the bank and got the funds. My question is how could he have cashed it without the original bank check? The other possibility is your mom lost this check, went to the bank and requested them to cancel this and reissue a fresh banker's check and give it to the business partner - in which case the check you had was worthless. You would need to work with the bank and ask them for details. However without the details of the original bank check that you found, it would be difficult for the bank to help you. |
Advice for opening an IRA as a newbie | If you want to 'offset' current (2016) income, only deductible contribution to a traditional IRA does that. You can make nondeductible contributions to a trad IRA, and there are cases where that makes sense for the future and cases where it doesn't, but it doesn't give you a deduction now. Similarly a Roth IRA has possible advantages and disadvantages, but it does not have a deduction now. Currently he maximum is $5500 per person ($6500 if over age 50, but you aren't) which with two accounts (barely) covers your $10k. To be eligible to make this deductible traditional contribution, you must have earned income (employment or self-employment, but NOT the distribution from another IRA) at least the amount you want to contribute NOT have combined income (specifically MAGI, Modified Adjusted Gross Income) exceeding the phaseout limit (starts at $96,000 for married-joint) IF you were covered during the year (either you or your spouse) by an employer retirement plan (look at box 13 on your W-2's). With whom. Pretty much any bank, brokerage, or mutual fund family can handle IRAs. (To be technical, the bank's holding company will have an investment arm -- to you it will usually look like one operation with one name and logo, one office, one customer service department, one website etc, but the investment part must be legally separate from the insured banking part so you may notice a different name on your legal and tax forms.) If you are satisified with the custodian of the inherited IRA you already have, you might just stay with them -- they may not need as much paperwork, you don't need to meet and get comfortable with new people, you don't need to learn a new website. But if they sold you an annuity at your age -- as opposed to you inheriting an already annuitized IRA -- I'd want a lot of details before trusting they are acting in your best interests; most annuities sold to IRA holders are poor deals. In what. Since you want only moderate risk at least to start, and also since you are starting with a relatively small amount where minimum investments, expenses and fees can make more of an impact on your results, I would go with one or a few broad (= lower risk) index (= lower cost) fund(s). Every major fund familly also offers at least a few 'balanced' funds which give you a mixture of stocks and bonds, and sometimes some 'alternatives', in one fund. Remember this is not committing you forever; any reasonable custodian will allow you to move or spread to more-adventurous (but not wild and crazy) investments, which may be better for you in future years when you have some more money in the account and some more time to ponder your goals and options and comfort level. |
83(b) and long term capital gain | You should apply for 83(b) within 30 days. 10 months is too late, sorry. |
Buying a home with down payment from family as a “loan” | Say you're buying a 400K house. Your relative finances 120K (30%). Say I'm optimistic, but the real-estate market recovers, and your house is worth 600K in 5-6 years (can happen, with the inflation and all). The gain is 200K. Your relative gets 100K. You repay him 220K on 120K loan for 5 years. Roughly, 16% APR. Quite an expensive loan. I'm of course optimistic, it seems to me that so is your relative. The question is: if the house loses value in that term, does your relative take 50% of the losses? Make calculations based on several expected returns (optimistic, "realistic", loss case, etc), and for each calculate how much in fact will that loan cost. It will help you to decide if you want it. Otherwise your relationships with your relative might go very bad in a few years. BTW: Suggestion: it's a bad idea to mix business and friend/family you don't want to lose. |
Should I trade in a car I own to lower my payments on a new lease? | You need to look at the numbers when you're ready to transact. What your crossover is worth now, what the truck will lease for then, what financing deals may or may not be available will all change. I'm not sure why you've already decided you will lease the truck, perhaps you're planning to take advantage of some kind of business write off. I would personally never put anything down on a lease, though I have argued with people on here about that particular decision. The reality is you need to look at the numbers. Some banks will adjust the interest you pay on your lease to account for your down payment, some don't. Consider a $9,000 lease, $250 per month for 36 months. Consider you pay $1,000 up front as a down payment. Example 1: $1,000 lowers the amount due on the lease to $8,000 lowering your monthly payment to $222.22 from $250, the downpayment has accomplished nothing. Over the 36 months you will have still paid the same $9,000. Example 2: $1,000 up front changes the amount owed and other fees generally applicable to a lease (gap insurance etc) and your payment drops to $215, your total over the lease is now $8,740 ($1,000 down and $7,740 in payments). You need to look at the numbers. In general if you know you will be purchasing the truck at the end of the lease it's more financially advantageous to just purchase it from the start. |
What percent of my salary should I save? | A single percentage figure makes little sense here as you are asking for a bunch of different things: |
What is the effect of a cancelled stock order on a stock and the market? | That article, like almost any article written by a non-expert and quoting only "research" from lobbying groups, hugely misses the point. The vast majority of orders that end up being cancelled are cancelled as a standard part of exchanges' official market-maker programs. Each exchange wants you and me to know that it has liquidity -- that when we go to buy or sell some stock, there will be someone waiting on the other side of the trade. So the exchange pays (via lowered fees or even rebates) hundreds of registered market makers to constantly have orders resting in each product's order book within a few ticks of the current NBBO or the last trade price. That way, if everyone else should suddenly disappear from the market, you and I will still be able to trade our shares for a price somewhat close to the last trade price. But market makers who are simply acting in this "backstop" role don't actually want to have their orders filled, because those orders will almost always lose them money. So as prices rise and fall (as much as tens of times per second), the market makers need to cancel their resting orders (so they don't get filled) and add new ones at new prices (so they meet their obligations to the exchange). And because the number of orders resting in any given product's order book is vastly larger than the number of actual trades that take place in any given time period, naturally the number of cancellations is also going to hugely outweigh the number of actual trades. As much as 97% to 3% (or even more). But that's completely fine! You and I don't have to care about any of that. We almost never need the market makers to be there to trade with us. They're only there as a backstop. There's almost always plenty of organic liquidity for us to trade against. Only in the rare case where liquidity completely dries up do we really care that the registered market makers are there. And in those cases (ideally) the market makers can't cancel their orders (depending on how well the exchange has set up its market maker program). So, to answer your question, the effect of standard order cancellation on a stock is essentially none. If you were to visualize the resting orders in a product's book as prices moved