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Does payment in goods count as “income” for tax purposes? | The IRS defines income quite specifically. On the topic What is Taxable and Nontaxable Income, they note: You can receive income in the form of money, property, or services. This section discusses many kinds of income that are taxable or nontaxable. It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties. Bartering, or giving someone wages (or similar) in something other than currency (or some other specifically defined things, like fringe benefits), is taxed at fair market value: Bartering Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. For additional information, Refer to Tax Topic 420 - Bartering Income and Barter Exchanges. Bartering is more specifically covered in Topic 420 - Bartering Income: You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 for information on filing an amended return. More details about income in general beyond the above articles is available in Publication 525, Taxable and Nontaxable Income. It goes into great detail about different kinds of income. In your example, you'd have to calculate the fair market value of an avocado, and then determine how much cash-equivalent you were paid in. The IRS wouldn't necessarily tell you what that value was; you'd calculate it based on something you feel you could justify to them afterwards. The way I'd do it would be to write down the price of avocados at each pay period, and apply a dollar-cost-averaging type method to determine the total pay's fair value. While the avocado example is of course largely absurd, the advent of bitcoins has made this much more relevant. Publication 525 has this to say about virtual currency: Virtual Currency. If your employer gives you virtual currency (such as Bitcoin) as payment for your services, you must include the fair market value of the currency in your income. The fair market value of virtual currency (such as Bitcoin) paid as wages is subject to federal income tax withholding, Federal Insurance Contribution Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. Gold would be fundamentally similar - although I am not sure it's legal to pay someone in gold; assuming it were, though, its fair market value would be again the definition of income. Similarly, if you're paid in another country's currency, the US dollar equivalent of that is what you'll pay taxes on, at the fair market value of that currency in US dollars. |
ESPP cost basis and taxes | If the $882 is reported on W2 as your income then it is added to your taxable income on W2 and is taxed as salary. Your basis then becomes $5882. If it is not reported on your W2 - you need to add it yourself. Its salary income. If its not properly reported on W2 it may have some issues with FICA, so I suggest talking to your salary department to verify it is. In any case, this is not short term capital gain. Your broker may or may not be aware of the reporting on W2, and if they report the basis as $5000 on your 1099, when you fill your tax form you can add a statement that it is ESPP reported on W2 and change the basis to correct one. H&R Block and TurboTax both support that (you need to chose the correct type of investment there). |
Is Stock Trading legal for a student on F-1 Visa in USA? [duplicate] | It is absolutely legal. While studying on a F-1 you would typically be considered a non-resident alien for tax purposes. You can trade stocks, just like any other foreigner having an account with a US- or non-US based brokerage firm. Make sure to account for profit made on dividends/capital gain when doing your US taxes. A software package provided by your university for doing taxes might not be adequate for this. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | I don't think there is a definite single answer for this. I think it largely depends on where you are on your financial journey. In the ideal world you'd have everything in bucket 2 built into your budget and be putting a little bit aside every paycheck to cover each of those things when they do come up but that takes a fair bit of discipline to do and experience (and data) to estimate reasonably. When you are just starting out in actually setting and keeping a budget or digging yourself out of CC debt/living paycheck to paycheck the odds are you aren't going to have the experience or disciple necessary to actually budget for those things in bucket 2 and even if you did the better option might well be to pay off that high interest debt you already have rather than saving up for an eventual expense. How ever as you start to improve your situation and pay off that debt, develop the disciple to set and follow a budget that is when you should start adding more of those things into your budget. How you track them doesn't really matter. A separate account at your bank. A total for a category in your budgeting software. An XLS file or even paper (ick). Ultimately it isn't about how you plan for and track things but more about actually doing that. So my question to the OP is where are you? If you already have a budget and do a good job of following it but don't have those items in it then consider that the next step in your financial journey. |
Is gold really an investment or just a hedge against inflation? | Over on Quantitative Finance Stack Exchange, I asked and answered a more technical and broader version of this question, Should the average investor hold commodities as part of a broadly diversified portfolio? In short, I believe the answer to your question is that gold is neither an investment nor a hedge against inflation. Although many studies claim that commodities (such as gold) do offer some diversification benefit, the most credible academic study I have seen to date, Should Investors Include Commodities in Their Portfolios After All? New Evidence, shows that a mean-variance investor would not want to allocate any of their portfolio to commodities (this would include gold, presumably). Nevertheless, many asset managers, such as PIMCO, offer funds that are marketed as "real return" or "inflation-managed" and include commodities (including gold) in their portfolios. PIMCO has also commissioned some research, Strategic Asset Allocation and Commodities, claiming that holding some commodities offers both diversification and inflation hedging benefits. |
What is the valuation of a company based on? | The textbook answer would be "assets-liabilities+present discounted value of all future profit". A&L is usually simple (if a company has an extra $1m in cash, it's worth $1m more; if it has an extra $1m in debt, it's worth $1m less). If a company with ~0 assets and $50k in profit has a $1m valuation, then that implies that whoever makes that valuation (wants to buy at that price) really believes one of two things - either the future profit will be significantly larger than $50k (say, it's rapidly growing); or the true worth of assets is much more - say, there's some IP/code/patents/people that have low book value but some other company would pay $1m just to get that. The point is that valuation is subjective since the key numbers in the calculations are not perfectly known by anyone who doesn't have a time machine, you can make estimates but the knowledge to make the estimates varies (some buyers/sellers have extra information), and they can be influenced by those buyers/sellers; e.g. for strategic acquisitions the value of company is significantly changed simply because someone claims they want to acquire it. And, $1m valuation for a company with $500m in profits isn't appropriate - it's appropriate only if the profits are expected to drop to zero within a couple years; a stagnant but stable company with $500m profits would be worth at least $5m and potentially much more. |
High-risk investing is better for the young? Why? | If you spent your whole life earning the same portfolio that amounts $20,000, the variance and volatility of watching your life savings drop to $10,000 overnight has a greater consequence than for someone who is young. This is why riskier portfolios aren't advised for older people closer to or within retirement age, the obvious complementary group being younger people who could lose more with lesser permanent consequence. Your high risk investment choices have nothing to do with your ability to manage other people's money, unless you fail to make a noteworthy investment return, then your high risk approach will be the death knell to your fund managing aspirations. |
In a competitive market, why is movie theater popcorn expensive? | I'm kind of shocked that no formal behavioral modeling has been proposed as an explanation yet. One such model would be steep (hyperbolic, quasi-hyperbolic) discounting. Consumers would rather pay for popcorn later than for an expensive movie ticket now. For instance, consumers might when purchasing the ticket see a low value of popcorn and view the ticket price as the whole price because they do not predict purchasing popcorn. Then when entering the theater, the present value of popcorn is very high and they purchase it. There might therefore be a market for a commitment device (such as a popcornless theater) to make the appropriate decision ex-ante. Another commitment device that seems to be practiced is when individuals sneak their own popcorn into the theater. They may not actually want the popcorn, but by bringing their own they ensure they do not purchase the theater's. |
How do investment banks evaluate a private firm going public? Is it based on the assets owned by the company? | Will the investment bank evaluate the worth of my company more than or less than 50 crs. Assuming the salvage value of the assets of 50 crs (meaning that's what you could sell them for to someone else), that would be the minimum value of your company (less any outstanding debts). There are many ways to calculate the "value" of a company, but the most common one is to look at the future potential for generating cash. The underwriters will look at what your current cash flow projections are, and what they will be when you invest the proceeds from the public offering back into the company. That will then be used to determine the total value of the company, and in turn the value of the portion that you are taking public. And what will be the owner’s share in the resulting public company? That's completely up to you. You're essentially selling a part of the company in order to bring cash in, presumably to invest in assets that will generate more cash in the future. If you want to keep complete control of the company, then you'll want to sell less than 50% of the company, otherwise you can sell as much or as little as you want. |
What's the best way to make money from a market correction? | The best way to make money during a market correction is to be a financial services company handling transactions for people who think they can beat the market, and charging a percentage commission on each transaction, while keeping your own money somewhere nice and safe, stable and low-fee. |
Settling house with husband during divorce. Which of these two options makes the most sense? | Both are close, but two notes - amiable or not, I'd rather have a deal that ends now, and nothing is hanging over my head to get or pay money on a future sale. 401(k) money is usually pre-tax, so releasing me from $10K of home equity is of more value than the $10K in a 401(k) that would net me $7K or so. As I commented to Joe, I'd focus on valuation. If your house is similar to those in the neighborhood, you might easily value it. If unique, the valuation may be tough. I'd spend a bit on an appraiser or two. |
Where can I buy stocks if I only want to invest a little bit at a time, and not really be involved in trading? | I'd look into ShareBuilder. You can buy stocks for as low as $2 each, and there is no minimum funding level. You have to be carefull about selling though, as they will charge you $10 each time you want to sell a stock, regardless of how much of it you want to sell. |
When following a buy and hold investment strategy, on what conditions should one sell? | Here's an easy test... Look at the investments in your portfolio and ask yourself whether if you had the cash value, would you buy those same investments today, because effectively that is what you are doing when you continue to hold. If the answer is no, sell and pick something else. Above all else, don't react to market swings, in most cases you are going to get it wrong and wind up losing more by making emotional decisions. |
Which practice to keep finances after getting married: joint, or separate? | We've had everything in one pot almost from day one of marriage. The key ingredients to making that arrangement work is to communicate about the money, and realize that you're in it together. Everything one person does affects the other. Separating finances compartmentalizes the "affecting one another" part and makes it a little clearer perhaps, but I can also see it creating a sense of entitlement: "This is my money." There should be a place for individual discretionary spending, of course, but I'm not sure that roping off that money is the best way to do it. It's less likely to be viable if there's one main breadwinner in the house. In our house, this is me. If we separated the finances like this, it would amount to giving my wife an allowance. Since she works harder at home than I do at work most of the time (she keeps the house, does meals and shopping, raises and schools our daughter, etc.) but just doesn't get paid for it, it would border on insult to her to treat the finances this way. |
Is it better to wait for a market downturn to do a Roth conversion? | On average, the market will be down 1 year out of 4. 26 of the last 100 years on the S&P were negative. The Roth conversion offers a unique opportunity to convert early in the year, and decide at tax time next year whether you are happy with the result. Of course, if your fund or stock is up, you are likely better off, paying the $1250 tax on the $5000 conversion that's now worth $6000 or more. If it's down, you can recharacterize. The volatility of the market helps makes this process more attractive. If my converted shares dropped quite a bit, the recharacterization is far more desirable than a small drop or no drop at all. Of course we don't wish for that drop, any more than we wish for our house to burn down to make our insurance pay off. To be clear, you'll benefit from a conversion she the market goes up. The downturn only lets you reverse the bad move. |
