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Starting a new job. Help me with retirement/debt planning please!
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I would go with your alternative idea: get rid of the debt as fast as possible. You have $32k of debt. It's a lot, but with your new $90k salary, do you think you could get rid of it all in 12 months? See if you can make that happen. Once the debt is gone, you'll be in a position to invest as much as you want and keep all your gains. You are worried about sacrificing future money in your investments, but if you eliminate the debt over the next year, this will be minimized. Just lose the debt.
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Are AAA private-sector corporate bonds safer than government bonds?
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Haven't there been examples of governments defaulting, delaying payment and imposing haircuts on investors? Greece and Argentina come to mind. Quite a few Govt have defaulted in the past or were very of default or crisis. Most 3rd world countries or developing countries have under gone stress at some point. Greece was amongst the first example of Developed country going bankrupt. am I not better off if the fund invests solely in AAA corporate bonds, avoiding government bonds? Well that depends. Corporate bonds are not safer than Government Bonds. There have been instances of Corporate bonds not giving the required returns.
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Should withheld income tax be included as income?
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This very topic was the subject of a question on workplace SE https://workplace.stackexchange.com/questions/8996/what-can-relocation-assistance-entail TL/DR; From tax publication 521 - Moving expenses table regarding how to report IF your Form W-2 shows... your entire reimbursement reported as wages in box 1 AND you have... moving expenses THEN... file Form 3903 showing all allowable expenses,* but do not show any reimbursements. There are tax implications Covered in tax publication 521 - Moving expenses and Employers tax guide to Fringe Benefits related to moving expenses. From the Employers View: Moving Expense Reimbursements This exclusion applies to any amount you directly or indirectly give to an employee, (including services furnished in kind) as payment for, or reimbursement of, moving expenses. You must make the reimbursement under rules similar to those described in chapter 11 of Publication 535 for reimbursement of expenses for travel, meals, and entertainment under accountable plans. The exclusion applies only to reimbursement of moving expenses that the employee could deduct if he or she had paid or incurred them without reimbursement. However, it does not apply if the employee actually deducted the expenses in a previous year. Deductible moving expenses. Deductible moving expenses include only the reasonable expenses of: Moving household goods and personal effects from the former home to the new home, and Traveling (including lodging) from the former home to the new home. Deductible moving expenses do not include any expenses for meals and must meet both the distance test and the time test. The distance test is met if the new job location is at least 50 miles farther from the employee's old home than the old job location was. The time test is met if the employee works at least 39 weeks during the first 12 months after arriving in the general area of the new job location. For more information on deductible moving expenses, see Publication 521, Moving Expenses. Employee. For this exclusion, treat the following individuals as employees. A current employee. A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Exception for S corporation shareholders. Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Exclusion from wages. Generally, you can exclude qualifying moving expense reimbursement you provide to an employee from the employee's wages. If you paid the reimbursement directly to the employee, report the amount in box 12 of Form W-2 with the code “P.” Do not report payments to a third party for the employee's moving expenses or the value of moving services you provided in kind. From the employees view: The not be included as income the expenses must be from an accountable plan: Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home. You must adequately account to your employer for these expenses within a reasonable period of time. You must return any excess reimbursement or allowance within a reasonable period of time. Also what is interesting is the table regarding how to report IF your Form W-2 shows... your entire reimbursement reported as wages in box 1 AND you have... moving expenses THEN... file Form 3903 showing all allowable expenses,* but do not show any reimbursements.
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Can't the account information on my checks be easily used for fraud?
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Yes, those numbers are all that is needed to withdraw funds, or at least set online payment of bills which you don't owe. Donald Knuth also faced this problem, leading him to cease sending checks as payment for finding errors in his writings.
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Stock options value
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What you will probably get is an option to buy, for £10,000, £10,000 worth of stock. If the stock price on the day your option is granted is £2.50, then that's 4,000 shares. Companies rarely grant discounted options, as there are tax disincentives. The benefit of the stock option is that when you exercise it, you still only pay £10,000, no matter what the 4,000 shares are now worth. This is supposed to be an incentive for you to work harder to increase the value of the company. You should also check the vesting schedule. You will typically not be able to exercise all your options for some years, although some portion of it may vest each year.
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Apartment lease renewal - is this rate increase normal?
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I think people are missing the most obvious thing. The yearly rate increases are just part of the landlord schtick and it is good business for them. My grandmother owned several large apartment complexes. She would raise rates for any resident that had been there between 1-5 years by 5-7% a year. Even when she had vacancies and property values didn't go up. For the following reasons: So yes it is not only normal but just part of the business. If there are better apartments for less money I suggest you move there. Soon those other apartments will even out and if they are better they will be much more. So if you see a gap take advantage of it. If you would rather stay, then simply say you will not pay the increase. There is no use arguing about why. The landlord will either be OK with it or say no. Probably the biggest factors include whether you will tell other tenants (or their perception if you would) and how good of a tenant/risk they feel you are.
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What steps should be taken, if any, when you find out your home's market value is underwater, i.e. worth less than the mortgage owed?
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I will echo the others; your home should be worth more to you than its market value. It is YOUR HOME. It's where you come home every day to your wife and kids, where you build a life. Yes it's an investment, but it's not like a stock or bond that you hold for a little while and then cash out for the profit. The one time you should be worried about being "upside-down" on your mortgage is if you're getting out. If you're moving to a new job at a new company in a new city, you have to make good on the remaining loan balance, and that won't all be from the sale of the house. Unless you're at that point however, if you can afford making the payments and have no reason to move or to cash in equity (of which you have none), then just keep making the payments. Hey, it's better than rent; you'll never see rent money again, while even if you're underwater, you're making headway with each payment.
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US Tax Form 1040EZ: Do I enter ALL income or ONLY income specified in W-2 forms?
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Yes, you need to include income from your freelance work on your tax return. In the eyes of the IRS, this is self-employment income from your sole-proprietorship business. The reason you don't see it mentioned in the 1040EZ instructions is that you can't use the 1040EZ form if you have self-employment income. You'll need to use the full 1040 form. Your business income and expenses will be reported on a Schedule C or Schedule C-EZ, and the result will end up on Line 12 of the 1040. Take a look at the requirements at the top of the C-EZ form; you probably meet them and can use it instead of the more complicated C form. If you have any deductible business expenses related to your freelance business, this would be done on Schedule C or C-EZ. If your freelance income was more than $400, you'll also need to pay self-employment tax. To do this, you file Schedule SE, and the tax from that schedule lands on form 1040 Line 57.
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As an employer, how do I start a 401k or traditional IRA plan?
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Here is a nice overview from Vanguard on some options for a small business owner to offer retirement accounts. https://investor.vanguard.com/what-we-offer/small-business/compare-plans I would look over the chart and decide which avenue is best for you and then call around to investment companies (Vanguard, Fidelity, etc. etc.) asking for pricing information.
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Will ADR owner enjoy same benefit as common shares holders
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The essential difference b/n ADR and a common share is that ADR do not have Voting rights. Common share has. There are some ADR that would in certain conditions get converted to common stock, but by and large most ADR's would remain ADR's without any voting rights. If you are an individual investor, this difference should not matter as rarely one would hold such a large number of shares to vote on General meeting on various issues. The other difference is that since many countries have regulations on who can buy common shares, for example in India an Non Resident cannot directly buy any share, hence he would buy ADR. Thus ADR would be priced more in the respective market if there is demand. For example Infosys Technologies, an India Company has ADR on NYSE. This is more expensive around 1.5 times the price of the common share available in India (at current exchange rate). Thus if you are able to invest with equal ease in HK (have broker / trading account etc), consider the taxation of the gains in HK as well the tax treatment in US for overseas gains then its recommended that you go for Common Stock in HK. Else it would make sense to buy in US.
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How does owning a home and paying on a mortgage fit into family savings and investment?
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Unless you plan to sell your home and live in a box during your retirement I wouldn't consider it an investment that is a viable replacement for a retirement account. Consider this: Even if housing prices DO go way up, you still need a place to live. When you sell that house and try to buy another one to live in, you will find that the other houses went up in price too, negating your gain. The only way this might work is if you buy a much bigger house than you will need later and trade down to pull out some equity, or consider a reverse-mortgage for retirement income.
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Are Certificates of Deposit worth it compared to investing in the stock market?
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The difference is downside risk. Your CD, assuming you are in the US and the CD is purchased from a deposit bank, will be FDIC insured, your $10,000 is definitely coming back to you. Your stock portfolio has no such guarantee and can lose money. Your potential upside is theoretically correlated to the risk that some or all of your money may not be returned to you.
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ETF S&P 500 with Reinvested Dividend
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The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account.
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Why is auto insurance ridiculously overpriced for those who drive few miles?
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People who drive long distances tend to do more of their driving on larger, well-built roads (freeways / motorways) that are designed for high-speed driving. Although some people find them intimidating, they are much safer in terms of accidents per kilometre driven for several reasons:
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Definition of equity
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I was wondering why equity is reflecting ownership of the issuing entity? That is the definition of equity in this regard. My understanding is that for a stock/equity, its issuing entity is a company/firm that sells the stock/equity, while its receiving entity is an investor that buys the stock/equity Correct. equity reflects ownership of the receiving entity i.e. investor Incorrect. Equity reflects ownership by the receiving entity of the issuing entity. That is, when you buy stock in a company (taking an equity stake in the company) you buy a piece of the company. It would be rather odd for the company to own a piece of you when you buy their stock.
