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Is there any real purpose in purchasing bonds? | Here are my reasons as to why bonds are considered to be a reasonable investment. While it is true that, on average over a sufficiently long period of time, stocks do have a high expected return, it is important to realize that bonds are a different type of financial instrument that stocks, and have features that are attractive to certain types of investors. The purpose of buying bonds is to convert a lump sum of currency into a series of future cash flows. This is in and of itself valuable to the issuer because they would prefer to have the lump sum today, rather than at some point in the future. So we generally don't say that we've "lost" the money, we say that we are purchasing a series of future payments, and we would only do this if it were more valuable to us than having the money in hand. Unlike stocks, where you are compensated with dividends and equity to take on the risks and rewards of ownership, and unlike a savings account (which is much different that a bond), where you are only being paid interest for the time value of your money while the bank lends it out at their risk, when you buy a bond you are putting your money at risk in order to provide financing to the issuer. It is also important to realize that there is a much higher risk that stocks will lose value, and you have to compare the risk-adjusted return, and not the nominal return, for stocks to the risk-adjusted return for bonds, since with investment-grade bonds there is generally a very low risk of default. While the returns being offered may not seem attractive to you individually, it is not reasonable to say that the returns offered by the issuer are insufficient in general, because both when the bonds are issued and then subsequently traded on a secondary market (which is done fairly easily), they function as a market. That is to say that sellers always want a higher price (resulting in a lower return), and buyers always want to receive a higher return (requiring a lower price). So while some sellers and buyers will be able to agree on a mutually acceptable price (such that a transaction occurs), there will almost always be some buyers and sellers who also do not enter into transactions because they are demanding a lower/higher price. The fact that a market exists indicates that enough investors are willing to accept the returns that are being offered by sellers. Bonds can be helpful in that as a class of assets, they are less risky than stocks. Additionally, bonds are paid back to investors ahead of equity, so in the case of a failing company or public entity, bondholders may be paid even if stockholders lose all their money. As a result, bonds can be a preferred way to make money on a company or government entity that is able to pay its bills, but has trouble generating any profits. Some investors have specific reasons why they may prefer a lower risk over time to maximizing their returns. For example, a government or pension fund or a university may be aware of financial payments that they will be required to make in a particular year in the future, and may purchase bonds that mature in that year. They may not be willing to take the risk that in that year, the stock market will fall, which could force them to reduce their principal to make the payments. Other individual investors may be close to a significant life event that can be predicted, such as college or retirement, and may not want to take on the risk of stocks. In the case of very large investors such as national governments, they are often looking for capital preservation to hedge against inflation and forex risk, rather than to "make money". Additionally, it is important to remember that until relatively recently in the developed world, and still to this day in many developing countries, people have been willing to pay banks and financial institutions to hold their money, and in the context of the global bond market, there are many people around the world who are willing to buy bonds and receive a very low rate of return on T-Bills, for example, because they are considered a very safe investment due to the creditworthiness of the USA, as well as the stability of the dollar, especially if inflation is very high in the investor's home country. For example, I once lived in an African country where inflation was 60-80% per year. This means if I had $100 today, I could buy $100 worth of goods, but by next year, I might need $160 to buy the same goods I could buy for $100 today. So you can see why simply being able to preserve the value of my money in a bond denominated in USA currency would be valuable in that case, because the alternative is so bad. So not all bondholders want to be owners or make as much money as possible, some just want a safe place to put their money. Also, it is true for both stocks and bonds that you are trading a lump sum of money today for payments over time, although for stocks this is a different kind of payment (dividends), and you only get paid if the company makes money. This is not specific to bonds. In most other cases when a stock price appreciates, this is to reflect new information not previously known, or earnings retained by the company rather than paid out as dividends. Most of the financial instruments where you can "make" money immediately are speculative, where two people are betting against each other, and one has to lose money for the other to make money. Again, it's not reasonable to say that any type of financial instrument is the "worst". They function differently, serve different purposes, and have different features that may or may not fit your needs and preferences. You seem to be saying that you simply don't find bond returns high enough to be attractive to you. That may be true, since different people have different investment objectives, risk tolerance, and preference for having money now versus more money later. However, some of your statements don't seem to be supported by facts. For example, retail banks are not highly profitable as an industry, so they are not making thousands of times what they are paying you. They also need to pay all of their operating expenses, as well as account for default risk and inflation, out of the different between what they lend and what they pay to savings account holders. Also, it's not reasonable to say that bonds are worthless, as I've explained. The world disagrees with you. If they agreed with you, they would stop buying bonds, and the people who need financing would have to lower bond prices until people became interested again. That is part of how markets work. In fact, much of the reason that bond yields are so low right now is that there has been such high global demand for safe investments like bonds, especially from other nations, such that bond issues (especially the US government) have not needed to pay high yields in order to raise money. |
Why does Google Finance show the NASDAQ Composite way up but Yahoo! Finance shows it slightly down? | First - Google's snapshot - Then - Yahoo - I took these snapshots because they will not exist on line after the market opens, and without this context, your question won't make sense. With the two snapshots you can see, Yahoo shows the after hours trades and not just the official market close for the day. The amount it's down is exactly tracked from the close shown on Google. Now you know. |
Tracking down stocks I own | My best answer is to simply fish out that old email account. DumbCoder makes a good point - the company whose shares you own can probably figure out what brokerage firm is holding the shares, but it'd take a lot on their end. Honestly you're better off just hitting up random brokerage firms until you find the right one than going to the company and asking them where your shares are. Good luck. |
Capital Gains in an S Corp | A nondividend distribution is typically a return of capital; in other words, you're getting money back that you've contributed previously (and thus would have been taxed upon in previous years when those funds were first remunerated to you). Nondividend distributions are nontaxable, so they do not represent income from capital gains, but do effect your cost basis when determining the capital gain/loss once that capital gain/loss is realized. As an example, publicly-traded real estate investment trusts (REITs) generally distribute a return of capital back to shareholders throughout the year as a nondividend distribution. This is a return of a portion of the shareholder's original capital investment, not a share of the REITs profits, so it is simply getting a portion of your original investment back, and thus, is not income being received (I like to refer to it as "new income" to differentiate). However, the return of capital does change the cost basis of the original investment, so if one were to then sell the shares of the REIT (in this example), the basis of the original investment has to be adjusted by the nondividend distributions received over the course of ownership (in other words, the cost basis will be reduced when the shares are sold). I'm wondering if the OP could give us some additional information about his/her S-Corp. What type of business is it? In the course of its business and trade activity, does it buy and sell securities (stocks, etc.)? Does it sell assets or business property? Does it own interests in other corporations or partnerships (sales of those interests are one form of capital gain). Long-term capital gains are taxed at rates lower than ordinary income, but the IRS has very specific rules as to what constitutes a capital gain (loss). I hate to answer a question with a question, but we need a little more information before we can weigh-in on whether you have actual capital gains or losses in the course of your S-Corporation trade. |
Is it practical to take actual delivery on a futures contract, and what is the process? | Not all futures contracts are deliverable. Some futures are specified as cash settlement only. In the case of deliverable contracts, part of the specification of a futures contract will be the delivery locations. As per my answer to your previous question, please see the CME Rulebook for details of delivery points for the deliverable futures contracts traded on CME, CBOT, NYMEX, and COMEX. Assuming your agreement with your broker allows you to exercise your right to take delivery, your broker will facilitate your delivery. You will be required to pay the contracted amount (your buy price x contract size x number of lots), as well as a delivery fee, insurance, and warehousing fees. In addition, your broker may charge you a fee for facilitating the delivery. You will be required to continue to pay insurance and warehousing fees so long as your holding of the underlying commodity is held in the exchange's designated warehouse. If you wish to take delivery yourself by having the commodity removed from the warehouse and delivered to you personally, then you will need to arrange this delivery yourself. Warehouse/delivery points obviously vary according the contract being exercised. See the CME Rulebook for available delivery points. Some exchanges are more accommodating than others. The practicality of taking delivery very much depends on your personal circumstances. An investment bank taking delivery of treasury bonds would be more practical than an individual investor taking delivery of treasury bonds. This is because the individual investor would be required to deliver the bonds to a brokerage in order to sell them. In the case of non-financial futures deliveries, it is hard to imagine any circumstance where an individual taking delivery would be practical. |