What kind of life insurance is cheaper? I'm not sure about term vs. whole vs. universal, etc | Whole life in most instances is a very bad plan. It's marketed as a life insurance policy wrapped in an investment but it does neither very well. The hidden caveat of whole life is that the investment goes away if you die. Say for example I have a $100,000 whole life insurance policy and over the years I have paid in enough to have a $15,000 cash value on the policy. If I die, my family gets $100,000 and the cash value is lost. With term life you can get a substantially higher amount of coverage for a smaller payment. If you invest the difference you end up not only with better coverage, but a better cash value from the difference if you don't die (which is what we all hope for anyways). As JackiYo said, your insurance should be designed around replacing lost income/value. You should get 10x your annual income in term life insurance. |
Save money in company for next year | As was once famously said, Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes. — Benjamin Franklin, 1789 It's very likely that either the company or you personally is going to have to pay taxes on that money. Really the only way to avoid it would be if the company spent that money on next year's expenses, and paid the bill before the end of this year. Of course you can only do that if the recipient is willing to receive their money so far in advance, which isn't necessarily the case since they would pay more taxes this year as a result. As for whether it's better to have the company pay the tax or for you to do as your accountant suggests, there are a lot of factors that go into that equation, and my gut feeling is that your accountant already ran it both ways and is suggesting the better choice. |
What are stock indexed funds and how do they lower taxes? | who computes the S&P 500? Standard and Poor's. Why are they sharing this information and Because that's what they do. This is a financial research company. how do they recuperate the costs inherent in computing the S&P 500? By charging clients for other information. The computing of the index itself is not all that complicated, its coming up with the index that's a problem. Once they've come up with the formula, and it became widely accepted, the computation itself is not an issue. But the fact that its so popular leads to the S&P brand recognition, and people come and pay good money for their other services (ratings and financial analysis of securities). They do more work for free. For example, the ratings of various government debts are being done by S&P for free (governments don't pay for that), while private bonds are rated for a fee (corporations pay to have their bonds rated). Also, as noted by JBKing, there are probably some licensing fees for using the index name in the fund name (and other users are probably paying the licensing fee, like the news agencies and the exchanges). S&P500 is a registered trademark, and as such cannot be used without the owner's permission. Why is then "active management" not required for indexed funds Because no research and stock picking is required. In fact, these funds don't really require a manager, they can be managed by a simple script. and how does it lower taxes? (perhaps this could be a different question if this has become too broad) Actively managed funds perform a lot more buy/sell operations, each leading to tax consequences to the fund (which rolls them over to the investors). Index funds only buy and sell to re-balance back to the index (or when the makeup of the index changes, usually once a year or half a year), leading to much lesser realized capital gains to the fund, thus much lesser tax consequences. |
Why do the 1 and 2 euro cent coins exist and why are they used? | While dealing with US pennies and not 1 and 2 cent euro pieces, you may find this Wikipedia article of interest and analogous: Penny debate in the United States This article briefly summarizes both the arguments for and against retaining the one cent piece. The arguments against include: Arguments for preservation include: Already a number of countries have removed their equivalents of the one and two cent coins, including New Zealand, Sweden, Australia, Israel, and Brazil (to name a few). |
Is the return on investment better with high or low dividends? | Someone (I forget who) did a study on classifying total return by the dividend profiles. In descending order by category, the results were as follows: 1) Growing dividends. These tend to be moderate yielders, say 2%-3% a year in today's markets. Because their dividends are starting from a low level, the growth of dividends is much higher than stocks in the next category. 2) "Flat" dividends. These tend to be higher yielders, 5% and up, but growing not at all, like interest on bonds, or very slowly (less than 2%-3% a year). 3) No dividends. A "neutral" posture. 4) Dividend cutters. Just "bad news." |
How does stock dilution work in relation to share volume? | Here is an example for you. We have a fictional company. It's called MoneyCorp. Its job is to own money, and that's all. Right now it owns $10,000. It doesn't do anything special with that $10,000 - it stores it in a bank account, and whenever it earns interest gives it to the shareholders as a dividend. Also, it doesn't have any expenses at all, and doesn't pay taxes, and is otherwise magic so that it doesn't have to worry about distractions from its mathematical perfection. There are 10,000 shares of MoneyCorp, each worth exactly $1. However, they may trade for more or less than $1 on the stock market, because it's a free market and people trading stock on the stock market can trade at whatever price two people agree on. Scenario 1. MoneyCorp wants to expand. They sell 90,000 shares for $1 each. The money goes in the same bank account at the same interest rate. Do the original shareholders see a change? No. 100,000 shares, $100,000, still $1/share. No problem. This is the ideal situation. Scenario 2: MoneyCorp sells 90,000 shares for less than the current price, $0.50 each. Do the original shareholders lose out? YES. It now has something like $55,000 and 100,000 shares. Each share is now worth $0.55. The company has given away valuable equity to new shareholders. That's bad. Why didn't they get more money from those guys? Scenario 3: MoneyCorp sells 90,000 shares for more than the current price, $2 each, because there's a lot of hype about its business. MoneyCorp now owns $190,000 in 100,000 shares and each share is worth $1.90. Existing shareholders win big! This is why a company would like to make its share offering at the highest price possible (think, Facebook IPO). Of course, the new shareholders may be disappointed. MoneyCorp is actually a lot like a real business! Actually, if you want to get down to it, MoneyCorp works very much like a money-market fund. The main difference between MoneyCorp and a random company on the stock market is that we know exactly how much money MoneyCorp is worth. You don't know that with a real business: sales may grow, sales may drop, input prices may rise and fall, and there's room for disagreement - that's why stock markets are as unpredictable as they are, so there's room for doubt when a company sells their stock at a price existing shareholders think is too cheap (or buys it at a price that is too expensive). Most companies raising capital will end up doing something close to scenario 1, the fair-prices-for-everyone scenario. Legally, if you own part of a company and they do something a Scenario-2 on you... you may be out of luck. Consider also: the other owners are probably hurt as much as you are. Only the new shareholders win. And unless the management approving the deal is somehow giving themselves a sweetheart deal, it'll be hard to demonstrate any malfeasance. As an individual, you probably won't file a lawsuit either, unless you own a very large stake in the company. Lawsuits are expensive. A big institutional investor or activist investor of some sort may file a suit if millions of dollars are at stake, but it'll be ugly at best. If there's nothing evil going on with the management, this is just one way that a company loses money from bad management. It's probably not the most important one to worry about. |
Where can I get interesting resources on Commodities? | Here are some pretty big name news agencies which have a section dedicated to commodities: CNN Bloomberg Reuters |
Using Euros to buy and sell NASDAQ stocks | Either way you'll be converting to US Dollars somewhere along the line. You are seeking something that is very redundant |
Why is being “upside down” on a mortgage so bad? | Being underwater a little is not all that scary, but those who talk of being underwater are typically underwater by quite a lot. The amount of money they owe is large compared to their yearly income. Consider a metaphor. I put you in a hole. Its only 1 foot deep. You're not too concerned. If you want to leave, you can step out of it. Now we look at a deeper hole, 3 feet. Now you're still not too concerned. You can't just walk out, but if you need to get out you can wiggle your way up. 6 feet. Now you start getting nervous. Climbing out is getting trickier and trickier. You may not be able to move in response to a changing enviornment around you, because you're stuck in a hole. Now make the hole 10 feet. Now you can't reach the edges. Now you're in trouble. You have lost all mobility. You can't get out under your own power. Now if something bad happens (such as losing your job or a sudden health issue), you can't move around to solve the problem. This is the issue that arise from underwater mortgages. Say you lose your job because the job market in your area dried up (think Detroit in the big auto manufacturer crash). You need to move. You are legally endebted to a lender for your existing underwater house by more than you can sell it for. You need to pay for the privilege to sell it. You still owe payments on it, so if you just buy a new house (or rent) in the new state, you're paying for twice as much property. You can't just shuffle the underwaterness from your old house to your new house because the new lender has no interest in giving a loan for more than the value of the new home. The only options you have to play with is renting the old house, which many underwater families did, or bankrupcy. If the area you were in is depressed, you may not be able to rent the house for enough to cover your mortgage. This is the fear of being underwater. You have a piece of paper which claims some lender can take money from you that you may or may not have, and that the US government will allow them to take your assets, if need be, to settle the score. If you're underwater by a few thousand, it's typically not a big deal. If you're underwater by 80 or 90 thousand dollars, which some people were, that's a lot of money to be endebted for without the assets to recover them. If you subscribe to the realtor story that the market will recover, all you have to do is scrape by, holding on, until the market rises again. However, those who are underwater recognize that the reason much of this occurred is that we entered a bubble because realtors kept saying the market could only go up. Fool me once.... |
Should I finance a new home theater at 0% even though I have the cash for it? | I think so. I am doing this with our furniture. It doesn't cost me any more money to pay right now than it will to pay over the course of 3 years, and I can earn interest on the money I didn't spend. But know this: they aren't offering 0%, they are deferring interest for 3 years. If you pay it off before then great, if you don't you will owe all the accumulated interest. The key with these is that you always pay it, and on time. Miss a payment and you get hosed. If you don't pay on time you will owe the interest that is being deferred. They will also be financing this through a third party (like a major bank) and that company is now "doing business with you" which means in the US they can call you and solicit new services. I am willing to deal with those trade offs though, plus, as you say, you can always pay it off. WHY THEY DO IT (what is in it for them...) A friend of mine works for a major bank that often finances these deals here is how they work. Basically, banks do this to generate leads for their divisions that do cold calls. If you are a high credit, high income customer you go to a classic bank and request cash, if you are building credit or have bad credit, you go to a "financial services" branch. If you tend to finance things like cars and furniture, you get more cold calls. |
Paying for things on credit and immediately paying them off: any help for credit rating? | One of the factors of a credit score is the "length of time revolving accounts have been established". Having a credit card with any line of credit will help in this regard. The account will age regardless of your use or utilization. If you are having issues with credit limits and no credit history, you may have trouble getting financing for the purchase. You should be sure you're approved for financing, and not just that the financing option is "available" (potentially with the caveat of "for well qualified borrowers"). Generally, if you've gotten approved for financing, that will come in the form of another credit card account (many contracting and plumbing companies will do this in hopes you will use the card for future purchases) or a bank loan account (more common for auto and home loans). With the credit card account, you might be able to perform a balance transfer, but there are usually fees associated with that. For bank loan accounts, you probably can't pay that off with a credit card. You'll need to transfer money to the account via ACH or send in a check. In short: I wouldn't bet on paying with your current credit card to get any benefit. IANAL. Utilizing promotional offers, whether interest-free for __ months, no balance transfer fees, or whatever, and passing your debt around is not illegal, not fraudulent, and in many cases advised (this is a link), though that is more for people to distribute utilization across multiple cards, and to minimize interest accrued. Many people, myself included, use a credit card for purchasing EVERYTHING, then pay it off in full every month (or sometimes immediately) to reap the benefit of cash back rewards and other cardholder benefits. I've also made a major payment (tuition, actually) on a Discover card, and opened up a new Visa card with 18-months of no interest and no balance transfer fees to let the bill sit for 12 months while I finished school and got a job. |