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Why having large capital is advantageous to trading
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It is a general truism but the reasons are that the rules change dramatically when you simply have more capital. Here are some examples, limited to particular kinds of markets: Under $2,000 in capital Nobody is going to offer you a margin account, and if you do get one it isn't with the best broker on commissions and other capabilities. So this means cash only trading, enjoy your 3 business day settlement periods. This means no shorting, confining a trader to only buy and hold strategies, making them more dependent on luck than a more capable trader. This means it is more expensive to buy stock, since you have to put down 100% of the cash to hold a share, whereas someone with more money puts down less capital to hold the exact same number of shares. This means no covered options strategies or spreads, again limiting the market directions where a trader could earn Under $25,000 in capital In the stock market, the pattern day trader rule applies to retail margin accounts with a balance under $25,000 and this severally limits the kinds of trades you are able to take because of the limit in the number of trades you can take in a given time period. Forget managing a multi-leg option position when the market isn't moving your direction. Under $125,000 in capital Worse margin rules. You excluded portfolio margin from your post, but it is a key part of the answer Over $1,000,000 in capital Participate in private placements, regulation D offerings reserved for accredited investors. These days, as buy and hold investments, these generally have more growth potential than publicly traded offerings. Over $5,000,000 in capital You can easily get the compliance and risk manager to turn the other way on margin rules. This is not conjecture, leverage up to infinity, try not to bankrupt yourself and the trading firm.
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Why is a stock trade flat on large volume?
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Large volume just means a lot of market participants believe they know where the stock price will be (after some amount of time). The fact that the price is not moving just means that about 50% of those really confident traders think the stock will be moving up, and about 50% of those really confident traders think the stock will be moving down.
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In what category would I put a loan I took to pay an expense
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A loan is most generally a liability, a part of the balance sheet. Expenses & income are part of the income statement. Income is the net of revenues after expenses. The interest is an expense on the income statement, but the loan itself does not reside there unless if it is defaulted and forgiven. Then it would become a revenue or contra-expense, depending on the methodology. The original purpose of the income statement is to show the net inflows of short term operational accruals which would exclude new borrowing and repaid loans. The cash flow statement will better show each cash event such as borrowing debt, repaying debt, or paying off a bill. To show how a loan may have funded a bill, which in theory it directly did not because an entity, be it a person or business, is like a single tank of water with multiple pipes filling and multiple pipes extracting, so it is impossible to know which exact inflow funded which exact outflow unless if there is only one inflow per period and one outflow per the same period. That being said, with a cash flow statement, the new loan will show a cash inflow when booked under the financing portion, and paying a bill will show a cash outflow when booked under the operating portion. With only those two transactions booked and an empty balance sheet beforehand, it could be determined that a new loan funded a bill payment.
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What is the process of getting your first share?
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I actually use a service called etorro, there are social trading and normal trading. It allows me to put money into the service, follow other people or just pick my own shares to buy and sell with a load other features. It does cost a small amount to extract money but the app is really good, the website is well designed and I've made a bit of money being 23, and in the It industry with no financial training ever it seems like a good way to start.
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What does “profits to the shareholders jumped to 15 cents a share” mean?
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What does it mean in terms of share price? Should the share price increase by 15 cents? No, but you're on the right track. In theory, the price of a share reflects it's "share" of time discounted future earnings. To put it concretely, imagine a company consistently earning 15 cents a share every year and paying it all out as dividends. If you only paid 25 cents for it, you could earn five cents a share by just holding it for two years. If you imagine that stocks are priced assuming a holding period of 20 years or so, so we'd expect the stock to cost less than 3 dollars. More accurately, the share price reflects expected future earnings. If everyone is assuming this company is growing earnings every quarter, an announcement will only confirm information people have already been trading based on. So if this 15 cents announcement is a surprise, then we'd expect the stock price to rise as a function of both the "surprise" in earnings, and how long we expect them to stay at this new profitability level before competition claws their earnings away. Concretely, if 5 cents a share of that announcement were "earnings surprise," you'd expect it to rise somewhere around a dollar.
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I am the sole owner of an LLC. Does it make a difference if I file as an S-Corp or a sole-member LLC?
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Be careful of the other answers here. Many are wrong or partially wrong. The question implies that you knew this, but for everyone else's benefit, you can keep you LLC organization and still elect to be treated as a S-Corp by the IRS just for tax purposes. You do this by filing Form 2553 with the IRS. (You can also, by the way, elect to be taxed as a "regular" C-Corp if you want, although that's probably not advantageous. See Form 8832.) The advantage of electing to be treated as an S-Corp is that income beyond what constitutes a "reasonable salary" are not subject to social security and medicare taxes as they would when paid was wages or counted as self-employment income on Schedule C. Depending on what you need to pay yourself to meet the "reasonable salary" test, your overall income, and other factors about your business, this could result in tax savings. Contrary to other answers here, making this election will not force you to create a board of directors. You are still an LLC for all purposes except taxes, so whatever requirements you had in organization and governance at the state level will not change. You will have to file a "corporate" tax return on Form 1120S (and likely some corresponding state tax form), so that is additional paperwork, but this "corporate" return does not mean the S-Corp pays taxes itself. With a couple of exceptions, the S-Corp pays no taxes directly (and therefore does not pay at the corporate tax rate). Instead the S-Corp apportions its income, expenses, and deductions to the owner(s) on Schedule K. The owners get their portion reported from the S-Corp on Schedule K1 and then include that on their personal Form 1040 to pay tax at their personal rate. In addition to filing Form 1120S, you will have to handle payroll taxes, which will create some additional administrative work and/or cost. Using a payroll service for this will likely be your best option and not terribly expensive. You've also got the issue of determining your reasonable salary within the rules, which is the subject of other questions on this site and other IRS guidance.
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Why don't share prices of a company rise every other Friday when the company buys shares for its own employees?
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This is an old question that has an accepted answer, but it has gotten bumped due to an edit and the answers given are incorrect. I am assuming this means that every other Friday, the company is going into the open public market, buying those shares and then giving it out to the employees. No. Companies will internally hold shares that it intends to offer employees as additional compensation. There are no open market transactions, so the market price of the stock does not change (at least not due to buying pressure). The only net effect is an equivalent expense for the compensation, but that should already be accounted for in the share price as normal operating expenses. These share may come through an initial buyback from the market, but more common is that when companies issue new shares they keep some internally for exactly this situation. If they issued new shares every pay period, it would dilute the existing shares several times a quarter which would be difficult to account for.
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Archive Financial Records by Account or by Year
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First, I try to keep electronic records (with appropriate backups) whenever it seems feasible: utility bills, credit card statements, bank statements, etc. This greatly cuts down on storage space, and are kept forever. For hard copy records, it depends on the transaction. I try to balance filing time and recover time, by how likely it is that I will need to access a record in the future. I'm much less likely to need the receipt for this mornings coffee at Starbucks than I am to need the utility bill for my rental property (100%, come tax time). For instance, by default I file my credit card receipts, that don't get filed elsewhere, by year with all cards kept together, and cull them after 5-7 years. I keep all of the credit card receipts, just because it is less effort for me than making a decision about what to keep and what to discard. I put them in an accordion file by month of charge, and keep two, for the current year and previous years. At the beginning of each year, I get rid of the receipts in the oldest file and reuse it. Anything that needs to be kept longer that a couple of years gets filed separately. Certain records are kept together. For example, car repair/maintenance receipts are filed by vehicle and kept for the life of the vehicle (could be useful when its sold, to provide the repair history). All receipts for the rental property are kept together, organized by account. I'll keep these until the property is sold. All tax related receipts that don't have a specific file are kept together, by year, along with the tax return.
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What should I do with my $10K windfall, given these options?
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If you need a new roof because your house is full of buckets that fill up every rain :) then that's most likely the item at the top of the list. If you need a new roof because you don't like the color, I'd do something else with it. If you are in the US and the 'education loan' has the same caveats attached as your average student loan, I would eye that one with intent if the roof can soldier on for a few years as is. The simple reason for this is that a student loan would be the one debt that you list that you can never get rid off unless you actually pay it off, no matter what happens (IOW student loans aren't bankruptable). Disregard this if the caveats in the first sentence don't apply...
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Buying back a covered Call
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if you buy back the now ITM calls, then you will have a short term loss. That pair of transactions is independent, from a tax perspective, of your long position (which was being used as "collateral" in the very case that occurred). I can see your tax situation and can see the logic of taking a short term loss to balance a short term gain. Referring to D Stanley's answer, #2 and #3 are not the same because you are paying intrinsic value in the options and the skew in #2, whereas #3 has no intrinsic value. Of course, because you can't know the future, the stock price could move higher or lower between #2 and #3. #1 presumes the stock continues to climb.
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First time investing advice (Canada)
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Question One: Question Two: Your best reference for this would be a brokerage account with data privileges in the markets you wish to trade. Failing that, I would reference the Chicago Mercantile Exchange Group (CME Group) website. Question Three: Considering future tuition costs and being Canadian, you are eligible to open a Registered Education Savings Plan (RESP). While contributions to this plan are not tax deductible, any taxes on income earned through investments within the fund are deferred until the beneficiary withdraws the funds. Since the beneficiary will likely be in a lower tax bracket at such a time, the sum will likely be taxed at a lower rate, assuming that the beneficiary enrolls in a qualifying post secondary institution. The Canadian government also offers the Canada Education Savings Grant (CESG) in which the federal government will match 20% of the first $2500 of your annual RESP contribution up to a maximum of $500.
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Does it make sense to talk about an ETF or index in terms of technical indicators?
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Yes, it makes sense. Like Lagerbaer says, the usefulness of technical indicators can not be answered with a simple yes or no. Some people gain something from it, others do not. Aside from this, applying technical indicators (or any other form of technical analysis - like order flow) to instruments which are composed of other instruments, such as indexes (more accurately, a derivative of it), does make sense. There are many theories why this is the case, but personally i believe it is a mixture of self fulfilling prophecy, that the instruments the index is composed of (like the stocks in the S&P500) are traded in similar ways as the index (or rather a trade-able derivative of it like ETFs and futures), and the idea that TA just represents human emotion and interaction in trading. This is a very subjective topic, so take this with a grain of salt, but in contrast to JoeTaxpayer i believe that yields are not necessary in order to use TA successfully. As long as the given instrument is liquid enough, TA can be applied and used to gain an edge. On the other hand, to answer your second question, not all stocks in an index correlate all the time, and not all of them will move in sync with the index.