Most effective Fundamental Analysis indicators for market entry | I think by definition there aren't, generally speaking, any indicators (as in chart indicators, I assume you mean) for fundamental analysis. Off the top of my head I can't think of one chart indicator that I wouldn't call 'technical', even though a couple could possibly go either way and I'm sure someone will help prove me wrong. But the point I want to make is that to do fundamental analysis, it is most certainly more time consuming. Depending on what instrument you're investing in, you need to have a micro perspective (company specific details) and a macro perspective (about the industry it's in). If you're investing in sector ETFs or the like, you'd be more reliant on the macro analysis. If you're investing in commodities, you'll need to consider macro analysis in multiple countries who are big producers/consumers of the item. There's no cut and dried way to do it, however I personally opt for a macro analysis of sector ETFs and then use technical analysis to determine my entry and/or exit. |
Why do some companies offer 401k retirement plans? | Let me add another consideration to the company's side of the equation. Not only is a 401K a tool for the company to make them competitive when recruiting employees among other companies that offer that benefit, it is also a good retention tool. Most company's 401K plans include a vesting period of at least 3 years, sometimes more. An employee that leaves the company before they are vested in the plan will have to give up some % of the employer matched funds in the account. This gives employees incentive to stick around longer and the company reduces the risk of turnover which can be costly in terms of training and recruiting. This also factors into the reason why employers would rather give matching on the 401K than a simple pay raise. Some of those employees are going to leave during the vesting period anyway, and when that happens the employer got the benefit of motivating (extrinsically) the employee, but in the end got to keep some of the money. |
Stock market order execution | When you are placing an order with an online broker you should already know what exchange or exchanges that stock trades on. For example if you look up under Yahoo Finance: Notice how News Corp is traded both on the ASX and the Nasdaq. The difference is the shares traded on the ASX have the extension .AX, that is how you know the difference between them. When you are putting orders in with your online broker you will need to select the exchange you wish your order to go to (if your broker allows trading on multiple exchanges). So you should always know which exchange your order goes to. |
Buy home and leverage roommates, or split rent? | There is a term for this. If you google "House Hacking" you will get lots of articles and advice. Some of it will pertain to multifamily properties but a good amount should be owner occupied and renting bedrooms. I would play with a mortgage calculator like Whats My Payment. Include Principle, interest, taxes and insurance see how much it will cost. At 110k your monthly fixed payments will depend on a number of factors (down payment, interest, real estate tax rate and insurance cost) but $700-$1000 would be a decent guess in my area. Going off that with two roommates willing to pay $500 a month you would have no living expenses except any maintenance or utilities. With your income I would expect you could make the payment alone if needed (and it may be needed) so it seems fairly low risk from my perspective. You need somewhere to live you are used to roommates and you can pay the entire cost yourself in a worst case. Some more things to consider.. Insurance will be more expensive, you want to ensure you as the landlord you are covered if anything happens. If a tenant burns down your house or trips and falls and decides to sue you insurance will protect you. Capital Expenses (CapEx) replacing things as they wear out. On a home the roof, siding, flooring and all mechanicals(furnace, water heater, etc.) have a lifespan and will need to be replaced. On rental properties a portion of rent should be set aside to replace these things in the future. If a roof lasts 20yrs,costs $8,000 and your roof is 10years old you should be setting aside $70 a month so in the future when this know expense comes up it is not a hardship. Taxes Yes there is a special way to report income from an arrangement like this. You will fill out a Schedule E form in addition to your regular tax documents. You will also be able to write off a percent of housing expenses and depreciation on the home. I have been told it is not a simple tax situation and to consult a CPA that specializes in real estate. |
Is there a debit card that earns miles (1 mile per $1 spent) and doesn't have an annual fee? | I have an American Airlines VISA with miles that has no annual fee, but only because I request that they waive the fee each year. Word to the wise - they've never refused. |
Do I need to file taxes jointly with my girlfriend if we live together? | If you pay her rent, how do you differ from a tenant in the eyes of the law? I ask this to show that you are in a business relationship first and foremost. If you don't want to file jointly, there is nothing compelling about your situation to force it. (Grant you, in most countries, there is a benefit to filing jointly) but here, I would argue it would be difficult to make the case. There are, to the best of my knowledge, no laws barring opposite sex landlord-tenant rental situations. Furthermore, there are no laws barring romantic relationships amongst landlords and tenants. Indeed, you would need to prove your relationship in some fashion for it to even be considered. In establishing a date of separation from my soon-to-be-ex-wife, for example, I merely needed to prove that we were not "presenting ourselves as husband and wife." Once I showed that we didn't sit together at church and that she was attending parties I wasn't, that was sufficient. Proving you are in a relationship is actually a lot harder than proving you're not. |
Does a stock really dip in price on the ex-dividend date? And why would it do this? | The stock price is what people think a company is worth, this is made up of When a company pays out a dividend the money in the company’s bank account reduces, therefore the value of the company reduces. When a company says they are going to pay a larger dividend than expected, we start to expect they are going to make more profit next year as well. So stock price tends to go up when a company says it is increasing the dividend, but down on the day then money leaves the companies bank account. There is normally many months between the two events. |
Pay off car or use money for down payment | Option 2. Selling the car yourself will give you the best value, especially if you can get its full value. This will cost you time, but will return much better return for your money. Also, I would strongly recommend buying a used car from a private owner (not a dealer), rather than buying a new car. For $14,000 in cash you can probably get a car like a 2013 Ford Fusion that has excellent all-wheel drive and winter handling. A new Fusion, loaded, will cost at least $25,000 from a dealer. If you buy a 2013 car outright from a private owner, you will have NO PAYMENTS and can spend that money on investments and build your wealth. |
Is there any data that shows how diversifying results in better returns than just sticking to an all-stock portfolio? | This paper by a Columbia business school professor says: The standard 60%/40% strategy outperforms a 100% bond or 100% stock strategy over the 1926-1940 period (Figure 5) and over the 1990-2011 period (Figure 6). This is based on actual market data from those periods. You can see the figures in the PDF. These are periods of 14 and 21 years, which is perhaps shorter than the amount of time money would sit in your IRA, but still a fairly long time. The author goes on with a lot of additional discussion and claims that "under certain conditions, rebalancing will always outperform a buy-and-hold portfolio given sufficient time". Of course, there are also many periods over which a given asset mix would underperform, so there are no guarantees here. I read your question as asking "is there any data suggesting that rebalancing a diversified portfolio can outperform an all-in-one-asset-class portfolio". There is some such data. However, if you're asking which investing strategy you should actually choose, you'd want to look at a lot of data on both sides. You're unlikely to find data that "proves" anything conclusively either way. It should also be noted that the rebalancing advantage described here (and in your question) is not specific to bonds. For instance, in theory, rebalancing between US and international stocks could show a similar advantage over an all-US or all-non-US portfolio. The paper contains a lot of additional discussion about rebalancing. It seems that your question is really about whether rebalancing a diverse portfolio is better than going all-in with one asset class, and this question is touched on throughout the paper. The author mentions that diversification and rebalancing strategies should be chosen not solely for their effect on mathematically-calculated returns, but for their match with your psychological makeup and tolerance for risk. |
How can one get their FICO/credit scores for free? (really free) | As of 2014, this answer is deprecated. Read answer here for recent developments up to January 2015. You can get a free credit report yearly, but you don't get your credit score, just the content of your report. This is useful to make sure your credit history is correct, etc. To get that, visit annualcreditreport.com. Another site which will give you your score for free, really free with no strings attached, is creditkarma.com, which gives you your TransUnion credit score and full TransUnion credit report. The site is run by TransUnion and supported via advertising. At this point Equifax and Experian offer similar services via subscription, but not for free. Update 8/14/2015: CreditKarma now offers the Equifax information as part of their service. |
Is human interaction required to open a discount brokerage account? | You definitely do not need human interaction to open an account at Schwab. You just need to provide a social security number and US drivers license. See http://www.schwab.com/public/schwab/investing/accounts_products/accounts/brokerage_account You can do it online or through the mail. They usually have some questions about your level of experience with investing. They are required to ask these questions to ensure that you don't get confused and put your money in inappropriate investments. |
Layman's guide to getting started with Forex (foreign exchange trading)? | Unless you have a lot of money to get rid of you should spend at least a year trading with a dummy account. It takes a long time to work out what is gong on and your training will get very expensive if you start using real money. Don't start trading with real money until you : Have a strategy. Never trade on a whim. Only trade if your strategy says it is time to trade. Are able to stick to that strategy. It is amazing how easy it is to stray from your strategy just because you feel it is right or you have to try to make up some losses. You will lose money doing this. You are making significant profits for at least 6 months using 1. and 2. with your dummy account. Even after all this, you will probably still lose money. Make sure you only trade with money you can afford to lose. ie. Never trade with this months rent money. |