up and down, you would essentially see a Gaussian distribution with mean at the last trade price, and it would move up and down with the price. That "movement" is accomplished by cancellations followed by new orders. P.S. As always, keep in mind that your and my orders almost never actually make it to a real stock exchange anymore. Nowadays they are almost always sent to brokers' and big banks' internal dark pools. And in there you and I have no idea what shenanigans are going on. As just one example, dark pools allow their operators and (for a fee) other institutional participants access to a feature called last look that allows them to cancel their resting order as late as after your order has been matched against it! :( Regarding the question in your comment ... If Alice is sending only bona fide orders (that is, only placing an order at time T if, given all the information she has at time T, she truly wants and intends for it to be filled) then her cancellation at a later time actually adds to the effectiveness of and public perception of the market as a tool for price discovery (which is its ultimate purpose). [In the following example imagine that there are no such things as trading fees or commissions or taxes.] Let's say Alice offers to buy AAPL at $99.99 when the rest of the market is trading it for $100.00. By doing so she is casting her vote that the "fair value" of a share of AAPL is between $99.99 and $100.00. After all, if she thought the fair value of a share of AAPL was higher -- say, between $100.00 and $100.01 -- then she should be willing to pay $100.00 (because that's below fair value) and she should expect that other people in the market will not soon decide to sell to her at $99.99. If some time later Alice does decide that the fair value of AAPL is between $100.00 and $100.01 then she should definitely cancel her order at $99.99, for exactly the reason discussed above. She probably won't get filled at $99.99, and by sitting there stubbornly she's missing out (potentially forever) on the possibility to make a profit. Through the simple act of cancelling her $99.99 order, Alice is once again casting a vote that she no longer thinks that's AAPL's fair value. She is (very slightly) altering the collective opinion of the entire market as to what a share of AAPL is worth. And if her cancellation then frees her up to place another order closer to her perceived fair value (say, at $100.00), then that's another vote for her honest optinion about AAPL's price. Since the whole goal of the market is to get a bunch of particpants to figure out the fair value of some financial instrument (or commodity, or smart phone, or advertising time, etc.), cancellations of honest votes from the past in order to replace them with new, better-informed honest votes in the present can only be a good thing for the market's effectiveness and perceived effectiveness. It's only when participants start sending non-honest votes (non bona fide orders) that things start to go off the rails. That's what @DumbCoder was referring to in his comment on your original question. |
Student loan payments and opportunity costs | As Mr. Money Money Mustache once said: IF YOU HAVE CREDIT CARD DEBT, YOU SHOULD FEEL LIKE YOUR HAIR IS ON FIRE Student loan debt is different than credit card debt. Rather than having spent the money on just about anything, it was invested in improving yourself and probably your financial future. This was probably a good decision. However, unlike most credit card debt, if you ever have to file for bankruptcy, your student loans will not be erased. They will follow you forever. Pay your debts off as quickly as you can. While it may be true that "long-term return on the stock market is about 7%", you cannot assume that this will always be the case, especially in the short term. What if you had made this assumption in 2007? To assume that your stocks will beat a 6.4% guaranteed return over the next few years is not really investing. It's gambling. |
Why is the dominant investing advice for individuals to use mutual funds, exchanged traded funds (ETFs), etc | No. You're lucky, maybe, but not really a successful investor. Warren Buffet is, you're not him. Sometimes it is easier to pick stocks to bid on, sometimes its harder. I got my successes too. It is easier on a raising market, especially when it is recovering after a deep fall, like now. But generally it is very hard to beat the market. You need to remember that an individual investor, not backed by deep pockets, algo-trading and an army of analysts, is in a disadvantage on the market by definition. So what can you do? Get the deep pockets, algo-trading and an army of analysts. How? By pooling with others - investing through funds. |
What is the best way to stay risk neutral when buying a house with a mortgage? | You can hedge your house price from losing value if you believe that the housing market is correlated with major stock indices. Speak with a commodities broker because they will be able to help you buy puts on stock indices which if correlated with housing prices will offer somewhat of a hedge. Example. House prices drop 30% because of weak economy, stocks will generally drop around that same amount 30%. If you have enough exposure to in the puts compared to your house value you will be protected. You can also buy calls in 30 year bonds for interest rate lock if you are not on a fixed interest rate. Many investors like warren buffet and carl icahn have been protecting them selves from a potential market downward turn. Speak to a local commodity broker to get some detailed advice, not etrade or any discount brokers they won't be able to help you specialize your trades. look for a full time commodity broker house. |
Online tutorials for calculating DCF (Discounted Cash Flow)? | what do you mean exactly? Do you have a future target price and projected future dividend payments and you want the present value (time discounted price) of those? Edit: The DCF formula is difficult to use for stocks because the future price is unknown. It is more applicable to fixed-income instruments like coupon bonds. You could use it but you need to predict / speculate a future price for the stock. You are better off using the standard stock analysis stuff: Learn Stock Basics - How To Read A Stock Table/Quote The P/E ratio and the Dividend yield are the two most important. The good P/E ratio for a mature company would be around 20. For smaller and growing companies, a higher P/E ratio is acceptable. The dividend yield is important because it tells you how much your shares grow even if the stock price stays unchanged for the year. HTH |
What are the benefits of opening an IRA in an unstable/uncertain economy? | You bring up a valid concern. IRAs are good retirement instruments as long as the rules don't change. History has shown that governments can change the rules regarding retirement accounts. As long as you have some of your retirement assets outside of an IRA I think IRAs are good ways to save for retirement. It's not possible to withdraw the money before retirement without penalty. Also, you will be penalized if you do not withdraw enough when you do retire. |
