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IRR vs. Interest Rates | IRR is subjective, if you could provide another metric instead of the IRR; then this would make sense. You can't spend IRR. For example, you purchase a property with a down payment; and the property provides cash-flow; you could show that your internal rate of return is 35%, but your actual rate of importance could be the RoR, or Cap Rate. I feel that IRR is very subjective. IRR is hardly looked at top MBA programs. It's studied, but other metrics are used, such as ROI, ROR, etc. IRR should be a tool that you visually compare to another metric. IRR can be very misleading, for example it's like the cash on cash return on an investment. |
If a startup can always issue new shares, what value is there to stocks/options? | Companies normally do not give you X% of shares, but in effect give you a fixed "N" number of shares. The "N" may translate initially to X%, but this can go down. If say we began with 100 shares, A holding 50 shares and B holding 50 shares. As the startup grows, there is need for more money. Create 50 more shares and sell it at an arranged price to investor C. Now the percentage of each investor is 33.33%. The money that comes in will go to the company and not to A & B. From here on, A & C together can decide to slowly cut out B by, for example: After any of the above the % of shares held by B would definitely go down. |
Is engaging in stocks without researching unwise? | If you don't want to do the deep research on each individual company, you might want to look at index funds and similar "whole market" investments. |
What publicly available software do professional stock traders use for stock analysis? | Bloomberg Professional seems to be very popular. It provides any kind of data you can imagine. Analysis is a subjective interpretation of the data. |
Do online repositories of publicly traded companies' financial statements exist? | You can use the Securities Exchange Commission's EDGAR search engine to search all available SEC related filings. https://www.sec.gov/edgar/searchedgar/companysearch.html Top tip: use the fast search on the right to search for the company ticker rather than by company name. |
standard method for learning more about a specific sector? (particularly biotech sector) | The important piece here is not necessarily understanding intimate details of biological engineering per se, but rather understanding how the business operates as a singular unit. It is also important to understand the business case for a firm, the evolution of demand for its products/services and the cost of its revenue. To understand a particular sector of the market, you should begin by studying how that sector interacts with and is influenced by the larger market and economy as a whole, both domestic and abroad. From there, you should study individual companies and again see how they interact with one another, the sector, market, etc. Many biotech firms have a different offering and meet different business and consumer demands. Some are near term solutions to existing problems, some long. It is important to see how the firms collectively interact with the consumer base and then differentiate on an individual level. |
Why is a stock dividend considered a dividend? What makes it different from a stock split? | You can argue that cash dividend is a kind of split as well by this logic. The stock price on ex-dividend gets a hit coincidental with the dividend to be paid, so one can argue that the investor has the same cash value on the day the dividend was paid as if it wouldn't be paid at all. However, for the company to distribute stocks instead of cash may be advantageous if they have low cash reserves but significant amount of treasury stocks, and the stocks are of high liquidity. It is also a way for the company to release treasury stocks without diluting the current shareholders and creating taxable income to the company, that's an important factor to consider. This is in fact the real answer to your question. The main difference between split and stock dividend is that in split, the stock distributions proportions don't change. With stock dividend - they do. While the outstanding share proportions do not change, total proportions do, because of the treasury stocks being distributed. So company has less stocks in its vaults, but everyone else still has the same proportions of ownership. Compare this to split: company's treasury stocks would be split as well, and it would continue essentially sitting on the same proportion of stocks. That shift of treasury stocks to the outside shareholders - this is what makes it a dividend. |
Is an interest-only mortgage a bad idea? | It's an interesting question, and one that has a few tentacles. A few thoughts come to mind: There's nothing wrong per se with these arrangements. I think it's a matter of doing what feels comfortable. Hopefully someone on here will have a personal experience to share. |
Shorting: What if you can't find lenders? | If you can't find anyone to lend you the shares, then you can't short. You can attempt to raise the interest rate at which you will borrow at, in order to entice others to lend you their shares. In practice, broadcasting this information is pretty convoluted. If there aren't any stocks for you to buy back, then you have to buy back at a higher price. As in, place a limit buy order higher and higher until someone decides to sell to you. This affects your profit. Regarding the public ledger: This functions different in different markets. United States stock markets have an evolving body of regulations to alleviate the exact concerns you detailed, but Canada's or Dubai's stock markets would have different provisions. You make the assumption that it is an efficient process, but it is not and it is indeed ripe for abuse. In US stocks, the public ledger has a 3 business day delay between showing change of ownership. Many times brokers and clearing firms and other market participants allow a customer to go short with fake shares, with the idea that they will find real shares within the 3 business day time period to cover the position. During the time period that there is no real shares hitting the market, this is called a "naked short". The only legal system that attempts to deter this practice is the "fail to deliver" (FTD) list. If someone fails to deliver, that means there is a short position active with fake shares for which no real shares have been borrowed against. Too many FTD's allow for a short selling restriction to be placed, meaning nobody else can be short, and existing short sellers may be forced to cover. |
First job: Renting vs get my parents to buy me a house | Say the price is $200K. Would I, as a real estate investor, want to buy such a house? If the rent is $600, that's $7200/yr. "the local property tax rate is levied on the tax base, and the applicable tax rate ranges from 0.40% to 0.76%" so, I'll assume .5%, just $1,000. There are rules of thumb that say half the rent will go to maintenance and other costs, if that seems high, say just $2000. We're left with $4000/yr. Less than 2% on the $200K investment. Italian bonds are yielding 8%. As an investor, if I couldn't get more than $2000/mo gross rent, I would not buy the house for $200K. As a parent, I'd have the money invested, have $16K/yr of income and help support you without taking all the risk the real estate investor has. Note: your question and my answer are in dollars, but I acknowledge the Italy tag, and used Italy property tax. My tax is 1.6% of home value in my US city. Edit: per the comment below, the 8% is incorrect. The return on the house purchase doesn't change, of course, but the safe yields are not that high, currently, 1%. |
Transfer from credit to debit | As revised, the answer is still that you're asking the wrong question. If your father wants to make money available on your debit card, all he has to do is deposit the money into your checking account. Where he gets that money from -- as an AmEx casH advance, by selling your bicycle for you, or simply out of one of his own bank accounts -- is irrelevant. |
What are some pre-tax programs similar to FSA that I can take advantage of? | There is a dependent care spending account for child care related expenses. Also Medical and Dental expenses over a certain % of your income maybe deductible on your tax return. |
Why is the highest quintile the only quintile whose wealth exceeds its income? | I think you came up with a worthy Masters/PhD research project, it is a great question. This is in Australia so it is difficult for me to have complete perspective. However, I can speak about the US of A. To your first point relatively few people inherit their wealth. According to a brief web search about 38% of billionaires, and 20% of millionaires inherited their wealth. The rest are self-made. Again, in the US, income mobility is very common. Some act like high level earners are just born that way, but studies have shown that a great deal of income mobility exists. I personally know people that have grown up without indoor plumbing, and extremely poor but now earn in the top 5% of wage earners. Quid's points are valid. For example a Starbucks, new I-Phone, and a brake job on your car are somewhat catastrophic if your income is 50K/year, hurts if your income is 100K, and an inconvenience if you make 250K/year. These situations are normal and happen regularly. The first person may have to take a pay day loan to pay for these items, the second credit card interest, the third probably has the money in the bank. All of this exaggerates the effect of an "emergency" on one's net worth. To me there is also a chicken-and-egg effect in wealth building and income. How does one build wealth? By investing wisely, planning ahead, budgeting, delaying gratification, finding opportunities, etc... Now if you take those same skills to your workplace isn't it likely you will receive more responsibility, promotions and raises? I believe so. And this too exaggerates the effect on one's net worth. If investing helps you to earn more, then you will have more to invest. To me one of the untold stories of this graph is not just investing, but first building a stable financial base. Having a sufficient emergency fund, having enough and the right kind of insurance, keeping loans to a minimum. Without doing those things first investments might need to be withdrawn, often at an inopportune time, for emergency purposes. Thanks for asking this! |
Optimal way to use a credit card to build better credit? | Great question. First, my recommendation would be for you to get a card that does not have a yearly fee. There are many credit cards out there that provide cash back on your purchases or points to redeem for gift cards or other items. Be sure to cancel the credit card that you have now so you don't forget about that yearly fee. Canceling will have a temporary impact on your credit score if the credit card is your longest held line of credit. Second, it is recommended not to use more than 20% of all the available credit, staying above that line can affect your credit score. I think that is what you are hearing about running up large balances on your credit card. If you are worried about staying below the 20% line, you can always request a larger line of credit. Just keep paying it off each month though and you will be fine. You already have a history of credit if you have begun paying off your student loans. |
Are real estate prices memory-less? | I would argue no. It's easy to correlate home prices based on size, neighborhood, school district, condition and other factors, such as property taxes. In fact, real estate people and government assessors use those characteristics to assess property value. The demographics of a home will drive desirability/demand for the property. Combine that with the cost and availability of capital, and house prices are relatively predictable. |
Co-signer deceased | People act like lawsuits are the end of the world, her suing shouldn't be considered a threat, it should be considered the accurate course of action to resolve contractual obligations. Of course, it would be convenient if she did nothing at all! If you believe her real goal is to "get it off her credit", then have her come refinance with you. This will give you the opportunity to not have her on it and you to get different terms. Of course, if your credit still is poor then this option also exacerbates the inconvenience. None of the options sounds like they will ruin your credit (unless you are scrounging for cash through credit facilities to pay her off). You have several completely benign options available. |
Price graphs: why not percent change? | The actual price is represented on charts and not the change in price as a percentage, because it is the actual price which is used in all other parts of analysis (both technical and fundamental), and it is the actual figure the security is bought and sold at. A change in price has to be relative to a previous price at a previous time, and we can easily work out the change in price over any given time period. I think what you are concerned about is how to compare a certain actual price change in low priced securities to the same actual price change in a higher priced securities. For example: $1.00 rise in a $2.00 stock representing a 50% increase in price; $1.00 rise in a $10.00 stock representing a 10% increase in price. On a standard chart both of these look the same, as they both show a $1.00 increase in price. So what can we do to show the true representation of the percentage increase in price? It is actually quite simple. You view the chart using a log scale instead of a standard scale (most charting packages should have this option). What may look like a bubble on a standard scale chart, looks like a healthy uptrend on a log scale chart and represents a true picture of the percentage change in price. Example of Standard Price Scale VS LOG Price Scale on a Chart Standard Price Scale On the standard scale the price seems to have very little movement from Mar09 to Jan12 and then the price seems to zoom up after Jan12 to Mar13. This is because a 4% increase (for example) of $0.50 is only $0.02, whilst a 4% increase of $7.00 $0.28, so the increases seem much bigger at the end of the chart. LOG Price Scale On the LOG chart however, these price changes seem to be more evenly displayed no matter at what price level the price change has occurred at. This thus give a better representation of how fast or slow the price is rising or falling, or the size of the change in price. |