Can you buy gift cards at grocery store to receive a higher reward rate? | I actually just did that with my Chase Freedom card. They rotate categories every 3 months, and from April-June it was 5% back at grocery stores. So I bought a ton of gas cards and got my 5% back. Next I figured out I would be clever and buy a ton of store gift cards (grocery gift cards) right at the end of the quarter, then use those in the future to purchase gas cards. Well, I just tried that a couple days ago and discovered the store refuses to sell a gift card if you're paying with a gift card! So now I'm stuck with $1,000 in grocery cards until I use them in actual grocery purchases haha One of the things about this grocery store is they partner with a gas station on their rewards program. They offer 10 cents off a gallon with every $100 spent in store, and they double it to 20 cents off a gallon if you buy $100 in gift cards. Then on the back of the receipt is a coupon for 10 cents off per gallon -- which they double on Tuesdays. Unfortunately I think I'm one of the only people that takes this much advantage of the program :-/ Side note: I actually just changed the billing cycle of my Chase Freedom card to end on the 24th of the month. That way I can charge a bunch of rewards in the final 6-7 days of the quarter. And if I have a $0 balance on the 24th, my bill isn't due for 7 weeks -- interest free! And Chase Freedom has never cared if you purchase gift cards with their quarterly rewards program. I also gave them a courtesy email giving the specific store and $$$ amount that was going to be charged, and of course they still called me with a 'fraud alert'... |
Are personal finance / money management classes taught in high school, anywhere? | Did a little bit of digging, and found this article, from Staples High School in Westport, Connecticut. Hopefully this will be a growing trend. They say: A personal financial management class will now be offered at the beginning of the upcoming school year (2011-2012). According to the course catalogue, the focus of this course will be using mathematics as a tool in developing financial literacy skills. Topics covered in the course will include: earnings, banking, credit cards, loans, taxes, insurance, investing, loans, budgeting, and buying personal property. “In a perfect world, everyone would be required to take a personal finance course,” Principal John Dodig said. |
Ballpark salary equivalent today of “healthcare benefits” in the US? | While the other answers try to quantify the value of health care the question you ask is about employee vs contractor. The delta between those regarding benefits goes way beyond health care. In fact because almost every full time employee must have health care offered by their employer the option of "you can have X with healthcare, or Y with no healthcare" is no longer an option. I have seen situations in the last few years where employees who had no need for healthcare coverage (retired military) were offered additional vacation days to compensate for their lower cost to the employer. For employee vs contractor what is different isn't just healthcare. It also includes holidays, vacation days, sick days, employer portion of social security, education benefits, and 401k. Insurance benefits include not just healthcare but also dental, vision, short term and long term disability, and life insurance. The rule of thumb to cover all these benefits that are lost when you are a contractor is an amount equal to your income. Of course some of these benefits depend on single vs married and kids or not. But unless the rate they are paying the contractors is approaching twice the rate they are paying employees the contractor will be hard pressed to cover the missing benefits. |
Ideal investments for a recent college grad with very high risk tolerance? | Sorry to be boring but you have the luxury of time and do not need high-risk investments. Just put the surplus cash into a diversified blue-chip fund, sit back, and enjoy it supporting you in 50 years time. Your post makes me think you're implicitly assuming that since you have a very high risk tolerance you ought to be able to earn spectacular returns. Unfortunately the risks involved are extremely difficult to quantify and there's no guarantee they're fairly discounted. Most people would intuitively realise betting on 100-1 horses is a losing proposition but not realise just how bad it is. In reality far fewer than one in a thousand 100-1 shots actually win. |
I have $100,000 in play money… what to do? | You can start a software company. Than your office will be around the world and you can work whenever you want. If you can appoint some people who can collect work from here and there and the coder around the world can give you the job done(this can be done by posting your work in various freelancing site). It is challenging, because you have to get yourself up-to-date with the technological things. |
Optimal way to use a credit card to build better credit? | In addition to the already good answers: I am assuming you are playing a long game and have no specific need for a high credit score in the next couple of years. This list is just good practice that will raise you score. |
Is it advisable to go for an auto loan if I can make the full payment for a new car? | Full payment is always better than auto-loan if you are prudent with finances. I.E if you take a loan, you are factoring the EMI hence your savings will remain as is. However if you manage well, you can buy the car with cash and at the same time put aside the notional EMI as savings and investments. The other factor to consider is what return your cash is giving. If this more than auto-loan interest rate post taxes, you should opt for loan. For example if auto-loan is 10% and you are getting a return of 15% after taxes on investment then loan is better. Company Car lease depends on terms. More often you get break on taxes on the EMI component. But you have to buy at the end of lease period and re-register the car in your name, so there is additional cost. Some companies give lease at very favourable rates. Plus if you leave the job lease has to be broken and it becomes more expensive. |
When following a buy and hold investment strategy, on what conditions should one sell? | You talk about an individual not being advised to sell (or purchase) in response to trends in the market in such a buy and hold strategy. But think of this for a moment: You buy stock ABC for $10 when both the market as a whole and stock ABC are near the bottom of a bear market as say part of a value buying strategy. You've now held stock ABC for a number of years and it is performing well hitting $50. There is all good news about stock ABC, profit increases year after year in double digits. Would you consider selling this stock just because it has increased 400%. It could start falling in a general market crash or it could keep going up to $100 or more. Maybe a better strategy to sell ABC would be to place a trailing stop of say 20% on the highest price reached by the stock. So if ABC falls, say in a general market correction, by less than 20% off its high and then rebounds and goes higher - you keep it. If ABC however falls by more than 20% off its high you automatically sell it with your stop loss order. You may give 20% back to the market if the market or the stock crashes, but if the stock continues going up you benefit from more upside in the price. Take AAPL as an example, if you bought AAPL in March 2009, after the GFC, for about $100, would you have sold it in December 2011 when it hit $400. If you did you would have left money on the table. If instead you placed a trailing stop loss on AAPL of 20% you would have been still in it when it hit its high of $702 in September 2012. You would have finally been stopped out in November 2012 for around the $560 mark, and made an extra $160 per share. And if your thinking, how about if I decided to sell AAPL at $700, well I don't think many would have picked $700 as the high in hindsight. The main benefit of using stop losses is that it takes your emotions out of your trading, especially your exits. |
Is it ever logical to not deposit to a matched 401(k) account? | Some have suggested you can put the money in the 401k then take a loan to pay off the student loan debt. Some things to consider before doing that: Check your 401k plan first. Some plans allow you to continue paying on a loan if you leave the company, some do not. If you have to change jobs before you pay back the 401k loan, you may only have 90 days to completely pay the loan or the IRS will treat this as an early withdrawal, which means taxes and penalties. If you don't have another job lined up, this is going to make things much worse since you will have lost your income and may owe even more to the government (depending on your state, it may be up to 50% of the remaining amount). There are ways to work with some student debt loans to defer or adjust payments. There is no such option with a 401k plan. This may change your taxes at the end of the year. Most people can deduct student loan interest payments. You cannot deduct interest paid to your 401k loan. You are paying the interest to yourself though. It may hurt your long term growth potential. Currently loans on 401k loans are in the 4% range. If you are able to make more than 4% inside of your 401k, you will be losing out on that growth since that money will only be earning the interest you pay back. It may limit flexibility for a few years. When people fall on hard times, their 401k is their last resort. Some plans have a limit on the number of loans you can have at one time. You may need a loan or a withdrawal in the future. Once you take the money out for a loan, you can't access it again. See the first bullet about working with student loan vendors, they typically have ways to work with you under hard circumstances. 401k loans don't. Amortization schedule. Many 401k loans can only be amortized for a max of 5 years, if you currently have 10 year loans, can you afford to pay the same debt back in 1/2 the time at a lower rate? You will have to do the math. When considering debt other than student loans (such as credit cards), if you fall on hard times, you can always negotiate to reduce the amount you owe, or the debt can be discharged (with tax penalties of course). They can't make you take money out. Once it is out, it is fair game. Just to clarify, the above isn't saying you shouldn't do it under any circumstances, it is a few things you need to evaluate before making that choice. The 401k is supposed to be used to help secure your financial future when you can't work. The numbers may work out in the short term, but do they still work out in the long term? Most credit cards require minimum payments high enough to pay back in 7-10 years, so does shortening that to 5 (or less) make up for the (probably early) years of compounding interest for your retirement? I think others have addressed some of this so I won't do the math. I can tell you that I have a 401k loan, and when things got iffy at my job for, it was a very bad feeling to have that over my head because, unlike other debts, there isn't much you can do about it. |
How to rescue my money from negative interest? | You obviously pay your taxes in Switzerland and are employed (judging from your comments on your maximum possible contribution to the 3. Säule). Under these circumstances, your best best may well be to pay into the occupational pension system ("Einkauf in die 2. Säule"). Essentially, you can add funds to your pension plan to match non-existent employer contributions from times you spent studying etc. The 2. Säule is usually defensively invested in bonds, so it's not a completely secure investment. In addition, it's a pretty fixed investment, since you can only get your money out if you buy a house or leave Switzerland for good. However, your entire payment into the 2. Säule is tax deductible, so the tax effect in itself should be a very attractive bit of "interest". Your pension plan can inform you about the maximum possible Einkauf. |
JCI headache part 1: How to calculate cost basis / tax consequences of JCI -> TYC merger? | I finally found it! Johnson Controls International PLC FORM 8-K/A (Amended Current report filing) Filed 10/03/16 for the Period Ending 09/02/16 from http://investors.johnsoncontrols.com/financial-information/johnson-sec-filings, says on page II-6: (my emphasis for the relevant paragraph) On September 2, 2016, Johnson Controls and Tyco completed their combination pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 24, 2016, as amended by Amendment No. 1, dated as of July 1, 2016, by and among Johnson Controls, Tyco and certain other parties named therein, including Jagara Merger Sub LLC, an indirect wholly owned subsidiary of Tyco (“Merger Sub”). Pursuant to the terms of the Merger Agreement, on September 2, 2016, Merger Sub merged with and into Johnson Controls with Johnson Controls being the surviving corporation in the merger and a wholly owned, indirect subsidiary of Tyco (the “merger”). Following the merger, Tyco changed its name to “Johnson Controls International plc.” Immediately prior to the merger and in connection therewith, Tyco shareholders received 0.955 ordinary shares of Tyco (which shares are now referred to as “combined company ordinary shares”) for each Tyco ordinary share they held by virtue of a 0.955-for-one share consolidation. In the merger, each outstanding share of common stock, par value $1.00 per share, of Johnson Controls (“Johnson Controls common stock”) (other than shares held by Johnson Controls, Tyco and certain of their subsidiaries) was converted into the right to receive either the cash consideration or the share consideration (each as described below), at the election of the holder, subject to proration procedures described in the Merger Agreement and applicable withholding taxes. The election to receive the cash consideration was undersubscribed. As a result, holders of shares of Johnson Controls common stock that elected to receive the share consideration and holders of shares of Johnson Controls common stock that made no election (or failed to properly make an election) became entitled to receive, for each such share of Johnson Controls common stock, $5.7293 in cash, without interest, and 0.8357 combined company ordinary shares, subject to applicable withholding taxes. Holders of shares of Johnson Controls common stock that elected to receive the cash consideration became entitled to receive, for each such share of Johnson Controls common stock, $34.88 in cash, without interest, subject to applicable withholding taxes. In the merger, Johnson Controls shareholders received, in the aggregate, approximately $3.864 billion in cash. Immediately after the closing of, and giving effect to, the merger, former Johnson Controls shareholders