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Should you always max out contributions to your 401k?
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Rule of thumb: Invest in a tax deferred account only if your marginal tax rate is higher now than it will be in retirement. If you plan on making more taxable income in retirement than you do right now, then you should invest outside a tax deferred account.
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Apartment lease renewal - is this rate increase normal?
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Should you negotiate? Yes, what harm can it possibly do? The landlord is unlikely to come back and say "Because you tried to negotiate, I'm putting the rent up by 10% instead.", or to evict a paying tenant merely because they tried to negotiate. Is the proposed rent increase "normal"? Yes. Landlords will generally try to get as high a rent as they can.
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What things are important to consider when investing in one's company stock?
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I would pass on their deal if they will only match if you invest in their stock. Think about when/if the company falls on bad times. What happens to the stock of a company when bad times come? The board of directors will reduce or eliminate the dividend payout. Current and potential investors will take notice. Current owners of the stock will sell. Potential investors will avoid buying. The price of the stock with go down. And, quite likely, the company will lay off workers. If/when that happens you would find yourself without a job and holding (almost) worthless stock as your savings. That would be quite a bad situation to be in.
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Should I sell a 2nd home, or rent it out?
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I don't see anything in this forum on the leverage aspect, so I'll toss that out for discussion. Using generic numbers, say you make a $10k down payment on a $100,000 house. The house appreciates 3% per year. First year, it's $103,000. Second year, $106090, third it's 109,272.70. (Assuming straight line appreciation.) End of three years, you've made $9,272.70 on your initial $10,000 investment, assuming you have managed the property well enough to have a neutral or positive cash flow. You can claim depreciation of the property over those rental years, which could help your tax situation. Of course, if you sell, closing costs will be a big factor. Plus... after three years, the dreaded capital gains tax jumps in as mentioned earlier, unless you do a 1031 exchange to defer it.
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If a stock doesn't pay dividends, then why is the stock worth anything?
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Stocks represent partial ownership of the company. So, if you owned 51% of the stock of the company (and therefore 51% of the company itself), you could decide to liquidate all the assets of the company, and you would be entitled to 51% of the proceeds from that sale. In the example above, it would have to be Common Stock, as preferred stock does not confer ownership. *In a situation where it is not possible to buy 51% or more of the company (for example, it's not for sale), this is not possible, so the value of the stock could be much less.
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What's a good option for passive income for a college student?
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As mentioned in the other answer, you can't invest all of your money in one slightly risky place, and to receive a significant return on your investment, you must take on a reasonable amount of risk, and must manage that risk by diversifying your portfolio of investments. Unfortunately, answers to this question will be somewhat opinion and experience-based. I have two suggestions, however both involve risk, which you will likely experience in any situation. Peer to Peer Lending In my own situation, I've placed a large sum of money into peer-to-peer lending sites, such as LendingClub. LendingClub specifically advertises that 98% of its user base that invests in 100 notes or more of relatively equal size receive positive returns, and I'm sure you'll see similar statements in other similarly established vendors in this area. Historical averages in this industry can be between 5-7%, you may be able to perform above or below this average. The returns on peer to peer lending investments are paid out fairly frequently, as each loan you invest in on the site pays back into your account every time the recipient of the loan makes a payment. If you invest in small amounts / fractions of several hundred loans, you're receiving several small payments throughout the month on various dates. You can withdraw any money you have received back that hasn't been invested, or money you have in the account that hasn't been invested, at any time for personal spending. However, this involves various risks, which have to be considered (Such as someone you've loaned money to on the site defaulting). Rental Property / Property itself I'm also considering purchasing a very cheap home, and renting it out to tenants for passive income. This is something I would consider a possibility for you. On this front, you have the savings to do the same. It would be possible for you to afford the 20% downpayment on a very low cost home (Say, $100,000 or less up to $200,000 depending on your area), but you'd need to be able to pay for the monthly mortgage payment until you had a tenant, and would need to be able to afford any on-going maintenance, however ideally you'd factor that into the amount you charged tenants. You could very likely get a mortgage for a place, and have a tenant that pays you rent that exceeds the amount you pay for the mortgage and any maintenance costs, earning you a profit and therefore passive income. However, rental properties involve risks in that you might have trouble finding tenants or keeping tenants or keeping the property in good shape, and it's possible the property value could decrease. One could also generalize that property is a somewhat 'safe' investment, in that property values tend to increase over time, and while you may not significantly over-run inflation's increase, you may be able to get more value out of the property by renting it out in the mean time. Additional Note on Credit You mention you have a credit card payment that you're making, to build credit. I'd like to place here, for your reference, that you do not need to carry a balance to build credit. Having active accounts and ensuring you don't miss payments builds your history. To be more specific, your history is based off of many different aspects, such as: I'm sure I missed a couple of things on this front, you should be able to find this information with some research. Wanted to make sure you weren't carrying a balance simply due to the common myth that you must do so to build credit. Summary The items mentioned above are suggestions, but whatever you choose to invest in, you should carefully spread out / diversify your portfolio across a variety of different areas. It would not be advisable to stick to just one investment method (Say, either of the two above) and not also invest in stocks / bonds or other types of investments as well. You can certainly decide what percentage of your portfolio you want to invest in different areas (for instance X% of assets in Stocks/bonds, Y% in real-estate, etc), but it does make the most sense to not have all of your eggs in one basket.
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Pay online: credit card or debit card?
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In the UK it is almost always better to purchase with a credit card for transactions above £100 but below £30,000. This is due to Section 75 of the Consumer Credit Act 1974 which makes your credit card company jointly liable if something goes wrong. In other words, if you buy something worth £1000 with your credit card, the company fails to deliver for any reason and you cannot get a refund from them directly, you are entitled to make a claim from your credit card company for the full amount.
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Need something more basic than a financial advisor or planner
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Yes, there is a profession that does exactly what you're looking for. It's called a fee-only financial advisor. These are professionals who (in the United States) enter into a fiduciary relationship with a client, meaning they are legally required to put your financial interests above all other considerations (such as any behind-the-scenes incentives to promote certain products). Between that requirement and the fact that they are paid for their time (and not on commission), they have zero incentive to try to sell you anything that you do not need. Their only job is to help you with your financial situation. (Of course, some of them may be better than others.) See the profession's website here to find such an advisor near you. (Credit to Marketplace Money, the old name for Marketplace Weekend, for mentioning fee-only advisors at least 87 times per show.)
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Clarification on 529 fund
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You are faced with a dilemma. If you use a 529 plan to fund your education, the short timeline of a few years will limit your returns that are tax free. Most people who use a 529 plan either purchase years of tuition via lump sum, when the child is young; or they put aside money on a regular basis that will grow tax deferred/tax free. Some states do give a tax break when the contribution is made by a state taxpayer into a plan run by the state. The long term plans generally use a risk profile that starts off heavily weighted in stock when the child is young, and becomes more fixed income as the child reaches their high school years. The idea is to protect the fund from big losses when there is no time to recover. If you choose the plan with the least risk the issue is that the amount of gains that are being protected from federal tax is small. If you pick a more aggressive plan the risk is that the losses could be larger than the state tax savings. Look at some of the other tax breaks for tuition to see if you qualify Credits An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American Opportunity Tax Credit and the Lifetime Learning Credit. Who Can Claim an Education Credit? There are additional rules for each credit, but you must meet all three of the following for either credit: If you’re eligible to claim the lifetime learning credit and are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. You can't claim the AOTC if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes. For more information about AOTC and foreign students, visit American Opportunity Tax Credit - Information for Foreign Students. Deductions Tuition and Fees Deduction You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education. The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high. You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax.
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What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund?
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The most obvious one these days is unexpected and extended unemployment. If you are living paycheck to paycheck, you are asking for trouble in this economy.
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If I have a lot of debt and the housing market is rising, should I rent and slowly pay off my debt or buy and roll the debt into a mortgage?
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Buy and Hope is a common investment strategy. It's also one that will keep you poor. Instead of thinking about saving money to put against a credit card or line of credit using your own job and hard-earned dollars, why not use someone else's money? If you have enough of a down payment for a property of your own, consider a duplex, triplex, or 4-plex where you live in one of the units. Since you will be living there you only need 5% down as opposed to 20% down if you do not live there. This arrangement gives you a place to live while you have other people paying your mortgage and other debts. If done properly, you can find a place that is cash-flow positive so you basically live rent-free. This all assumes you have a down payment and a bank that will work with you. Your best bet is to discuss your situation with a mortgage broker. They know all the rules, and which banks have the best deal for you. A mortgage broker works on your behalf and is paid by the lending institution, not you. There are various caveats with this strategy, and they all revolve around knowing what to do and how to execute the plan. I suggest Googling Robert Kiyosaki and reading "Rich Dad Poor Dad" before taking this journey. He offers a number of free and paid seminars that teach people how to purchase real estate and make it pay. I have taken the free evening seminar and the $500 weekend seminar on how to purchase properties and make money with them. Note that I have no affiliation with Kiyosaki, and I do find his methods to work.
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What's the difference between Market Cap and NAV?