Why so much noise about USA's credit rating being lowered? | The credit scale is deceptive, it goes: AAA, AA, A, BBB, BBB-, BB+, BB, B, CCC, CC, C, D. In reality it should be A,B,C,D,E, F, G,H, I, etc. The current scale does not reflect with clarity the ranking of risks and ratings. AA is much worse than AAA, but the uncertainty involved can be scary. Check out these corporate and sovereign debt credit ratings. |
Stock market transaction cost calculation | An order is your command to the broker to, say, "sell 100 shares of AAPL". An executed order (or partially executed order) is when all (or some) of that command is successfully completed. A transaction is an actual exchange of shares for money, and there may be one or more transactions per executed order. For example, the broker might perform all of the following 5 transactions in order to do what you asked: On the other hand, if the broker cannot execute your order, then 0 transactions have taken place. The fee schedule you quote is saying that no matter how many transactions the broker has to perform in order to fill your order -- and no matter what the share prices are -- they're only going to charge you $0.005 per share ($0.50 in this example of 100 shares), subject to certain limits. However, as it says at the top of the page you linked, Our Fixed pricing for stocks, ETFs (Exchange Traded Products, or ETPs) and warrants charges a fixed amount per share or a set percent of trade value, and includes all IB commissions, exchange and most regulatory fees with the exception of the transaction fees, which are passed through on all stock sales. certain transaction fees are passed through to the client. The transaction fee you included above is the SEC fee on sales. Many (but not all) transaction fees DO depend on the prices of the shares involved; as a result they cannot be called "fixed" fees. For example, if you sell 100 shares of AAPL at $150 each, But if you sell 100 shares of AMZN at $940 each, So the broker will charge you the same $0.50 on either of those orders, but the SEC will charge you more for the expensive AMZN shares than for the cheaper AAPL shares. The reason this specific SEC fee mentions aggregate sales rather than trade value is because this particular SEC fee applies only to the seller and not to the buyer. So they could have written aggregate trade value, but they probably wanted to highlight to the reader that the fee is only charged on sells. |
Best ISA alternative | Your question is actually quite broad, so will try to split it into it's key parts: Yes, standard bank ISAs pay very poor rates of interest at the moment. They are however basically risk free and should track inflation. Any investment in the 6-7% return range at the moment will be linked to stock. Stock always carries large risks (~50% swings in capital are pretty standard in the short run. In the long run it generally beats every other asset class by miles). If you can’t handle those types of short terms swings, you shouldn’t get involved. If you do want to invest in stock, there is a hefty ignorance tax waiting at every corner in terms of how brokers construct their fees. In a nutshell, there is a different best value broker in the UK for virtually every band of capital, and they make their money through people signing up when they are in range x, and not moving their money when they reach band y; or just having a large marketing budget and screwing you from the start (Nutmeg at ~1% a year is def in this category). There isn't much of an obvious way around this if you are adamant you don't want to learn about it - the way the market is constructed is just a total predatory minefield for the complete novice. There are middle ground style investments between the two extremes you are looking at: bonds, bond funds and mixes of bonds and small amounts of stock (such as the Vanguard income or Conservative Growth funds outlined here), can return more than savings accounts with less risk than stocks, but again its a very diverse field that's hard to give specific advice about without knowing more about what your risk tolerance, timelines and aims are. If you do go down this (or the pure stock fund) route, it will need to be purchased via a broker in an ISA wrapper. The broker charges a platform fee, the fund charges a fund fee. In both cases you want these as low as possible. The Telegraph has a good heat map for the best value ISA platform providers by capital range here. Fund fees are always in the key investor document (KIID), under 'ongoing charges'. |
Why would anyone buy a government bond? | There are a few other factors possible here: Taxes - Something you don't mention is what are the tax rates on each of those choices. If the 4% gain is taxed at 33% while the 3% government bond is taxed at 0% then it may well make more sense to have the government bond that makes more money after taxes. Potential changes in rates - Could that 4% rate change at any time? Yield curves are an idea here to consider where at times they can become inverted where short-term bonds yield more than long-term bonds due to expectations about rates. Some banks may advertise a special rate for a limited time to try to get more deposits and then change the rate later. Beware the fine print. Could the bond have some kind of extra feature on it? For example, in the US there are bonds known as TIPS that while the interest rate may be low, there is a principal adjustment that comes as part of the inflation adjustment that is part how the security is structured. |
I'm 20 and starting to build up for my mortgage downpayment, where should I put my money for optimal growth? | The big question is whether you will be flexible about when you'll get that house. The overall best investment (in terms of yielding a good risk/return ratio and requiring little effort) is a broad index fund (mutual or ETF), especially if you're contributing continuously and thereby take advantage of cost averaging. But the downside is that you have some volatility: during an economic downturn, your investment may be worth only half of what it's worth when the economy is booming. And of course it's very bad to have that happening just when you want to get your house. Then again, chances are that house prices will also go down in such times. If you want to avoid ever having to see the value of your investment go down, then you're pretty much stuck with things like your high-interest savings account (which sounds like a very good fit for your requirements. |
Is Amazon's offer of a $50 gift card a scam? | What's going on here is that Amazon/visa thinks that the money they will earn on average from irresponsible credit card users is more value than 50$ each. This is the same logic that is behind the cash back or airplane point bonuses many credit cards offer, or the "apply and get a free 2-liter of soda" that some stores offer. I would need more information about the card to say whether or not you should apply (What are the fees, if any? What is the interest rate? etc). |
Paid cash for a car, but dealer wants to change price | I have one additional recommendation: if the dealer continues to press the issue, tell them that they need to drop it, or you will write a Yelp review in excruciating detail about the entire experience. Used car dealers are very aware of their Yelp presence and don't like to see recent, negative reviews because it can cost them a lot of new business. (I'm assuming this is a used car. If it's a new car, you could go over their heads and bring up the problem with the manufacturer. Dealers hate it when you go directly to the manufacturer with a dealer complaint.) |
What is the difference between “good debt” vs. “bad debt”? | None of the previous answers (which are all good) mention margin accounts (loans from your broker). You may also have heard them described as "leverage". It may seem odd to mention this rather narrow form of debt here, but it's important because overuse of leverage has played a large part in pretty much every financial crisis you can think of (including the most recent one). As the Investopedia definitions indicate, leverage magnifies gains, but also magnifies losses. I consider margin/leverage to be "bad" debt. |
Is diversification better | There are probably 3-4 questions here. Diversification - A good index, a low cost S&P fund or ETF can serve you very well. If you add an extended market index or just go with "Total market", that might be it for your stock allocation. I've seen people with 5 funds, and it didn't take much analysis to see the overlap was so significant, that the extra 4 funds added little, and 2 of the 5 would have been it. If you diversify by buying more ETFs or funds, be sure to see what they contain. If you can go back in time, buy Apple, Google, Amazon, etc, and don't sell them. Individual stocks are fun to pick, but unless you put in your homework, are tough to succeed at. You need to be right at the buy side, and again to know if, and when, to sell. I bought Apple, for example, long ago, pre-last few splits. But, using responsible a approach, I sold a bit each time it doubled. Has I kept it all through the splits, I'd have $1M+ instead of the current $200K or so of stock. Can you tell which companies now have that kind of potential for the future? The S&P has been just about double digit over 60 years. The average managed fund will lag the S&P over time, many will be combined with other funds or just close. Even with huge survivor bias, managed funds can't beat the index over time, on average. Aside from a small portion of stocks I've picked, I'm happy to get S&P less .02% in my 401(k). In aggregate, people actually do far worse due to horrific timing and some odd thing, called emotions. |
Are buyouts always for higher than the market value of a stock? | 1) Yes, buyouts are always higher than the trading price. 2) ANYTHING can be negotiated. There is no rule saying buyouts have to be higher. |
More money towards down payment versus long-term investments | There are two components to any non-trivial financial decision: Assuming that all things remain equal, borrowing money at a low rate while investing for a higher return is a no-brainer. The problem is, all things do not remain equal. For example: I think that you need to assess your position and preferences. I'd err on the side of being in less debt. |
How does a high share price benefit a company when it is raising funds? | A private company say has 100 shares with single owner Mr X, now it needs say 10,000/- to run the company, if they can get a price of say 1000 per share, then they just need to issue 10 additional shares, so now the total shares is 110 [100 older plus 10]. So now the owner's share in the company is around 91%. However if they can get a price of only Rs 200 per share, they need to create 50 more shares. So now the total shares is 150 [100 older plus 50]. So now Mr X's equity in his own company is down to 66%. While this may still be OK, if it continues and goes below 50%, there is chances that he [Original owner] will be thrown out |
How much does a landlord pay in taxes? | I'd recommend you use an online tax calculator to see the effect it will have. To your comment with @littleadv, there's FMV, agreed, but there's also a rate below that. One that's a bit lower than FMV, but it's a discount for a tenant who will handle certain things on their own. I had an arm's length tenant, who was below FMV, I literally never met him. But, our agreement through a realtor, was that for any repairs, I was not required to arrange or meet repairmen. FMV is not a fixed number, but a bit of a range. If this is your first rental, you need to be aware of the requirement to take depreciation. Simply put, you separate your cost into land and house. The house value gets depreciated by 1/27.5 (i.e. you divide the value by 27.5 and that's taken as depreciation each year. You may break even on cash flow, the rent paying the mortgage, property tax, etc, but the depreciation might still produce a loss. This isn't optional. It flows to your tax return, and is limited to $25K/yr. Further, if your adjusted gross income is over $100K, the allowed loss is phased out over the next $50K of income. i.e. each $1000 of AGI reduces the allowed loss by $500. The losses you can't take are carried forward, until you use them to offset profit each year, or sell the property. If you offer numbers, you'll get a more detailed answer, but this is the general overview. In general, if you are paying tax, you are doing well, running a profit even after depreciation. |
Open Interest vs Volume for Stock Options | You are asking 'what if', do you have some anticipated answers? Having volume smaller than open interest is the norm. As far as I can tell, having only one trading day and no previous open interest only affects someone trying to sell a contract they are holding. Meaning that if you only have one day to sell your contract then you need to offer it 'at market' or at the bid price (or even lower than the bid price). If you cannot sell your contract then you have to let it expire worthless or you have to exercise it. Those are your three options: let it expire, sell it (perhaps at a loss), and exercise it. Edit: be careful about holding an in-the-money option. Many brokers will automatically exercise an in-the-money contract if you hold it till expiration date. |
Explanations on credit cards in Canada | If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. I have my back account (i.e. chequing account) and VISA account at/from the same bank (which, in my case, is the Royal Bank of Canada). I asked my bank to set up an automatic transfer, so that they automatically pay off my whole VISA balance every month, on time, by taking the money from my bank account. In that way I am never late paying the VISA so I never pay interest charges. IOW I use the VISA like a debit card; the difference is that it's accepted at some places where a debit card isn't (e.g. online, and for car rentals), and that the money is deducted from my bank account at the end of the month instead of immediately. |
Why do investors buy stock that had appreciated? | You seem to prefer to trade like I do: "Buy low, sell high." But there are some people that prefer a different way: "Buy high, sell higher." A stock that has "just appreciated" is "in motion." That is a "promise" (not always kept) that it will continue to go higher. Some people want stocks that not only go higher, but also SOON. The disadvantage of "buy low, sell high" is that the stock can stay low for some time. So that's a strategy for patient investors like you and me. |