Is there a term for the risk of investing in an asset with a positive but inferior return? | I'd question whether a guaranteed savings instrument underperforming the stock market really is a risk, or not? Rather, you reap what you sow. There's a trade-off, and one makes a choice. If one chooses to invest in a highly conservative, low-risk asset class, then one should expect lower returns from it. That doesn't necessarily mean the return will be lower — stock markets could tank and a CD could look brilliant in hindsight — but one should expect lower returns. This is what we learn from the risk-return spectrum and Modern Portfolio Theory. You've mentioned and discounted inflation risk already, and that would've been one I'd mention with respect to guaranteed savings. Yet, one still accepts inflation risk in choosing the 3% CD, because inflation isn't known in advance. If inflation happened to be 2% after the fact, that just means the risk didn't materialize. But, inflation could have been, say, 4%. Nevertheless, I'll try and describe the phenomenon of significantly underperforming a portfolio with more higher-risk assets. I'd suggest one of: Perhaps we can sum those up as: the risk of "investing illiteracy"? Alternatively, if one were actually fully aware of the risk-reward spectrum and MPT and still chose an excessive amount of low-risk investments (such that one wouldn't be able to attain reasonable investing goals), then I'd probably file the risk under psychological risk, e.g. overly cautious / excessive risk aversion. Yet, the term "psychological risk", with respect to investing, encompasses other situations as well (e.g. chasing high returns.) FWIW, the risk of underperformance also came to mind, but I think that's mostly used to describe the risk of choosing, say, an actively-managed fund (or individual stocks) over a passive benchmark index investment more likely to match market returns. |
What to do with $50,000? | Considered a down payment on a house? Some illiquid assets? Otherwise you are doing 'responsible' get rich slow (read: get rich old) type things. And this question only invites opinion based answer. You tried futures and don't want to take that kind of risk again with your $50,000, so thats that |
Does reading financial statements (quarterly or annual reports) really help investing? | Wow, I cannot believe this is a question. Of course reading the 10Ks and 10Qs from the SEC are incredibly beneficial. Especially if you are a follower of the investing gurus such as Warren Buffett, Peter Lynch, Shelby Davis. Personally I only read the 10K's I copy the pertinent numbers over to my spreadsheets so I can compare multiple companies that I am invested in. I'm sure there are easier ways to obtain the data. I'm a particular user of the discounted free cash flow methodology and buying/selling in thirds. I feel like management that says what they are going to do and does it (over a period of years) is something that cannot be underestimated in investing. yes, there are slipups, but those tend to be well documented in the 10Qs. I totally disagree in the efficient market stuff. I tend to love using methodologies like Hewitt Heisermans " It's Earnings that Count" you cannot do his power-staircase without digging into the 10Qs. by using his methodology I have several 5 baggers over the last 5 years and I'm confident that I'll have more. I think it is an interesting factoid as well that the books most recommended for investing in stocks on Amazon all advocate reading and getting information from 10Ks. The other book to read is Peter Lynch's one-up-wall-street. The fact is money manager's hands are tied when it comes to investing, especially in small companies and learning over the last 6 years how to invest on my own has given me that much more of my investing money back rather than paying it to some money manager doing more trades than they should to get commision fees. |
Can you buy out a pink sheet listed company by purchasing all of the oustanding shares? | Sure. No-one promises that all the outstanding stocks are ever for sale, but if you get them all - you get them all, what marketplace you used for that doesn't really matter. |
Do stocks give you more control over your finances than mutual funds? | The issue with trading stocks vs. mutual funds (or ETFs) is all about risk. You trade Microsoft you now have a Stock Risk in your portfolio. It drops 5% you are down 5%. Instead if you want to buy Tech and you buy QQQ if MSFT fell 5% the QQQs would not be as impacted to the downside. So if you want to trade a mutual fund, but you want to be able to put in stop sell orders trade ETFs instead. Considering mutual funds it is better to say Invest vs. Trade. Since all fund families have different rules and once you sell (if you sell it early) you will pay a fee and will not be able to invest in that same fund for x number of days (30, 60...) |
Should I pay cash or prefer a 0% interest loan for home furnishings? | A friend recently bought an 800€ TV on 0% financing. Sounded like a sensible thing to do. Why pay 800 when you can pay 80pm for 10 months? It took 30mins to set up the 'loan'. She had to sign all kinds of documents, giving away much personal information (age, employment info, income, email address etc). She now has a financial relationship with an institution which has nothing to do with the item purchased. She is bombarded with all kinds of financial offerings. She regrets taking out the finance. She had the money. The hassle and the unwanted links to banks make the deal unattractive. Perhaps she should have tried to make a cash deal... |
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? | Plus, there's the feeling my parents want me to have a house in case we can't save the one we (my mom and brothers) all live in. First, you should not be forced to buy a home because your parents are telling you to. You should have your own life. Period. That said, while you are doing well from a salary perspective, your savings are somewhat borderline for a purchase if you ask me. Meaning your savings would essentially be the full downpayment & then your whole paycheck basically becomes payments on the mortgage. Not a good situation to be in. My advice would be that if you can invest in something smaller—like a small apartment for yourself—that is what you should purchase. That would allow you to invest in something but not be completely financially drained by the prospect. And then in a few years, you can sell that apartment & move onto something else. Perhaps a house at that stage? But right now, a full home purchase would be a fairly massive risk. |
Why UK bank charges are not taken account when looking on interest for taxation? | When I left the UK four years ago, free banking is still an option and I'm pretty sure it still is. Therefore, you have chosen to have a bank account with a 5.00/month charge. In return for this charge, you will be eligible to receive certain benefits. For example; reduced borrowing costs, discounted mortgage rates, free overdraft on small amounts, "rewards" for paying household bills by direct debit, and things of this sort. Amongst these benefits may be preferential savings rates. However, from HMRC's point of view it will be the extra perks you are paying for with your monthly charge. You have chosen to pay for the account and HMRC is not interested in how you choose to spend your money, only in the money you earn. While I agree with you that it does have an element of unfairness, the problem is how would you divide the cost amongst the various benefits. |
How do amortization schedules work and when are they used? | Simply put, for a mortgage, interest is charged only on the balance as well. Think of it this way - on a $100K 6% loan, on day one, 1/2% is $500, and the payment is just under $600, so barely $100 goes to principal. But the last payment of $600 is nearly all principal. By the way, you are welcome to make extra principal payments along with the payment due each month. An extra $244 in this example, paid each and every month, will drop the term to just 15 years. Think about that, 40% higher payment, all attacking the principal, and you cut the term by 1/2 the time. |