owned approximately 56% of the issued and outstanding combined company ordinary shares and former Tyco stockholders owned approximately 44% of the issued and outstanding combined company ordinary shares. This answers what actually happened in the transaction; as far as my cost basis in the new JCI, it's a little more obscure; on page II-7 it says: For pro forma purposes, the valuation of consideration transferred is based on, amongst other things, the adjusted share price of Johnson Controls on September 2, 2016 of $47.67 per share and on page II-8: Johnson Controls adjusted share price as of September 2, 2016 (2): $47.67 (2) Amount equals Johnson Control closing share price and market capitalization at September 2, 2016 ($45.45 and $29,012 million, respectively) adjusted for the Tyco $3,864 million cash contribution used to purchase 110.8 million shares of Johnson Controls stock for $34.88 per share. and both agree with the information posted at http://www.secinfo.com/dpdtb.w6n.2n.htm#1stPage (R66 Merger Transaction Fair Value of Consideration Transferred (Details)) which I can't seem to find on an "official" website but it purports to post from the SEC EDGAR database. So for each share of JCI, it had a fair value of $47.67 prior to the acquisition, and transformed into $5.7293 in cash, plus 0.8357 of "new" JCI shares with a basis of $47.67 - $5.7293 = $41.9407. Stated in terms of "new" JCI shares, this is $50.1863 (=$41.9407/0.8357) per "new" JCI share. (I'm not really 100% sure of this calculation though.) I also found JCI's Form 8937 which states Fair market value generally is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the facts. U.S. federal income tax law does not specifically prescribe how former JCI shareholders should determine the fair market value of the Tyco ordinary shares received in the merger. One possible method of determining the fair market value of one Tyco ordinary share is to use the average of the high and low trading prices on the date of the merger, which was $45.69. Other methods for determining the fair market value of Tyco ordinary shares are possible. Former JCI shareholders are not bound by the approach described above and may, in consultation with their tax advisors, use another approach. as well as similar text on the IRS website: One possible method of determining the fair market value of one Tyco ordinary share is to use the average of the high and low trading prices on the date of the merger, which was $45.69. Using this figure, former JCI shareholders that elected to receive shares in the merger would receive cash and Tyco ordinary shares worth approximately $43.91 per share of JCI common stock exchanged in the merger (assuming no cash received in lieu of fractional shares). |
What variety of hedges are there against index funds of U.S. based stocks? | The only way to hedge a position is to take on a countervailing position with a higher multiplier as any counter position such as a 1:1 inverse ETF will merely cancel out the ETF it is meant to hedge yielding a negative return roughly in the amount of fees & slippage. For true risk-aversion, continually selling the shortest term available covered calls is the only free lunch. A suboptimal version, the CBOE BuyWrite Index, has outperformed its underlying with lower volatility. The second best way is to continually hedge positions with long puts, but this can become very tax-complicated since the hedged positions need to be rebalanced continually and expensive depending on option liquidity. The ideal, assuming no taxes and infinite liquidity, is to sell covered calls when implied volatility is high and buy puts when implied volatility is low. |
Why is being “upside down” on a mortgage so bad? | tl;dr: when everything is going great, it's not really a problem. It's when things change that it's a problem. Finally, home loans are extended over extremely long periods (i.e. 15 or 30 years), making any fluctuations in their value short-lived - even less reason to be obsessed over their current value relative to the loan. Your post is based on the assumption that you never move. In that case, you are correct - being underwater on a mortgage is not a problem. The market value of your house matters little, except if you sell it or it gets reassessed. The primary problem arises if you want to sell. There are a variety of reasons you might be required to move: In all of these scenarios it is a major problem if you cannot sell. Your options generally are: In the first option, you will destroy your credit. This may or may not be a problem. The second is a major inconvenience. The third is ideal, but often people in this situation have money related problems. Student loans can deferred if needed. Mortgages cannot. A car is more likely to be a lower payment as well as a lower amount underwater. Generally, the problem comes when people buy a mortgage assuming certain things - whether that's appreciation, income stability/growth, etc. When these change they run into these problems and that is exactly a moment where being underwater is a problem. |
From Facebook's perspective, was the fall in price after IPO actually an indication that it went well? | There could be an impact on Facebook because just before the IPO, Morgan Stanley apparently sent information to selected clients that their analysts had just lowered their valuation of the company. There were also reports yesterday that the lowered valuation came about because Facebook sent some revised preliminary estimates of second quarter earnings (showing lower than expected earnings) to Morgan Stanley, and least one talking head said that Facebook might also face charges depending on what the cover letters and the e-mails back and forth between Facebook and Morgan Stanley said. Investigations have already been opened. Yes, a company wants to sell the stock being offered at the IPO at the highest price possible, but if it misled the public when offering the stock for sale (through its underwriters), it can also be liable, possibly even criminally liable. Material added in Edit: In fact, a lawsuit has already been filed in the US District Court in Manhattan in this matter. Whether the SEC ever does anything about the matter remains to be seen. |
What would I miss out on by self insuring my car? | You lose your agent services. When my wife wrecked our car 3 years ago our agent took care of everything. He got us a rental car, made the arrangements to get it fixed, checked in to see how we were doing, and even helped us set up a second opinion on my wifes wrist surgery. The accident was ruled the fault of the uninsured driver who decided to take off through the red light. But our insurance was the one that covered it all total expenses over 80k. We would have had to eat most of those with out full coverage. Most everything was set up (our rental car, estimates on repair, even her inital consutation with the surgeon) before the investigator had filed her report. Our agents first question was is everyone ok. His second was what can i do to help? He never asked us what happened and was always ahead of our needs in dealing with it. If these things are not important to you, you can probably save quite a bit of money self insuring. But if you are in an accident and unable to do them yourself, do you have someone to do it for you? Do you trust them to handle your business and are you willing to saddle them with the responsibility of dealing with it? To me insurance is less about me and more about my family. It was nice that my agent did all of that for me. I would have been willing to do it myself though. But I am glad to know he is there for my wife if something happens to me. |
Prize Money, Taxes and Foreign / International Students | The committee folks told us Did they also give you advice on your medication? Maybe if they told you to take this medicine or that you'd do that? What is it with people taking tax advice from random people? The committee told you that one person should take income belonging to others because they don't know how to explain to you which form to fill. Essentially, they told you to commit a fraud because forms are hard. I now think about the tax implications, that makes me pretty nervous. Rightly so. Am I going to have to pay tax on $3000 of income, even though my actual winning is only $1000? From the IRS standpoint - yes. Can I take in the $3000 as income with $2000 out as expenses to independent contractors somehow? That's the only solution. You'll have to get their W8's, and issue 1099 to each of them for the amounts you're going to pay them. Essentially you volunteered to do what the award committee was supposed to be doing, on your own dime. Note that if you already got the $3K but haven't paid them yet - you'll pay taxes on $3K for the year 2015, but the expense will be for the year 2016. Except guess what: it may land your international students friends in trouble. They're allowed to win prizes. But they're not allowed to work. Being independent contractor is considered work. While I'm sure if USCIS comes knocking, you'll be kind enough to testify on their behalf, the problem might be that the USCIS won't come knocking. They'll just look at their tax returns and deny their visas/extensions. Bottom line, next time ask a professional (EA/CPA licensed in your State) before taking advice from random people who just want the headache of figuring out new forms to go away. |
What does the term “match the market” mean? | There was a time when everyone felt their goal was to beat the respective index they followed. But of course, in aggregate, that's a mathematical impossibility. The result was that the average say large cap fund, whose benchmark index would be the S&P, would lag on average by 1-2%. A trend toward ETFs that would match the market had begun, and the current ETFs that follow the S&P are sub .1% expense. For the fact that studies (Google "Dalbar" for examples) show the typical investor lags not by 1% or 2%, but by far more for reasons of bad timing, my own statement that "I've gotten a return these past years of .06% less than the S&P" would have been seen many years ago as failure, now it's bragging. It handily beats the typical investor and yet, can be had by anyone wishing to stay the course, keep the ETF very long term. |
Maintaining “Woman Owned Business” while taking on investor | In addition to finding another woman investor, you have an equitable option that is not unreasonable: ask your partner to buy out 3% worth of shares from you (which then gives her 54%, allowing you to then sell 5% to an investor and have it not dilute her below 51%: .54 * .95 = .513). That keeps you whole but also keeps your woman-owned-business status. |
What is a good way to save money on car expenses? | Manage the fuel consumption price: check the pattern of fuel prices if you can for your area. Some areas have weekly changes which are somewhat predictable and some sites will even predict the minimum price for the next day. Some other areas will have a discount fuel day. Switch to diesel: fuel consumption by diesel engines are much better than standard combustion engines. Downside is not as many refueling stations. Switch to a hybrid: fuel consumption is better than comparable combustion engines alone but the downside is that the technology is new and still maturing. Check out this site for more information. |
What is the best way to stay risk neutral when buying a house with a mortgage? | How can one offset exposure created by real-estate purchase? provides a similar discussion. Even if such a product were available in the precise increments you need, the pricing would make it a loser for you. "There's no free lunch" in this case, and the cost to insure against the downside would be disproportional to the true risk. Say you bought a $100K home. At today's valuations, the downside over a given year might be, say, 20%. It might cost you $5000 to 'insure' against that $20K risk. Let me offer an example - The SPY (S&P ETF) is now at $177. A $160 (Dec '14) put costs $7.50. So, if you fear a crash, you can pay 4%, but only get a return if the market falls by over 14%. If it falls 'just' 10%, you lose your premium. With only 5% down, you will get a far better risk-adjusted return by paying down the mortgage to <78% LTV, and requesting PMI, if any, be removed. Even if no PMI, in 5 years, you'll have 20% more equity than otherwise. Over the long term, 5 year's housing inflation would be ~ 15% or so. This process would help insure you are not underwater in that time. Not guarantee, but help. |
How Should I Start my Finance Life and Invest? | The best way to start out is to know that even the experts typically under-perform the market, so you have no chance. Your best bet is to invest in diversified funds, either through something like Betterment or something like Vanguard's ETFs that track the markets. Buying individual stocks isn't typically a winning strategy. |
Should I invest or repay my debts? | Like azam pointed out, fundamentally you need to decide if the money invested elsewhere will grow faster than the Interest you are paying on the loan. In India, the safe returns from Fixed Deposits is around 8-9% currently. Factoring taxes, the real rate of return would be around 6-7%. This is less than what you are paying towards interest. The PPF gives around 9% with Tax break [if there are no other options] and tax free interest, the real return can be as high as 12-14%. There is a limit on how much you can invest in PPF. However this looks higher than your average interest. The stock markets in long term [7 Years] averages give you around 15% returns, but are not predictable year to year. So the suggest from azam is valid, you would need to see what are the high rate of interest loans and if they accept early repayment, you should complete it ASAP. If there are loans that are less than average, say in the range of 7-8%, you can keep it and pay as per schedule. |
How to fix Finance::Quote to pull quotes in GnuCash | The yahoo finance API is no longer which broke the Finance:Quote perl module. The Finance:Quote developers have been quick to fix things and have produced several new versions in the last week or two. The short of it is that you need to update Finance:Quote, then obtain an AlphaVantage free key and tell Gnucash to use AlphaVantage as it's source for online quotes by editing your securities in the Price Editor. |