What is a Student Loan and does it allow you to cover a wide range of expenses relating to school? | Student loan is a class of unsecured loan. The characteristics that define a student loan are, primarily, that it is a loan that is intended to be used by someone who is currently a student. Beyond that, though, there are many variations. The different kinds of requirements usually have to do with who is eligible for the loan, and with what the loan is allowed to be used to pay. Some loans have other limitations, such as only being allowed to be directly paid to the institution. Some student loans are federally guaranteed (meaning the Federal Government will repay the bank if you default). Those have a lower interest rate, typically, and often have more stringent requirements, such as only full-time students being eligible, being need-based, and limitations on what the loan's funds can be used for. See studentaid.ed.gov for more information. Many private student loans have quite lax limitations. Some for example have nearly no limitation as to what they can fund; many are allowed to be taken out by part-time students and even non-degree-seeking students in some cases. Private loans usually have somewhat higher rates (as they're entirely unsecured) to go along with the lower restrictions and higher borrowing limits. You'd have to see the specific details of any particular loan to know what it's allowed to pay for, so if you choose this route, know what you plan to use it to pay for before you go looking. |
Put idle savings to use while keeping them liquid | Provide you are willing to do a bit of work each month, you should apply for a "rewards checking" account. Basically these accounts require you to set up direct deposit (can be any amount and your employer can easily deposit $25 into one account and the rest into another if you like). They also require you to use your debit card attached to the account (probably about 10 times per month). Check out the list on the fatwallet finance forum. Right now the best accounts are earning over 4%. |
what are the downsides of rolling credit card debt in this fashion | Awesome, you are a math guy. Very good for you. In theory, what you are proposing, should work out great as the math works out great. However have you taken a economics or finance coursework? The math that they do in these class will leave a most math guys uncomfortable with the imprecision even when one is comfortable with chaos theory. Personal finance is worse. If it were about math things like reverse mortgages, payday lenders, and advances on one income tax returns would not exist. The risk derived from the situation you describe is one born out of behavior. Sometimes it is beyond control of the person attempting your scheme. Suppose one of these happen: In my opinion the market is risky enough without borrowing money in order to invest. Its one thing to not pay extra principle to a mortgage in order to put that money in play in the market, it is another thing to do what you are suggesting. While their may be late fees associated with a mortgage payment, a fixed rate mortgage will not change if you late on payment(s). On these balance transfer CC schemes they will jack your rate up for any excuse possible. I read an article that the most common way to end up with a 23%+ credit card was to start out with a 0% balance transfer. One thing that is often overlooked is that the transfer fee paid jacks up the stated rate of the card. In the end, get out of consumer debt, have an emergency fund, then start investing. Building a firm financial foundation is the best way to go about it. Without one it will be difficult to make headway. With one your net worth will increase faster then you imagined possible. |
Should I be worried that I won't be given a receipt if I pay with cash? | There are number of reasons why someone doesn't want to give you a receipt for cash payment. Anything ranging from not wanting to pay taxes, to being able to deny you gave them money for service in the event you're not happy with the service and ask for money back. You won't get in trouble for giving him cash, however you should be worried because any "reputable" person providing any type of service/product will provide a receipt regardless of payment type. |
Should I continue to invest in an S&P 500 index fund? | 5-8 years is not quite long term. Until the naughts (the 2001-10 decade), advisors were known to say that the S&P was always positive given a 10 year holding period. Now, we're saying 15 years is always positive looking back. One can easily pull S&P return data which would let you run numbers showing the range of returns for the 5-8 yr period you have in mind. A bit of extra effort and you can include the dollar cost averaging factor. This wouldn't produce a guarantee, but a statistical range of expected returns over your time horizon. Then a decision like "with a 1/4 chance of losing 25% of my money, should I stay with this plan?" This is just an example. The numbers for 1900-2014 look like this - In any 5 year period, an average return of 69.2% (note 1.69 means a 69% gain). Of the 111 5 year periods, 14 were negative with the worst being a 46% loss. I maintain 5 years is not really long term, but the risk is relatively low of being in the red. |
What gives non-dividend stocks value to purchasers? [duplicate] | A Company start with say $100. Lets say the max it can borrow from bank is $100 @ $10 a year as Interest. After a years say, On the $200 the company made a profit of $110. So it now has total $310 Option 1: Company pays back the Bank $100 + $10. It further gave away the $100 back to shareholders as dividends. The Balance with company $100. It can again start the second year, borrow from Bank $100 @ 10 interest and restart. Option 2: Company pays back the Bank $100 + $10. It now has $200. It can now borrow $200 from Bank @ $20. After a year it makes a profit of $250. [Economics of scale result $30 more] Quite a few companies in growth phase use Option 2 as they can grow faster, achieve economies of scale, keep competition at bay, etc Now if I had a share of this company say 1 @ $1, by end of first year its value would be $2, at the end of year 2 it would be $3.3. Now there is someone else who wants to buy this share at end of year 1. I would say this share gives me 100% returns every year, so I will not sell at $2. Give me $3 at the end of first year. The buyer would think well, if I buy this at $3, first year I would notionally get $.3 and from then on $1 every year. Not bad. This is still better than other stocks and better than Bank CD etc ... So as long as the company is doing well and expected to do well in future its price keeps on increasing as there is someone who want to buy. Why would someone want to sell and not hold one: 1. Needs cash for buying house or other purposes, close to retirement etc 2. Is balancing the portfolio to make is less risk based 3. Quite a few similar reasons Why would someone feel its right to buy: 1. Has cash and is young is open to small risk 2. Believes the value will still go up further 3. Quite a few similar reasons |
Why are there many small banks and more banks in the U.S.? | I can't find a citation, but from memory (EDIT: and reading the newspapers at the time it happened): up until around 1980, banks couldn't cross state borders. In my state, at least, they were also very local, only staying within one county. This was to enforce "localness", the thought being that local bankers would know local people and the local situation better than far away people who only see numbers and paperwork. |
How much house can a retired person afford | Consider property taxes (school, municipal, county, etc.) summing to 10% of the property value. So each year, another .02N is removed. Assume the property value rises with inflation. Allow for a 5% after inflation return on a 70/30 stock bond mix for N. After inflation return. Let's assume a 20% rate. And let's bump the .05N after inflation to .07N before inflation. Inflation is still taxable. Result Drop in value of investment funds due to purchase. Return after inflation. After-inflation return minus property taxes. Taxes are on the return including inflation, so we'll assume .06N and a 20% rate (may be lower than that, but better safe than sorry). Amount left. If no property, you would have .036N to live on after taxes. But with the property, that drops to .008N. Given the constraints of the problem, .008N could be anywhere from $8k to $80k. So if we ignore housing, can you live on $8k a year? If so, then no problem. If not, then you need to constrain N more or make do with less house. On the bright side, you don't have to pay rent out of the .008N. You still need housing out of the .036N without the house. These formulas should be considered examples. I don't know how much your property taxes might be. Nor do I know how much you'll pay in taxes. Heck, I don't know that you'll average a 5% return after inflation. You may have to put some of the money into cash equivalents with negligible return. But this should allow you to research more what your situation really is. If we set returns to 3.5% after inflation and 2.4% after inflation and taxes, that changes the numbers slightly but importantly. The "no house" number becomes .024N. The "with house" number becomes So that's $24,000 (which needs to include rent) versus -$800 (no rent needed). There is not enough money in that plan to have any remainder to live on in the "with house" option. Given the constraints for N and these assumptions about returns, you would be $800 to $8000 short every year. This continues to assume that property taxes are 10% of the property value annually. Lower property taxes would of course make this better. Higher property taxes would be even less feasible. When comparing to people with homes, remember the option of selling the home. If you sell your .2N home for .2N and buy a .08N condo instead, that's not just .12N more that is invested. You'll also have less tied up with property taxes. It's a lot easier to live on $20k than $8k. Or do a reverse mortgage where the lender pays the property taxes. You'll get some more savings up front, have a place to live while you're alive, and save money annually. There are options with a house that you don't have without one. |
Should you co-sign a personal loan for a friend/family member? Why/why not? | Never co-sign a loan for someone, especially family Taking out a loan for yourself is bad enough, but co-signing a loan is just plain stupid. Think about it, if the bank is asking for a co-signer its because they are not very confident that the applicant is going to be paying back the loan. So why would you then step up and say I'll pay back the loan if they don't, make me a co-signer please. Here is a list of things that people never think about when they cosign a loan for somebody. Now if you absolutely must co-sign a loan here is how I would do it. I, the co-signer would be the one who makes the payments to ensure that the loan was paid on time and I would be the one collecting the payment from the person who is getting the loan. Its a very simple way of preventing some of the worst situations that can arise and you should be willing to make the payments anyway after all thats what it means to cosign a loan. Your just turning things around and paying the loan upfront instead of paying after the applicant defaults and ruins every ones credit. (Source: user's own blog post Never co-sign a loan for someone, especially family) |
Dealership made me the secondary owner to my own car | Your best bet is to refinance the car in your own name only. Hopefully a year of making the payments has improved your credit score enough. If not, you can approach a loan officer at a credit union and make your case (that you haven't missed any payments, etc.). A new title should be sent to the new lien holder, and in that process, if your ex needs to sign any paperwork, it can be done while refinancing. |
What's the difference between Buy and Sell price on the stock exchange [duplicate] | To add to @Victor 's answer; if you are entering a market order, and not a limit order (where you set the price you want to buy or sell at), then the Ask price is what you can expect to pay to purchase shares of stock in a long position and the Bid price is what you can expect to receive when you sell stock you own in a long position. |
What kind news or information would make the price of a stock go up? | You should not trade based on what news is just released, if you try you will be too slow to react most of the time. In many cases the news is already priced into the stock during the anticipation of the news being released. Other times as soon as the news is released the price will gap up or down in response to the news. Some times when you think that the news is good, like new record profits have been achieved, but the share price goes down instead of up. This may be due to the expectation of the record profits by analysts to be 20% more than last year, but the company only achieves 10% more than last year. So the news is actually seen as bad because, even though record profits, it hasn't met expectations. The same can happen in the other direction, a company may make a loss and the share price goes up. This may be because it was expected to make a 50% loss but only made a 20% loss due to cost cutting, so this is seen as a good thing and the price can shoot up, especially if it had been beaten down for months. An other example is when the Federal Reserve in the USA put up interest rates earlier this month. Some may have seen this as bad news and expected share prices to fall, but instead prices rallied. This was actually seen as good news, firstly because it had been expected for a long time, and secondly and more importantly because a small rise in interest rates after many years of near zero rates is a sign of the economy finally starting to improve. If the economy is improving, that means more people will have jobs, more people will be spending more money, companies will start to make higher revenues and start to expand, which means higher profits and higher share prices. A better way to trade is to have a written trading plan and use technical analysis to develop a set of buy and sell criteria that you follow to the tea. Then back test your trading plan through various market conditions to make sure you get a positive expectancy. |