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I think the key concept here is future value. The NAV is essentially a book-keeping exercise- you add up all the assets and remove all the liabilities. For a public company this is spelled out in the balance sheet, and is generally listed at the bottom. I pulled a recent one from Cisco Systems (because I used to work there and know the numbers ;-) and you can see it here: roughly $56 billion... https://finance.yahoo.com/q/bs?s=CSCO+Balance+Sheet&annual Another way to think about it: In theory (and we know about this, right?) the NAV is what you would get if you liquidated the company instantaneously. A definition I like to use for market cap is "the current assets, plus the perceived present value of all future earnings for the company"... so let's dissect that a little. The term "present value" is really important, because a million dollars today is worth more than a million dollars next year. A company expected to make a lot of money soon will be worth more (i.e. a higher market cap) than a company expected to make the same amount of money, but later. The "all future earnings" part is exactly what it sounds like. So again, following our cisco example, the current market cap is ~142 billion, which means that "the market" thinks they will earn about $85 billion over the life of the company (in present day dollars).
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Does SIPC protect securities purchased in foreign exchanges?
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I'll give it a shot, even though you don't seem to be responding to my comment. SIPC insures against fraud or abuse of its members. If you purchased a stock through a SIPC member broker and it was held in trust by a SIPC member, you're covered by its protection. Where you purchased the stock - doesn't matter. There are however things SIPC doesn't cover. That said, SIPC members are SEC-registred brokers, i.e.: brokers operating in the USA. If you're buying on the UK stock exchange - you need to check that you're still operating through a US SIPC member. As I mentioned in the comment - the specific company that you mentioned has different entities for the US operations and the UK operations. Buying through them on LSE is likely to bind you with their UK entity that is not SIPC member. You'll have to check that directly with them.
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I started some small businesses but need help figuring out taxes. Should I hire a CPA?
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The only professional designations for people allowed to provide tax advice are Attorney, EA or CPA. Attorney and CPA must be licensed in the State they practice in, EA's are licensed by the Federal government. Tax preparers are not allowed to provide any tax advice, unless they hold any of these designations. They are only allowed to prepare your tax forms for you. So no, tax preparer is not a solution. Yes, you need to talk to a tax adviser (EA/CPA licensed in your State, you probably don't need a tax attorney). You should do that before you start earning money - so that you can plan properly and understand what expenses you can incur and how they're handled with regards to your future income tax payments. You might also want to consider a bookkeeping service (many EA/CPA offices offer the bookkeeping as well). But that you can also do yourself, not all that complicated if you don't have tons of transactions and accounts.
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How do I invest and buy/sell stocks? What does “use a broker” mean?
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Some good answers already, but let me add a TL:DR version. Brokers work like a special type of bank account where you can deposit or withdraw money. The major difference is that they also give you the ability to buy/sell investments with the money in your account which you can do by either calling them or using their website. Important: Many investments you will make through a broker(e.g. stocks) are not insured against losing value like the money in your bank account.
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Shares; are they really only for the rich/investors?
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Shares are for investors. Most of the rich are investors. Unfortunately, the reverse is not true. But if you want to get rich, the first step is to become an investor. (The second is to become a SUCCESSFUL investor. 50 pounds might be too little. Try to start with at least 500 at a time. You can ADD amounts of 50 pounds. There are definitely fees involved. You will "pay for lessons." But it will be worth it, if you become even a moderately successful investor. As for rules, they'll teach you the rules. Everyone wants your business. People have gotten (modestly) rich, buying shares here and there. One man told me of investing $600 in a company called Limited, and ending up with $12,000 some years later. BRIC is not a "share." It is an acronym for four countries "of the future." High risk, high reward here.
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First 401K portfolio with high expense ratios - which funds to pick? (24yo)
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If you're willing to do a little more work and bookkeeping than just putting money into the 401(k) I would recommend the following. I note that you said you chose some funds based on performance since the expense ratios are all high. I would recommend against chasing performance because active funds will almost always falter; honor the old saw: "past performance is no guarantee of future returns". Assuming the cash in your Ally account is an emergency fund, I would use it to pay off your credit card debt to avoid the interest payments. Use free cash flow in the coming months to bring the emergency fund balance back up to an acceptable level. If the Ally account is not an emergency fund, I would make it one! With no debt and an emergency fund for 3-12 months of living expenses (pick your risk tolerance), then you can concentrate on investing. Your 401(k) options are unfortunately pretty poor. With those choices I would invest this way: Once you fill up your choice of IRA, then you have the tougher decision of where to put any extra money you have to invest (if any). A brokerage account gives you the freedom of investment choices and the ability to easily pull out money in the case of a dire emergency. The 401(k) will give you tax benefits, but high fund expenses. The tax benefits are considerable, so if I were at a job where I plan on moving on in a few years, I'd fund the 401(k) up to the max with the knowledge that I'd roll the 401(k) into a rollover IRA in the (relatively) short term. If I saw myself staying at the employer for a long time (5+ years), I'd probably take the taxable account route since those high fund fees will add up over time. One you start building up a solid base, then I might look into having a small allocation in one of my accounts for "play money" to pick individual stocks, or start making sector bets.
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When does it make sense for the money paid for equity to go to the corporation?
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BigCo is selling new shares and receives the money from Venturo. If Venturo is offering $250k for 25% of the company, then the valuation that they are agreeing on is a value of $1m for the company after the new investment is made. If Jack is the sole owner of one million shares before the new investment, then BigCo sells 333,333 shares to Venturo for $250k. The new total number of shares of BigCo is 1,333,333; Venturo holds 25%, and Jack holds 75%. The amount that Jack originally invested in the company is irrelevant. At the moment of the sale, the Venturo and Jack agree that Jack's stake is worth $750k. The value of Jack's stake may have gone up, but he owes no capital gains tax, because he hasn't realized any of his gains yet. Jack hasn't sold any of his stake. You might think that he has, because he used to hold 100% and now he holds 75%. However, the difference is that the company is worth more than was before the sale. So the value of his stake was unchanged immediately before and after the sale. Jack agrees to this because the company needs this additional capital in order to meet its potential. (See "Why is stock dilution legal?") For further explanation and another example of this, see the question "If a startup receives investment money, does the startup founder/owner actually gain anything?" Your other scenario, where Venturo purchases existing shares directly from Jack, is not practical in this situation. If Jack sells his existing shares, you are correct that the company does not gain any additional capital. An investor would not want to invest in the company this way, because the company is struggling and needs new capital.
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Is it possible to make money by getting a mortgage?
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This answer is based on Australian tax, which is significantly different. I only offer it in case others want to compare situations. In Australia, a popular tax reduction technique is "Negative Gearing". Borrow from a bank, buy an investment property. If the income frome the new property is not enough to cover interest payments (plus maintenance etc) then the excess each year is a capital loss - which you claim each year, as an offset to your income (ie. pay less tax). By the time you reach retirement, the idea is to have paid off the mortgage. You then live off the revenue stream in retirement, or sell the property for a (taxed) lump sum.
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What does an x% inflation rate actually mean?
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Inflation is an attempt to measure how much less money is worth. It is a weighted average of some bundle of goods and services price's increase. Money's value is in what you can exchange it for, so higher prices means money is worth less. Monthly inflation is quoted either as "a year, ending on that month" or "since the previous month". As the values differ by more than a factor of 10, you can usually tell which one is being referred to when they say "inflation in August was 0.4%, a record high" or "inflation in August was 3.6%". You do need some context of the state of the economy, and how surprised the people talking about the numbers are. Sometimes they refer to inflation since the last month, and then annualize it, which adds to the confusion. "Consumer Inflation"'s value depends on what the basket of goods is, and what you define as the same "good". Is a computer this year the same as the last? If the computer is 10x faster, do you ignore that, or factor it in? What basket do you use? The typical monthly consumables purchased by a middle class citizen? By a poor citizen? By a rich citizen? A mixture, and if so which mixture? More detailed inflation figures can focus on inflation facing each quntile of the population by household income, split durable goods from non-durable goods from services, split wage from non-wage inflation, ignore volatile things like food and energy, etc. Inflation doesn't directly cause prices to raise; instead it is a measure of how much raise in prices happened. It can easily be a self-fullfilling prophesy, as inflation expectations can lead to everyone automatically increasing the price they charge for everything (wages, goods, etc). Inflation can be viewed as a measurement of the "cost of holding cash". At 10% inflation per year, holding a million dollars in cash for a year costs you 100,000$ in buying power. At 1% inflation it costs 10,000$. At 0.1% inflation, 1000$. Inflation of 10% in one year, followed by 10% the next, adds up to 1.1*1.1-1 = 21% inflation over the two years. For low inflation numbers this acts a lot like adding; the further from 0% you get the more the lower-order terms make the result larger. 1% inflation for two years adds up to 2.01%, 10% over two years 21%, 100% over two years 300%, 1000% over two years 12000%, etc. (and yes, some places suffer 1000% inflation)
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How to invest for the event of a US default?
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If the US economy crashes at all suddenly, the global economy goes with it. In that case, yes, the postapocalyptic scenarios may be the best answer. But that's got so low a probability of happening that you'd be a fool to invest in it. If you really feel the need, consider investing in the companies which supply those activities. The big winners in the California gold rush were the general stores that sold supplies to the speculators.
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What happens if stock purchased on margin plummets below what I have in the brokerage?
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If the price had dropped to $4 from $50, and you had $5000 to start with on your account, you will be left with $400 in your account if you closed the position now. So you would not be in debt if this was the only possition you had open.
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Why are daily rebalanced inverse/leveraged ETFs bad for long term investing?
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In addition to the excellent answers here I might suggest a reason for investing in leveraged funds and the original purpose for their existence. Lets say you run a mutual fund that is supposed to track the performance of the S&P 500. If you have cash inflows and outflows from your fund due to people investing and selling shares of your fund you may have periods where not all funds are invested appropriately because some of the funds are in cash. Lets say 98% of your funds are invested in the securities that reflect the stocks in the S&P 500. You will will miss matching the S&P 500 because you have 2% not invested in some money market account. If you take 1/3 of the cash balance and invest in a triple leveraged fund or take 1/2 of the funds and invest in a double leveraged fund you will more accurately track the index to which your fund is supposed to track. I am not sure what percentage mutual fund owners keep in cash but this is one use that I know these ETFs are used for. The difference over time that compounding effects have on leveraged funds is called Beta Slippage. There are many fine articles explaining it at you can find one located at this link.