Estimated Taxes after surge in income | You will not necessarily incur a penalty. You can potentially use the Annualized Income Installment method, which allows you to compute the tax due for each quarter based on income actually earned up to that point in the year. See Publication 505, in particular Worksheet 2-9. Form 2210 is also relevant as that is the form you will use when actually calculating whether you owe a penalty after the year is over. On my reading of Form 2210, if you had literally zero income during the first quarter, you won't be expected to make an estimated tax payment for that quarter (as long as you properly follow the Annualized Income Installment method for future quarters). However, you should go through the calculations yourself to see what the situation is with your actual numbers. |
Car dealers offering lower prices when financing a used car | With new cars it's usually the other way around: finance at a low APR or get cash back when you buy it outright. With used cars you usually don't know how much they have invested in the car, so it's more difficult to know how low they're willing to go. Regardless, I do think it's odd that they would knock 2K off the price if you finance with them, but not if you pay cash. The only reason they would do that is if they intend to make at least 2K in interest over the life of the loan, but they have no way of guaranteeing you won't refi. Therefore, I suspect they are bluffing and would probably close the deal if you wrote them a check (or put the cash on the table) for 2K less. However, if they won't budge and will only knock off 2K if you finance, you could finance and pay it off in full a week later. Just make sure they don't have any hidden origination fees or pay-off-early fees. |
Is the Yale/Swenson Asset Allocation Too Conservative for a 20 Something? | I don't think the advice to take lots more risk when young makes so much sense. The additional returns from loading up on stocks are overblown; and the rocky road from owning 75-100% stocks will almost certainly mess you up and make you lose money. Everyone thinks they're different, but none of us are. One big advantage of stocks over bonds is tax efficiency only if you buy index funds and don't ever sell them. But this does not matter in a retirement account, and outside a retirement account you can use tax-exempt bonds. Stocks have higher returns in theory but to have a reasonable guarantee of higher returns from them, you need around a 30-year horizon. That is a long, long time. Psychologically, a 60/40 stocks/bonds portfolio, or something with similar risk mixing in a few more alternative assets like Swenson's, is SO MUCH better. With 100% stocks you can spend 10 or 15 years saving money and your investment returns may get you nowhere. Think what that does to your motivation to save. (And how much you save is way more important than what you invest in.) The same doesn't happen with a balanced portfolio. With a balanced portfolio you get reasonably steady progress. You can still have a down year, but you're a lot less likely to have a down decade or even a down few years. You save steadily and your balance goes up fairly steadily. The way humans really work, this is so important. For the same kind of reason, I think it's great to buy one fund that has both stocks and bonds in there. This forces you to view the thing as a whole instead of wrongly looking at the individual asset class "buckets." And it also means rebalancing will happen automatically, without having to remember to do it, which you won't. Or if you remember you won't do it when you should, because stocks are doing so well, or some other rationalization. Speaking of rebalancing, that's where a lot of the steady, predictable returns come from if you have a nice balanced portfolio. You can make money over time even if both asset classes end up going nowhere, as long as they bounce around somewhat independently, so you'll buy low and sell high when you rebalance. To me the ideal is an all-in-one fund that aims for about 60/40 stocks/bonds level of risk, somewhat more diversified than stocks/bonds is great (international stock, commodities, high yield, REIT, etc.). You can just buy that at age 20 and keep it until you retire. In beautiful ideal-world economic theory, buy 90% stocks when young. Real world with human brain involved: I love balanced funds. The steady gains are such a mental win. The "target retirement" funds are not a bad option, but if you buy the matching year for your age, I personally wish they had less in stocks. If you want to read more on the "equity premium" (how much more you make from owning stocks) here are a couple of posts on it from a blog I like: Update: I wrote this up more comprehensively on my blog, |
Dealing with event driven market volatility | If you are worried about an increase in volatility, then go long volatility. Volatility itself can be traded. Here in the US there is an index VIX that is described as tracking volatility. What VIX actually tracks is the premium of S&P 500 options, which become more expensive when traders want to hedge against volatility. In the US you can trade VIX options or invest in VIX tracking ETFs like VXX. Apparently there are similar ETFs listed in Canada, such as HUV. Volatility itself is quite volatile so it is possible that a small volatility long position would cover the losses of a larger long position in stocks. If you do choose to invest in a volatility ETF, be aware that they experience quite a lot of decay. You will not want to hold it for very long. |
Investment time horizon: When is it acceptable to withdraw money from investments? | shouldn't withdraw stock investments for at least 5 years would be better re-phrased as: "don't invest money in stocks if you (really) need it within next few years". The underlying principle is: stocks are one of the higher-risk investment classes out there. While that's exactly what you want over a long time horizon (longer than the ebb and flow of the broader economy); if you know you'll definitely have to withdraw $50k (or any large chunk) of it within just a few years, it's possible that a great long-term vehicle like stocks, could actually rob you of money on a shorter time horizon. So if you want to start a business 2 years from now, you'll probably want to retain some of that $300k initial pile in lower-risk investment vehicles (e.g. bonds, CDs, certain ETFs and mutual funds aimed at "capital preservation", etc). That said, interest rates are so low, that if you're flexible with how much money you'll need to start that business, I'd probably keep as much as you can stomach in diversified stocks (per your original plan). |
Should I set a stop loss for long term investments? | Do not use a stop loss order as a long-term investor. The arguments in favor of stop losses being presented by a few users here rely on a faulty premise, namely, that there is some kind of formula that will let you set your stop such that it won't trigger on day-to-day fluctuations but will trigger in time to protect you from a significant loss in a serious market downturn. No such formula exists. No matter where you set your stop, it is as likely to dump you from your investment just before it begins climbing again as it is to shield you from continued losses. Each time that happens, you will have sold low and bought high, incurring trading fees into the bargain. It is very unlikely that the losses you avoid in a bear market (remember, you still incur the loss up until your stop is hit; it's only the losses after that that you avoid) will make up the costs of false alarms. On top of that, once you have stopped out of your first investment choice, then what? Will you reinvest in some other stock or fund? If those investments didn't look good to you when you first set up your asset allocation, then why should they look any better now, just because your primary investment has dropped by some arbitrary[*] amount? Will you park the money in cash while you wait for prices to bottom out? The market bottom is only apparent in retrospect. There is no formula for calling it in real time. Perhaps stop loss orders have their uses in active trading strategies, or maybe they're just chrome that trading platforms use to attract customers. Either way, using them on long-term investments will just cost you money in the long run. Forget the fancy order types, and manage your risk through your asset allocation. The overwhelming likelihood is that you will get better performance, and you will spend less time worrying about your investments to boot. [*] Why are the stop levels recommended by the formulae invariably multiples of 5%? Do the market gods have a thing for round numbers? |
What's an Exchange-Traded Fund (ETF)? | Wikipedia has a fairly detailed explanation of ETFs. http://en.wikipedia.org/wiki/Exchange-traded_fund |
Investment Newbie - Options in India - For $10K - for 10 years | I would suggest you to put your money in an FD for a year, and as soon as you get paid the interest, start investing that interest in a SIP(Systematic investment plan). This is your safest option but it will not give you a lot of returns. But I can guarantee that you will not lose your capital(Unless the economy fails as a whole, which is unlikely). For example: - you have 500000 rupees. If you put it in a fixed deposit for 1 year, you earn 46500 in interest(At 9% compounded quarterly). With this interest you can invest Rs.3875(46500/12) every month in an SIP for 12 months and also renew your FD, so that you can keep earning that interest.So at the end of 10 years, you will have 5 lacs in your FD and Rs. 4,18,500 in your SIP(Good funds usually make 13-16 % a year). Assuming your fund gives you 14%, you make: - 1.) 46500 at 14% for 9 years - 1,51,215 2.)8 years - 1,32,645 3.) 7 years - 1,16,355 4.) 6 years - 1,02,066 5.) 5 years - 89,531 6.) 4 years - 78,536 7.) 3 years - 68891 8.) 2 years 60,431 9.) 1 year - 53010 Total Maturity Value on SIP = Rs, 8,52,680 Principal on FD = Rs 5,00,000 Interest earned on 10th year = Rs. 46,500 Total = Rs. 13,99,180(14 lacs). Please note: - Interest rates and rate of return on funds may vary. This figure can only be assumed if these rates stay the same.:). Cheers! |
Is there a government-mandated resource that lists the shareholders of a public company? | There are several problems with trying to get this data: |
How to continuously plot futures data | Note that the series you are showing is the historical spot index (what you would pay to be long the index today), not the history of the futures quotes. It's like looking at the current price of a stock or commodity (like oil) versus the futures price. The prompt futures quote will be different that the spot quote. If you graphed the history of the prompt future you might notice the discontinuity more. How do you determine when to roll from one contract to the other? Many data providers will give you a time series for the "prompt" contract history, which will automatically roll to the next expiring contract for you. Some even provide 2nd prompt, etc. time series. If that is not available, you'd have to query multiple futures contracts and interleave them based on the expiry rules, which should be publicly available. Also is there not a price difference from the contract which is expiring and the one that is being rolled forward to? Yes, since the time to delivery is extended by ~30 days when you roll to the next contract. but yet there are no sudden price discontinuities in the charts. Well, there are, but it could be indistinguishable from the normal volatility of the time series. |
using credit card and paying back quickly | I can't speak for every credit card, but I know two of mine don't have overage fees. The transaction either goes through, or gets denied. Check your card agreement and look for the fee section. One other thing to consider, sometimes when you make an online payment to a credit card, you will notice that the "Available Balance" number on the account will increase right away even if the payment is not reflected on your "Current Balance". If this is the case, and you are positive that your payment will be successfully posted to the account, I say go for it. |
Why I cannot find a “Pure Cash” option in 401k investments? | This situation, wanting desperately to have access to an investment vehicle in a 401K, but it not being available reminds me of two suggestions some make regarding retirement investing: This allows you the maximum flexibility in your retirement investing. I have never, in almost 30 years of 401K investing, seen a pure cash investment, is was always something that was at its core very short term bonds. The exception is one company that once you had a few thousand in the 401K, you could transfer it to a brokerage account. I have no idea if there was a way to invest in a money market fund via the brokerage, but I guess it was possible. You may have to look and see if the company running the 401K has other investment options that your employer didn't select. Or you will have to see if other 401K custodians have these types of investments. Then push for changes next year. Regarding external IRA/Roth IRA: You can buy a CD with FDIC protection from funds in an IRA/Roth IRA. My credit union with NCUA protection currently has CDs and even bump up CDs, minimum balance is $500, and the periods are from 6 months to 3 years. |
I just made $50K from selling my house. How should I invest the proceeds? | First pay off all existing debt. Then set up at least 6 month emergency fund. Freelancing exposes you to way more risks than employment. Then buy GIC's to cover and match the maturity of your expected education fees. Only 'play' with what is left. Don't over think it. Buy a low-cost (less than 0.5%) passive large-index mutual fund covering either the S&P or TSX. |
Why is Insider Trading Illegal? | Secret formulas are legal, "privileged information" is not. And that may be the whole point. People are allowed to trade stocks profitably if doing so results only from their skill. A "secret formula" (for evaluating information) is part of that skill. But having "privileged information" is not considered skill. It is considered an unfair, illegal advantage. Because company officials (and others) with privileged information are 1) not permitted to trade stocks while that information is privileged and 2) are not allowed to share that information with others. Inevitably, some do one or the other, which is why they are prosecuted. "Raj" took the process to new highs (or lows). He not only "dealt" in privileged information, he PAID for it. Anything from a new car or house to $500,000 a year in cash. In essence, he had a bunch of strategically placed "spies" inside or close to corporations including one on the board of Goldman Sachs, "selling out" their companies, and thereby practicing a form of corporate "treason." |