Looking to buy a house in 1-2 years. Does starting a Roth IRA now make sense? | First, look at the local housing market, and the price to rent ratios. If you are comfortable that a house can be had for near to the cost of renting, and are not still dropping is price, then focus on the down-payment. I don't imagine housing prices to start picking up any time soon, so you don't be too rushed. If you feel like you have a longer time to save before you want to buy, I would focus as much money as I can into a retirement account while still saving for a down payment. Since you are young, you really want your retirement accounts working for you as soon as possible. You should not be investing in 3% stable funds, but the stock market index funds. Retirement is for 40 years in the future. Using funds for a down-payment from a retirement account should be a last resort. Remember this money is to provide you security later in life, not to get you into a house. When you take out money and put it into a house, it will not be appreciating nearly as fast. It is easy to say you will save later, but the money you save early in life will make up 50% or more of your funds when you retire. That is why it is critical to save for retirement as soon as possible. |
What does APR mean I'm paying? | Credit Cards typically charge interest on money you borrow from them. They work in one of two ways. Most cards will not charge you any interest if you pay the balance in full each month. You typically have around 25 days (the "grace period") to pay that off. If that's the case, then you will use your credit card without any cost to yourself. However, if you do not pay it in full by that point, then you will owe 19.9% interest on the balance, typically from the day you charged the payment (so, retroactively). You'll also immediately begin owing interest on anything else you charge - typically, even if you do then pay the next month the entire balance on time. It's typically a "daily" rate, which means that the annual rate (APR) is divided into its daily rate (think the APR divided by 365 - though it's a bit different than that, since it's the rate which would be 19.9% annualized when you realize interest is paid on interest). Say in your case it's 0.05% daily - that means, each day, 0.05% is added to your balance due. If you charged $1000 on day one and never made a payment (but never had to - ignore penalties here), you'd owe $1199 at the end of the year, paying $199 interest (19.9*1000). Note that your interest is calculated on the daily balance, not on your actual credit limit - if you only charge $100, you'd owe $19.90 interest, not $199. Also note that this simplifies what they're actually doing. They often use things like "average daily balance" calculations and such to work out actual interest charged; they tend to be similar to what I'm describing, but usually favor the bank a bit (or, are simpler to calculate). Finally: some credit cards do not have a grace period. In the US, most do, but not all; in other countries it may be less common. Some simply charge you interest from day one. As far as "Standard Purchases", that means buying services or goods. Using your credit card for cash advances (i.e., receiving cash from an ATM), using those checks they mail you, or for cash-like purchases (for example, at a casino), are often under a different scheme; they may have the same rate, or a different rate. They likely incur interest from the moment cash is produced (no grace period), and they may involve additional fees. Never use cash advances unless you absolutely cannot avoid it. |
Looking for a good source for Financial Statements | You can access financial statements contained within 10K and 10Q filings using Last10K.com's mobile app: Last10K.com/mobile Disclosure: I work for Last10K.com |
Financing with two mortgages: a thing of the past? | I doubt it. I researched it a bit when I was shopping for a HELOC, and found no bank giving HELOC for more than 80% LTV. In fact, most required less than 80%. Banks are more cautious now. If the bank is not willing to compromise on the LTV for the first mortgage - either look for another bank, or another place to buy. I personally would not consider buying something I cannot put at least 20% downpayment on. It means that such a purchase is beyond means. |
What happens to public shareholders when a public stock goes private? | I can see two possibilities. Either a deal is struck that someone (the company itself, or a large owner) buys out the remaining shares. This is the scenario @mbhunter is talking about, so I won't go too deeply into it, but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach. The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the "market" part of "stock market". That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with. |
How do dividend reinvestment purchases work? | Many brokers administer their own dividend reinvestment plans. In this case, on dividend payment date, they automatically buy from the market on behalf of their reinvestment customers, and they administer all fractional shares across all customers. All of your shares are in the broker's street name anyway, the fractional share is simply in their account system. The process is well documented for several common online brokers; so any specific questions you may have about differences in policies or implementation should be directed to your broker: https://us.etrade.com/e/t/estation/help?id=1301060000 https://www.tdameritrade.com/retail-en_us/resources/pdf/TDA208.pdf |
How to calculate how far a stock price can drop before a broker would issue a margin call? | With your numbers, look at it this way - You borrowed $50. When the stock is $100, you are at 50% margin. What's most important, is that there's margin interest charged, so the amount owed will increase regardless of the stock price. When calculating your return or loss, the interest has to be accounted for or your numbers will be wrong. For a small investor, margin rates can run high, and often, will offset much of your potential gain. What good is a $100 gain if you paid $125 in margin interest? |
In your 20s how much money should you have and how to properly use & manage it? | If you are just barely scraping by on your current income, then you shouldn't be thinking about buying a car or house unless you can present (at least to yourself) clear evidence that doing so will actually lower your monthly expenses. Yes, there are times when even buying depreciating assets such as a car can lower your expenses, but you need to think hard about whether that is the case or if it is just something you want to get because you feel you "should". Remember the old adage that rich people buy themselves income streams (investments that either earn money or reduce expenses), while poor people buy expenses. If you are in the situation of barely scraping by on your current income, then the first step in my mind is to find out exactly what you are spending your money on (do this for a month or two, and then try to include non-regular or rarely-occuring bills such as subscriptions, insurance, perhaps utilities, and so on). Once you know where your money is going right now, outline that in a budget. At this point, you aren't judging your spending, but rather simply looking at the facts. Once you have a decent idea of where your money is going, only then try to think about what you can cut back on. Some things will be easier than others to change (it's much easier to cancel a premium TV channels package than to move to cheaper living quarters, for example, although in some cases simply picking the low-hanging fruit alone won't help you). Make a revised budget for the next month based on the new numbers, and try to live by it. Keep writing down what you actually spend your money on, then rinse and repeat. (Of course, you can make a budget for whatever period of time works for you; if you get paid every two weeks, budgeting per two weeks might be easier than budgeting per month.) The bottom line is that a budget is useless without a follow-up process to see how well your spending actually matches the budgeted amounts, so you need to spend some time following up on it and making adjustments. No budget will ever match reality exactly; think of the budget as a map, not a footstep-by-footstep guide for getting from A to B. When you find some wiggle room in your budget (for example, let's say you decide to cancel the premium TV channels package you got some time ago because it turns out you aren't watching much TV anyway), don't put that money into a "discretionary spending" category. There is an old rule in personal finance that says pay yourself first. If you are able to find $5/month of wiggle room, put it into savings of some kind. If you are unsure what kind of savings vehicle you should use, I'd suggest starting off with a simple savings account; it certainly won't earn you a great return (you'll be lucky if you can keep up with inflation), but it will get you into the habit of saving which at this point is a lot more important. And make that savings transfer as soon as the money hits your account. If you can, get the depositor to put a portion of your income directly into the savings account; if you cannot, make the transfer yourself immediately afterwards. And try to force yourself to live with the money that's left, not touching the savings account. Ideally, you should save a decent fraction of your income - I've seen figures everywhere from 10% to 25% of your after-tax income recommended by various people - and start out by budgeting that to savings and then working with whatever is left. In practice, saving anything and putting the money anywhere is much better than saving nothing. Just make sure that the savings are liquid (easy to convert to cash and withdraw without a penalty, should the need arise), set up a regular bank transfer for whatever amount you can find in that budget, and try to forget about it until you get the bank statement for the savings account and get that warm, fuzzy feeling for actually having a decent amount of money set aside should something ever happen making you need it. Then, later, you can decide whether to use the money to buy a car, start a company, take early retirement, or something entirely different. Having the money will give you the options, and you can decide what is more important to you yourself. Just keep on saving. |
Debit card for minor (< 8 y.o.) | It seems the age restriction for the Capital One MONEY account has been removed; I just read the entire terms and conditions and there's no minimum age requirement. I just finished opening Capital One MONEY accounts for a child who is <5 and a child <8. Both now have activated debit cards and online access. Their accounts are accessible via their card, but also appear under my online banking login, as they are joint accounts. It is possible to deposit cheques, but no cheques are issued for writing. Debit card access is provided for ATM withdrawals and purchases. And the design on the card is really nice; my son said it looks like the $100 bill. |
Dealing with Form 1099 | Am I required to send form 1099 to non-US citizens who are not even residing in the US? Since they're not required to file US taxes, do I still have to send the form to them? That's tricky. You need to get W8/W9 from them, and act accordingly. You may need to withhold 30% (or different percentage, depending on tax treaty they claim on W8). If you withhold taxes, you also need to file form 1042. I suggest you talk to a tax professional. Is it fine to expose my ITIN (taxpayer identification number) to individuals or companies who I send the form to them. Since the form requires me to write my TIN/EIN, what would be the risks of this and what precautions should be taken to avoid inappropriate/illegal use? No, it is not OK. But if you pay these people directly - you don't have much choice, so deal with it. Get a good insurance for identity theft, and don't transact with people you don't trust. One alternative would be to pay through a payment processor (Paypal or credit cards) - see your next question. I send payments via PayPal and wire transfer. Should I send form 1099-MISC or 1099-K? Paypal is a corporation, so you don't need to send 1099 to Paypal. Whatever Paypal sends to others - it will issue the appropriate forms. Similarly if you use a credit card for payment. When you send money through Paypal - you don't send money directly to your business counterparts. You send money to Paypal. |
Why don't more people run up their credit cards and skip the country? | Quality of life, success and happiness are three factors that are self define by each individual. Most of the time all three factors go hand by hand with your ability to generate wealth and save. Actually, a recent study showed that there were more happy families with savings than with expensive products (car, jewelry and others). These 3 factors, will be very difficult to maintain after someone commit such action. First, because you will fear every interaction with the origin of the money. Second, because every individual has a notion of wrong doing. Third, for the reasons that Jaydles express. Also, most cards, will call you and stop the cards ability to give money, if they see an abusive pattern. Ether, skipping your country has some adverse psychological impact in the family and individual that most of the time 100K is not enough to motivate such change. Thanks for reading. Geo |
What are frontier markets? Is investing in them a good idea? | From Wikipedia A frontier market is a type of developing country which is more developed than the least developing countries, but too small to be generally considered an emerging market. The term is an economic term which was coined by International Finance Corporation’s Farida Khambata in 1992. The term is commonly used to describe the equity markets of the smaller and less accessible, but still "investable", countries of the developing world. The frontier, or pre-emerging equity markets are typically pursued by investors seeking high, long-run return potential as well as low correlations with other markets. Some frontier market countries were emerging markets in the past, but have regressed to frontier status. Investopedia has a good comparison on Emerging Vs Frontier While frontier market investments certainly come with some substantial risks, they also may post the kind of returns that emerging markets did during the 1990s and early 2000s. The frontier market contains anywhere from one-fifth to one-third of the world’s population and includes several exponentially growing economies. The other Question and are they a good option as well? This depends on risk appetite and your current investment profile. If you have already invested in domestic markets with a well diversified portfolio and have also invested in emerging markets, you can then think of expanding your portfolio into these. |