Will I be turned down for a car loan? | Considering I'm putting 30% down and having my father cosign is there any chance I would be turned down for a loan on a $100k car? According to BankRate, the average credit score needed to buy a new car is 714, but they also show average interest rates at 6.39% for new-car loans to people with credit scores in the 601-660 range. High income certainly helps offset credit score to some extent. Not every bank/dealership does things the same way. Being self-employed you'd most likely be required to show 2 years of tax returns, and they'd use those as a basis for your income rather than whatever you have made recently. If using a co-signer, their income matters. Another key factor is debt to income ratio, if too much of someone's income is already spoken for by other debts a lender will shy away. So, yes, there's a chance, given all the information we don't know and the variability with lender policies, that you could be turned down for a car loan. How should I go about this? If you're set on pursuing the car loan, just go talk to some lenders. You'll want to shop around for a good rate anyway, so no need to speculate just go find out. Include the dealership as a potential financing option, they can have great rates. Personally, I'd get a much cheaper car. Your insurance premium on a 100k car will be quite high due to your age. You might be rightly confident in your earning potential, but nothing is guaranteed, situations can change wildly in short order. A new car is not a good investment or a value-retaining asset, so why bother going into debt for one if you don't have to? If you buy something in cash now, you could upgrade in a few years without financing if your earning prediction holds and would save quite a bit in car insurance and interest over the years between. |
How might trading volume affect future share price? | As said previously, most of the time volume does not affect stock prices, except with penny stocks. These stocks typically have a small volume in the 3 or 4 figure range and because of this they typically experience very sharp rises and drops in stock prices, contrasting normal stocks that go up and down constantly every minute. Volume is not one thing you should be looking at when analyzing a stock in most cases, since it is simply the number of people of trades made in a day. That has no effect on the value of the company, whereas looking at P/E ratios, dividend growth, etc all can be analyzed to see if a company is growing and is doing well in its field. If I buy an iPhone, it doesn't matter if 100 other people or 100,000 other people have bought it as well, since they won't really affect my experience with the product. Whereas the type of iPhone I buy will. |
Why call option price increases with higher volatility | The entire premise of purchasing a call option is your expectation that the prices will rise. So even though there is a possibility of prices falling, you wouldn't mind paying higher premiums in a volatile market for a call option because you're bullish and are expecting the volatility to eventually turn out in your favour i.e. prices to rise |
How can online trading platforms be trustworthly? | Most investors vote with their wallets. I expect ZERO glitches from a trading platform. If someone was actually causing trades to fail maliciously, their reputation would immediately suffer and their business would dry up over night. You can't just play dumb and not respond to a button click. I can watch and replay the traffic I'm sending out to their server and see if they are responding to verify this. If their system goes down and has no redundancy, that is their fault and opens them to lawsuits. No trading platform could withstand scrutiny from its users if it was dishonest in the scenario you imagine. |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | Is there anyway to salvage my investment for short-term? No. If by "salvage" you mean "get back as much as you paid", the only way to salvage it is to wait as long as you consider "short-term" and see if goes up again. If by "salvage" you mean "get some money back", the only thing you can do to guarantee that is sell it now. By doing so, you guarantee that you will get neither more nor less than it is worth right now. Either way, there is nothing you can do other than sell the stock or hold it. The stock price went down. You can't make it go back up. Would it be better if I sell my stocks now and buy from other company? Or should I just wait for it's price to go up again? This depends on why you bought the stock, and what you think it will do in the future. You said a family member persuaded you. Does that family member still think the stock will go up again? If so, do you still trust them? You didn't even say what stock it is in your question, so there's no way anyone here can tell you whether it's a good idea to sell it or not. Even if you do say what stock it is, all anyone can do is guess. If you want, you could look the stock up on Motley Fool or other sites to see if analysts believe it will rise. There are lots of sources of information. But all you can do with that information is decide to sell the stock or not. It may sound obvious, but you should sell if you think the stock will go lower, and hold it if you think it could still go back up. No one can tell you which of those things is going to happen. |
What are reasons a company would want to be listed on one exchange vs. another? | Listing on NYSE has more associated overhead costs than listing on NASDAQ. In the case of young technology companies, this makes NASDAQ a more attractive option. Perhaps the most important factor is that NYSE requires that a company has an independent compensation committee and an independent nominating committee while NASDAQ requires only that executive compensation and nominating decisions are made by a majority of independent directors. No self-respecting, would-be-instant-billionare tech entreprenuer is going to want some independent committee lording it over their pay packet. Additionally, listing on NYSE requires a company have stated guidance for corporate governance while NASDAQ imposes no such requirement. Similarly, NYSE requires a company have an internal audit team while NASDAQ imposes no such requirement. Fees on NYSE are also a bit higher than NASDAQ, but the difference is not significant. A good rundown of the pros/cons: http://www.investopedia.com/ask/answers/062215/what-are-advantages-and-disadvantages-listing-nasdaq-versus-other-stock-exchanges.asp |
In a competitive market, why is movie theater popcorn expensive? | To add to Jason's answer; a further mechanism is that of monopoly rents which you mention in your question. Movie theatres are often in shopping complexes (which themselves may offer a particular cinema exclusivity), or physically remote from each other, making price comparison more difficult. Different companies may not offer the same movies (similar to the way phone companies offer difficult-to-compare contract pricing). Once you've paid for your movie ticket, if you're suddenly thirsty or peckish, the theatre is the only place selling snacks. Many theatres (including film theatres) discourage (or refuse) patrons from consuming products purchased elsewhere on site. A sense of "capture" is reinforced with ticket collection at the entrance or some form of barrier (inside vs outside the cordon). A theatre can thus capture their patrons and then leverage that access in order to discriminate amongst the higher-paying consumers mentioned by Jason. |
How to get started with options investing? | What is a good resource to learn about options trading strategies? Options are a quite advanced investment form, and you'd do well to learn a lot about them before attempting to dive into this fairly illiquid market. Yale's online course in financial markets covers the Options Market and is a good starting point to make sure you've got all the basics. You may be familiar with most of it, but it's a decent refresher on lingo and Black-Scholes. How can I use options to establish some cash flow from long standing investments while minimizing capital gains expenses? This question seems designed to get people to talk about covered calls. Essentially, you sell call contracts: you let people buy things you already have at a price in the future, at their whim. They pay you for this option, though usually not much if the options aren't in the money. You can think of this as trading any return above the call option for a bit of extra cash. I don't invest with taxable accounts, but there are significant tax consequences for options. Because they expire, there will be turnover in your portfolio, and up front income when you take the sell side. So if you trade in options with close expiration dates, you'll probably end up with a lot of short-term capital gains, which are treated as normal income. One strategy is to trade in broad-based stock index options, which have favorable tax treatments. Some people have abused this though to disguise normal income as capital gains, so it could go away. Obviously the easy approach is to just use a tax advantaged account for options trading. An ETF might also be able to handle the turnover on your behalf, for example VIX is a series of options on S&P500 options. A second strategy I've heard of is buying calls and puts at a given strike price. For example, if you bought Dec '13 calls and puts on SPX @ 115 today, it would cost you about $35 dollars. If the price moves more than 35 dollars away from 115 by DEC '13 (in either direction), you've made a profit. If you reflect on that for a bit, you'll see why VIX is considered a volatility index. I guess I should mention that shorting a stock and buying a put option at the market price are very similar, with the exception that your loss is limited to the price of the option. Is there ever an instance where options investing is not speculative? The term 'speculative' is not well defined. For many people, the answer is no. It's very easy to just buy put options and wait for prices to fall, or call options and wait for prices to rise. Moreover, the second strategy above essentially gives you similar performance to a stock without paying full price. These all fall under the headline of increasing a risk portfolio rather than decreasing it, which I figure is a decent definition of speculation. On the other hand, there are ways to use options minimize risk rather than increase it. You can buy underwater options as portfolio insurance, if your portfolio drops below a certain amount, you still have the right to sell it at a higher one. And the Case-Schiller index is run in part, on the hopes that one day there might be a thriving market for real estate options (or futures). When you buy a home or lend money to someone to buy one, you could buy regional Case-Schiller options to protect you if the regional market tanks. But in all of these cases, it's required for someone else to take the opposite trade. Risk isn't reduced, it's traded around. So technically, there is a speculative element to these as well. I think the proper question here is whether speculation is present, but whether speculation can be put to good ends. Without speculators, the already very thin market for options would shrivel faster. |