Does the bid/ask concept exist in dealer markets? | The Auction Market is where investors such you and me, as well as Market Makers, buy and sell securities. The Auction Markets operate with the familiar bid-ask pricing that you see on financial pages such as Google and Yahoo. The Market Makers are institutions that are there to provide liquidity so that investors can easily buy and sell shares at a "fair" price. Market Makers need to have on hand a suitable supply of shares to meet investor demands. When Market Makers feel the need to either increase or decrease their supply of a particular security quickly, they turn to the Dealer Market. In order to participate in a Dealer Market, you must be designated a Market Maker. As noted already, Market Makers are dedicated to providing liquidity for the Auction Market in certain securities and therefore require that they have on hand a suitable supply of those securities which they support. For example, if a Market Maker for Apple shares is low on their supply of Apple shares, then will go the Dealer Market to purchase more Apple shares. Conversely, if they are holding what they feel are too many Apple shares, they will go to the Dealer Market to sell Apple shares. The Dealer Market does operate on a bid-ask basis, contrary to your stated understanding. The bid-ask prices quoted on the Dealer Market are more or less identical to those on the Auction Market, except the quote sizes will be generally much larger. This is the case because otherwise, why would a Market Maker offer to sell shares to another Market Maker at a price well below what they could themselves sell them for in the Auction Market. (And similarly with buy orders.) If Market Makers are generally holding low quantities of a particular security, this will drive up the price in both the Dealer Market and the Auction Market. Similarly, if Market Makers are generally holding too much of a particular security, this may drive down prices on both the Auction Market and the Dealer Market. |
File bankruptcy, consolidate, or other options? | If your parents can afford to shell out $1,250 a month for 5 years, they would pretty much have the debt paid off, provided the credit card companies don't start playing games with rates. If that payment is too high, maybe you could kick in $5k every few months to knock the principal down. If they think the business can keep puttering along without losing more money, that may be the way to go. Five years is long enough that the business or property may have recovered some value. Another option, depending on the value of the home, could be a reverse mortgage. I don't know how the economy has affected those programs, but that might be a good option to get the debt cleared away. My grandfather was in a similar position back in the 70's. He owned taverns in NYC that catered to an industrial clientele... the place was booming in the 60s and my grandfather and his brother owned 4 locations at one point. But the death of his brother, post-Vietnam malaise, suburban exodus and shutting of industry really hurt the business, and he ended up selling out his last tavern in 1979 -- which was a dark hour in NYC history and real estate values. A few years later, that building sold for a tremendous amount of money... I believe 10x more. I don't know whether there was a way for his business to survive for another 5-7 years, as I was too young to remember. But I do remember my grandfather (and my father to this day) being melancholy about the whole affair. It's hard to have to work part-time in your 60's and be constantly reminded that your family business -- and to some degree a part of your life -- ended in failure. The stress of keeping things afloat when you're broke is tough. But there's also a mental reward from getting through a tough situation on your own. Good luck! |
Does the P/E ratio not apply to bond ETFs? | A bond fund has a 5% yield. You can take 1/.05 and think of it as a 20 P/E. I wouldn't, because no one else does, really. An individual bond has a coupon yield, and a YTM, yield to maturity. A bond fund or ETF usually won't have a maturity, only a yield. |
Cannot get a mortgage because I work through a recruiter | To a mortgage lender, it appears that you have a temporary contract (perhaps extending for nine more months) with a agency that supplies workers to companies that need temporary help. You have been placed currently with a company and are making good money, but that job might disappear soon and then you will have no income while your recruiter tries to find you another assignment. How will you make your mortgage payments then? The recruiter agency's contract with your current company probably has clauses to the effect that the company agrees to not offer you a permanent job unless it pays a head-hunter's fee to the recruiter agency. Your contract with the recruiter agency also likely has clauses to the effect that if the company where you have been placed offers you a permanent job, you must pay the recruiter company a fee (typically one or two months of salary) to the recruiter agency as compensation for releasing you from your current contract (unless the company hiring you pays the head-hunter's fee). This is why the company where you are working right now wants to wait until after your contract with the recruiter company ends before making you an offer of permanent employment. Be aware that sometimes such clauses extend out to three months after the ending date of your contract with the recruiter company. As far as the condo is concerned, unless there is a specific one that you absolutely must have because it has an ocean view or other desirable properties, you may well find that another condo in the same complex is available some months from now. If you are lucky, it may well have an acceptable ocean view. If you are even luckier, it may be the condo that you absolutely must have which has remained unsold all that time -- as you said, the economy is crappy -- and you will be able to buy it for a lower price from an owner getting desperate to make a sale. To answer your question: is there any way around this? My recommendation is to simply wait out the end of your recruiter agency contract and get a permanent job with the company where you have been placed. Then there are no issues. If not, get your company to make a written offer of a permanent job starting nine months from now and hope that this (together with your current employment) impresses your bank into lending you money. This might not work, though. In the early 1970s, one of my friends was offered a job at a large aerospace company which lost a major contract in the interim period between offer and joining. My friend showed up for work on the day he was supposed to start, and instead of being processed through HR etc, his job was terminated on the spot, he was paid one day's salary, and shown the door. Times were crappy then too. If this does not work, get your company to offer you a permanent job right away, pay off the recruiter company yourself, and then go to the bank. |
What does it mean for issuing corporations to “crank out expensive shares when markets are frothy … and issue debt when markets are cheap”? | crank out expensive shares when markets are frothy Corporations go public (sell their shares for the first time) in market conditions that have a lot of liquidity (a lot of people buying shares) and when they have to make the fewest concessions to appease an investing public. When people are greedy and looking to make money without using too much due diligence. Think Netscape's IPO in 1995 or Snapchat's IPO in 2017. They also issue more shares after already being public in similar circumstances. Think Tesla's 1 billion dollar dilution in 2017. Dilution results in the 1 share owning less of the company. So in a less euphoric investing environment, share prices go down in response to dilution. See Viggle's stock for an example, if you can find a chart. issue debt Non-financial companies create bonds and sell bonds. Why is that surprising to you? Cash is cash. This is called corporate bonds or corporate debt. You can buy Apple bonds right now if you want from the same brokers that let you buy stocks. mutual fund investor Bernstein is making a cynical assessment of the markets which carries a lot of truth. Dumping shares on your mom's 401k is a running gag amongst some financial professionals. Basically mutual fund investors are typically the least well researched or most gullible market participants to sell to, influenced by brand name more than company fundamentals, who will balk at the concept of reading a prospectus. Financial professionals and CFOs have more information than their investors and can gain extended advantages because of this. Just take the emotions out of it and make objective assessments. |
Expensive agenda book/organizer. Office expense or fixed asset? | I cannot imagine an organizer being worth enough to consider depreciating the expense over a period of time greater than one year. Also, once you write in an organizer, it's pretty much worthless to anyone else. Talk to your accountant if you'd like, but I cannot see how you would classify a fancy organizer as a fixed asset. |