How to transfer personal auto lease to business auto lease? | See what the contract says about transfers or subleases. A lease is a credit agreement, so the lessor may not allow transfers. You probably ought to talk to an accountant about this. You can probably recognize most of the costs associated with the car without re-financing it in another lease. |
Pay off credit card debt or earn employer 401(k) match? | There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually. The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000. You can either pay off your credit card or invest, but not both. For most people, this isn't the case. Ideally, you would simply forego $1000 worth of spending, AND DO BOTH Worked Example: Pay $1000 in Credit Card Debt, at 20% interest. After 1 year, if you pay off that debt, you no longer owe $1200. ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31. ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters. Paying off a credit card is a guaranteed investment. The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else. Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is "better" than the market. |
What does the Fed do with the extra money it is printing? | Usually the FED uses newly printed money to buy US treasuries from Goldman Sachs, JP Morgan, etc.. These banks then lend out the new cash which expands the money supply. During the height of the crisis the FED printed over $1.0 Trillion and bought....well...almost anything the banks couldn't offload elsewhere. Mortgage Backed Securities, Credit Default Swaps, you name it - they bought it. Must be nice to always have a customer to sell your junk investments to. They also bought these securities at face value - not at market value. Chart from here. The FED announced in early November, 2010 that they will print another $600 billion and buy US Treasuries. They will be buying ALL the debt that will be sold by the US government for the next 8 months. This was admitted by the Dallas FED chairman in this article: For the next eight months, the nation’s central bank will be monetizing the federal debt. "Monetizing" is a fancy word for printing money. I think this was done because the US government ran out of customers for its debt. China has reduced its purchases of US debt and the Social Security Trust Fund is no longer buying US debt since it is running a deficit. |
Debit card funds on preauthorization hold to paypal: can it be used for another transaction? | In short you have to wait till the hold expires. If its one week, its great. Few years back it was one Month. It is advisable you use a Credit Card for these type of transactions. With Credit Cards you are not out of funds like in Debit Cards. Plus the reversals are as much as I know automatic. In case of Debit Cards, the Holds are not automatically released on cancelled transactions but released only after expiry. Where as in Credit Cards, the holds are released immediately on cancelled transactions. "Does the hold reserve it for them or for the original transaction?" Yes hold is for that specific transaction from that specific merchant. i.e. if you try and book the same item from the same merchant, you will not be able to as you have money blocked. Although the merchant sends an unblock message when cancelling, on Debit cards these messages are not supported in India |
How much is university projected to cost in Canada in 18 years? | I personally do not buy any those so-call forecasts - look no further than the economic forecasts by those experts with PhDs over the last decade or so. Truth is there are too many factors that affects the tuition fees that far down the road (think inflation, cost of living, the method for which the education is being delivered, anticipated salary for the teachers, the ratio of schools and students, your children's ability to obtain scholarship money, and etc). Put in what you can afford for RESP - I put in $2000 annually per child to take maximum advantage of the 20% government matching. And be prepare to augment that with additional fund in 18 years. I am prepared to take on significant loans if my children both decided and qualified for graduated studies in specialized fields in a prestige universities - I have had met people with graduate degrees from Harvard and Cambridge and the obscure sum they (or their parents) paid on tuition are about as good investment as I have ever seen. Education is one of the best gifts any parent could give to their child. |
Why would someone want to buy an option on the day of expiry | The short answer to your initial question is: yes. The option doesn't expire until the close of the market on the day of expiration. Because the option is expiring so soon, the time value of the option is quite small. That is why the option, once it is 'in-the-money', will track so closely to the underlying stock price. If someone buys an in-the-money option on the day of expiration, they are likely still expecting the price to go up before they sell it or exercise it. Many brokers will exercise your in-the-money options sometime after 3pm on the day of expiration. If this is not what you desire, you should communicate that with them prior to that day. |
I received $1000 and was asked to send it back. How was this scam meant to work? | There are three possibilities. This is a scam, as others have pointed out, it works by you sending money, then them stopping the original transfer, meaning you sent them your money and not theirs. They make money cause a stop payment only costs $50 (or around there) but you sent $1,000. So they profit $950. You lose $1,000 and maybe some processing fees. This is money hiding, or money laundering. They send you $1,000 in drug money, you send them $1,000 in "clean" money. You don't lose any money. But they gain a clear paper trail. With large sums of money (in the U.S. anything over $5k) you have to prove a paper trail. They just did. You gifted it to them. On your end, it looks like you just profited from illegal activity, which in the worst case ends in confiscation of ALL your assets and jail time. It might not come to that, but it could. This was an honest mistake, by an idiot. It is possible to wire a complete stranger money. If you make a mistake on the wire transfer forms, and the account number exists, it will go through. Now what makes the sender an idiot is not the mistake. We all do that. It's the fact that banks have a built in system for handling these mistakes. Simply put, you can make a stop payment. It's around $50 (varies by bank and sometimes amount transferred), it's easy to do, and almost automatic. If you tell a bank rep that you made a mistake they will likely have you fill out a paper, and in many cases will "just take care of it". If "the idiot" didn't want to tell the bank of the mistake, or didn't ask for help, or didn't want to pay the fee. Then maybe they would contact the receiving party. But that's pretty dumb. Resolution The resolution in all cases is the same. Visit your local branch, or send in writing, an explanation: "I found $1,000 in my bank account that I didn't put there, and got this email (see attached print out). Please advise." They will "freeze" the $1,000 (or maybe the account but I have never seen that) while they investigate. You won't be able to spend it, they might even remove it pending the investigation. They will contact the bank that issued the transfer and attempt to sort things out. You shouldn't be charged anything. You also won't get to keep the money. Eventually the bank will send you a letter stating what happened with the investigation. And the money will vanish from your account. Specific questions I wanted to state the information above even though it doesn't address your concerns directly because it is important. To address your specific questions: Question 1) Surely bank account numbers have a checksum, which make it relatively difficult for a typo to result in a payment going to the wrong person? Nope, that's up to each bank. Usually the account numbers are not sequential, but there is no "checksum" either. Just like credit cards, there are rules, but once you know those rules you can generate fake ones all day long. In some cases, account numbers 5487-8954-7854 and 5487-8945-7854 are both valid. It happens. Question 2) What are likely sources of them being able to find my phone number to call me? Phone numbers are not private. Not even close. Phone books, Google, Websites, etc etc. if you think your phone number is in any way a secret then your totally misinformed. Account numbers are not a secret either. Especially bank account numbers. You could totally just call a bank, and say "What is the name on account 12345?" and they would tell you. Checks have your name and account number on them, as do MANY documents from a bank. So anything from asking the bank, to finding a copy of a check or document in the trash are valid ways to make the link. Question 3) How were they expecting to benefit? See options 1 and 2 above. If is is really option 3, then your bank should have directed the money back. But if the person was so messed up as you say, the account may have been closed and "written off". When that happens a lot of weird stuff can happen. Essentially the bank is "taking a loss" of money and doesn't want the money back even if the account was closed with a negative balance. Usually though contract with debt collectors, they may have already been "paid" for that debt, and are not allowed to take the money back. These things happen, but it seems like a pretty odd set of things that need to line up for #3 to be valid. About your Length of time Usually these things resolve in less then 90 days. Usually far less. At the 90 day mark, it gets really hard to reverse a transaction. It's possible that it was a scam and so many people fell for it that the scammers just let you keep the money instead of "highlighting" their scam. The fact that your using a "net bank" means that your can't go in person, but you should get details in writing. State the transaction number (it should be in your account records) and ask them for a "letter of resolution" or some form of official document stating the outcome of their investigation. I suspect that no one every really investigated the issue and the rep you spoke to never did anything then ask you to ask them to fill out a stop payment. You need a record of trying to sort this out. You don't want to up for some legal battle 10 years from now because someone found out that the money was part of a pool that was used to fund some terrorist group or some such. So get a paper trail, then go with what the bank says. |
How to make money from a downward European market? | If you are interested in short term trading and live in the UK you can do some Spread Betting. If you know what you are doing you can make money no matter which way the market is moving. Note that most people don't know what they are doing and lose their money pretty quickly. |
How to properly collect money from corporate sponsors? | If this is something you plan to continue doing it would make sense to create it as it's own business entity and then to get non-profit status eg: 501c3. Otherwise I'm pretty sure you have to think of it as YOU receiving the money as a sole proprietor - and file a couple more tax forms at the end of the year. I think it's a Schedule C. So essentially if you bring in $10,000, then you spend that $10,000 as legit business expenses for your venture your schedule C would show no profit and wouldn't pay taxes on it. BUT, you do have to file that form. Operating this way could have legal implications should something happen and you get sued. Having the proper business entity setup could help in that situation. |
Are leverage/ko products the only reasonable way to trade stocks? | There's no free lunch. Here are some positions that should be economically equivalent (same risk and reward) in a theoretically-pure universe with no regulations or transaction costs: You're proposing to buy the call. If you look at the equivalent, stock plus protective put, you can quickly see the "catch"; the protective put is expensive. That same expense is embedded in the call option. See put-call parity on Wikipedia for more: http://en.wikipedia.org/wiki/Put%E2%80%93call_parity You could easily pay 10% a year or more for the protection, which could easily eat up most of your returns, if you consider that average returns on a stock index might be about 10% (nominal, not real). Another way to look at it is that buying the long call and selling a put, which is a synthetic long position in the stock, would give you the put premium. So by not selling the put, you should be worse off than owning the stock - worse than the synthetic long - by about the value of the put premium. Or yet another way to look at it is that you're repeatedly paying time value on the long call option as you roll it. In practical world instead of theory world, I think you'd probably get a noticeable hit to returns just from bid-ask and commissions, even without the cost of the protection. Options cost more. Digressing a bit, some practical complications of equivalency between different combinations of options and underlying are: Anyway, roughly speaking, any position without the "downside risk" is going to have an annual loss built in due to the cost of the protection. Occasionally the options market can do something weird due to supply/demand or liquidity issues but mostly the parity relationships hold, or hold closely enough that you can't profit once expenses are considered. Update: one note, I'm talking about "vanilla" options as traded in the US here, I guess there are some somewhat different products elsewhere; I'm not sure exactly which derivatives you mean. All derivatives have a cost though or nobody would take the other side of the trade. |
Is there a generally accepted term for fractions of Currency Units? | of course if you asked me to give you $24.4955 I can't. No, but if I asked you to give me $24.4955 and you gave me a piece of paper saying "I O U $24.4955", and then this happened repeatedly until I had collected 100 of these pieces of paper from you, then I could give them back to you in exchange for $2449.55 of currency. There's nothing magical about the fact that there doesn't happen to be a $0.001 coin in current circulation. This question has some further information. |