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What are futures and how are they different from options?
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Cart's answer is basically correct, but I'd like to elaborate: A futures contract obligates both the buyer of a contract and the seller of a contract to conduct the underlying transaction (settle) at the agreed-upon future date and price written into the contract. Aside from settlement, the only other way either party can get out of the transaction is to initiate a closing transaction, which means: The party that sold the contract buys back another similar contract to close his position. The party that bought the contract can sell the contract on to somebody else. Whereas, an option contract provides the buyer of the option with the choice of completing the transaction. Because it's a choice, the buyer can choose to walk away from the transaction if the option exercise price is not attractive relative to the underlying stock price at the date written into the contract. When an option buyer walks away, the option is said to have expired. However – and this is the part I think needs elaboration – the original seller (writer) of the option contract doesn't have a choice. If a buyer chooses to exercise the option contract the seller wrote, the seller is obligated to conduct the transaction. In such a case, the seller's option contract is said to have been assigned. Only if the buyer chooses not to exercise does the seller's obligation go away. Before the option expires, the option seller can close their position by initiating a closing transaction. But, the seller can't simply walk away like the option buyer can.
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Are Credit Cards a service to banks?
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Credit cards are a golden goose for banks, as they get to issue high-interest loans and simultaneously generate alot of fee income. Debit cards aren't quite as good, but they still generate substantial fee income -- ~2% of every credit/non-PIN debit transaction goes to the bank and credit card network. Credit histories exist because they are the most effective tool available to predict whether you will pay back your loans or not. You don't need a credit history to buy most things, you need a credit history to get a large loan. Think of it from perspective of a lender: Credit scoring is the bank's way screening out people who are expensive to do business with. It's objective, doesn't discriminate on the basis of race, sex or other factors, and you have recourse if the rating agencies have incorrect information.
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I'm 18. How to build good monthly income at my 20's?
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Market rate of return averages about 8% annually (sometimes more, sometimes less or negative). To get 30k monthly -- even taking that as pretax -- you're talking about 360k yearly. Divide that by 0.08 and you need to have savings of 4.5 million--- and really you should double that for safety.. Tl;dr: forget it. Added thought: If you really have $20k/month coming in, you really have no business asking the Internet for advice. Hire a professional financial advisor (not a broker, someone who is paid a flat fee for their expertise and has no incentives to give you less-than-optimal advice). . The money they will save/make for you will more than pay for their hire.
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Is it worth it to buy TurboTax Premier over Deluxe if I sold investments in a taxable account?
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Here are the lists for the tax forms that Deluxe and Premier include. I think you'll be fine with Deluxe because it sounds like all you need is the Schedule D/8949 forms. Deluxe actually includes most investment related forms.
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Why might it be advisable to keep student debt vs. paying it off quickly?
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I'm no financial advisor, but I do have student loans and I do choose to pay them off as slowly as I can. I will explain my reasoning for doing so. (FWIW, these are all things that pertain to government student loans in the US, not necessarily private student loans, and not necessarily student loans from other countries) So that's my reasoning. $55 per month for the rest of my life adds up to a large amount of money over the course of my life, but the impact month-to-month is essentially nonexistent. That combined with the low interest and the super-low-pressure-sales-tactics means I just literally don't have any incentive to ever pay it all off. Like I said before, I'm just a guy who has student loans, and not even one who is particularly good with money, but as someone who does choose not to pay off my student loans any faster than I have to, this is why.
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HELOC vs. Parental Student Loans vs. Second Mortgage?
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Thank God you have your child back, it is so awesome that you finally found a medical treatment that worked. It must have been a truly trying time in your lives. That situation is an important template in personal finance. Through no fault of your own, a series of events occurred that caused you to spend far more money then you anticipated. Per your post this was complicated by lost income due to economic situations. What is to say that this does not happen again in the future? While we can all hope that our child does not get sick, there are other events that could also fit into this template. Because of this I hate all options you present. Per your post, you are pretty thin with free cash flow and have high income, and yet you are looking to borrow more. That is a recipe for disaster with it being made worse as you are considering putting your home at risk. The 20K per year per kid sounds like a live at the university state school; or, a close by private school. Your finances do not support either option. There are times when the word "No" is in order when answering questions. Doing a live at home community college to university will cost you a total of about 30K per kid rather than the 80K you are proposing. Doing this alone will greatly reduce the risk you are attempting to assume. Doing that and having your child work some, you could cash flow college. That is what I would recommend. Given that you are so thin, you will also have to put constraints on college attendance. No changing major three times, only majors with an employable skills, and studying before partying. It may be worth it to wait a year of two before attending if a decision cannot be made. I was in a similar situation when my son started college. High income, but broke. He worked and went to a community college and was able to pay for the bulk of it himself. From there he obtained a job with a healthy salary and completed his degree at the University. It took him a little longer, but he is debt free and has a fantastic work ethic.
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Are buying and selling futures based on objective data?
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If you're simply a futures speculator, then yes, it does seem like gambling. If you're a farmer producing a few thousand bushels of wheat, futures can be a mechanism for you to hedge against certain kinds of market risk. Same if you're running a heating oil company, etc. I just read somewhere that the bad spring weather in South Dakota has prevented farmers from getting corn planted -- nothing is in the ground yet. This is "objective data" from which you might infer that this year's corn harvest could be late and/or smaller than normal. So maybe if you're a buyer for General Mills, you use corn futures to control your costs. In this case you'd have some idea based on experience what to expect for the price of corn, what your production line requires for input, how much you can charge for finished product, etc. These all factor in to the price you'd be willing to pay for corn futures.
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How can I withdraw money from my LLC?
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Generally, unless you explicitly elect otherwise, LLCs are transparent when it comes to taxes. So the money in the LLC is your money for tax purposes, there's no need to pay yourself a salary. In fact, the concept of salary for LLC members doesn't exist at all. It is either distributions or guaranteed payments (and even that is mostly relevant to multi-member LLCs). The only concern is the separation of personal and LLC finances - avoiding commingling. Mixing your personal and business expenses by using the same accounts/cards for both business and personal spending may cause troubles when it comes to the liability protection in case of a lawsuit. I'd suggest discussing this with a FL-licensed attorney. Bottom line - technically the withdrawal is just writing yourself a check from the business account or moving money between your personal and business accounts. If you're a sole member - you need not more than that. Make sure the operating agreement explicitly empowers you to do that, of course. There are no tax consequences, but as I mentioned - there may be legal consequences.
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Why do Americans have to file taxes, even if their only source of income is from a regular job?
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A couple things. First of all, most people's MAIN source of income is from their job, but they have others, such as bank interest, stock dividends, etc. So that income has to be reported with their wage income. The second thing is that most people have deductions NOT connected with their job. These deductions reduce income (and generate refunds). So it's in their interest to file.
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Should I finance a new home theater at 0% even though I have the cash for it?
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I think most people have already answered this one pretty well. (It's usually worth it, as long as you pay it off before the interest kicks in, and you don't get hit with any fees.) I just wanted to add one thing that no one else has pointed out: Applying for the loan usually counts as a hard pull on your credit history. It also changes your Debt-to-income ratio (DTI). This can negatively impact your credit score. Usually, the credit score impact for these (relatively) small loans isn't that much. And your score will rebound over time. However, if it makes your score drop below a certain threshold, (e.g. FICO dips below 700), it could trip you up if you are also applying for other sources of credit in the immediate future. Not a big deal, but it is something to keep in mind.
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Thinking of doing an MBA: Is an $80K top MBA school better than a $24K online MBA school?
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If you can get into the top school, it's a no-brainer to go that route. An MBA at a top school will not only give you an education taught by world-renowned professors but also a large network of students and alumni.
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For what dates are the NYSE and U.S. stock exchanges typically closed?
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All public US equity exchanges are closed on the 9 US trading holidays (see below) and open on all other days. Exchanges also close early (13:00 ET) on the Friday after Thanksgiving and on the day before Independence Day if Independence Day is being observed on a Tuesday, Wednesday, Thursday, or Friday. (Some venues have extended trading hours as a matter of course; for them an "early close" might be later than 13:00 ET.) To answer the second question, yes, if you know NASDAQ's or AMEX's holiday schedule, then you know NYSE's (modulo the timing of their early close). I'm not sure about the options exchanges; they're not regulated the same way and are a good example of exchanges with extended trading hours in the first place. The US trading holidays are as follows. Note that trading holidays are not the same as federal or bank holidays, which include Columbus Day and Veterans Day but do not include Good Friday.
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How to evaluate investment risk in practical terms
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Generally investing in index-tracking funds in the long term poses relatively low risk (compared to "short term investment", aka speculation). No-one says differently. However, it is a higher risk than money-market/savings/bonds. The reason for that is that the return is not guaranteed and loss is not limited. Here volatility plays part, as well as general market conditions (although the volatility risk also affects bonds at some level as well). While long term trend may be upwards, short term trend may be significantly different. Take as an example year 2008 for S&P500. If, by any chance, you needed to liquidate your investment in November 2008 after investing in November 1998 - you might have ended up with 0 gain (or even loss). Had you waited just another year (or liquidated a year earlier) - the result would be significantly different. That's the volatility risk. You don't invest indefinitely, even when you invest long term. At some point you'll have to liquidate your investment. Higher volatility means that there's a higher chance of downward spike just at that point of time killing your gains, even if the general trend over the period around that point of time was upward (as it was for S&P500, for example, for the period 1998-2014, with the significant downward spikes in 2003 and 2008). If you invest in major indexes, these kinds of risks are hard to avoid (as they're all tied together). So you need to diversify between different kinds of investments (bonds vs stocks, as the books "parrot"), and/or different markets (not only US, but also foreign).