How do you calculate the rate of return (ROR) when buying and selling put options? | What Jaydles said. I think of each strategy in terms of Capital at Risk (CaR). It's a good thing to know when considering any position. And then conveniently, the return is always profit / CaR. With covered calls it's pretty easy. Pay $1000 for stock, receive $80 in premium, net CaR is $920. If you own the stock and write calls many times (that expire worthless, or you that you buy back), there are two measurements to consider. First, treat every covered call as a buy-write. Even if you already own the stock, disregard the real cost basis, and calculate from the moment you write the call, using the stock price at that time. The second measure is more complicated, but involves using something like the XIRR function in a spreadsheet. This tracks the series as a whole, even accounting for times where there is no written call outstanding. For the written put, even though your broker may only require 30% collateral in a margin account, mentally treat them as cash-secured. Strike less premium is your true CaR. If the stock goes to zero by expiration, that's what you're on the hook for. You could just compute based on the 30% collateral required, but in my view that confuses cash/collateral needs with true risk. Note: a written put is exactly identical to a covered call at the same strike. If you tend to favor puts over CCs, ask yourself why. Just like a loaded gun, leverage isn't inherently bad, but you sure want to know when you're using it. |
How does one determine the width of a candlestick bar? | Very common question. There is no any rule of thumb. This solely depends on your trading strategy. I will share my own experience. My day starts with the daily chart, if I have a signal, either I open my position or I check 30 minute chart to make sure that it won't go too much against my trade. and I open my position. If I am waiting for the signal the minimum timeframe is 4 hours for me. I use 30 minutes to find the best time to enter the market. So, this is totally something special for my trading strategy, that is why those things can change based on the different strategies. I also check weekly and monthly charts to confirm trend. I have been busy with forex since 2007 and I am a verified investor on etoro At the end, I never use 1,5,15,60 minute charts as they are against my strategy. |
What to do with small dividends in brokerage account? | Don't sit on it, because the money does not work for you. Add more money to it and buy a stock or stocks of the company. |
How to search efficiently for financial institutions, credit cards, etc (At least in Canada)? | Searching for Banks or Credit Unions based on their high interest accounts is likely to be a giant waste of your time. The highest you might find is 1.5% not clearing inflation. For anything less than 100k youre better off putting it in a money market fund until you know what you want to do with it, which you can find anywhere. |
When investing, is the risk/reward tradeoff linear? | The risk-reward relation depends on what you are changing. In the most cases people ask about, it is not linear but I will give examples of both. Nonlinear case 1: As you diversify your portfolio, the firm-specific risks of various stocks cancel each other out without necessarily affecting the expected return of the portfolio. Reduction in risk without any loss in returns--very nonlinear. Nonlinear case 2: If you are changing the weights in your portfolio to move along the efficient frontier, then you the risk-reward relation is a hyperbola, which is nonlinear. Nonlinear case 3: If you are changing the weights in your portfolio to move away from the efficient frontier, then you increase risk without adding a fully compensatory amount of return. There could be many paths along the risk-reward plane, but generally it will not be linear in the sense that it will not be on the same line as your initial, efficient, portfolio and your savings account. Linear case 1: The most common sense in which we think of the risk-reward relation being linear is when the thing you are changing is the size of your investment. If you take money out of savings to put in your fully diversified portfolio without changing the relative weights, your expected returns will increase linearly. Linear case 2: If you believe the CAPM, then the expected return of an asset stock is linearly proportional to the market risk of the firm. If you could change the market risk of a single asset without changing anything else, then you would linearly change its expected return. The general rule about the risk/reward relation is this: If you are changing the size of your investment, the relation is linear. If you are changing its composition, the relation is nonlinear |
What options do I have at 26 years old, with 1.2 million USD? | Lots of good advice so far. Here's some meta-advice. Read through everything here twice, and distill out what the big picture ideas are. Learn about what you need to know about them. Pick a strategy and/or long term goals. Work toward them. Get advice from many many places and distill it. This is currently known as crowd-sourcing but I've been doing it all my life. It's very effective. No one will ever care as much about your money as you. Some specific things I haven't seen mentioned (or not mentioned much): |
How does a CFD work behind the scenes? | There are several ways that the issuers profit from CFDs. If the broker has trades on both sides (buy and sell) they can net the volumes off against each other and profit off the spread whilst using the posted margins to cover p&l from both sides. Because settlement for most securities is not on the same day that the order is placed they can also buy the security with no intention of taking delivery and simply sell it off at the end of day to pass delivery on to someone else. Here again they profit from the spread and that their volumes give them really low commissions so their costs are much lower than the value of the spread. If they have to do this rather than netting the position out the spreads will be wider. Sometimes that may be forced to buy the security outright but that is rare and the spreads will be even wider so that they can make a decent profit. |
Companies that use their cash to buy back stock, issue dividends, etc. — how does this this typically affect share price? | So far buying of own by own companies like Apple, is concerned it will surely raise the price of the script. At some level, the share prices are a factor of supply and demand at a given price. Apple being a very demanded script, its supply in the market goes down with the buy back. After a while, this will surely make the script price rise. It also depends at what price the buy back is affected. If the buy back is done at a right price, it will help the existing shareholder. If a very high price is paid, it will erode shareholders wealth. Hence each buy back needs to be studies separately. There are several and at times complex variables which determines if the buy back is good for continuing shareholders or not. |
What should I do with the 50k I have sitting in a European bank? | As always with investments, it depends on your risk adversity. I don't want to repeat the content of hundreds of recommendations here, so just the nutshell: (For qualified investments,) the more risk you are willing to take, the more returns you'll get. The upper end is the mutual funds and share market, where you have long-term expectations of 8 - 10 % (and corresponding risks of maybe +/- 50% per year), the lower end is a CD, where you can expect little to no interest, corresponding to little to no risk. Investing in shares/funds is not 'better' than investing in CDs, it is different. Not everybody likes financial roller-coasters, and some people mainly consider the high risk, which gives them sleepless nights; while others just consider the expected high long-term gains as all that counts. Find out what your personal risk adversity is, and then pick accordingly. |
Strategies for putting away money for a child's future (college, etc.)? | Saving for college you have a couple of options. 529 plans are probably the best bet for most people wanting to save for their kids college education. You can put a lot of money away ~$300k and you may get a state tax deduction. The downside is if you're kid doesn't go to college you may end up eating the 10% penalty. State specific prepaid tuition plans. The upside is you know roughly the return you are going to get on your money. The downside is your kid has to go to a state school in the state you prepaid or there are likely withdrawal penalties. For the most part these really aren't that great of a deal any more. ESAs are also an option but they only allow you to contribute $2k/year, but you have more investment options than with the 529 plans. Traditional and ROTH IRA accounts can also be used to pay for higher education. I wouldn't recommend this route in general but if you maxed out your 401k and weren't using your IRA contribution limits you could put extra money here and get more or really different flexibility than you can with a 529 account. I doubt IRA's will ever be asked for on a FAFSA which might be helpful. Another option is to save the money in a regular brokerage account. You would have more flexibility, but lower returns after taxes. One advantage to this route is if you think your kid might be borderline for financial aid a year or two before he starts college you could move this money into another investment that doesn't matter for financial aid purposes. A few words of caution, make sure you save for retirement before saving for your kids college. He can always get loans to pay for school but no one is going to give you a loan to pay for your retirement. Also be cautious with the amount of money you give your adult child, studies have shown that the more money that parents give their adult children the less successful they are compared to their peers. |
Companies that use their cash to buy back stock, issue dividends, etc. — how does this this typically affect share price? | If a company is valued correctly, then paying dividends should lower the share price, and buying back shares should leave the share price unchanged. If the share price is $100, and the company pays a $10 dividend, then either its cash goes down by $10 per share, it is has to borrow money for the same amount, or some mixture. Either way, the value of the company has gone down by $10 per share. If the share price is $100, and the company buys back 10 percent of its shares, then it also has to find the money, just as for the dividend, and the value of the company goes down by 10 percent. However, the number of shares also goes down by 10 percent, so the amount of value per share is the same, and the share price should stay unchanged. Now there are psychological effects. Many people like getting paid dividends, so they will want to own shares of a company paying dividends, so the share price goes up. Similar with a share buyback; the fact that someone buys huge amounts of shares drives the price up. Both effects are purely psychological. A buyback has another effect if the shares are not valued correctly. If the company is worth $100 per share but for some reason the shareprice is down to $50, then after the buyback the value per share has even gone up. Basically the company buys from stupid investors, which increases the value for clever investors holding on to their shares. If the shareprice were $200, then buying back shares would be a stupid move for the company. |