1.4 million cash. What do I do? | At 1.4 Million, you can definately afford a professional advisor who would give you the best advice taking into account all your goals and risk appetite. |
Should I get a personal loan to pay on my mortgage to go “above water” to qualify for a refinance? | Let's say you owe $200K (since you didn't mention balance. If you do, I'd edit my response), and can get 4.5%. You'd save 1.5% or about $3K/yr the first few years. If a $12K paydown is all that's between you and and refi I'd figure out a way. There are banks that are offering refi's under the HARP program if your current mortgage is owned by FNMA or FMAC which permit even if under water. So, the first step is research to see if you can refi exactly what's owed, failing that, shop around. A 401(k) loan will not appear as a loan on your credit report, that may be one way to raise the $12K. The best thing you can do is put all the savings into the 401(k) to really get it going. |
What is the point of the stock market? What is it for, and why might someone want to trade or invest? | The stock market is just like any other market, but stocks are bought and sold here. Just like you buy and sell your electronics at the electronics market, this is a place where buyers and sellers come together to buy and sell shares or stocks or equity, no matter what you call it. What are these shares? A share is nothing but a portion of ownership of a company. Suppose a company has 100 shares issued to it, and you were sold 10 out of those, it literally means you are a 10% owner of the company. Why do companies sell shares? Companies sell shares to grow or expand. Suppose a business is manufacturing or producing and selling goods or services that are high in demand, the owners would want to take advantage of it and increase the production of his goods or services. And in order to increase production he would need money to buy land or equipment or labor, etc. Now either he could go get a loan by pledging something, or he could partner with someone who could give him money in exchange for some portion of the ownership of the company. This way, the owner gets the money to expand his business and make more profit, and the lender gets a portion of profit every time the company makes some. Now if the owner decides to sell shares rather than getting a loan, that's when the stock market comes into the picture. Why would a person want to trade stocks? First of all, please remember that stocks were never meant to be traded. You always invest in stocks. What's the difference? Trading is short term and investing is long term, in very simple language. It's the greed of humans which led to this concept of trading stocks. A person should only buy stocks if he believes in the business the company is doing and sees the potential of growth. Back to the question: a person would want to buy stocks of the company because: How does a stock market help society? Look around you for the answer to this question. Let me give you a start and I wish everyone reading this post to add at least one point to the answer. Corporations in general allow many people come together and invest in a business without fear that their investment will cause them undue liability - because shareholders are ultimately not liable for the actions of a corporation. The cornerstone North American case of how corporations add value is by allowing many investors to have put money towards the railroads that were built across America and Canada. For The stock market in particular, by making it easier to trade shares of a company once the company sells them, the number of people able to conveniently invest grows exponentially. This means that someone can buy shares in a company without needing to knock door to door in 5 years trying to find someone to sell to. Participating in the stock market creates 'liquidity', which is essentially the ease with which stocks are converted into cash. High liquidity reduces risk overall, and it means that those who want risk [because high risk often creates high reward] can buy shares, and those who want low risk [because say they are retiring and don't have a risk appetite anymore] can sell shares. |
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? | I thought the other answers had some good aspect but also some things that might not be completely correct, so I'll take a shot. As noted by others, there are three different types of entities in your question: The ETF SPY, the index SPX, and options contracts. First, let's deal with the options contracts. You can buy options on the ETF SPY or marked to the index SPX. Either way, options are about the price of the ETF / index at some future date, so the local min and max of the "underlying" symbol generally will not coincide with the min and max of the options. Of course, the closer the expiration date on the option, the more closely the option price tracks its underlying directly. Beyond the difference in how they are priced, the options market has different liquidity, and so it may not be able to track quick moves in the underlying. (Although there's a reasonably robust market for option on SPY and SPX specifically.) Second, let's ask what forces really make SPY and SPX move together as much as they do. It's one thing to say "SPY is tied to SPX," but how? There are several answers to this, but I'll argue that the most important factor is that there's a notion of "authorized participants" who are players in the market who can "create" shares of SPY at will. They do this by accumulating stock in the constituent companies and turning them into the market maker. There's also the corresponding notion of "redemption" by which an authorized participant will turn in a share of SPY to get stock in the constituent companies. (See http://www.spdrsmobile.com/content/how-etfs-are-created-and-redeemed and http://www.etf.com/etf-education-center/7540-what-is-the-etf-creationredemption-mechanism.html) Meanwhile, SPX is just computed from the prices of the constituent companies, so it's got no market forces directly on it. It just reflects what the prices of the companies in the index are doing. (Of course those companies are subject to market forces.) Key point: Creation / redemption is the real driver for keeping the price aligned. If it gets too far out of line, then it creates an arbitrage opportunity for an authorized participant. If the price of SPY gets "too high" compared to SPX (and therefore the constituent stocks), an authorized participant can simultaneously sell short SPY shares and buy the constituent companies' stocks. They can then use the redemption process to close their position at no risk. And vice versa if SPY gets "too low." Now that we understand why they move together, why don't they move together perfectly. To some extent information about fees, slight differences in composition between SPY and SPX over time, etc. do play. The bigger reasons are probably that (a) there are not a lot of authorized participants, (b) there are a relatively large number of companies represented in SPY, so there's some actual cost and risk involved in trying to quickly buy/sell the full set to capture the theoretical arbitrage that I described, and (c) redemption / creation units only come in pretty big blocks, which complicates the issues under point b. You asked about dividends, so let me comment briefly on that too. The dividend on SPY is (more or less) passing on the dividends from the constituent companies. (I think - not completely sure - that the market maker deducts its fees from this cash, so it's not a direct pass through.) But each company pays on its own schedule and SPY does not make a payment every time, so it's holding a corresponding amount of cash between its dividend payments. This is factored into the price through the creation / redemption process. I don't know how big of a factor it is though. |