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Is there any benefit to investing in an index fund?
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when the index is altered to include new players/exclude old ones, the fund also adjusts The largest and (I would say) most important index funds are whole-market funds, like "all-world-ex-US", or VT "Total World Stock", or "All Japan". (And similarly for bonds, REITS, etc.) So companies don't leave or enter these indexes very often, and when they do (by an initial offering or bankruptcy) it is often at a pretty small value. Some older indices like the DJIA are a bit more arbitrary but these are generally not things that index funds would try to match. More narrow sector or country indices can have more of this effect, and I believe some investors have made a living from index arbitrage. However well run index funds don't need to just blindly play along with this. You need to remember that an index fund doesn't need to hold precisely every company in the index, they just need to sample such that they will perform very similarly to the index. The 500th-largest company in the S&P 500 is not likely to have all that much of an effect on the overall performance of the index, and it's likely to be fairly correlated to other companies in similar sectors, which are also covered by the index. So if there is a bit of churn around the bottom of the index, it doesn't necessarily mean the fund needs to be buying and selling on each transition. If I recall correctly it's been shown that holding about 250 stocks gives you a very good match with the entire US stock market.
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Why so much noise about USA's credit rating being lowered?
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Dollar is the lingua franca of the financial industry and unluckily it is the US currency. It is till today considered the most safest investment bet, that is why you have China possesing $3 trillion of US debt, as an investment albiet a very safe one. Financial investors get in queue to by US bonds the moment they are put up for sale. Because of the AAA rating the investors consider it to be safe at a specific rate. Now when you lower the credit rating you are indirectly asking the US government that you want a higher return(yield) on your investments. When you ask for higher yields, it translates into higher interest rates (money US would get for bonds issued decreases and so more bonds are issued). So you basically start looking at a slowdown in consumer spendings households and businesses. With already defaults, repossesions and lesser spending, the slowdown would increase manifold.
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2 houses 450k each or one 800k?
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Having someone else paying you rent is always going to be the better deal financially. The question is, what does $450k buy in the neighborhood in which you want to live, vs $800k? I'm going to assume you can afford either option (buying a $450k home and not selling, or an $800k home and selling your current one) whether someone's paying you rent or not. Let's make up some numbers here; a $450k home, financed 80/20 (360k principal) at 4% for 30 years will cost you about $1720 in P&I payments per year (plus escrows such as RE taxes, PMI, and homeowners insurance where applicable). An $800k home financed 80/20 (640k principal) at 4% for 30yr will give you payments of about $3,055/mo before taxes and insurance. So, the worst case overall is that you buy a 450k home in the new neighborhood and are not, at any given time, collecting rent on the old property. That would (assuming the mortgage terms on both home loans were comparable) cost you $3440/mo and you'd be living in a $450k home in a neighborhood where 450k may not buy a home as nice as the one you moved out of. The question as I stated above is this; assuming you had a reliable tenant in your home for the entire remaining life of the loan on your current home, which is more acceptable to you: buying $450k of home (which might be a downgrade in sqft or amenities) and paying $2020 in P&I, or paying about a grand more ($3055/mo) for a much nicer home in the new location? Strictly from a money perspective, the renter is going to be the best option, IF you get reliable tenancy for the entire life of the mortgage on that house; you'll be paying $2020/mo for 30 years, which is $727,200, to end up with $950k of total home value (plus adjustments for actual home value appreciation/depreciation). That's the only way you'll come out ahead on any mortgage; have someone else pay most of it for you. If you don't rent, the $800k home will cost you $1,099,800, while two $450k homes will cost you $1,454,400. The percentage of home value over total payments for the 800k home would be 72% (you will have paid 137% of the value of the home), while you will have paid 153% of the value of two 450k homes.
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Should we park our money in our escrow account?
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You should talk to a financial fiduciary (make sure they are a fiduciary, not all planners are) about investing your money. Even ultra safe investments such as treasury bonds will beat the 1% interest rate offered by your savings account (the yield on the 5 year treasury is currently around 2%).
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In a competitive market, why is movie theater popcorn expensive?
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Movie theater popcorn concessions are not really a competitive market.
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How can put options be used to buy shares at a lower price?
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Cart's answer describes well one aspects of puts: protective puts; which means using puts as insurance against a decline in the price of shares that you own. That's a popular use of puts. But I think the wording of your question is angling for another strategy: Writing puts. Consider: Cart's strategy refers to the buyer of a put. But, on the transaction's other side is a seller of the put – and ultimately somebody created or wrote that put contract in the first place! That first seller of the put – that is, the seller that isn't just selling one they themselves bought – is the put writer. When you write a put, you are taking on the obligation to buy the other side's stock at the put exercise price if the stock price falls below that exercise price by the expiry date. For taking on the obligation, you receive a premium, like how an insurance company charges a premium to insure against a loss. Example: Imagine ABC Co. stock is trading at $25.00. You write a put contract agreeing to buy 100 shares of ABC at $20.00 per share (the exercise price) by a given expiration date. Say you receive $2.00/share premium from the put buyer. You now have the obligation to purchase the shares from the put buyer in the event they are below $20.00 per share when the option expires – or, technically any time before then, if the buyer chooses to exercise the option early. Assuming no early assignment, one of two things will happen at the option expiration date: ABC trades at or above $20.00 per share. In this case, the put option will expire worthless in the hands of the put buyer. You will have pocketed the $200 and be absolved from your obligation. This case, where ABC trades above the exercise price, is the maximum profit potential. ABC trades below $20.00 per share. In this case, the put option will be assigned and you'll need to fork over $2000 to the put buyer in exchange for his 100 ABC shares. If those shares are worth less than $18.00 in the market, then you've suffered a loss to the extent they are below that price (times 100), because remember – you pocketed $200 premium in the first place. If the shares are between $18.00 to $20.00, you're still profitable, but not to the full extent of the premium received. You can see that by having written a put it's possible to acquire ABC stock at a price lower than the market price – because you received some premium in the process of writing your put. If you don't "succeed" in acquiring shares on your first write (because the shares didn't get below the exercise price), you can continue to write puts and collect premium until you do get assigned. I have read the book "Money for Nothing (And Your Stocks for FREE!)" by Canadian author Derek Foster. Despite the flashy title, the book essentially describes Derek's strategy for writing puts against dividend-paying value stocks he would love to own. Derek picks quality companies that pay a dividend, and uses put writing to get in at lower-than-market prices. Four Pillars reviewed the book and interviewed Derek Foster: Money for Nothing: Book Review and Interview with Derek Foster. Writing puts entails risk. If the stock price drops to zero then you'll end up paying the put exercise price to acquire worthless shares! So your down-side can easily be multiples of the premium collected. Don't do this until and unless you understand exactly how this works. It's advanced. Note also that your broker isn't likely to permit you to write puts without having sufficient cash or margin in your account to cover the case where you are forced to buy the stock. You're better off having cash to secure your put buys, otherwise you may be forced into leverage (borrowing) when assigned. Additional Resources: The Montreal Exchange options guide (PDF) that Cart already linked to is an excellent free resource for learning about options. Refer to page 39, "Writing secured put options", for the strategy above. Other major options exchanges and organizations also provide high-quality free learning material:
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What does “balance sheet banks” mean in this context?
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The balance sheet for a bank is the list of assets and liabilities that the bank directly is responsible for. This would be things like loans the bank issues and accounts with the bank. Banks can make both "balance sheet" loans, meaning a loan that says on the balance sheet - one the bank gains the profits from but holds the risks for also. They can also make "off balance sheet" loans, meaning they securitize the loan (sell it off, such as the mortgage backed securities). Most major banks, i.e. Chase, Citibank, etc., could be called "balance sheet" banks because at least some portion of their lending comes from their balance sheet. Not 100% by any means, they participate in the security swaps extensively just like everyone does, but they do at least some normal, boring lending just as you would explain a bank to a five year old. Bank takes in deposits from account holders, loans that money out to people who want to buy homes or start businesses. However, some (particularly smaller) firms don't work this way - they don't take responsibility for the money or the loans. They instead "manage assets" or some similar term. I think of it like the difference between Wal-Mart and a consignment store. Wal-Mart buys things from its distributors, and sells them, taking the risk (of the item not selling) and the reward (of the profit from selling) to itself. On the other hand, a consignment store takes on neither: it takes a flat fee to host your items in its store, but takes no risk (you own the items) nor the majority of the profit. In this case, Mischler Financial Group is not a bank per se - they don't have accounts; they manage funds, instead. Note the following statement on their Services page for example: Mischler Financial Group holds no risk positions and no unwanted inventory of securities, which preserves the integrity of our capital and assures our clients that we will be able to obtain bids and offers for them regardless of adverse market conditions. They're not taking your money and then making their own investments; they're advising you how to invest your money, or they're helping do it for you, but it's your money going out and your risk (and reward).
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Legal documents required for managing an investment portfolio among friends?
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You have to register with the SEC as an Investment Company. The SEC has a "Investment Company Regulation and Registration Package", available here: http://www.sec.gov/divisions/investment/invcoreg121504.htm I found that off their overall page for funds and advisors: http://www.sec.gov/divisions/investment.shtml Finally, bear in mind that your state may have various requirements as well.
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Is candlestick charting an effective trading tool in timing the markets?