How is initial stock price (IPO) of a stock determined | Who determines company value at IPO? The Owners based on the advice from Lead Bankers and other Independent auditors who would determine the value of the company at the time of listing. At times instead of determining a fixed price a range is given [lower side and higher side]. The Market participants [FI / Institutional Investor Segments] then decide the price by bidding at an amount. There are multiple aspects in play that help stabalize the IPO and roles of various parties. A quick read of question with IPO tag is recommended Edits: Generally at a very broad level, one of the key purpose of the IPO is to either encash Owner equity [Owner wants some profits immediately] or Raise additional Capital. More often it is a mix of both. If the price is too low, one loose out on getting the true value, this would go to someone else. If the price is too high, then it may not attract enough buyers or even there are buyers, there is substantial -ve sentiment. This is not good for the company. Read the question From Facebook's perspective, was the fall in price after IPO actually an indication that it went well? This puts determining the price of IPO more in the realm of art than science. There are various mechanism [Lead bankers, Institutional Investors, Underwriters] the a company would put in place to ensure the IPO is success and that itself would moderate the price to realistic level. More often the price is kept slightly lower to create a positive buzz about the stock. |
Sales Tax Licence/Permit - When is it required and how can I make a use of it as a non-US resident selling in USA? | Disclaimer: I am not a tax specialist You probably need a sales tax permit if you're going to sell goods, since just about every state taxes goods, though some states have exemptions for various types of goods. For services, it gets tricker. There is a database here that lists what services are taxed in what states; in Wyoming, for example, cellphone services and diaper services are taxed, while insurance services and barber services are not. For selling over the internet, it gets even dicier. There's a guide on nolo.com that claims to be comprehensive; it states that the default rule of thumb is that if you have a physical presence in a state, such as a warehouse or a retail shop or an office, you must collect tax on sales in that state. Given your situation, you probably only need to collect sales tax on customers in Wyoming. Probably. In any event, I'd advice having a chat with an accountant in Wyoming who can help walk you through what permits may or may not be needed. |
If USA defaults on its debt, will the T bond holder get back his money | The only party that can pay back a government bond is the government that issued it itself. In the case of Argentina, US vulture funds have won cases against it, but it has yet to pay. The best one can do to collect is to sue in a jurisdiction that permits and hope to seize the defaulted government's assets held in such jurisdiction. One could encourage another state to go to war to collect, but this is highly unlikely since a state that doesn't repay is probably a poor state with nothing much to loot; besides, most modern governments do not loot the conquered anymore. Such a specific eventuality hasn't happened in at least a lifetime, anyways. It is highly unlikely that any nation would be foolish enough to challenge the United States considering its present military dominance. It is rare for nations with medium to large economies to spurn their government obligations for long with Argentina as the notable exception. Even Russia became current when they spontaneously disavowed their government debt during the oil collapse of 1998. Countries with very small economies such as Zimbabwe are the only remaining nations that try to use their central banks to fund debt repayments if they even repay at all, but they quickly see that the destruction caused by hyperinflation neither helps with government debt nor excessive government expenditure. Nevertheless, it could be dangerous to assume that no nation would default on its debt for any period of time, and the effects upon countries with defaulted government debt show that it has far reaching negative consequences. If the US were to use its central bank to repay its government obligations, the law governing the Federal Reserve would have to be changed since it is currently mandated to "maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates." The United States Treasury has no power over the Federal Reserve thus cannot force the Federal Reserve to betray its mandate by purchasing government debt. It should be noted that while Japan has a government debt twice its GDP, it also has a persistent slight deflation which has produced incredibly low interest rates, allowing it to finance government debt more easily, a situation the US does not enjoy. For now, the United States seems to be able to pay expenditures and finance at low interest rates. At what ratio of government debt to GDP that would cause interest rates to climb thus put pressure on the US's ability to repay does not seem to be well known. |
How smart is it really to take out a loan right now? | so this is a loan for a house? a loan on a house? a new mortgage? you shouldn't just get a loan for the hell of it any time. interests rates are low because the yields on US treasuries have been pushed closer to zero, and thats pretty much that. the risk is on the bank that approves the loan, and not you. (your ability to repay should be truthful, but your payments are smaller because the interest is so low) |
Invest in low cost small cap index funds when saving towards retirement? | I think you're on the right track with that strategy. If you want to learn more about this strategy, I'd recommend "The Intelligent Asset Allocator" by William Bernstein. As for the Über–Tuber portfolio you linked to, my only concern would be that it is diversified in everything except for the short-term bond component, which is 40%. It might be worth looking at some portfolios that have more than one bond allocation -- possibly diversifying more across corporate vs government, and intermediate vs short term. Even the Cheapskate's portfolio located immediately above the Über–Tuber has 20% Corporate and 20% Government. Also note that they mention: Because it includes so many funds, it would be expensive and unwieldy for an account less than $100,000. Regarding your question about the disadvantages of an index-fund-based asset allocation strategy: |
Cash or Bonds (UK) | The 'appropriate' amount of cash/bonds to hold will be largely a matter of opinion, but here are the general reasons why having at least some is a good idea: Cash is very liquid, and bonds are often mostly liquid. This means you can access them very quickly, without taking on losses. To get the most liquidity out of your bonds, you can do what is called 'laddering'. This means that you take out different bond amounts with different maturity dates, and periodically renew them on a schedule, so that you always have some bonds maturing, which you can access without paying an interest penalty. You can look this term up online for more details. Cash and bonds are low risk. If you have absolutely no low-risk assets, then in the event of, say, a market crash, you may have no savings to fall back on. By owning some bonds, and some equities, you are able to earn a modest return, without being too risky. However, note that some bonds are just as risky as equities - any bond which pays an abnormally high interest rate does so because the entity backing the repayment (government, company, whomever) is thought to not be guaranteed to be able to do so. The 25% figure given by your author is his opinion on the appropriate mix of cash/bonds to equities, but there are many views on the matter. Consider that any 'rule of thumb' in personal finance should be for general consideration only. |
Interest on self assessment tax | Assuming you are Resident Indian. As per Indian Income Tax As per section 208 every person whose estimated tax liability for the year exceeds Rs. 10,000, shall pay his tax in advance in the form of “advance tax”. Thus, any taxpayer whose estimated tax liability for the year exceeds Rs. 10,000 has to pay his tax in advance by the due dates prescribed in this regard. However, as per section 207, a resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from business or profession is not liable to pay advance tax. In other words, if a person satisfies the following conditions, he will not be liable to pay advance tax: Hence only self assessment tax need to be paid without any interest. Refer the full guideline on Income tax website |
Would it make sense to take a loan from a relative to pay off student loans? | My biggest concern with this plan is that there's no going back should you decide that it is not going to work, either due to the strain on the relationship or for some other reason. If you were borrowing from a relative in place of a mortgage or a car loan, you can always refinance, and might just pay a little more interest or closing costs from a bank. Student loans are effectively unsecured, so your only option for a "refinance" would be to get a personal, unsecured loan (or borrow against existing collateral if you have it). You are going to have a tough time getting another 50k unsecured personal loan at anywhere near student-loan rates. The other negative aspects (overall risk of borrowing from family, loss of possible tax deduction) make this plan a no-go for me. (I'm NOT saying that it's always a good idea to borrow from family for homes or cars, only that there's at least an exit plan should you both decide it was a bad idea). |
Why do consultants or contractors make more money than employees? | The benefits and taxes thing, in my opinion is the biggie. Most people don't realize that the cost to the company for a full-time employee with benefits can be 2x or even 3x the amount they see in their paycheck. Health plans are extremely expensive. Even if you are having money taken from your check for health insurance, it is often just a fraction of the total cost, and the employer is subsidizing the rest. More expensive benefits that contractors don't typically get are 401K matches and paid vacation days. When contractors call in sick or don't work because it is a national holiday, they don't get paid for that day. Also, see that line on your paycheck deducting for Social security and Medicare? That is only half of the tax. The employer pays an equal amount that is not shown on that statement. Also, they pay taxes that go towards unemployment benefits , and may be required to pay higher taxes if they churn through a lot of full-time employees. You can usually let contractors go with relative impunity . For the unemployment tax reasons, not paying for people's days off or benefits, a lot less paperwork, and less risk to the business associated with committing to full-time employees all provide value to the company. Thus companies are willing to pay more because they are getting more. Think of it like a cell phone-contract. If you commit to a three year contract it can be a pain/expensive to get out of the deal early, but you will probably get a better rate in exchange for the risk being shifted to your end of the deal. |