California tells me I didn't file documents for an LLC that isn't mine. What do I do? | Did it show just your address, or was your name on it as well? You didn't share how long you've lived at the address either, so it makes me wonder whether a former tenant is the one who filed that paperwork. It's also possible that someone used your address when making a filing. Whether that was deliberate or accidental is hard to discern, as is their intent if it was intentional. It could be accidental -- someone picked "CA" for California when they meant to pick "CO" for Colorado or "CT" for Connecticut...These things do happen. It can't make you feel any better about the situation though. You should be able to go online to the California Secretary of State's website (here) and look up everything filed by the LLC with the state. That will show who the founders were and everything else that is a matter of public record on the LLC. At the very least, you can obtain the registered agent's name and address for the LLC, which you can then use to contact them and ask why your address is listed as the LLC's business address. Once you have that info, you can then contact the Secretary of State and tell them it isn't you so they can do whatever is necessary to correct this. This doesn't sound like a difficult matter to clear up, but it's important to do your homework first and gather as much information as you can before you call the state. Answering "I don't know" won't get you very far with them compared to having the best answers you can about where the mistake started. I hope this helps. Good luck! |
Why do people take out life insurance on their children? Should I take out a policy on my child? | Sales tactics for permanent insurance policies can get pretty sleazy. Sending home a flier from school is a way for an insurance salesperson to get his/her message out to 800 families without any effort at all, and very little advertising cost (just a ream of paper and some toner). The biggest catchphrases used are the "just pennies per day" and "in case they get (some devastating medical condition) and become uninsurable." Sure, both are technically true, but are definitely used to trigger the grown ups' insecurities. Having said that (and having been in the financial business for a time, which included selling insurance policies), there is a place for insurance of children. A small amount can be used to offset the loss of income for the parents who may have to take extended time away from work to deal with the event of the loss of their child, and to deal with the costs of funeral and burial. Let's face it, the percentage of families who have a sufficiently large emergency fund is extremely small compared to the overall population. Personally, I have added a child rider to my own (term) insurance policies that covers any/all of my children. It does add some cost to my premiums, but it's a small cost on top of something that is already justifiably in place for myself. One other thing to be aware of: if you're in a group policy (any life insurance where you're automatically accepted without any underwriting process, like through a benefit at work, or some other club or association), the healthy members are subsidizing the unhealthy ones. If you're on the healthy side, you might consider foregoing that policy in favor of getting your own policy through an insurance company of your choice. If you're healthy, it will always be cheaper than the group coverage. |
Is 401k as good as it sounds given the way it is taxed? | Before anything, I see that no one mentioned the one thing about 401(k) accounts that's just shy of magic - The matching deposit. In 2015, 42% of companies offered a dollar for dollar match on deposits. Can't beat that. (Note - to respond to Xalorous' comment, the $18K OP deposits can be nearly any percent of his income. The typical match is 'up to' 6% of gross income. If that's the case, the 401(k) deposits are doubled. But say he makes $100K. The $18K deposit will see a $6K match. This adds a layer of complexity to the answer that I preferred to avoid, as I show with no match at all, and no change in tax brackets, the deferral alone shows value to the investor.) On to the main answer - Let's pull out a spreadsheet - We start with $10,000, and assume the 25% bracket. This gives a choice of $10,000 in the 401(k) or $7500 in the taxable account. Next, let 20 years pass, with 10% return each year. The 401(k) sees the full 10% and after 20 years, $67K. The taxable account owner waits to get the 15% cap gain rate and adjusts portfolio, thus seeing an 8.5% return each year and carrying no ongoing gains. After 20 years of 8.5% returns, he has $38K net. The 401(k) owner on withdrawal pays the 25% tax and has $50K, still more than 25% more money that the taxable account. Because transactions within the account were all tax deferred. EDIT - With respect to davmp's comment, I'll offer the other extreme - In his comment, he (rightly) objected that I chose to trade every year, although I did assign the long term 15% cap gain rate, he felt the annual trade was my attempt to game the analysis. Above, I offer his extreme case, a 10% return each year, no trade, no dividend. Just a cap gain at the end. The 401(k) still wins. I also left the tax (on the 401(k)) at withdrawal at 25%, when in fact, much, if not all will be taxed at 15% or lower, which would put the net at $57K or 30% above the taxable account final withdrawal. The next issue I'd bring up is that the 401(k) is taken out at the top (marginal) tax rate, e.g. a single filer with taxable income over $37,650 (in 2016) would save 25% on that 401(k) deduction. Of course if the deduction pulls you under that line, I'd go Roth or taxable. But, withdrawals start at zero. Today, a single retiree has a standard deduction ($4050) and exemption ($6300) for a total $10,350 "zero bracket" with the next $9275 taxed at 10%. This points to needing $500K in pre tax accounts before withdrawals each year would get you past the 10% bracket. (This comes from the suggestion of using 4% as an annual withdrawal rate). Last - the tax discussion has 2 major points in time, deposit and withdrawal, of course. But, the answers here all ignore all the time in between. In between, you see that for any number of reasons, you'll drop from the 25% bracket to 15% that year. That's the time to convert a bit of money to Roth and 'top off' the 15% bracket. It can happen due to job loss, marriage with new spouse either not working or having lower income, new baby, house purchase, etc. Or in-between, a disability put you out of work. That permits you to take money out with no penalty, and little chance of paying even the 25% that you paid going in. This, from personal experience with a family member, funded a 401(k) with 28% money. Then divorced and disabled, able to take the $10K/yr to supplement worker's comp (non taxed) income. |
Should I invest my money in an ISA or Government bonds? (Or any other suggestion) | So you are off to a really good start. Congratulations on being debt free and having a nice income. Being an IT contractor can be financially rewarding, but also have some risks to it much like investing. With your disposable income I would not shy away from investing in further training through sites like PluralSite or CodeSchool to improve weak skills. They are not terribly expensive for a person in your situation. If you were loaded down with debt and payments, the story would be different. Having an emergency fund will help you be a good IT contractor as it adds stability to your life. I would keep £10K or so in a boring savings account. Think of it not as an investment, but as insurance against life's woes. Having such a fund allows you to go after a high paying job you might fail at, or invest with impunity. I would encourage you to take an intermediary step: Moving out on your own. I would encourage renting before buying even if it is just a room in someone else's home. I would try to be out of the house in less than 3 months. Being on your own helps you mature in ways that can only be accomplished by being on your own. It will also reduce the culture shock of buying your own home or entering into an adult relationship. I would put a minimum of £300/month in growth stock mutual funds. Keeping this around 15% of your income is a good metric. If available you may want to put this in tax favored retirement accounts. (Sorry but I am woefully ignorant of UK retirement savings). This becomes your retire at 60 fund. (Starting now, you can retire well before 68.) For now stick to an index fund, and once it gets to 25K, you may want to look to diversify. For the rest of your disposable income I'd invest in something safe and secure. The amount of your disposable income will change, presumably, as you will have additional expenses for rent and food. This will become your buy a house fund. This is something that should be safe and secure. Something like a bond fund, money market, dividend producing stocks, or preferred stocks. I am currently doing something like this and have 50% in a savings account, 25% in a "Blue chip index fund", and 25% in a preferred stock fund. This way you have some decent stability of principle while also having some ability to grow. Once you have that built up to about 12K and you feel comfortable you can start shopping for a house. You may want to be at the high end of your area, so you should try and save at least 10%; or, you may want to be really weird and save the whole thing and buy your house for cash. If you are still single you may want to rent a room or two so your home can generate income. Here in the US there can be other ways to generate income from your property. One example is a home that has a separate area (and room) to park a boat. A boat owner will pay some decent money to have a place to park their boat and there is very little impact to the owner. Be creative and perhaps find a way where a potential property could also produce income. Good luck, check back in with progress and further questions! Edit: After some reading, ISA seem like a really good deal. |
Borrowing 100k and paying it to someone then declaring bankruptcy | Note that in the UK at least this scam - not so dissimilar from what you propose - seems be perfectly legal behaviour: Evidence to date is that both of you can expect to walk away without much consequence. |
Are individual allowed to use accrual based accounting for federal income tax? | Yes. But once you chose the method (on your first tax return), you cannot change it without the IRS approval. Similarly the fiscal year. For individuals, I can't think of any reason why would accrual basis be better than cash, or why would an individual use a fiscal year other than the calendar year. |
What prevents interest rates from rising? | A lot of loans are taken out on a fixed rate basis, so the rate is part of the contract and is therefore covered by contract law. If the loan is taken out on a variable basis then in principle the rate can rise within the terms of the contract. If a particular lender tries to raise its rates out of line with the market then its customers will seek alternative, cheaper, loans and pay off their expensive loan if they can. If rates rise sharply in general due to unusual politico-economic circumstances then those with variable rate loans can find themselves in severe trouble. For example the base rate in the UK (and therefore variable mortgage rates closely tied to it) spiked sharply in the late 80s which caused severe stress to a lot of borrowers and undoubtedly pushed some into financial difficulties. |
What happens if futures contract seller defaults? | MD-Tech answered: The answer is in your question: derivatives are contracts so are enforced in the same way as any other contract. If the counterparty refuses to pay immediately they will, in the first instance be billed by any intermediary (Prime Broker etc.) that facilitated the contract. If they still refuse to pay the contract may stipulate that a broker can "net off" any outstanding payments against it or pay out using deposited cash or posted margins. The contract will usually include the broker as an interested party and so they can, but don't need to, report a default (such that this is) to credit agencies (in some jurisdictions they are required to by law). Any parties to the trade and the courts may use a debt collection agency to collect payments or seize assets to cover payment. If there is no broker or the counterparty still has not paid the bill then the parties involved (the party to the trade and any intermediaries) can sue for breach of contract. If they win (which would be expected) the counterparty will be made to pay by the legal system including, but not limited to, seizure of assets, enforced bankruptcy, and prison terms for any contempts of court rulings. All of this holds for governments who refuse to pay derivatives losses (as Argentina did in the early 20th century) but in that case it may escalate as far as war. It has never done so for derivatives contracts as far as I know but other breaches of contract between countries have resulted in armed conflict. As well as the "hard" results of failing to pay there are soft implications including a guaranteed fall in credit ratings that will result in parties refusing to do business with the counterparty and a separate loss of reputation that will reduce business even further. Potential employees and funders will be unwilling to become involved with such a party and suppliers will be unwilling to supply on credit. The end result in almost every way would be bankruptcy and prison sentences for the party or their senior employees. Most jurisdictions allow for board members at companies in material breach of contract to be banned from running any company for a set period as well. edit: netting off cash flows netting off is a process whereby all of a party's cash flows, positive and negative, are used to pay each other off so that only the net change is reflected in account balances, for example: company 1 cash flows netting off the total outgoings are 3M + 500k = 3.5M and total incomings are 1.2M + 1.1M + 1.2M = 3.5M so the incoming cash flows can be used to pay the outgoing cash flows leaving a net payment into company1's account of 0. |