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From my 15 years of experience, no technical indicator actually ever works. Those teaching technical indicators are either mostly brokers or broker promoted so called technical analysts. And what you really lose in disciplined trading over longer period is the taxes and brokerages. That is why you will see that teachers involved in this field are mostly technical analysts because they can never make money in real markets and believe that they did not adhere to rules or it was an exception case and they are not ready to accept facts. The graph given above for coin flip is really very interesting and proves that every trade you enter has 50% probability of win and lose. Now when you remove the brokerage and taxes from win side of your game, you will always lose. That is why the Warren Buffets of the world are never technical analysts. In fact, they buy when all technical analysts fails. Holding a stock may give pain over longer period but still that is only way to really earn. Diversification is a good friend of all bulls. Another friend of bull is the fact that you can lose 100% but gain any much as 1000%. So if one can work in his limits and keep investing, he can surely make money. So, if you have to invest 100 grand in 10 stocks, but 10 grand in each and then one of the stocks will multiply 10 times in long term to take out cost and others will give profit too... 1-2 stocks will fail totally, 2-3 will remain there where they were, 2-3 will double and 2-3 will multiply 3-4 times. Investor can get approx 15% CAGR earning from stock markets... Cheers !!!
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What are some factors I should consider when choosing between a CPA and tax software
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Hiring a CPA comes into play if you're doing something that requires judgement or planning, such as valuation of internal shares in a partnership, valuation of assets in an asset swap, or distribution of the proceeds of a liquidation. That said, I would strongly suggest hiring someone who is also a Tax Attorney over a plain old CPA. In the event you do need representation to clarify positions or assertions, you're probably going to need to hire one anyway. Qualified representation is much cheaper to hire up front than after the fact. If all you need is help filing compliance paperwork (returns), software should be more than adequate.
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Is it wise to invest in bond fund when interest rates are low?
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This is just a pedestrian (my) opinion: Yes, It is wise to invest in bond funds even in a low interest environment. Check out the lazy man's portfolio on bogleheads. The reason is:
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Can stock brokerage firms fail?
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Brokerages are supposed to keep your money separate from theirs. So, even if they fail as a company, your money and investments are still there, and can be transferred to another brokerage. It doesn't matter if it's an IRA or taxable account. Of course, as is the case with MF Global, if illegally take their client's money (i.e., steal), it may be a different story. In such cases, SIPC covers up to $500K, of which $250K can be cash, as JoeTaxpayer said. You may be interested in the following news item from the SEC. It's about some proposed changes, but to frame the proposal they lay out the way it is now: http://www.sec.gov/news/press/2011/2011-128.htm The most relevant quote: The Customer Protection Rule (Rule 15c3-3). This SEC rule requires a broker-dealer to segregate customer securities and cash from the firm’s proprietary business activities. If the broker-dealer fails, these customer assets should be readily available to be returned to customers.
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Could ignoring sunk costs be used to make an investment look more attractive when it's really not?
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I'm not sure that you're considering all the options. So you may not subtract $X from B, but you do compare NPV(B) to $Y. Also, remember that we're not trying to figure out the return on B. We're trying to figure out what to do next. In terms of planning, the sunk cost is irrelevant. But in terms of calculating return, A was a turkey. And to calculate the return, we would include $X in our costs for B. And for the second option, we'd subtract $X from $Y (may be negative). Sunk costs are irrelevant to planning, but they are very relevant to retrospective analysis. Please don't confuse the two. When looking back, part of the cost for B will be that $X. But in the middle, after paying $X and before starting B, the $X is gone. You only have the building and have to make your decision based on the options you have at that moment. You will sometimes hear $Y called the opportunity cost of B. You could sell out for $Y or you could do B. You should only do B if it is worth more than $Y. The sunk cost fallacy would be comparing B to $X. Assuming $Y is less than $X, this would make you not do B when it is your best path forward from that moment. I.e. $Y < NPV(B) < $X means that you should do the project. You will lose money (apparently that's a foregone conclusion), but you will lose less money than if you just sold out. You should also do B if $Y < $X < NPV(B) or $X < $Y < NPV(B). In general, you should do B any time $Y < NPV(B). The only time you should not do B is if NPV(B) < $Y. If they are exactly equal, then it doesn't matter financially whether you do B or not.
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Generally Accepted Accounting Principles question
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You recognize expense when you sell the hot dog. When you pay for the buns you have inventory, which is an asset. When you sell the hot dog - you have cost of goods sold, which is the expense. Expense principle says that you recognize expense when you use the product. You use the buns when you actually sell the hot dog, not before. The matching principle is also honored because you recognize expense of the buns at the time of recognizing revenue of the hot dog.
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Form 1040 - where to place my stipend?
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If you're correct that it's not taxable because it's non-taxable reimbursement (which is supported by your W-2), then it should not go on your 1040 at all. If it is taxable, then it really should have appeared on your W-2 and would probably end up on Line 7 of your Form 1040.
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Why must identification be provided when purchasing a money order?
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The Bank Secrecy Act of 1970 requires that banks assist the U.S. Gov't in identifying and preventing money laundering. This means they're required to keep records of cash transactions of Negotiable Instruments, and report any such transactions with a daily aggregate limit of a value greater than (or equal to?) $10,000. Because of this, the business which is issuing the money order is also required to record this transaction to report it to the bank, who then holds the records in case FinCEN wants to review the transactions. EDITED: Added clarification on the $10,000 rule
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Is the money you get from shorting a stock free to use for going long on other stocks?
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You will be charged a stock borrow fee, which is inversely related to the relative supply of the stock you are shorting. IB claims to pay a rebate on the short proceeds, which would offset part or all of that fee, but it doesn't appear relevant in your case because: It is a bit strange to me that IB would not require you to keep the cash in your account, as they need the cash to collateralize the stock borrow with the lending institution. In fact, per Regulation T, the short position requires an initial margin of 150%, which includes the short proceeds. As described by Investopedia: In the first table of Figure 1, a short sale is initiated for 1,000 shares at a price of $50. The proceeds of the short sale are $50,000, and this amount is deposited into the short sale margin account. Along with the proceeds of the sale, an additional 50% margin amount of $25,000 must be deposited in the account, bringing the total margin requirement to $75,000. At this time, the proceeds of the short sale must remain in the account; they cannot be removed or used to purchase other securities. Here is a good answer to your question from The Street: Even though you might see a balance in your brokerage account after shorting a stock, you're actually looking at a false credit, according to one big brokerage firm. That money is acting as collateral for the short position. So, you won't have use of these funds for investment purposes and won't earn interest on it. And there are indeed costs associated with shorting a stock. The broker has to find stock to loan to you. That might come out of a broker's own inventory or might be borrowed from another stock lender.
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Why do stores and manufacturers use mail in rebates? A scam, or is there a way to use them effectively?
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Chiming in with other answers that incriminate market segmentation attempts, I would like to offer this Seth Godin video where (among other things) he speaks about breakage, the art of making coupon redemption so difficult that most people get it wrong and do not redeem them. Oh, and when comparing/deciding which/whether to buy, I always use the up-front price. Don't want to encourage the wrong behavior.
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How is stock price determined?
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The answer to each of your questions is no. It is important to appreciate that the "quoted" ticker price may be delayed by say 15 minutes, and thus is not "real-time."
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How to calculate car insurance quote
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Former software developer at an insurance company here (not State Farm though). All of the above answers are accurate and address how the business analysts come up with factors on which to rate your quote. I wanted to chime in on the software side here; specifically, what goes into actually crunching those numbers to produce an end result. In my experience, business analysts provide the site developers with a spreadsheet of base rates and factors, which get imported into a database. When you calculate a quote, the site starts by taking your data, and finding the appropriate base rate to start with (usually based on vehicle type, quote type (personal/commercial/etc.) and garaging zip code for the US). The appropriate factors are then also pulled, and are typically either multiplicative or additive relative to the base rate. The most 'creative' operation I've seen other than add/multiply was a linear interpolation to get some kind of gradient value, usually based on the amount of coverage you selected. At this point, you could have upwards of twenty rating factors affecting your base rate: marriage status, MVR reports, SR-22; basically, anything you might've filled into your application. In the case of MVR reports specifically, we'd usually verify your input against an MVR providing service to check that you didn't omit any violations, but we wouldn't penalize for lying about it...we didn't get that creative :) Then we'd apply any fees and discounts before spitting out the final number. With all that said, these algorithms that companies apply to calculate quotes are confidential as far as I'm aware, insofar as they don't publish those steps anywhere for the public to access. The type of algorithm used could even vary based on the state you live in, or really just when the site code is arbitrarily updated to use a new rating system. Underwriters and agents might have access to company-specific rating tables, so they might have more insight at the company level. In short, if there's an equation out there being used to calculate your rate, it's probably a huge string of multiplications with some base rate additions and linear interpolations peppered in, based on factors (and base rates) that aren't readily publicized. Your best bet is to not go through the site at all and talk to a State Farm agent about agency-specific practices if you're really curious about the numbers.
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Looking for good investment vehicle for seasonal work and savings
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In the short-term, a savings account with an online bank can net you ~1% interest, while many banks/credit unions with local branches are 0.05%. Most of the online savings accounts allow 6 withdrawals per month (they'll let you do more, but charge a fee), if you pair it with a checking account, you can transfer your expected monthly need in one or two planned transfers to your checking account. Any other options that may result in a higher yield will either tie up your money for a set length of time, or expose you to risk of losing money. I wouldn't recommend gambling on short-term stock gains if you need the money during the off-season.
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When should I walk away from my mortgage?
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This is a very personal situation of course, but if you can afford the repayments then I recommend keeping the house!. A house is a long term investment and one has to live somewhere. You probably didn't buy the house planning to sell it in 5 years so while in the short term you could suffer a loss on paper chances are things will pick up, they have to eventually. For each boom there is a bust, one for one.
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Should a high-school student invest their (relative meager) savings?
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If you have no immediate need for the money you can apply the Rule of 72 to that money. Ask your parent's financial advisor to invest the money. Based on the rate of return your money will double like clockwork. At 8% interest your money will double every 9 years. 45 years from now that initial investment will have doubled 5 times. That adds up pretty fast. Time is your best friend when investing at your age. Odds are you'll want to be saving for a college education though. Graduating debt free is by far the best plan.