Why do some people go through contortions to avoid paying taxes, yet spend money on expensive financial advice, high-interest loans, etc? | I think sometimes this is simply ignorance. If my marginal tax rate is 25%, then I can either pay tax deductible interest of $10K or pay income tax of $2.5K. I think most americans don't realize that paying $10K of tax deductible interest (think mortgage) only saves them $2.5K in taxes. In other words, I'd be $7.5K ahead if I didn't have the debt, but did pay higher taxes. |
What should I do with the stock from my Employee Stock Purchase Plan? | Split the difference. Max it out, sell half immediately and wait a year or more for the rest. Or keep a third... whatever works for your risk tolerance. A perfectly diversified portfolio with $0 in it is still worth $0. |
Must a company have a specific number of employees to do an IPO? | No, there is no minimum employee limit in order for a company to initiate an initial public offering. |
Where to find out conversion ratio between General Motors bonds and new GM stock? | Looks like the result got decided recently, with a little uncertainty about exactly how much is the total allowed claims: http://www.wilmingtontrust.com/gmbondholders/plan_disclosure.html http://www.wilmingtontrust.com/gmbondholders/pdf/GUC_Trust_Agreement.pdf They give the following example: Accordingly, pursuant to Section 5.3 of the GUC Trust Agreement, a holder of a Disputed Claim in the Amount of $2,000,000 that was Allowed in the amount of $1,000,000 (A) as of the end of the first calendar quarter would receive: Corresponding to the Distribution to the Holders of Initial Allowed Claims: Corresponding to the First Quarter Distribution to Holders of Units: Total: |
Why would you ever turn down a raise in salary? | I probably wouldn't turn down a raise, but there are some circumstances in which you might hesitate. Having a disproportionately high salary for your type of role or the value you are providing to the company makes you an attractive layoff target in an economic downturn. I've heard anecdotally of lots of corporate lawyers getting laid off because they were getting raises every year, and ended up with such ridiculous salaries that when the economy went south, the company basically asked "why are we paying these people so much?" Same thing happens in lots of places - Circuit City lays off the experienced, highly-paid salespeople and brings in cheap-o high school students (that didn't work out well for them, but they did it anyway). Still, even knowing that, I'd accept the pay raise. You're making more money the whole time you're employed, and prior salary is the biggest predictor of the salary you can negotiate at a new position. |
How do I figure out if I will owe taxes | The short answer is - "Your employer should typically deduct enough every paycheck so you don't owe anything on April 15th, and no more." The long answer is "Your employer may make an error in how much to deduct, particularly if you have more than 1 job, or have any special deductions/income. Calculate your estimated total taxes for the year by estimating all your income and deductions on a paper copy of a tax return [I say paper copy so that you become familiar with what the income and deductions actually are, whereas plugging into an online spreadsheet makes you blind to what's actually going on]. Compare that with what your employer deducts every paycheck, * the number of paychecks in the year. This tells you how much extra you will pay / be refunded on April 15th, as accurately as you can estimate your income and deductions." |
Is it true that 90% of investors lose their money? | Fail? What is the standard? If you include the base case of keeping your money under a mattress, then you only have to earn a $1 over your lifetime of investing to not fail. What about making more by investing when compared to keeping money in a checking or savings account? How could 90% of investors fail to achieve these standards? Update: with the hint from the OP to google "90% investors lose their money" it is clear that "experts" on complex trading systems are claiming that the 90% of the people that try similar systems, fail to make money. Therefore try their system, for a fee. The statements are being made by people who have what should be an obvious bias. |
Clothing Store Credit Card Account closed but not deleted | You have little chance of getting it deleted. I have the same situation, I closed mine in 2006, and the login still works. Keep the paperwork that you closed it (or print a PDF of the site showing so), and forget about it. If someone is trying to cheat, re-opening it should be the same difficulty as making a new one in your name, so it is not really an additional risk. You could also set the username and password both to a long random string, and not keep them. That soft-forces you to never login again. Note that it will also stay on your credit record for some years (but that's not a bad thing, as it is not in default; in the contrary). The only negative is that if you apply for credit, you might be ashamed of people seeing you ever having had a Sears or Macy's card or so. |
401(k) Investment stategies | Ending up with nothing is an unlikely situation unless you invest 100% in a company stock and the company goes under. In order to give you a good answer we need to see what options your employer gives for 401k investments. The best advice would be to take a list of all options that your employer allows and talk with a financial advisor. Here are a few options that you may or may not have as an option from an employer: Definitions from wikipedia: A target-date fund – also known as a lifecycle, dynamic-risk or age-based fund – is a collective investment scheme, usually a mutual fund, designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date (usually retirement) approaches. An index fund or index tracker is a collective investment scheme (usually a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market... An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks.[1] An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. The capital stock (or stock) of an incorporated business constitutes the equity stake of its owners. Which one can you lose everything in? You can lose everything in stocks by the company going under. In Index funds the entire market that it follows would have to collapse. The chances are slim here since the index made up of several companies. The S&P 500 is made up of 500 leading companies publicly traded in the U.S. A Pacific-Europe index such as MSCI EAFE Index is made up of 907 companies. The chances of losing everything in an ETF are also slim. The ETF that follows the S&P 500 is made up of 500 companies. An Pacific-Europe ETF such as MSCI EAFE ETF is made up of 871 companies. Target date funds are also slim to lose everything. Target date funds are made up of several companies like indexes and etfs and also mix in bonds and other investments depending on your age. What would I recommend? I would recommend the Index funds and/or ETFs that have the lowest fee that make up the following strategy for your age: Why Not Target Date Funds or Stocks? Target date funds have high fees. Later in life when you are closer to retirement you may want to add bonds to your portfolio. At that time if this is the only option to add bonds then you can change your elections. Stocks are too risky for you with your current knowledge. If your company matches by buying their stock you may want to consider reallocating that stock at certain points to your Index funds or ETFs. |
Are junk bonds advisable to be inside a bond portfolio that has the objective of generating stable income for a retiree? | Junk Bonds (aka High Yield bonds) are typically those bonds from issues with credit ratings below BBB-. Not all such companies are big risks. They are just less financially sound than other, higher rated, companies. If you are not comfortable doing the analysis yourself, you should consider investing in a mutual fund, ETF, or unit trust that invests in high yield bonds. You get access to "better quality" issues because a huge amount of the debt markets goes to the institutional channels, not to the retail markets. High yield (junk) bonds can make up a part of your portfolio, and are a good source of regular income. As always, you should diversify and not have everything you own in one asset class. There are no real rules of thumb for asset allocation -- it all depends on your risk tolerance, goals, time horizon, and needs. If you don't trust yourself to make wise decisions, consult with a professional whom you trust. |
Are there any Social Responsibility Index funds or ETFs? | Index funds: Some of the funds listed by US SIF are index funds. ETFs: ETFdb has a list, though it's pretty short at the moment. |
Alternative to Jumbo Mortgage | You should also be aware that there are banks that do business in the US that do not deal with Fannie Mae, and thus are not subject to the rules about conforming loans. Here is an example of a well-known bank that lists two sets of rates, with the second being for loans of $750,000 or more (meaning the first covers everything up to that) https://home.ingdirect.com/orange-mortgage/rates |
Best way to make most of savings with ISA and Offset mortgage | I am not a Financial Advisor, but I an tell you what I did in exactly this situation - which is pretty much what you are proposing. I put money into the offset savings account until I had only a small amount of mortgage "balance" left (less than a year's worth of mortgage payments), then I set it up so that each month I did the transfer from the offset savings pot into the mortgage itself. This depleted the offset savings in line with the mortgage debt, and the interest on the two balanced out almost to zero. This was self-sustaining and meant that I kept the same margin owing over time (i.e. if I was in this situation for 5 years, for the whole 5 years I would effectively have 1 year remaining on the mortgage). Meanwhile, since I now didn't have any mortgage outgoings from my regular income, I put any spare money into ISA savings. No need to withdraw money from the mortgage to move to the ISA. The benefits of this (as opposed to just paying off the damn mortgage already) were that I kept the full liquidity of the mortgage amount - I could withdraw all the offset savings pot if I wanted to, although I would then have to have funded the mortgage payments differently, and as that liquidity went down over time I was building up other savings in parallel. It worked well for me. It almost doesn't matter what the offset mortgage rate is since you are effectively paying it off by keeping the offset savings pot so high. |
In double entry book-keeping, how should I record writing of a check? | I'm no accounting expert, but I've never heard of anyone using a separate account to track outstanding checks. Instead, the software I use (GnuCash) uses a "reconciled" flag on each transaction. This has 3 states: n: new transaction (the bank doesn't know about it yet), c: cleared transaction (the bank deducted the money), and y: reconciled transaction (the transaction has appeared on a bank statement). The account status line includes a Cleared balance (which should be how much is in your bank account right now), a Reconciled balance (which is how much your last bank statement said you had), and a Present balance (which is how much you'll have after your outstanding checks clear). I believe most accounting packages have a similar feature. |