Can I negotiate a credit card settlement by stopping payments? | This strategy will have long lasting effects since negative items can persist for many years, making financing a home difficult, the primary source of household credit. It is also very risky. You can play hard, but then the creditor may choose you to be the one that they make an example out of by suing you for a judgement that allows them to empty your accounts and garnish your wages. If you have no record of late payments, or they are old and/or few, your credit score will quickly shoot up if you pay down to 10% of the balance, keep the cards, and maintain that balance rate. This strategy will have them begging you to take on more credit with offers of lower interest rates. The less credit you take on, the more they'll throw at you, and when it comes time to purchase a home, more home can be bought because your interest rates will be lower. |
I'm only spending roughly half of what I earn; should I spend more? | I have an idea. Keep saving what you are and think "Early Retirement". Work for 20 years, then do whatever you want 40 hours a week. If your satisfied with your current lifestyle, start thinking of your bigger long term financial goals and when you want to accomplish them by. Maybe you can accomplish these sooner than you think. Saving to buy a house/property? Investment portfolio? Want to travel all over the world? Family planning/kids? I am sure you will figure out how you would want to spend it. |
How to determine how much to charge your business for rent (in your house)? | In the UK it all comes down to what HMRC will allow you to charge without taxing you on the "rent profit" and not hitting capital gain tax when you sell the house, it may not all count as your "main home" if some is rented out. (http://www.accountingweb.co.uk/ is a good place to ask this type of questions in the uk) |
How to start investing/thinking about money as a young person? | There are books like, "The Millionaire Mind" that could be of interest when it comes to basics like living below your means, investing what you save, etc. that while it is common sense, it is uncommonly done in the world. Something to consider is how actively do you want your money management to be? Is it something to spend hours on each week or a few hours a year tops? You have lots of choices and decisions to make. I would suggest keeping part of your savings as an emergency fund just in case something happens. As for another part, this is where you could invest in a few different options and see what happens. There would be a couple of different methods I could see for breaking into finance that I'd imagine: IT of a finance company - In this case you'd likely be working on customizations for what the bank, insurance or other kind of financial firm requires. This could be somewhat boring as you are basically a part of the backbone that keeps the company going but not really able to take much of the glory when the company makes a lot of money. Brains of a hedge fund - In this case, you may have to know some trading algorithms and handle updating the code so that the trading activities can be done by a computer with lightning speed. Harder to crack into since these would be the secretive people to find and join in a way. |
How to realize capital gains before going from non-resident alien to resident alien in USA | This will work as intended, but there's another point to consider. In the US, the tax rate on proceeds from stock sales is higher for short term holdings, which are defined as held for less than one year. Both rates vary based on your income. Bracket numbers are for fiscal year 2014, filing as single. The difference between short and long term capital gains tax in the US is a minimum of ten percentage points, and works out to 15 percentage points on average. This is substantial. If you won't be reporting much income the year you move to the US (say because you only worked for a portion of the year) it is decidedly to your advantage to wait and sell the stocks in the US, to get that sweet 0% rate. At a minimum, you should hold the position for a year if you sell and rebuy, from a tax optimization perspective. Two caveats: |
How can all these countries owe so much money? Why & where did they borrow it from? | By the phrasing of your question it seems that you are under the mistaken impression that countries are borrowing money from other countries, in which case it would make sense to question how everyone can be a borrower with no one on the other side of the equation. The short answer is that the debt is owed mostly to individuals and institutions that buy debt instruments. For example, you know those US savings bonds that parents are buying to save for their children's education? Well a bond is just a way to loan money to the Government in exchange for the original money plus some interest back later. It is as simple as that. I think because the debt and the deficit are usually discussed in the context of more complex macroeconomic concerns people often mistakenly assume that national debts are denominated in some shadow banking system that is hidden from the common person behind some red-tape covered bureaucracy. This is not the case here. Why did they get themselves into this much debt? The same reason the average person does, they are spending more than they bring in and are enabled by access to easy credit. Like many people they are also paying off one credit card using another one. |
Why can't you just have someone invest for you and split the profits (and losses) with him? | On reflection there are financial products that do what you want, whole-life insurance policies that guarantee an annual dividend calculation on some index with a ceiling and floor. So you will have a return within a defined minimum and maximum range. There are a lot of opinions on the internet on this. This Consumer Reports article is balanced These have a reputation for being bad for the consumer compared to buying term life and investing in a mutual fund separately, but if you want the guarantee (or are a "moral hazard" for a life insurance policy, closer to death than you appear on paper) it may be a product for you. If you're very wealthy, there is an estate tax exploit in insurance death benefits that can make this an exceptional shield on assets for your heirs, with the market return just the gravy. |
Is it possible to take advantage of exceptions to early withdrawal penalties on a 401(k)? | Your question doesn't make much sense. The exceptions are very specific and are listed on this site (IRS.GOV). I can't see how you can use any of the exceptions regularly while still continuing being employed and contributing. In any case, you pay income tax on any distribution that has not been taxed before (which would be a Roth account or a non-deductible IRA contribution). Including the employer's match. Here's the relevant portion: The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: |
value of guaranteeing a business loan | The standard goal of valuing anything is to seek the fair price for that thing in the open market. Depending on what is being valued, that may or may not be an easy task. eg: to value your home, get a real estate appraiser, who will look at recent market sales in your area, and adjust for nuances of your property. To value your loan guarantee, you would need to figure out what it is actually worth to the business, which may be difficult. In a perfect world, you would be able to ask the bank to tell you the interest rate you would have to pay, if the loan was not guaranteed. This would show you the value you are providing to the business by guaranteeing it. ie: if the interest would be $100k a year unguaranteed, but is only $40k a year guaranteed, you are saving the business $60k a year. If the loan is to last 5 years, that's a total of $300k. Of course, it is likely the bank simply won't offer you an unguaranteed loan at all. This makes the value quite difficult to determine, and highlights the underlying transaction you are considering: You are taking on personal risk of loan default, to profit the business. If you truly can't find an equitable way to value the guarantee, consider whether you understand the true risk of what you are doing. If you are able to determine an appropriate value for the loan, consider whether increasing your equity is fair compensation. There are other methods of compensation available, such as having the company pay you directly, or decrease the amount of capital you need to invest for this new set of equity. In the end, what is fair is what the other shareholders agree to. If you go to the shareholders with anything less than professional 3rd party advice (and stackexchange does not count as professional), then they may be wary of accepting your 'fee', no matter how reasonable. |
Advantages/Disadvantages to refinancing online? | For what its worth, I recently closed on a 30 year refinance mortage with an agent I found through Zillow. The lender has a perfect 5/5 reputation score, whose office was located within 5 miles of my house, and as suggested by justkt on MrChrister's response, I checked out the business on the better business bureau and its online presence prior to going forward with the bank. The process was relatively painless, and the APR and closing costs were less than my previous loan with a federal credit union which I've used in the past. I can't say if the bank I'll be using going forward is as good as the one I've used in the past, but overall I'm quite happy with it. I never met the individual in person but this saved both of us a fair amount of time honestly. |
When are equal-weighted index funds / ETFs preferable to market-cap-weighted funds? | Equal weighted indexes are not theoretically meant to be less volatile or less risky; they're just a different way to weigh stocks in an index. If you had a problem that hurt small caps more than large caps, an equal weighted index will be hurt more than a market-cap weighted one. On the other hand, if you consider that second rung companies have come up to replace the top layer, it makes sense to weigh them on par. History changes on a per-country basis - in India, for instance, the market's so small at the lower-cap end that big money chases only the large caps, which go up more in a liquidity driven move. But in a more secular period (like the last 18 months) we see that smaller caps have outperformed. |
Are there any catches with interest from banks? Is this interest “too good to be true”? | The 1.09% is per year, not per month. Not too bad for a regular savings, but it's just interest rates in general that are bad right now. The inflation rate should be 3.8% currently so if you hide your money in a bank you'll end up with a loss of 2% in buying power in a year... If you open an CD (Certificate of Deposit), the best APY would be around 2.2% for a 5 years one and you will still get hit by the inflation. You might want to invest those money somewhere else and in some other ways. The stock market might give you excellent entry points soon (if not right now) but since you're very young and inexperienced I strongly recommend to do tons of research and ask for advice from experienced people before you jump into these kind of things by yourself. |
Why did the stock chart for Facebook's first trading day show an initial price of $42 when the IPO price was $38? | The IPO price is set between the underwriters and the specialist in the NASDAQ. There are a lot of complexities on how to get to this price, everyone is trying to pull to their own side. In the Facebook example, the price was $38 for all IPO participants. Then, once the IPO went to the secondary market, the bid/ask drove the pricing. At the secondary market the price is driven by the demand and offer of the stock. That is, people who wanted to buy right after the IPO likely drove the initial price up. |
Should I be worried that I won't be given a receipt if I pay with cash? | In some states, it is your responsibility to pay the sales tax on a transaction, even if the party your purchase from doesn't collect it. This is common with online purchases across state lines; for example, here in Massachusetts, if I buy something from New Hampshire (where there is no sales tax), I am required to pay MA sales tax on the purchase when I file my income taxes. Buying a service that did not include taxes just shifts the burden of paperwork from the other party to me. Even if you would end up saving money by paying in cash, as other here have pointed out, you are sacrificing a degree of protection if something goes wrong with the transaction. He could take your money and walk away without doing the work, or do a sloppy job, or even damage your vehicle. Without a receipt, it is your word against his that the transaction ever even took place. Should you be worried that he is offering a discount for an under the table transaction? Probably not, as long as you don't take him up on it. |
Are you preparing for a possible dollar (USD) collapse? (How?) | Depends what kind of expenses you intend to use this money for. If you plan to buy housing in the future (eg you're saving a deposit), then you need to ensure that the value doesn't deteriorate relative to the value of the housing you are likely to buy - so you could buy a Residential REIT, or buy some investment property. If you expect to use this money for food, then you should buy suitable assets (eg Wheat futures, etc). Link the current asset to the future expense, and you will be fine. If you buy Gold, then you are making a bet that Gold will retain its value compared to the thing you want to purchase in future. It doesn't matter what the price of Gold does in $US. |
Why would anyone want to pay off their debts in a way other than “highest interest” first? | Another unmentioned reason: flexibility and liquidity. There is a fundamental difference between installment and revolving debt, such that it could be rational to pay revolving debt before an amortizing loan. Lets say you have 100K in cash, a 100K mortgage at 4% and 4 25K credit cards at maximum balance and a 0% promotional rate (at least for now). If you pay off the mortgage, you may not get liquidity if you need it. This path is not necessarily reversible. If you pay off the credit cards, you have 100K of credit available to you. You can reverse to the case of having 100K in cash, and 200K in debt. |