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Investment in mutual fund in India for long term goals
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Buy only 'Direct' Plans, not regular. - Demat providers won't sell Direct plans, that you can do it through https://www.mfuindia.com Make sure expense ratio < 2.5% (With direct plans it will be much lesser) I hope these points will help you to take a better decision.
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How to acquire assets without buying them?
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Assets can be acquired in different ways and for different purposes. I will only address common legal ways of acquiring assets. You can trade one asset for another asset. This usually takes place in the form of trading cash or a cash equivalent for an asset. The asset received should be of equal or greater value than the asset given in the eyes of the purchaser in order for the trade to be rational. Take this example: I am selling a bike that has been sitting on my porch for a few months. It's worth about $25 to me. My friend, Andy, comes by and offers $90 for it. I happily accept. Andy valued the bike at $110. This transaction produced value for both parties. I had a value benefit of $65 (90 - 25) and Andy had a value benefit of $20 (110 - 90). You can receive an asset as a gift or an inheritance. Less common, but still frequent. Someone gives you a gift or a family member dies and you receive an asset you did not own previously. You can receive an asset in exchange for a liability. When you take out a loan, you receive an asset (cash) which is financed by a liability (loan payable). In your case: Why would I buy a mall if having assets worth the same amount as the mall? I must value the mall more than the assets I currently have. This may stem from the possibility of greater future returns than I am currently making on my asset, or, if I financed the purchase with a liability, greater future returns than the cost associated with payment on the principal and interest of the liability.
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Switch from DINK to SIWK: How do people afford kids?
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If you want to have your wife stay home with kids, you'll have to make a plan to get there. As you point out, your situation right now won't support this. Create a budget that will work for you with a single income -- a "zero based" budget, not a budget based on your current expense structure. Figure out what you can afford on just your income for housing, church, food, transport, etc. Or apply the same idea on the assumption that she will keep working -- budget based on a second income plus child care expenses. Then you can decide what you have to change in order for that to work: maybe it means selling your house, renting, relocating, selling a car, finding a better or second job, etc. Then decide what you need to do in order to make these changes.
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How can I estimate the value of private stock behind employee stock options?
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It is difficult to value a private company. Most of the valuations is based on how one feels the idea would translate into revenue in some future time. The VC firms take into account various factors to determine the price, but more often then not, its their hunch. Even VC don't make money on all picks, very few picks turn out to be stars, most picks lose money they have invested. Few picks just return their money. So if you feel that the idea/product/brand/people are great and would someday make good money, invest into it. Else stay away.
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What does a contract's worth mean?
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It means $400m expected revenue, likely spread out over multiple years as it gets implemented, and not entirely guaranteed to happen as they still need to fulfill the contract. The impact on the stock price is complex - it should be positive, but nowhere close to a $400m increase in market cap. If the company is expected to routinely win such contracts, it may have no significant effect on the stock price, as it's already priced in - say, if analysts expect the company to win 1.2b contracts in this fiscal year, and now they've done 1/3 of that, as expected.
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How to protect yourself from fraud when selling on eBay UK
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Just ship using a reputable courier (definitely not Yodel or Hermes!) that requires and obtains a surname and signature which you can view on their website (Citylink, Parcel Force to name a couple). Then remember to submit the tracking details when you mark the item as shipped on eBay. If the buyer is still brazen enough to claim the item never arrived, Paypal (in my experience) don't even entertain their claim. If however they claim the item arrived damaged/not as described, it could be trickier to defend. I'd recommend thoroughly documenting your item with photographs and recording the serial number, just in case you need to provide the details to Paypal. Again, in my experience, this has been enough to protect me from any fraudulent claims. To answer your second question, I don't believe eBay permits you to specify 'No Paypal', but if they did then yes, bank transfer is 100% safe (short of someone using stolen money to pay for the item, in which case you'd be guilty of money laundering thanks to the UK's wonderful laws on such things...)
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Looking to buy a house in 1-2 years. Does starting a Roth IRA now make sense?
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With a Roth IRA, you can withdraw the contributions at any time without penalty as long as you don't withdraw the earnings/interest. There are some circumstances where you can withdraw the earnings such as disability (and maybe first home). Also, the Roth IRA doesn't need to go through your employer and I wouldn't do it through your employer. I have mine setup through Fidelity though I'm not sure if they have any guaranteed 3% return unless it was a CD. All of mine is in stocks. Your wife could also setup a Roth IRA so over 2 years, you could contribute $20,000. If I was you, I would just max out any 403-b matches (which you surely are at 25% of gross income) and then save my down payment money in a normal money market/savings account. You are doing good contributing almost 25% to the 403-b. There are also some income limitations on Roth IRAs. I believe for a married couple, it is $160k.
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What amount of money can a corporation spend on entertainment
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There is no simple rule like "you can/can't spend more/less than $X per person." Instead there is a reasonableness test. There is such a thing as an audit of just your travel and entertainment expenses - I know because I've had one for my Ontario corporation. I've deducted company Christmas parties, and going-away dinners for departing employees, without incident. (You know, I presume, about only deducting half of certain expenses?) If the reason for the entertainment is to acquire or keep either employees or clients, there shouldn't be a problem. Things are slightly trickier with very small companies. Microsoft can send an entire team to Hawaii, with their families, as a reward at the end of a tough project, and deduct it. You probably can't send yourself as a similar reward. If your party is strictly for your neighbours, personal friends, and close family, with no clients, potential clients, employees, potential employees, suppliers, or potential suppliers in attendance, then no, don't deduct it. If you imagine yourself telling an auditor why you threw the party and why the business funded it, you'll know whether it's ok to do it or not.
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Is there a “standard deduction” for Line 5 on Schedule A of Federal taxes?
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The $10,400 is in the question, in two pieces. His employer withheld $8000, and her employer withheld $2400. Thus they paid together $10,400 in income taxes, which are deductible if you itemize deductions and choose income taxes over sales taxes (you can deduct one or the other). There's nothing "standard" about the amount, though it is standard to take the income tax deduction (almost always higher than sales tax).
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How can small children contribute to the “family economy”?
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@MrChrister - Savings is a great idea. Coudl also give them 1/2 the difference, rather than the whole difference, as then you both get to benefit... Also, a friend of mine had the Bank of Dad, where he'd keep his savings, and Dad would pay him 100% interest every year. Clearly, this would be unsustainable after a while, but something like 10% per month would be a great way to teach the value of compounding returns over a shorter time period. I also think that it's critical how you respond to things like "I want that computer/car/horse/bike/toy". Just helping them to make a plan on how to get there, considering their income (and ways to increase it), savings, spending and so on. Help them see that it's possible, and you'll teach them a worthwhile lesson.
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What exactly happens during a settlement period?
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Securities clearing and settlement is a complex topic - you can start by browsing relevant Wikipedia articles, and (given sufficient quantities of masochism and strong coffee) progress to entire technical books. You're correct - modern trade settlement systems are electronic and heavily streamlined. However, you're never going to see people hand over assets until they're sure that payment has cleared - given current payment systems, that means the fastest settlement time is going to be the next business day (so-called T+1 settlement), which is what's seen for heavily standardized instruments like standard options and government debt securities. Stocks present bigger obstacles. First, the seller has to locate the asset being sold & make sure they have clear title to it... which is tougher than it might seem, given the layers of abstraction/virtualization involved in the chain of ownership & custody, complicated in particular by "rehypothecation" involved in stock borrowing/lending for short sales... especially since stock borrow/lending record-keeping tends to be somewhat slipshod (cf. periodic uproar about "naked shorting" and "failure to deliver"). Second, the seller has to determine what exactly it is that they have sold... which, again, can be tougher than it might seem. You see, stocks are subject to all kinds of corporate actions (e.g. cash distributions, spin-offs, splits, liquidations, delistings...) A particular topic of keen interest is who exactly is entitled to large cash distributions - the buyer or the seller? Depending on the cutoff date (the "ex-dividend date"), the seller may need to deliver to the buyer just the shares of stock, or the shares plus a big chunk of cash - a significant difference in settlement. Determining the precise ex-dividend date (and so what exactly are the assets to be settled) can sometimes be very difficult... it's usually T-2, except in the case of large distributions, which are usually T+1, unless the regulatory authority has neglected to declare an ex-dividend date, in which case it defaults to standard DTC payment policy (i.e. T-2)... I've been involved in a few situations where the brokers involved were clueless, and full settlement of "due bills" for cash distributions to the buyer took several months of hard arguing. So yeah, the brokers want a little time to get their records in order and settle the trade correctly.
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Cons of withdrawing money from an Roth IRA account?
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First thing to note is that contributions (i.e. the total of all the amounts that you directly contributed into Roth IRA at any point in time) to a Roth IRA can be withdrawn at any time, without needing any reason, without any tax or penalty. Early withdrawal (early because you are under 59.5) of earnings, on the other hand, will incur tax and penalty. (I didn't go into withdrawal of conversions as those are a little more complex.) When you withdraw, contributions come out first, so as long as you don't withdraw more than the amount of past contributions, you won't have any tax or penalty. And if it's not going to have tax, it doesn't really matter if you do it this year or next year. If you need to dip into the earnings, however, then maybe it would be better to do this year so it will be taxed at lower rates.
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What are the common moving averages used in a “Golden Cross” stock evaluation?
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Technical analysis is insufficient. You're halfway to figuring it out if you start to question why a 50 day moving average vs 200 vs 173. Invest in companies that are attractively valued vs. their sales/growth/divends/anythingelsereal
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Why would a bank need to accept deposits from private clients if it can just borrow from the Federal Reserve?
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They don't need to accept deposits from normal persons, but that's how they make lots of money. Banks make money off the fees they charge retailers when those folks swipe their debit cards at the retailer. It's their bread and butter. In order to facilitate you accruing swipe fees for them, they need to allow you to make deposits, on which they can charge the retailers swipe fees.
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