Would parking at a parking lot near or in my residence prevent me from paying for it with my transit FSA? | No, it doesn't look like you can use the employee benefit to pay for parking near your home. The definition for "qualified parking" is in the Internal Revenue Code Section 132 ("Certain Fringe Benefits") (f) (5) (c): (C) Qualified parking The term “qualified parking” means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation described in subparagraph (A), in a commuter highway vehicle, or by carpool. Such term shall not include any parking on or near property used by the employee for residential purposes. Parking near your home is explicitly excluded. Your employer's human resources department can probably provide information on the details of where you can park and get reimbursement. |
Why is retirement planning so commonly recommended? | In addition to the choice that saving for retirement affords - itself a great comfort - the miracle of compounding is so great that even if you chose to work in old age, having set aside sums of money that grow will itself help your future. The are so many versions of the "saving money in your 20s" that equals millions of dollars that the numbers aren't worth showing here. Still, any time value of money example will illustrate the truth. That said, time value of money does start with the assumption that a dollar today is worth more than a dollar tomorrow. Inflation, after all, eats away at the value of a dollar. It's just that compounding so outshines inflation that any mature person who is willing to wait, should be convinced. Until you work the examples, however, it's not at all obvious. It took my daughter years to figure out that saving her allowance let her get way better stuff. The same is true of everyone. |
What are the costs to establish an LLC and to maintain it? | The cost will be around $300-$500 if you do it correctly it in Florida and can be over a $1,000 if you do it in New York (New York is more expensive due to a publication requirement that New York has for LLC’s). The price ranges I’ve given include filing, state fees, getting a tax ID number (EIN), operating agreement, membership certificates, registered agent fees and publication fees if done in New York. Each state also have licensing boards and city fees that are applicable, so you would want to also make sure that you are keeping compliant there. Yearly paperwork to keep the LLC running won’t be so expensive, expect the state to charge a yearly fee and require some basic information to be submitted. I had a quick look at Florida, and with someone filing it for you, expect around $200 to $250 a year, plus registered agent fees. If you are late in Florida the penalty is $400 so you definitely would want a service that provides compliance calendar notifications to make sure you are on time with fees. In regards to bookkeeping and taxes, yearly tax filing will start at $250 to $500 for an LLC and move up from there depending on the services being offered and the amount of time of work. I recently referred someone to an accountant that will charge $250 to file an almost zero tax return on an LLC. I think $40 an hour is a little low for a bookkeeper but it all depends on where you are. I know in some major cities bookkeepers expect $75 an hour or higher. So the expectation in Miami and Manhattan will probably be more expensive than Jacksonville and Albany. If you doing a little business don’t expect the cost to be too much on the bookkeeping. So, breakdown: $300-$500 (FL) - $1,000 (NY) Registration of LLC + any business license, city or other registrations $250 Yearly Fee + Yearly Registered Agent + any business licenses, city or other fee $500 Tax Return + Bookkeeping Fee Banks will charge more than a personal account so expect $120 a year plus. In regards to service I would look at companies that specialize in foreigners setting up businesses in the US, because they will have services designed to help you more than services that primarily specialize with US clients. You are going to have some different needs, based on not having a Social Security Number or establishing from overseas. |
bid & ask prices and technical indicators | If you are looking to go long (buy) you would use bid prices as this is what you will be matched against for your order to be executed and a trade to go through. If you are looking to go short (sell) you would use the ask prices as this is what you will be matched against for your order to be executed and a trade go through. In your analysis you could use either this convention or the midpoint of the two prices. As FX is very liquid the bid and ask prices would be quite close to each other, so the easiest way to do your analysis is to use the convention I listed above. |
Trouble sticking to a budget when using credit cards for day to day transactions? | First of all, I have to recognize up front that my "spending personality" is frugal. I don't recreational shop, and I save a lot of my total income. Building a budget and sticking to it is difficult, especially for people who are closer to living paycheck to paycheck than I. Theoretically, it should be easy to stick to a budget by overestimating expenses, but for many people planning to spend more than necessary isn't a luxury available. That said, I have a system that works for me, maybe it can work for you. This system lets me see how much I have to spend, and close to optimally arranges assets. As you can see, this system relies on some pretty strong upfront planning and adherence to the plan. And what you might not realize is that you can deviate from the plan in two ways: by spending variations and by timing variations. Credit should really help with a lot of the timing variations; it takes a series of expenses and translates them into one lump payment every month. As for spending variations, like spending 20 dollars for lunch when you only budgeted 5, it turns out this technique helps a lot. Some academic work suggests that spending with plastic is more likely to blow your budget than cash, unless you make detailed plans. But it sounds like your main problem is knowing whether you can afford to splurge. And the future minimum balance of your checking account can be your splurge number. |
Income tax on my online drop-shipping business (India) | Please consult a tax advisor. You may be voilating the FEMA [Foreign Exchange Management Act] and can land into trouble. Further what you are doing can land up into various other acts as illegal including AML. Further if there is income generated by Indian citizen in India, he is still liable to pay tax, irrespective of whether you get the funds back into India. Edit: AML is Anti Money Laundering. Your transaction is sure to raise AML triggers as it looks like converting Black Money to White in round about way. Once the triggers are raised, RBI division will investigate further to verify what you are doing. If you are able to prove that this is a valid transaction, you would be OK on AML front. How will Income Tax Know? - If they don't know does not mean you are not liable for tax. - Any suspicious transactions would get investigated and sooner or later Income Tax would know about it and can cause a serious problem. - It is irrelevant where you have kept the money, if you have earned something, its taxable. For it not to be taxable you need to conduct this business differently. Please consult a tax adviser who will advice you on the tax-ability of this type of transaction. |
Are the stocks of competitor companies negatively correlated? | In theory, say we had two soft drink companies, and no other existed. On Jan 1, they report they each had 50% market share for the past year. Over the next year, one company's gain is the other's loss. But over the year, for whatever reason, the market has grown 10% (all the stories of bad water helped this), and while the market share ends at 49/51, the 49 guy has improved his margins, and that stock rises by more than the other. In general, companies in the same industry will be positively correlated, and strongly so. I offer my "spreadsheets are your friend" advice. I took data over the last 10 years for Coke and Pepsi. Easy to pull from various sites, I tend to use Yahoo. In Excel the function CORREL with let you compare two columns of numbers for correlation. I got a .85 result, pretty high. To show how a different industry would have a lower correlation, I picked Intel. Strangely, enough, Intel and Pepsi had a .94 correlation. A coincidence, I suppose, but my point is that you can easily get data and perform your own analysis to better understand what's going on. |
Accepting high volatility for high long-term returns | Modern portfolio theory dramatically underestimates the risk of the recommended assets. This is because so few underlying assets are in the recommended part of the curve. As investors identify such assets, large amounts of money are invested in them. This temporarily reduces measured risk, and temporarily increases measured return. Sooner or later, "the trade" becomes "crowded". Eventually, large amounts of money try to "exit the trade" (into cash or the next discovered asset). And so the measurable risk suddenly rises, and the measured return drops. In other words, modern portfolio theory causes bubbles, and causes those bubbles to pop. Some other strategies to consider: |
Responsible investing - just a marketing trick? | A share is just a part ownership of a company. If you buy a share of a green stock in the open market, you now just own part of a green company. Just like if you buy a house, the money you paid moves to the former owner, but what you are getting is a clear asset in return that you now own. Via mutual funds/indexes this can get a little more complicated (voting rights etc tend to go to the mutual/indexing company rather than the holders of the fund), but is approximately the same thing: the fund buys assets on the open market, then holds them, buys more, or sells them on behalf of the fund investors. |
Trouble sticking to a budget when using credit cards for day to day transactions? | I am like you with not acknowledging balances in my accounts, so I pay my credit card early and often. Much more than once a month. With my banks bill pay, I can send money to the credit card for free and at any time. I pay it every two weeks (when I get paid), and I will put other extra payments on there if I bought a large item. It helps me keep my balances based in reality in Quicken. For example, I saved the cash for my trip, put the trip on my credit card, then paid it all off the day after I got home. I used the card because I didn't want to carry the cash, I wanted the rewards cash back, I wanted the automatic protection on the car rental, and I couldn't pay for a hotel with cash. There are many good reasons to use credit cards, but only if you can avoid carrying a balance. |
Clarification on options jargon regarding spreads | Yes. It seems to me you got it right. On my site, Stock Options Cafe, my last post was an illustration of a bullish call spread. In this case, I bought a 50 call, and sold the 60 call. This is a debit order as I was paying money, not collecting a new premium. |
What is the difference between fixed-income duration and equity duration? | A bond has a duration that can be easily calculated. It's the time weighted average of all the payments you'll receive and helpful to understand the effect a change in rates will have on that instrument. The duration of a stock, on the other hand, is a forced construct to then use in other equations to help calculate, say, the summation of a dividend stream. I can calculate the duration of a bond and come up with an answer that's not up for discussion or dispute. The duration of a stock, on the other hand, isn't such a number. Will J&J last 50 more years? Will Apple? Who knows? |