Credit rating in Germany | The SCHUFA in Germany works a bit different from the FICO score in the US. My background: I am a German currently living in the US. The information others want to see from the SCHUFA are a bit different. If you want to example rent a house or an apartment, the landlord often wants to see a SCHUFA statement which only shows that there are no negative entries. This statement you can get easily from online and they don't mention your credit score there. If you apply for a real credit or want to lease a car, they want to look deeper in your SCHUFA profile. However, very important is: They need signed permission to do this. Every participating company can submit entries to your profile where the score is calculated from. For example mobile phone plans, leasing a car, applying for a loan. Some lenders decide on the score itself, some on the overall profile and some also take your income into account. Since there is no hire & fire in Germany you are often asked to show your last 3 paychecks. This, in combination with your SCHUFA score is used for determination if you are eligible for a loan or not. However, they check through every entry which is made there and as long as it is reasonable and fits to your income (car for 800 EUR/month with a 1000 EUR salary does not!) you should not have a problem establishing a good score. The, in my eyes, unfair part about Schufa is that they take your zip code and your neighborhood into account when calculating their score. Also moving often affects the score negatively. To finally answer your question: Credit history is also built by mobile phone plans etc. in Germany. As long as you pay everything on time you should be fine. A bad score can definitely hurt you, but it is not as important to have a score as it is in the US because the banks also determine your creditworthiness based on your monthly income and your spending behavior. |
Family suggests my first real estate. Advice? | You say My work is steady; even if I lost my job it'd be easy to get another. Location has been static for a few years now, but I'm not sure that'll extrapolate to the future; I'm lazy, so I don't want to move, but for a significantly better job opportunity I wouldn't mind. The general rule of thumb is that you'll come out ahead if you buy a house (with a mortgage) and live there for five years. What you lose in interest, you make up in rent. And living there for five years, you make back your closing costs in equity. If you're there less than five years though, you don't make back the closing costs. You'd have been better off renting. Historically (up to about twenty years ago), your mortgage payment and rent payment for the same basic property would be about the same. I.e. if your current landlord sold you what you are renting, your mortgage payment would be roughly the same as your rent. Maybe a little lower or a little higher but about the same. More recently, it hasn't been strange to see a divergence in those. Now it is not uncommon for a mortgage payment to be 50% higher than rent on the same property. This has some consequences. First, your $1000 rent probably won't stretch as far as a $1000 mortgage payment. So you'll be buying something that you'd only pay $650 or $700 rent. Second, if you move and can't sell immediately, you'll get less in rent than you'd pay in mortgage. Rather than contributing to your income, the property will require subsidy just to maintain the mortgage. And in the early years of the mortgage, this means that you're paying all of the principal (equity) and some of the interest. Buying a duplex makes this worse. You have your side and their side. You can substitute your $1000 rent for half of the mortgage payment. Meanwhile, they are paying $700 in rent. You have to subsidize the mortgage by $300. Plus, you are talking about hiring a property management company to do things like lawn maintenance. There goes another $100 a month. So you are subsidizing the mortgage by $400. I don't know real estate prices in Utah, but a quick search finds a median house price over $200,000. So it seems unlikely that you are buying new construction with new appliances. More likely you are buying an existing duplex with existing appliances. What happens when they fail? The renter doesn't pay for that. The property management company doesn't pay for that (although they'll likely arrange for it to happen). You pay for it. Also, it often takes a bit of time to clean up the apartment after one tenant leaves before the new tenant starts paying rent. That's a dead weight loss. If this happens during a local recession, you could be carrying the mortgage on a property with no offsetting rental income for months. There are some countervailing forces. For example, if house prices in your area are increasing, the rent will increase with them (not necessarily at the same pace). But your mortgage payment stays the same. So eventually the rent may catch up with the mortgage payment. If you wait long enough in a strong enough market, the rent on the other half of the duplex may cover the entire mortgage payment. If you currently have an urban apartment within walking distance of work and switch to a suburban apartment with a commute, you have a better chance of finding a duplex where the entire mortgage payment is only the $1000 that you pay in rent. Your half of the duplex won't be as nice as your apartment is, and you'll have a half hour or hour long commute every morning (and the same to get home in the evening). But on strictly fiscal terms you'll be doing about as well. Plus you have the income from the other half. So even if your mortgage payment is more than your rent payment, you can still break even if the rent covers it. Consider a $1400 mortgage and $400 in rent from the other half (after property management fees). So long as nothing goes wrong, you break even. Perhaps the agreement is that your parents take care of things going wrong (broken appliances, troublesome tenants, time between tenants). Or perhaps you drain your emergency fund and adjust your 401(k) payment down to the minimum when that happens. Once your emergency fund is replenished, restore the 401(k). If you're willing to live in what's essentially a $500 apartment, you can do better this way. Of course, you can also do better by living in a $500 apartment and banking the other $500 that you spend on rent. Plus you now have the expenses of a commute and five hours less free time a week. You describe yourself as essentially living paycheck to paycheck. You have adequate savings but no building excess. Whatever you get paid, you immediately turn around and spend. Your parents may view you as profligate. Your apartment is nicer than their early apartments were. You go out more often. You're not putting anything aside for later (except retirement). It didn't use to be at all strange for people to move out of the city because they needed more space. For the same rent they were paying in the city, they could buy a house in the suburbs. Then they'd build up equity. So long as they stayed in roughly the same work location, they didn't need to move until they were ready to upgrade their house. The duplex plan leads to one of two things. Either you sell the duplex and use the equity to buy a nicer regular house, or you move out of the duplex and rent your half. Now you have a rental property providing income. And if you saved enough for a down payment, you can still buy a regular house. From your parents' perspective, encouraging you to buy a duplex may be the equivalent of asking you to cut back on spending. Rather than reducing your 401(k) deposits, they may be envisioning you trading in your car for a cheaper one and trading in your nice but expensive apartment for something more reasonable in a cheaper neighborhood. Rather than working with a property management company, you'll be out doing yardwork rather than cavorting with your friends. And maybe the new place would have more space to share when you meet someone--you aren't going to provide many grandkids alone. If you get a mortgage on a duplex, you are responsible for paying the mortgage. You are responsible even if something happens to the house. For example, if a fire burns it down or a tornado takes it away. Or you just find that the house isn't solid enough to support that party where all of your friends are jumping up and down to the latest pop sensation. So beyond losing whatever you invest in the property, you may also lose what you borrowed. Now consider what happens if you invest the same amount of money in General Motors as in the house. Let's call that $10,000 and give the house a value of $200,000. With General Motors, even if they go bankrupt tomorrow, you're only out $10,000. With the house, you're out $200,000. Admittedly it's much hard to lose the entire $200,000 value of the house. But even if the house loses $80,000 in value, you are still $70,000 in the hole. You don't need a disaster for the house to lose $80,000 in value. That's pretty much what happened in the 2006-2010 period. People were losing all of what they invested in houses plus having to declare bankruptcy to get out of the excess debt. Of course, if they had been able to hold on until 2015 markets mostly recovered. But if you lost your job in 2008, they wouldn't let you not make mortgage payments until you got a new one in 2012. When you declare bankruptcy, you don't just lose the house. You also lose all your emergency savings and may lose some of your belongings. There are some pretty prosaic disasters too. For example, you and your tenant both go away for a weekend. It rains heavily and your roof starts to leak due to weak maintenance (so not covered by insurance). The house floods, destroying all the electronics and damaging various other things. Bad enough if it's just you, but you're also responsible for the tenant's belongings. They sue you for $20,000 and they move out. So no rent and big expenses. To get the house livable again is going to take $160,000. Plus you have a $190,000 mortgage on a property that is only worth about $40,000. That's at the extreme end. |
Plan/education for someone desiring to achieve financial independence primarily through investing? | Stay in school, learn everything you can, and spend as little money as possible. And realize that the chances of you dropping out and becoming a millionaire are much lower than the chances of you staying in school and becoming a millionaire. You're unlikely to be a good investor if you make bets with negative expected payoffs. |
Tenant wants to pay rent with EFT | Given a routing number / account number, it's easy to print a check with those details. All you need is a MICR font. No EFT needed. I would recommend that instead, you get his account information, and set up a direct withdrawal. Of course, then you could potentially use HIS account fraudulently, but that would be true even if he just wrote you a check. |
I gave an incorrect account number to pay my income taxes | They will not send a bill, though there's a chance they will eventually send an accusatory letter. You must proactively pay your taxes. The simplest route is to send a check to each taxing authority with the respective full amounts due. I wouldn't bother calling them. You could also file amended returns with each containing the correct information. As a general rule, tax advisors tend to counsel against giving bank account information to the IRS for payment purposes (as opposed to refund purposes), both to protect the timing of payment and to make it slightly more difficult for them to seize or lien your account. If you choose to send a check, you can use Form 1040-V and NY Form IT-201-V. Please triple check your Social Security Number matches your tax return SSN, so they correctly credit you for payment. You may include an explanation of the closed account if you are feeling either fearful or contrite, but if the amount due is paid in full, then neither taxing authority should really care about your error. |
What should I do with my $25k to invest as a 20 years old? | Waiting for the next economic downturn probably isn't the best plan at this point. While it could happen tomorrow, you may end up waiting a long time. If you would prefer not to think much about your investment and just let them grow then mutual funds are a really good option. Make sure you research them before you buy into any and make sure to diversify, as in buy into a lot of different mutual funds that cover different parts of the market. If you want to be more active in investing then start researching the market and stick to industries you have very good understanding of. It's tough to invest in a market you know nothing about. I'd suggest putting at least some of that into a retirement savings account for long term growth. Make sure you look at both your short term and long term goals. Letting an investment mature from age 20 through to retirement will net you plenty of compound interest but don't forget about your short term goals like possible cars, houses and families. Do as much research as you can and you will be fine! |
Who can I get to help me roll my 401(k) into an IRA when I live overseas? | This is more of a general answer about your situation than a specific answer to your question. You might consider getting a SIP telephone number based in the US, or an even easier to use IP based phone number. That way you can use it through your Internet connection and make eaiser calls to US companies that you still have a business relationship with. |
Working on a tax free island to make money? | From http://www.taxrates.cc/html/cayman-islands-tax-rates.html: There is no income tax, corporate tax, sales tax, capital gains tax, wealth tax, inheritance tax, property tax, gift tax or any other kind of direct taxation in Cayman Islands. Cayman Islands government receives the majority of its income from indirect taxation. There is no income tax or capital gains tax or corporation tax in Cayman Islands imposed on Cayman individuals and Cayman Islands companies. An import duty of 5% to 20% is levied against goods imported into the islands. Some items are tax exempt like baby formula, books and cameras. Tax on automobiles depends on the class and make of the model. Tax can reach up to 40% for expensive car models. Financial institutions that operate in the islands are charged a flat licensing fee by the government. A 10% government tax is placed on all tourist accommodations in addition to the small fee each tourist pays upon getting on the Caymans. The Cayman Islands government charges licensing fees to financial institutions that operate in the islands as well as work permit fees for expatriate employees ranging from around US$ 500 for a clerk to around US$ 20,000 for a CEO. |
In today's low interest environment, is it generally more economical to buy or lease a new car in the US? | The most economical way is to save your money, and buy a 1+ year old used car with cash. |