How does a lender compute equity requirement for PMI? | In regards to the legal recourse, no there is none. Also, despite your frustrations with Citi, it may not be their fault. Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs). This randomization mandate from the government was issued in order to combat fraud, but it is really causing more trouble for homeowners because it took away appraiser accountability. Basically, there's nothing we can do to fire an appraiser anymore. I've had appraiser do terrible jobs, just blatantly wrong, and have gone the distance with the dispute process only to find they won't change the value. My favorite real-life example came from an appraiser who got the bedroom count wrong (4 instead of 5); yet he took pictures of 5 bedrooms. The one he excluded he stated it shouldn't count because it didn't have a closet. Problem is, it DID have a closet. I had the homeowner take pictures of all of the closets in his house, and send them in. He still refused to change the count. After close to 2 months of the dispute process, the ARC came in and changed the count, but did not chagne the value, stating that the room count didn't increase the sqft, and there would be no adjustment in value. I was floored. The only solution we had was to wait for the appraisal to expire, then order it again; which we did. The new appraiser got the count right, and surprisingly (not really), it came in at the right value... In regards to the value necessary to avoid MI, they are likely using 80%, but it's not based on your current balance vs the value, it's based on the new loan amount (which will include costs, prepaids, skipped mortgage payments, etc) vs the value. Here are your options: Get a new appraisal. If you are confident the value is wrong, go somewhere else and get a new appraisal. Restructure the loan. Any competent Loan Officer would have noticed that you are very close to 80%, and should have offer you the option of splitting the mortgage into a 1st and 2nd loan. Keeping the first loan at 80%, and taking out a 2nd for the difference would avoid MI. Best Regards, Jared Newton |
Top 3 things to do before year end for your Stock Portfolio? | Bonus: Contribute to (or start!) your IRA for 2010. This doesn't have to be done have to be done by the end of the year; you can make your 2011 contribution in 2010, before you file your tax return (by Apr. 15 at the latest, even if you get an extension.) |
can the government or debt collectors garnish money from any bank account to which the debtor has access? | I agree with the comments so far. Access doesn't equal ownership. There are also different levels of access. E.g. your financial advisor can have access to your retirement account via power of attorney, but only ability to add or change things, not withdraw. Another consideration is when a creditor tries to garnish wages / bank accounts, it needs to find the accounts first. This could be done by running a credit report via SSN. My guess is an account with access-only rights won't show up on such a report. I suppose the court could subpoena bank information. But I'm not an attorney so please check with a professional. |
Should I use my non-tax advantaged investment account to pay off debt? | Paying off debts will reduce your monthly obligation to creditors (less risk) and also remove the possibility of foreclosure / repossession / lawsuit if you ever lost access to income (less risk). Risk is an important part of the equation that can get overlooked. It sounds like pulling that money out of the market will reduce your yearly tax bill as well. |
How does the yield on my investments stack up against other investors? | It can be pretty hard to compute the right number. What you need to know for your actual return is called the dollar-weighted return. This is the Internal Rate of Return (IRR) http://en.wikipedia.org/wiki/Internal_rate_of_return computed for your actual cash flows. So if you add $100 per month or whatever, that has to be factored in. If you have a separate account then hopefully your investment manager is computing this. If you just have mutual funds at a brokerage or fund company, computing it may be a bunch of manual labor, unless the brokerage does it for you. A site like Morningstar will show a couple of return numbers on say an S&P500 index fund. The first is "time weighted" and is just the raw return if you invested all money at time A and took it all out at time B. They also show "investor return" which is the average dollar-weighted return for everyone who invested in the fund; so if people sold the fund during a market crash, that would lower the investor return. This investor return shows actual returns for the average person, which makes it more relevant in one way (these were returns people actually received) but less relevant in another (the return is often lower because people are on average doing dumb stuff, such as selling at market bottoms). You could compare yourself to the time-weighted return to see how you did vs. if you'd bought and held with a big lump sum. And you can compare yourself to the investor return to see how you did vs. actual irrational people. .02, it isn't clear that either comparison matters so much; after all, the idea is to make adequate returns to meet your goals with minimum risk of not meeting your goals. You can't spend "beating the market" (or "matching the market" or anything else benchmarked to the market) in retirement, you can only spend cash. So beating a terrible market return won't make you feel better, and beating a great market return isn't necessary. I think it's bad that many investment books and advisors frame things in terms of a market benchmark. (Market benchmarks have their uses, such as exposing index-hugging active managers that aren't earning their fees, but to me it's easy to get mixed up and think the market benchmark is "the point" - I feel "the point" is to achieve your financial goals.) |
Are Index Funds really as good as “experts” claim? | Comparing index funds to long-term investments in individual companies? A counterintuitive study by Jeremy Siegel addressed a similar question: Would you be better off sticking with the original 500 stocks in the S&P 500, or like an index fund, changing your investments as the index is changed? The study: "Long-Term Returns on the Original S&P 500 Companies" Siegel found that the original 500 (including spinoffs, mergers, etc.) would do slightly better than a changing index. This is likely because the original 500 companies take on a value (rather than growth) aspect as the decades pass, and value stocks outperform growth stocks. Index funds' main strength may be in the behavior change they induce in some investors. To the extent that investors genuinely set-and-forget their index fund investments, they far outperform the average investor who mis-times the market. The average investor enters and leaves the market at the worst times, underperforming by a few percentage points each year on average. This buying-high and selling-low timing behavior damages long-term returns. Paying active management fees (e.g. 1% per year) makes returns worse. Returns compound on themselves, a great benefit to the investor. Fees also compound, to the benefit of someone other than the investor. Paying 1% annually to a financial advisor may further dent long-term returns. But Robert Shiller notes that advisors can dissuade investors from market timing. For clients who will always follow advice, the 1% advisory fee is worth it. |
How much does the volatility change for a 1$ move in the underlying | The volatility measures how fast the stock moves, not how much. So you need to know the period during which that change occurred. Then the volatility naturally is higher the faster is the change. |
Abundance of Cash - What should I do? | There's a few different types of investments you could do. As poolie mentioned, you could split your money between the Vanguard All World ex-US and Vanguard Total Stock Market index. A similar approach would be to invest in the Vanguard Total World Stock ETF. You wouldn't have to track separate fund performances, at the downside of not being able to allocate differential amounts to the US and non-US markets (Vanguard will allocate them by market cap). You could consider investing in country-specific broad market indices like the S&P 500 and FTSE 100. While not as diversified as the world indices, they are more correlated with the country's economic outlook. Other common investing paradigms are investing in companies which have historically paid out high dividends and companies that are under-valued by the market but have good prospects for future growth. This gets in the domain of value investing, which an entire field by itself. Like Andrew mentioned, investing in a mutual fund is hassle-free. However, mutual fees/commissions and taxes can be higher (somewhere in the range 1%-5%) than index funds/ETF expense ratios (typically <0.50%), so they would have to outperform the market by a bit to break-even. There are quite a few good books out there to read up about investing. I'd recommend The Intelligent Investor and Millionaire Teacher to understand the basics of long-term investing, but of course, there are many other equally good books too. |
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other? | As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index: |
us citizen receiving bank transfer from foreign boyfriend | No, any gifts you receive are not taxable to you. In fact, losing money in a scam (as this sure sounds like to me) can even be tax-deductible if you lose enough! I wouldn't recommend accepting anything. Usually people with millions are dollars are capable of setting up their own bank accounts. |
Investment strategy for a 20 year old with about 30k in bank account | Thank you for your service. My first suggestion since your car is a planned for the near future is keep that amount in savings and just pay cash. There are plenty of attractive offers to entice you to finance your vehicle but there really is no compelling reason to do it considering the savings you have. Second I would keep an additional portion of savings as a rainy day emergency fund. How much is based mostly on what you feel comfortable with. The number of possible emergencies that can come up is limited and your expenses are limited which is normal given your age. This fund might be for something such as emergency travel for a sick family member, cover a deductible for an auto accident, whatever unforseen event might occur (hence the name emergency fund). What investments you are comfortable with will be determined by risk tolerance. While in the military individual stocks that are aggressive risky investments may not be a good idea because of the extra attention they require and you can't really babysit a portfolio while deployed but there are many good low or no cost mutual funds or ETFs that you could get into. I would look into setting up a recurring purchase with a set dollar amount monthly so you will continue to accumulate whatever option you are investing in regularly even if you are deployed. Which fund or ETF you pick will depend on your goals and risk tolerance but you could very easily pick several for diversity. Good luck and thank you again for your service. |
How much should a new graduate with new job put towards a car? | As someone who has a very similar debt amount and environment (new grad, nice new paying job, want a car, etc), I'd like to share something with you. Life has unexpected costs. Luckily I didn't buy that new car the first few months out of college like I had planned to; I'm glad that I didn't because, as a fledgling "adult", despite having lived on my own while in college while working part-to-full time there are some things you just don't realize until it either happens or it happens to someone else. Here are some of those things: I could go on but I won't. $95K is good money and I would definitely recommend spending it a bit to enjoy yourself. But I would honestly tell you that taking your monthly expenses, adding a few hundred on top of that and then multiplying that sum by 3 would be a smart savings amount before picking up a car loan. Maybe that's an excessive savings but I've seen way too many people burn out over their cost-of-living and their failure to adjust appropriately when shit hits the fan. So instead of having to deal with the stab at your pride when having to lower the cost/quality of living that you'll probably grow accustomed to at a $95K salary, just prepare for the worst. Oh, and did I mention... A NEW JOB IS NOT A SECURE JOB Consider yourself to likely be the first asset dropped from the company if even the tiniest thing goes wrong. I know way too many people who were fresh hires at Intel, Boeing, and a few other big tech companies that pay around what you make and, despite being bad asses in college, they were dropped like a bad habit when their employers hit rough patches. To those even more experienced than me, please feel free to add to the list. I'd personally love to know them myself. |
Student loan payments and opportunity costs | I agree with the advice given, but I'll add another angle from which to look at it. It sounds like you are already viewing the money used to either pay off the loan early or invest in the market as an investment, which is great. You are wise to think about opportunity cost, but like others pointed out, you are overlooking the risk factor. The way I would look at this is: I could take a guaranteed 6.4% return by paying off the loan or a possible 7% return by investing the money. If the risk pays off modestly, all you've done is earned 0.6%, with a huge debt still hanging over you. Personally, I would take the guaranteed 6.4% return by paying off the debt, then invest in the stock market. Now this is looking at the investment as a single, atomic pool of money. But you can split it up a bit. Let's say the amount of extra disposable income you want to invest with is $1,000/mo. Then you could pay an extra $500/mo to your student loan and invest the other $500 in the stock market, or do a 400/600 split, or whatever suits your risk tolerance. You mentioned multiple loans and 6.4% is the highest loan. What I would do, based on what I value personally, is put every extra penny into paying off the 6.4% loan because that is high. Once that is done, if the next loan is 4% of less, then split my income between paying extra to it and investing in the market. Remember, with each loan you pay off, the monthly income that previously went to it is now available, and can be used for the next loan or the other goals. |
What do these numbers mean for the S&P? | USB is the ticker for US Bancorp. The numbers to me look like their prediction of the return for the day, I could be wrong but I think that's what it is. |