W2 vs 1099 Employee status | In general that's illegal. If you're a W2 employee, you don't miraculously become a 1099 contractor just because they pay you more. If your job doesn't change - then your status doesn't change just because they give you a raise. They can be sued (by you, and by the IRS) for that. Other issues have already been raised by other respondents, just wanted to point out this legal perspective. |
What evidence is there that rising interest rates causes Canadian condo prices to go down? | In general, prices are inversely proportional to rates; however, accurate interest rate prediction would make one worthy of managing a large credit derivative hedge fund. This is not to say that interest rates cannot go up in Canada since the world is currently undergoing a resource bust, and the United States has begun exporting more oil, even trying to recently open the market to Europe, both of which Canada is relatively dependent upon. Also, to say that Canada currently has the most overpriced real estate is an oversight to say the least considering China currently has entire cities that are empty because prices are too high. A ten to twenty percent drop in real estate prices would probably be a full blown financial crisis, and since mortgage rates are currently around 2.5%, a one to two hundred basis point rise could mean a nearly 50% decrease in real estate prices if interest payments are held constant. Canada would either have to start growing its economy at a much higher rate to encourage the central bank to raise rates to such a height, or oil would have to completely collapse suddenly to cause a speculatively possible collapse of CAD to encourage the same. The easiest relationship to manipulate between prices and rates is the perpetuity: where p is the price, i is the interest payment, and r is the interest rate. In this case, an increase of r from 2.5% to 4.5% would cause a 44.5% decrease in p if i is held constant. However, typical Canadian mortgages seem to mature in ten years at a fixed rate, so i cannot be held constant, and the relationship between r and p is less strong at earlier maturities, thus the most likely way for prices to collapse is for a financial collapse as described above. |
How do I adjust to a new social class? | I live in one of the highest cost of living areas in my country. For the cost of less than half the down payment my spouse and I have saved up for a house we could easily buy a home in most of the lower cost of living areas (and several homes in, say, Detroit). As for the rest of your question, though, we've chosen not to live that way. Because, like all high cost of living areas, ours is near a city there are more free and inexpensive things to do than you would think at first. While others in our area think a great time is pre-gaming drinks at a nice bar, an expensive restaurant, then some more drinks we've taught ourselves how to make great meals from scratch using sale and inexpensive ingredients from the grocery store and often do that on weekends, topped off by a movie from the redbox that we promptly return the next day. We have chosen friends who will hang out with us over potluck dinners and board games instead of out on the town. On weekend days we visit free museums, do hikes, wander around revitalized downtown strips, or play at the local parks. Our groceries, as I mentioned, are sale items or use coupons and we go for less expensive meats and produce. We visit our local farmer's market for fun, not to buy the expensive produce. We might find ourselves wandering through the mall to window shop, but when it comes time to actually buy clothing or goods for the apartment we shop around for up to months to find a good deal. Plenty of our friends have money enough to spend, and the most debt they are usually wallowing in is a big car payment, no consumer debt. At the same time I have trouble imagining some of them buying a house any time soon, because they simply can't be saving all that much (since I know their incomes). They may eventually be able to afford a condo and ride rising housing prices to a townhome and then a house - it's what lots of people do around here, loosing buckets money in realtor fees and closing costs along the way. Even with these choices, it's hard to view my friends as selfish knowing that most of them give around 10% of their income to charity. There are probably plenty of people around here swimming in debt (somebody recently asked in a Q&A with the local paper editors how she could stop going to the city's most expensive restaurants and start living within her means when she only liked expensive places), but lots of folks can stretch themselves and afford to get by while wasting a lot of money. It's not what my spouse and I have chosen to do, because we want to be able to live very responsibly and plan for a rainy day, but the longer you live with and around the money that tends to permeate high cost of living areas, the more it will seem normal to you. Also, if it's really $1000/mo for a 2 br. apartment, your cost of living is still lower than mine is. If I were you I wouldn't try to acclimate myself to the spendy habits of your surroundings. Instead I'd find friends who are frugal and work on maintaining your good financial habits. If you ever want one of those $4, $5, or $6K (plus!) houses, you're going to need them. |
Consequences of not closing an open short sell position? | 2 things may happen. Either your positions are closed by the broker and the loss or profit is credited to your account. Else it is carried over to the next day and you pay interest on the stocks lent to you. What happens will be decided by the agreement signed between you and your broker. |
How do credit card payments work? What ensures the retailer charges the right amount? | When you give your credit card number and authorize a merchant to charge your credit card, the merchant then gives the information to their merchant processor which in turns bills the bank that issued the card (it's a little more complex and it all happens instantly unless the merchant is using the very old fasion imprinting gizmos). It is possible for a merchant to attempt to charge you more than you authorized but if they do they risk a fine ($25-$50 for a chargeback) from their processor, the legitimate portion of the charge as well as increasing the processing fees charged by their processor or even the possibility of loosing their merchant account entirely and being permanently blacklisted by Visa/Mastercard. In short no legitimate business is going to intentionally over charge your credit card. There really isn't significant risk in using a reputable online retailer's order forms. There is the possibility that their database could be compromised but that risk is lower than the risk of having an employee steal your credit number when you give it to them in person. Besides in the US at least the most you can legally be held liable for is $50 assuming you notice the discrepancy within 60 days of statement the charge appears on and most banks limit liability to $0. Over the years I have had a number of different credit card numbers stolen and used fraudulently and I have never had to pay any fraudulent charges. |
Is giving my girlfriend money for her mortgage closing costs and down payment considered fraud? | There is not any fraud involved. Anybody can gift money to another person. |
Withdraw funds with penalty or bear high management fees for 10 years? | To me, it depends. How much are their total assets? Having 10% of your money in something like that isn't crazy. having it all in? That IS crazy. Can they reduce their exposure to this account without paying a penalty (say pull out 10%?) The Manager should be taking direction from them. If they aren't able to get the manager to re-allocate to something more suitable, under your friends direction, they should then pursue whether or not the manager is operating lawfully. |