Why do people use mortgages, when they could just pay for the house in full? | The advantage of using a mortgage is that you pay for a house at TODAY's price, using TOMORROW's money. Your question suggests that you rightly observed that it was not a good idea around 2006 (the last peak in housing). That was when prices were at their maximum, and had nowhere to go but down. Some experts think that house prices STILL have further to go on the downside. Meanwhile, wages have been going nowhere during that time. This phenomenon seems to happen about every 40 years or so, the 1930s, the 1970s, and around 2010. At MOST other times, say the 1980s, houses are likely to go up for the "foreseeable" future. At those times, you want to buy the house at "today's" price, then pay for it in future dollars when you are earning more money. The irony is that what most people observe as teenagers is usually the wrong thing to do when they are, say, forty. In 2035, it will probably make sense to have a large mortgage in a bull housing market, which is the opposite of what you observed around 2010. So a better rule is to do at age 40 what made sense about the time you were born (in your case, perhaps the 1990s). Whereas the people born in the early 1970s that got "caught" recently, observed the bull market of the 1980s and 1990s in THEIR teens and twenties, rather than the bear market of the 1970s that took place about the time they were born. |
What are the economic benefits of owning a home in the United States? | Altough this may vary a lot depending on where you live and your actual finance, here what convinced me buying a home instead of renting : Other benefits : |
For very high-net worth individuals, does it make sense to not have insurance? | I think the key to this question is your last sentence, because it's applicable to everyone, high net-worth or not: How would one determine whether they are better off without insurance? In general, insurance is a net good when the coverage would prevent a 'catastrophic' event. If a catastrophic event doesn't happen, oh well, you wasted money on insurance. If it does happen, you just saved yourself from bankruptcy. These are two separate outcomes, so taking the 'average' cost of a catastrophic event (and weighing that against the more expensive insurance premiums) is not practical. This is a way of reducing risk, not of maximizing returns. Let the insurance company take the risk - they benefit from having a pool of people paying premiums, and you benefit because your own life has less financial risk. Now for something like cheap home electronics, insurance is a bad idea. This is because you now have a 'pool' of potential risks, and your own life experience could be close to the 'average' expected result. Meaning you'll pay more for insurance than you would just replacing broken things. This answer is another good resource on the topic. So to your question, at what point in terms of net-worth does someone's house become equivalent to you and your toaster? Remember that if you have home fire insurance, you are protecting the value of your house, because that loss would be catastrophic to you. But a high net-worth individual would also likely find the loss of their house catastrophic. Unless they are billionaires with multiple 10M+ mansions, then it is quite likely that regardless of wealth, a significant portion of their worth is tied up in their home. Even 10% of your net worth would be a substantial amount. As an example, would someone worth $1M have only a 100k home? Would someone worth $10M have only a $1M Home? Depends on where they live, and how extravagantly. Similarly, if you were worth $10M, you might not need extra insurance on your Toyota Camry, but you might want it if you drive a $1M Ferrari! Not to mention that things like auto insurance may cover you for liability, which could extend beyond the value of your car, into medical and disability costs for anyone in an accident. In fact, being high net-worth may make you more vulnerable to lawsuits, making this insurance even more important. In addition, high net-worth individuals have insurance that you or I have no need of. Things like kidnapping insurance; business operation insurance, life insurance used to secure bank loans. So yes, even high net-worth individuals may fear catastrophic events, and if they have so much money - why wouldn't they pay to reduce that risk? Insurance provides a service to them the same as to everyone else, it's just that the items they consider too 'cheap' too insure are more expensive than a toaster. Edit to counter concerns in some other answers, which say that insurance is "always a bad idea": Imagine you are in a kafka-esque episode of "Let's Make a Deal". Monty Hall shows you two parallel universes, each with 100 doors. You must choose your universe, then choose a door. The first universe is where you bought insurance, and behind every door is a penalty of $200. The second universe is where you didn't buy insurance, and behind 99 doors is nothing, with one random door containing a penalty of $10,000. On average, playing the game 99,999 times, you will come out ahead 2:1 by not buying insurance. But you play the game only maybe 3 times in your life. So which universe do you choose? Now, you might say "pfft - I can cover the cost of a 10k penalty if it happens". But this is exactly the point - insurance (unless already required by law) is a net good when it covers catastrophic losses. If you are wealthy enough to cover a particular loss, you typically shouldn't buy that insurance. That's why no one should insure their toaster. This is not a question of "average returns", it is a question of "risk reduction". |
Returning to the UK after working in Switzerland, What to do with my Swiss Francs? | If you "have no immediate plans for the money and will probably not return to Switzerland for a long time or at all" then it might be best just to exchange the money so then you can use/invest it in the UK. Maybe keep a bill or two for memory-sake - I do that whenever I travel to a foreign country. |
Is there such a thing as “stock insurance”? | Put options are basically this. Buying a put option gives you the right but not the obligation to sell the underlying security at a certain date for a fixed price, no matter its current market value at that time. However, markets are largely effective, and the price of put options is such that if you bought them to cover you the whole time, you would on average pay more than you'd gain from the underlying security. There is no such thing as a risk-free investment. |
Insider Trading? | Nope, its not legal. Easy to explain: If you know something that isn't public known ("inside") it's called insider trading. Hard to prove (impossible), but still illegal. To clarify: If the CEO says it AND its known in public its not illegal. In any case the CEO could face consequences (at least from his company). |
When should I start an LLC for my side work? | The major reason to start an LLC for side work is if you want the additional personal liability protection afforded by one. If you're operating as a sole proprietor, you may be exposing yourself to liability: debts and judgments against your business can put your personal assets at risk! So, if you're intending to continue and grow your side work in the future, you ought to consider the LLC sooner than later. It's also an important legal decision and you should consider seeking a professional opinion. The Wall Street Journal has a brief guide titled How to Form an LLC. Here are some notable excerpts: A limited liability company, or LLC, is similar to a partnership but has the legal protections of personal assets that a corporation offers without the burdensome formalities, paperwork and fees. [...] Some states charge annual fees and taxes that can diminish the economic advantage of choosing to become an LLC. Among LLC advantages: pass-through taxation – meaning the profits and losses “pass through” the business to the individuals owning the business who report this information on their own personal tax returns. The result can be paying less in taxes, since profits are not taxed at both the business level and the personal level. Another plus: Owners aren’t usually responsible for the company’s debts and liabilities. [...] Also check out onstartups.com's Startup 101: Should You Form An Inc. or An LLC? Here are some additional articles that discuss the advantages / disadvantages of forming an LLC: |
What are the differences between gold/siver “coin” vs. “round”? | Coins are legal tender. They're authorized by governments and have a face value. Rounds are simply coined pieces of metal minted by private manufacturers. They do not have any face value and are not legal tender. Rounds are used to own metal, they have no value other than the value of the metal in them. Any premium you pay over the price of the metal is the mint's profit. Coins are also used as bulions (i.e.: to own metal and create profits for the government), but many times coins have limited issue and become valuable because of the rarity, specific issues with a specific coin (mistakes, impurities, exclusive designs), etc. So they also may have some numismatic value (depends on the specific coin). Coins also have the assurance of quality of the authorizing government (and fakes are dealt with by the law as forgery of coins is illegal and is a crime), rounds however do not enjoy such protection, and any one can mint them (only copyright/trademark protections apply, where the enforcement is by the owner and not the government). Re the advantages - coins (if you pick the right ones...) appreciate much more than the metal. However, this is mostly in hindsight, and most of the "bulion" coins do not appreciate significantly beyond the price of the metal unless there's something else significant about them (first year of issue, high quality certification, etc). Rounds on the other hand are cheaper (1 oz round will be significantly cheaper than 1 oz coin), and monitor more closely the price of the metal. It is unlikely for rounds to significantly deviate from the spot price (although this does happen occasionally, for specific designs or if a mint goes out of business). |
How best to grow my small amount of money starting at a young age? [duplicate] | I would like to add my accolades in saving $3000, it is an accomplishment that the majority of US households are unable to achieve. source While it is something, in some ways it is hardly anything. Working part time at a entry level job will earn you almost three times this amount per year, and with the same job you can earn about as much in two weeks as this investment is likely to earn, in the market in one year. All this leads to one thing: At your age you should be looking to increase your income. No matter if it is college or a high paying trade, whatever you can do to increase your life time earning potential would be the best investment for this money. I would advocate a more patient approach. Stick the money in the bank until you complete your education enough for an "adult job". Use it, if needed, for training to get that adult job. Get a car, a place of your own, and a sufficient enough wardrobe. Save an emergency fund. Then invest with impunity. Imagine two versions of yourself. One with basic education, a average to below average salary, that uses this money to invest in the stock market. Eventually that money will be needed and it will probably be pulled out of the market at an in opportune time. It might worth less than the original 3K! Now imagine a second version of yourself that has an above average salary due to some good education or training. Perhaps that 3K was used to help provide that education. However, this second version will probably earn 25,000 to 75,000 per year then the first version. Which one do you want to be? Which one do you think will be wealthier? Better educated people not only earn more, they are out of work less. You may want to look at this chart. |
Why are options created? | The main reason is that you move from the linear payoff structure to a non-linear one. This is called convexity in finance. With options you can design a payoff structure in almost any way to want it to be. For example you can say that you only want the upside but not the downside, so you buy a call option. It is obvious that this comes at a price, the option premium. Or equivalently you buy the underlying and for risk management reasons buy a put option on top of it as an insurance. The price of the put could be seen as the insurance premium. You can of course combine options in more complicated ways so that you e.g. profit as long as the underlying moves strongly enough in either direction. This is called a straddle. |
For net worth, should I value physical property at my cost to replace it, or the amount I could get for selling it? | You're asking for opinions here, because it's a matter of how you look at it. I'll give it a shot anyway. For insurance purposes - there's a clear answer: you insure based on how much it would cost you to replace it. For some reason, you're considering as a possibility negotiating with the insurance company about that, but I've never heard of insuring something at a "possible sales value" unless you're talking about a one of a kind thing, or a particularly valuable artifact: art, jewelry, etc. That it would be appraised and insured based on the appraised value. Besides, most of the stuff usually loses value once you bought it, not gains, so insuring per replacement costs makes more sense because it costs more. As to your estimations of your own net worth to yourself - its up to you. I would say that something only worth what people would pay for it. So if you have a car that you just bought brand new, replacing it would cost you $X, but you can only sell it for $X-10%, because it depreciated by at least 10% once you've driven it off the dealer's lot. So I would estimate your worth as $X-10% based on the car, not $X, because although you spent $X on it - you can never recover it if you sell it, so you can't claim to have it as your "net worth". |
How is it possible that a preauth sticks to a credit card for 30 days, even though the goods have already been delivered? | The answer to your question is very simple: The preauth and the shipment of the goods have no connection within the credit card system. It is possible to process a payment that does not cancel a preauthorization. This is needed for the case where you place two orders and the one you placed second ships first. A preauth can remain active for some time unless it is captured or cancelled. So in your case a preauth was placed and remained active. That you were shipped and billed for some goods had no effect on the preauth because one side or the other failed to attach them. |
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