Best way to invest money as a 22 year old? | First off, monozok is right, at the end of the day, you should not accept what anyone says to do without your money - take their suggestions as directions to research and decide for yourself. I also do not think what you have is too little to invest, but that depends on how liquid you need to be. Often in order to make a small amount of money grow via investments, you have to be willing to take all the investment profits from that principle and reinvest it. Thus, can you see how your investment ability is governed by the time you plan to spend without that money? They mantra that I have heard from many people is that the longer you are able to wait, the more 'risk' you can take. As someone who is about the same age as you (I'm 24) I can't exactly say yet that what I have done is sure fire for the long term, but I suggest you adopt a few principles: 1) Go read "A Random Walk Down Wall Street" by Burton G. Malkiel. A key point for you might be that you can do better than most of these professional investors for hire simply by putting more money in a well selected index fund. For example, Vanguard is a nice online service to buy indexes through, but they may require a minimum. 2) Since you are young, if you go into any firm, bank, or "financial planner," they will just think you are naive and try to get you to buy whatever is best for them (one of their mutual funds, money market accounts, annuities, some flashy cd). Don't. You can do better on your own and while it might be tempting because these options look more secure or well managed, most of the time you will barely make above inflation, and you will not have learned very much. 3) One exciting thin you should start learning now is about algorithmic trading because it is cool and super efficient. quantopian.com is a good platform for this. It is a fun community and it is also free. 4) One of the best ways I have found to watch the stock market is actually through a stock game app on my phone that has realtime stock price feed. Seeking Alpha has a good mobile app interface and it also connects you to news that has to do with the companies you are interested in. |
Transfering money from NRE account in India to family member | I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide here and here for more details. There are some conditions; (iv) Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that - a) the loan is free of interest; b) the minimum maturity period of the loan is seven years; c) The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender; d) The loan is utilised for the borrower's personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending. Although it is mentioned as Seven years, this is revised to one year. Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account. A repatriate-able loan as above can be deposited into NRE Account. Is there any illegality here doing such transaction? No. Please ensure proper paper work to show this as loan and document the money trail. Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited? This question does not arise. |
Understanding Gift taxes for mortgage downpayment | You are using interchangeably borrow/loan and gift. They are very different. For the mortgage company, they would prefer that the money from friends and family be a gift. If it is a loan, then you have an obligation to pay it back. If they see money added to your bank accounts in the months just before getting the loan, they will ask for the source of the money. Anything you claim as a gift will be required to be documented by you and the person making the gift. You don't want to lie about it, and have the other person lie about it. They will make you sign documents, if they catch you in a lie you can lose the loan, or be prosecuted for fraud. If the money from friends and family is a loan, the payments for the loan will impact the amount of money you can borrow. From the view of the IRS the gift tax only comes into play if during one calendar year a person makes a gift to somebody else of 14,000 or more. There are two points related to this. It is person-to-person. So if your dad gives you 14K, and your mom gives you 14K, and your dad gives your wife 14k and your mom gives your wife 14K; everything is fine. So two people can give 2 people 56K in one year. Please use separate checks to make it clear to the IRS. If somebody gives a gift above the exclusion limit for the year, they will have to complete IRS form 709. This essentially removes the excess amount from their life time exclusion, in other words from their estate. Nothing to worry about from the IRS. The bank wants to see the documentation. Also you are not a charity, so they can't claim it as a donation. Why do you have 6,000 in cash sitting around. The mortgage company will want an explanation for all large deposits so you better have a good explanation. From the IRS FAQ on Gift Taxes: What can be excluded from gifts? The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts. Number 3 on the list is the one you care about. |
What is the rationale behind stock markets retreating due to S&P having a negative outlook on the USA? | Many of the major indices retreated today because of this news. Why? How do the rising budget deficits and debt relate to the stock markets? The major reason for the market retreating is the uncertainty regarding the US Dollar. If the US credit rating drops that will have an inflationary effect on the currency (as it will push up the cost of US Treasuries and reduce confidence in the USD). If this continues the loss of USD confidence could bring an end to the USD as the world's reserve currency which could also create inflation (as world banks could reduce their USD reserves). This can make US assets appear overvalued. Why is there such a large emphasis on the S&P rating? S&P is a large trusted rating agency so the market will respond to their analysis much like how a bank would respond to any change in your rating by Transunion (Consumer Credit Bureau) Does this have any major implications for the US stock markets today, in the short term and in July? If you are a day-trader I'm sure it does. There will be minor fluctuations in the market as soon as news comes out (either of its extension or any expected delays in passing that extension). What happens when the debt ceiling is reached? Since the US is in a deficit spending situation it needs to borrow more to satisfy its existing obligations (in short it pays its debt with more debt). As a result, if the debt ceiling isn't raised then eventually the US will be unable to pay its existing obligations. We would be in a default situation which could have devastating affects on the value of the USD. How hard the hit will depend on how long the default situation lasts (the longer we go without an increased ceiling after the exhaustion point the more we default on). In reality, Congress will approve a raise, but they will drag it out to the last possible minute. They want to appear as if they are against it, but they understand the catastrophic effects of not doing so. |
How smart is it to really be 100% debt free? | The responses here are excellent. I'd add just a couple points. Debt is not generic. It ranges from low (my HELOC is 2.5%) to insane (24% credit card, anyone?). When I read about the obsession to be completely debt free, I ask questions. Are you saving in your 401(k) at least up to the match? I disagree with the "debt is evil" people who advise to ignore retirement savings while paying off every last debt. My company offers a dollar for dollar match on the first 5% of income deposited. So a $60K earner will see a $3000 deposit doubled. 5 years of this, and he has 1/2 a year's income in his retirement account, more with positive returns. (note - for those so fearful of losses, all 401(k) accounts have to offer a fixed income, low risk choice. currently 1% or less, but the opposite of "I can lose it all".) After that, paying off the higher debt is great. When it's time to hack away at student debt and mortgage, I am concerned that if it's at the risk of having no savings, I'd hold off. Consider - Two people in homes worth $250K. One has a mortgage of $250K and $100K in the bank. The other has his mortgage paid down to $150K. When they lose their jobs, the guy with the $100K in the bank has the funds to float himself through a period of unemployment as well as a house the bank is less likely to foreclose on. The guy with no money is in deep trouble, and the bank can sell his house for $150K and run away (after proper foreclosure proceedings of course.) My mortgage is one bill, like any other, and only a bit more than my property tax. I don't lose sleep over it. It will be paid before I retire, and before my 11yr old is off to college. I don't think you stupid for paying your low interest debt at your own pace. |
How do I know what loan terms I can qualify for? | You can find out the most money they will loan you for a car loan when you approach your current bank/credit union. They should be willing to layout options based on your income, and credit history. You then have to decide if those terms work for you. There are several dangers with getting loan estimates, they may be willing to lend you more than you can actually handle. They think you can afford it, but maybe you can't. They may also have a loan with a longer term, which does bring the monthly cost down, but exposes you to being upside down on the loan. You then use this a a data point when looking at other lenders. The last place you look is the auto dealer. They will be trying to pressure you on both the loan and the price, that is not the time to do doing complex mental calculations. The Suntrust web page was interesting, it included the quote: The lowest rate in each range is for LightStream's unsecured auto loan product and requires that you have an excellent credit profile. It also induced the example the rate of 2.19% - 4.24% for a 24 to 36 month loan of $10,000 to $24,999 for a used car purchased from a dealer. Also note that my local credit union has a new/used loan at 1.49%, but you have to be a member. Sunstrust seems to be in the minority. In general a loan for X$ and y months will have a lower rate if it is secured with collateral. But Suntrust is offering unsecured loans (i.e. no collateral) at a low rate. The big benefit for their product is that you get the cash today. You can get the cash before you know what you want to buy. You get the cash before you have negotiated with the dealer. That makes that step easier. Now will they in the near future ask for proof you bought a car with the money? no idea. If you went to the same web page and wanted a debt consolidation loan the rate for the same $ range and the same months is: 5.49% - 11.24% the quote now changes to: The lowest rate in each range requires that you have an excellent credit profile. I have no idea what rate they will actually approve you for. It is possible that if you don't have excellent credit the rate rises quickly, but 4.24% for the worst auto loan is better than 5.49% for the best debt consolidation. Excellent Credit Given the unique nature of each individual’s credit situation, LightStream believes there is no single definition for "excellent credit". However, we find individuals with excellent credit usually share the following characteristics: Finally, it should be noted again that each individual situation is different and that we make our credit judgment based on the specific facts of that situation. Ultimately our determination of excellent credit is based on whether we conclude that there is a very high likelihood that our loan will be repaid in a full and timely manner. All the rates mentioned in this answer are from 15 July 2017. |
What should I reserve “emergency savings” for? | I think it is stated perfectly in the question, "unforeseen critical needs." You know you will need to buy new tires for your car, they are critical but not unforeseen. However, if a tree falls on your car and you need to pay the insurance deductible for the repairs it would be unforeseen. You should budget for the expenses you can plan for in advance like car maintenance and repairs. An emergency fund is for items that are out of the ordinary. |
Buying shares in employer's company during IPO | So the key factor here, IMHO, is the amount we are talking about. $2K is just not a lot of money. If you lose every penny, you can recover. On the other hand it is unlikely to make you wealthy. So if I was you I would buy in, more for the fun of it all. Now if it was a large amount of money that we were talking about it would be about a percentage of my net worth. For example, lets say the minimum was 20K, and you really believed in the company. If I had a net worth of less than 200K, I would not do it. If I had a larger net worth, I would consider it unless I was near retirement. So if I was 30, hand a net worth of 300K, I would probably invest as even if I did lose it all, I could recover. Having said all that it does not sound like you completely agree that the company will be profitable. So in that case, don't buy. Also, I have the opportunity to buy my own company's stock at a discount. However, I do not for two reasons. The first is I don't like investing in the company I work for. Secondly, they require you to hold the stock for a year. |
What's behind the long secular bull market in U.S. Treasuries? | In a secular bull market, strong investor sentiment drives prices higher, as participants, over time, are net buyers. Secular markets are typically driven by large-scale national and worldwide events... demographic/ population shifts, governmental policies... bear market periods occur within the longer interval, but do not reverse the trend. There are still many reasons to buy the long bond, despite the lack of yield (nearly flat term structure of interest rates). Despite the recent credit ratings agency downgrades of U.S. sovereign risk, the T-bond offers greater relative security than many alternatives. If Germany were NOT part of the EU, its government bonds would be issued by the Bundesbank, denominated in Deutsche Marks. German government bonds would probably be a better choice than the U.S. Treasury's 30-year bond. Long-term maturity U.S. Treasuries are in demand by investment and portfolio managers because: |
How are dividends for shareholders of banks paid? | Why? Balance sheet is balance sheet, why is it complicated? Bank shareholders get dividends in exactly the same way as any other company shareholders do: the company ends up with net profits, which the board of directors decides to distribute to shareholders based on certain amount per share. If at all. Not all the profits are distributed, and in fact - there are companies who don't distribute dividends at all. Apple, for example, hasn't ever distributed dividends until very very recently. |
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