What could be the cause of a extreme high/low price in after hours market? | Many of the above comments are correct about illiquidity. If someone needs to trade at a time of low liquidity, for instance when the markets are closed, the bid/ask spread can often be large to induce someone to trade at odd times. Especially as the broker/bank on the other side of the trade can't immediately go to the market to close out the risk as they often prefer to do. In this case the jump is actually is large but not that large (~4%). Note this trade price is near the close price on the day before. The system I use shows a trade that evening for 5 shares near the price on the graph. If you called me after I was done with work and tried to buy 5 shares I'd quote you a bad price too. |
What types of receipts do I need to keep for itemized tax deductions? | I would say to only bother keeping the ones you know you'll use for itemized deductions. This includes any unreimbursed business expenses and vehicle licensing fees. There are a lot of other itemized tax deductions possible, but those are two common ones. Also, keep track of your business mileage (mileage before and after the trip, and commuting doesn't count as "business mileage"). You may also want to keep receipts of all out-of-state purchases if your state is one of those that tries to collect state tax on out-of-state purchases. Ensure your supported charities are 501(c)(3), and they'll give you a receipt at the end of the year. Don't bother keeping fast food or gas receipts (unless they're business expenses). |
How do I determine how much rent I could charge for a property or location? | This may not be entirely scientific, but as a landlord my usual approach is just to do a search for rental properties on Craigslist for comparable homes in the neighborhood. There are all kinds of formulas professional property managers use, but in the end these listings are the ones you are going to be competing with for tenants. Also, it isn't super accurate, but online services like Zillow.com can give you some numbers for rental houses that include those that aren't currently advertising. |
When would one actually want to use a market order instead of a limit order? | After learning about things that happened in the "flash crash" I always use limit orders. In an extremely rare instance if you place a market order when there is a some glitch, for example some large trader adds a zero at the end of their volume, you could get an awful price. If I want to buy at the market price, I just set the limit about 1% above the market price. If I want to sell, I set the limit 1% below the market price. I should point out that your trade is not executed at the limit price. If your limit price on a buy order is higher than the lowest offer, you still get filled at the lowest offer. If before your order is submitted someone fills all offers up to your limit price, you will get your limit price. If someone, perhaps by accident, fills all orders up to twice your limit price, you won't end up making the purchase. I have executed many purchases this way and never been filled at my limit price. |
What's the best way to make money from a market correction? | Depends on how long you're willing to invest for. Broadly speaking, the best (by which I mean, more reliably repeatable) way to make money from market corrections is to accept them as a fact of life, and not sell in a panic when they happen, such that the money you already invested can ride back up again. Put another way, just invest your money in one or two broad, low cost index funds with dividends reinvested (maybe spreading your investment over the course of six months or so) and then let time do its work. Have you worked out how much you've missed out on by holding your money as cash all this time (I presume you've been saving up a while) instead of investing it as you went? I suspect that by waiting for your correction, you've already missed out on more than you're going to make from that correction. |
Does gold's value decrease over time due to the fact that it is being continuously mined? | does it mean uncontrolled severe deflation/inflation is more likely to occur compared to "normal" currencies such as USD, EUR etc? Look at the chart referenced in the link in your question. It took approximately 50 years for annual production of gold to double from 500 tons to 1000 tons. It took approximately 40 years for annual production to double from 1000 tons to 2000 tons. Compare that to the production of US dollars by the Federal Reserve (see chart below obtained from here). US dollar production doubled in DAYS. Which one do you think will lead to uncontrolled inflation/deflation? Update: Why did I include a chart of the FED's balance sheet? Because this is the way newly printed money is introduced - the FED will purchase something from banks (mortgage-backed securities, US treasuries, etc.) with newly printed money. The banks can then loan this money to people who then deposit the money into other banks who loan those deposits to other people and so on. This is how the fractional reserve process expands the money supply. This is why I did not include a chart of the money supply since that is counting the same money multiple times. If I deposited 100 newly minted coins into a bank and that bank proceeded to loan out 80 of my coins where 80 are deposited into another bank who then proceeds to loan out 60 of the coins, and so on....the production of coins only changed by the initial 100 that I minted - not by the fractional reserve multiple. There are historical examples of inflation with gold and silver as duff has pointed out. None of them come close in magnitude to the inflation experienced with government fiat money. |
What are the common income tax deductions used by “rich” salaried households? | The $250K and up are not one homogeneous group. The lower end of this group benefits from normal Schedule A itemized deductions, e.g. mortgage interest, property tax, state income tax, and charitable donations. As you mention, 401(k) ($17k employee contribution limit this year), but also things like the dependent care account ($5k limit) and flexible spending account, limited usually up to $2500 in '14. The 529 deposits are limited to the gifting limit, $14K in 2014, but one can gift up to five years' deposits up front. This isn't a tax deduction, but does pull money out of one's estate and lets it grow tax free similar to a Roth IRA. The savings from such accounts is probably in the $15k - $20K range given the 20 or so year lifetime of the account and limited deposits. At the higher end, the folks making the news are those whose income is all considered capital gains. This applies both to hedge fund managers as well as CEOs whose compensation included large blocks of stock. This isn't a tax deduction, but it's how our system works, the taxation of capital gains vs. ordinary income. |
What could be the harm in sharing my American Express statements online? | American Express is great for this use case -- they have two user roles "Account Agent" and "Account Manager" which allow you to designate logins to review your account details or act on your behalf to pay bills or request service. This scheme is designed for exactly what you are doing and offers you more security and less hassle. More details here. |
How to pay with cash when car shopping? | I have in the last few years purchased several used cars from dealers. They have handled it two different ways. They accepted a small check ~$1,000 now, and then gave me three business days to bring the rest as a cashiers check. They also insisted that I submit a application for credit, in case I needed a loan. They accepted a personal check on the spot. Ask them before you drive to the dealer. Of course they would love you to get a loan from them. |
Starting long-term savings account as a college student | Where is the money coming from? If you already have the money (inheritance, gifts or similar) sitting in your account, you can just buy e.g. index funds from Vanguard, Robinhood or other low-cost brokerages. But first you should estimate how much money you need for your studies - it is a bit of a gamble to invest money that you'll need to withdraw in a few years time. Even though the average return may be quite high (12% sounds like an overestimate, more commonly quoted figure is 7%), over short timespans your stocks will go up and down randomly. Once you actually have a job and have income from it, then the 401k and IRA and similar retirement accounts start to make sense. There is no need to have all your savings in the same account, so you can start saving now already. |
Should I include retirement funds in calculating my asset allocation? | I separate them out, simply because they're for different purposes, with different goals and time-frames, and combining them may mask hidden problems in either the retirement account or the regular account. Consider an example: A young investor has been working on their retirement planning for a few years now, and has a modest amount of retirement savings (say $15,000) allocated carefully according to one of the usually recommended schemes. A majority exposure to large cap U.S. stocks, with smaller exposures to small cap, international and bond markets. Years before however, they mad an essentially emotional investment in a struggling manufacturer of niche personal computers, which then enjoyed something of a renaissance and a staggering growth in shareholder value. Lets say their current holdings in this company now represent $50,000. Combining them, their portfolio is dominated by large cap U.S. equities to such an extent that the only way to rebalance their portfolio is to pour money into bonds and the international market for years on end. This utterly changes the risk profile of their retirement account. At the same time, if we switch the account balances, the investor might be reassured that their asset allocation is fine and diversified, even though the assets they have access to before retirement are entirely in a single risky stock. In neither case is the investor well served by combining their funds when figuring out their allocation - especially as the "goal" allocations may very well be different. |
Is it sensible to redirect retirement contributions from 401(k) towards becoming a landlord? | Here are the issues, as I see them - It's not that I don't trust banks, but I just feel like throwing all of our money into intangible investments is unwise. Banks have virtually nothing to do with this. And intangible assets has a different meaning than you assume. You don't have to like the market, but try to understand it, and dislike it for a good reason. (Which I won't offer here). Do your 401(k) accounts offer company match? When people start with "we'd like to reduce our deposits" that's the first thing we need to know. Last - you plan to gain "a few hundred dollars a month." I bet it's closer to zero or a loss. I'll return to edit, we have recent posts here that reviewed the expenses to consider, and I'd bet that if you review the numbers, you've ignored some of them. "A few hundred" - say it's $300. Or $4000/yr. It would take far less work and risk to simply save $100K in your retirement accounts to produce this sum each year. The investment may very well be excellent. I'm just offering the flip side, things you might have missed. Edit - please read the discussion at How much more than my mortgage should I charge for rent? The answers offer a good look at the list of expenses you need to consider. In my opinion, this is one of the most important things. I've seen too many new RE investors "forget" about so many expenses, a projected monthly income reverts to annual losses. |
Optimal down payment amount | The optimal down payment is 100%. The only way you would do anything else when you have the cash to buy it outright is to invest the remaining money to get a better return. When you compare investments, you need to take risk into account as well. When you make loan payments, you are getting a risk free return. You can't find a risk-free investment that pays as much as your car loan will be. If you think you can "game the system" by taking a 0% loan, then you will end up paying more for the car, since the financing is baked into the sales [price in those cases (there is no such thing as free money). If you pay cash, you have much more bargaining power. Buy the car outright (negotiating as hard as you can), start saving what you would have been making as a car payment as an emergency fund, and you'll be ahead of the game. For the inflation hedge - you need to find investments that act as an inflation hedge - taking a loan does not "hedge" against inflation since you'll still be paying interest regardless of the inflation rate. The fact that you'll be paying slightly less interest (in "real" terms) does not make it a hedge. To answer the actual question, if your "reinvestment rate" (the return you can get from investing the "borrowed" cash) is less than the interest rate, then the more you put down, the greater your present value (PV). If your reinvestment rate is less than the interest rate, then the less you put down the better (not including risk). When you incorporate risk, though, the additional return is probably not worth the risk. So there is no "optimal" down payment in between those mathematically - it will depend on how much liquid cash you need (knowing that every dollar that you borrow is costing you interest). |
Can one be non-resident alien in the US without being a resident anywhere else? | If you aren't a US National (citizen or Green Card holder or some other exception I know not of), you're an alien, no matter where else you may or may not be a citizen. If you don't meet the residency tests, you're nonresident. Simple as that. |
What is the best way to stay risk neutral when buying a house with a mortgage? | Note: I am making a USA-assumption here; keep in mind this answer doesn't necessarily apply to all countries (or even states in the USA). You asked two questions: I'm looking to buy a property. I do not want to take a risk on this property. Its sole purpose is to provide me with a place to live. How would I go about hedging against increasing interest rates, to counter the increasing mortgage costs? To counter increasing interest rates, obtaining a fixed interest rate on a mortgage is the answer, if that's available. As far as costs for a mortgage, that depends, as mortgages are tied to the value of the property/home. If you want a place to live, a piece of property, and want to hedge against possible rising interest rates, a fixed mortgage would work for these goals. Ideally I'd like to not lose money on my property, seeing as I will be borrowing 95% of the property's value. So, I'd like to hedge against interest rates and falling property prices in order to have a risk neutral position on my property. Now we have a different issue. For instance, if someone had opened a fixed mortgage on a home for $500,000, and the housing value plummeted 50% (or more), the person may still have a fixed interest rate protecting the person from higher rates, but that doesn't protect the property value. In addition to that, if the person needed to move for a job, that person would face a difficult choice: move and sell at a loss, or move and rent and face some complications. Renting is generally a good idea for people who (1) have not determined if they'll be in an area for more than 5-10 years, (2) want the flexibility to move if their living costs rises (which may be an issue if they lose wages), (3) don't want to pay property taxes (varies by state), homeowner's insurance, or maintenance costs, (4) enjoy regular negotiation (something which renters can do before re-signing a lease or looking for a new place to live). Again, other conditions can apply to people who favor renting, such as someone might enjoy living in one room out of a house rather than a full apartment or a person who likes a "change of scenes" and moves from one apartment to another for a fresh perspective, but these are smaller exceptions. But with renting, you have nothing to re-sell and no financial asset so far as a property is concerned (thus why some real estate agents refer to it as "throwing away money" which isn't necessarily true, but one should be aware that the money they invest in renting doesn't go into an asset that can be re-sold). |
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