How decreasing the prime interest rate helps to offset decreasing oil prices | You may be missing how countries like Canada may have oil be more of the GDP than countries like the US. In Canada, the lower oil prices may mean more of an economic slowdown with oil companies laying off staff, canceling projects and some companies probably going under as some provinces like Alberta are highly dependent on oil prices to drive most of the economy. In contrast, the US isn't quite as rich in Energy sources and thus may not have the same issues would be my guess. Context matters here. If the rate change helps everybody, doesn't that include the oil producing companies? I'd like to think so using basic logic. What if the main reason for lowering rates was the economic fallout of the decrease in oil prices? Consider that the there would be the question of, "Why do this now?" that has to be answered and the only main change is lower oil prices on a macroeconomic level. |
Evidence For/Against Real Estate Investing Vis-a-vis Investing in ETFs | Real Estate potentially has two components of profit, the increase in value, and the ongoing returns, similar to a stock appreciating and its dividends. It's possible to buy both badly, and in the case of stocks, there are studies that show the typical investor lags the market by many percent. Real estate is not a homogeneous asset class. A $200K house renting for $1,000 is a far different investment than a $100K 3 family renting for $2,000 total rents. Both exist depending on the part of the country you are in. If you simply divide the price to the rent you get either 16.7X or 4.2X. This is an oversimplification, and of course, interest rates will push these numbers in one direction or another. It's safe to say that at any given time, the ratio can help determine if home prices are too high, a bargain, or somewhere in between. As one article suggests, the median price tracks inflation pretty closely. And I'd add, that median home prices would track median income long term. To circle back, yes, real estate can be a good investment if you buy right, find good tenants, and are willing to put in the time. Note: Buying to rent and buying to live in are not always the same economic decision. The home buyer will very often buy a larger house than they should, and turn their own 'profit' into a loss. e.g. A buyer who would otherwise be advised to buy the $150K house instead of renting is talked into a bigger house by the real estate agent, the bank, the spouse. The extra cost of the $225K house is the 1/3 more cost of repair, utilities, interest, etc. It's identical to needing a 1000 sq ft apartment, but grabbing one that's 1500 sq ft for the view. |
How to maximize small business 401k contribution? | I would hire an accountant to help set this up, given the sums of money involved. $53,000 would be the minimum amount of compensation needed to maximize the 401k. The total limit of contributions is the lesser of: 100% of the participant's compensation, or $53,000 ($59,000 including catch-up contributions) for 2015 and 2016. and they don't count contributions as compensation Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. (Your employer can tell you whether your retirement plan is qualified.) On the bright side, employer contributions aren't subject to FICA withholdings. |
While working overseas my retirement has not gone into a retirement account. Is it going to kill me on the FAFSA? | According to the FAFSA info here, they will count your nonretirement assets when figuring the EFC. The old Motley Fool forum question I mentioned in my comment suggests asking the school for a "special circumstances adjustment to your FAFSA". I don't know much about it, but googling finds many pages about it at different colleges. This would seem to be something you need to do individually with whatever school(s) your son winds up considering. Also, it is up to the school whether to have mercy on you and accept your request. Other than that, you should establish whatever retirement accounts you can and immediately begin contributing as much as possible. Given that the decision is likely to be complicated by your foreign income, you should seek professional advice from an accountant versed in such matters. |
Equity - date of offer, or date of joining? | TL;DR: The date they were granted. (Usually, this follows both an offer and acceptance.) It's not uncommon for a new vesting clock to start when there's a new round of funding coming in, because the investors want to make sure the key people are going to be engaged and incentivized going forward from that point. They don't lower their expectations for how long they want folks engaged based on the person having started earlier. Non-institutional investors may have the same concerns as institutional investors here and use the same vesting strategy to address them. Primary recognition of the benefits from having had people start earlier or be there longer (so long as it correlates with having gotten more done) is embedded in the valuation (which affects how much founders' shares are diluted in the raise). |
Why can't you just have someone invest for you and split the profits (and losses) with him? | Written with some mild snark , but no insult intended, because financial stuff can be ridiculously confusing... Looked at another way, you're basically asking if the Biblical "Parable of the Talents" can be implemented as a business model. You as the investor wish to be the "master", with the entity doing the investing playing the part of the "servant". Since the law prohibits actual servitude as described in scripture, the model must substitute a contractual profit- and loss-sharing scheme. OK, based on what you've proposed, and by way of example, let's say you invested a thousand dollars. You give the investment service your money. At the end of a year, they give you back - Your capital ($1000) - Plus 1/2 of any profits OR - Less 1/2 of any losses So let's say the worst happens and they lose ALL of it. According to your proposal, they have to cover 1/2 of the loss. You end up with $500...but they end up with LESS than nothing. They will be in a deficit situation because all the expense was theirs. They don't just fail to make a profit. They go in the hole. It doesn't matter what percentages you use. Regardless of how the loss is shared, you've only guaranteed YOU can't lose all your money. The company CAN. Given a large enough investment, or enough market fluctuation, a big shared loss could shut down a smaller firm. To summarize: - You want a service that charges you nothing - Does all the work of expertly managing and investing your capital - Takes on part of the risk you would normally bear - (on top of their usual risk and liability) - Agrees to do so solely for a percentage of any return (where higher returns will likely involve a higher degree of risk) - AND that guarantees, after just 1 year, you'll get X% of your capital back, no matter what. Win or lose. - Even if the market crashes and all your capital, and theirs, is wiped out Superbest, um, to be serious briefly: what you're proposing is, if nothing else, inherently unfair and inequitable. I believe you intended it as a mutually beneficial scenario, but the real-world imbalance in risk and reward prevents it being so. Any financial service that would accept those terms along with the extra degree of risk would be fiscally irresponsible. From a business standpoint it's an untenable model, and no company would build on it. It would be tantamount to corporate suicide. The requirement that a service promise to give you back X% of your money, no matter how great the loss, makes your proposal impossible. You need to think about how much all this costs, realistically, as well what kind of returns you can actually expect. And that more risk for higher return is exactly what a service could NOT take a chance on if it had to "share" investors' losses. Besides, it's not really sharing, now is it? They will always lose more than you, always end up in a negative situation, unable even to recoup costs. Circumstances beyond their control could result in a drop in the value that not only wipes out any profit, but requires them to pay YOU for work performed and expenses incurred on your behalf. Why would they let anyon double-dip like that? Yeah, we all prefer getting something for nothing...but you want valuable services and for them to pay you money for the privilege of providing them? I totally agree that would be fantastic, but in this world even "free" doesn't come cheap anymore. And getting back to costs: Without consistent income the service would have nowhere to work and no resources to work with. No office, computer, phone, electricity, Internet, insurance, payroll, licensing, training, maintenance, security, lobbying, etc., etc., etc. Why do people always forget overhead? There's a reason these services operate the way they do. Even the best are working with fairly slim margins in a volatile sector. They're not into 1-year gambles unlikely to cover their cost of doing business, or having to pay for a negative return out of their own pocket. Look, if you're the Biblical master asking your servant to manage things, overhead is built-in. You're taking all the risk as well. You're paying for all three servants' food, home, clothing, etc, plus you had to buy the servants themselves. So its reasonable that you reap the reward of their labor. You paid for it, and you didn't even punish the servant who buried your money in a hole. The two good servants may have done the legwork, but you took on the burden of everything else. In your proposed service, however, contrary to the servant's usual role, the servant - i.e., the company - would be assuming a portion of your risk on top of their own, yet without any guarantee of profit, income, or even coverage of costs. They're also subject to regulations, fees, liability, legal stuff, etc. that you're not, against most of which you are indemnified and held harmless. If they agree to cover a share of your loss, it exposes to greater liability and more related risk. It robs them of resources they need to invest in their own business, while at the same time forcing them to do all the work. As a result, your model doesn't give such a service a fighting chance. Getting it off the ground and lasting past the first-year payouts would require more luck than skill. They'd be better off heading to Vegas and the blackjack table, where the only overhead is a cheap flight and room, where the odds and rules don't change overnight, and they at least get free drinks. If none of the equivalents satisfies, then the Biblical parable appears to describe your only option for obtaining exactly what you want: Move to a country where slavery is legal and buy an investor :-) Cheers, c |
Mortgage sold to yet another servicer. What are my options? | You would need to check the original mortgage papers you signed with the originators. Chances are you agreed to allow the mortgage to be sold and serviced by other parties. Refinancing would also put you in the same boat unless you got them to take that clause out of the mortgage/refinance papers. Also, chances are most small banks and originators simply can not keep mortgages on their books. There are also third parties that service loans too that do not actually own the mortgages as well. This is another party that could be involved out of many in your mortgage. I would also not worry about 127/139 complaints out of 1,100,000 loans. Most probably were underwater on their mortgage but I am sure a few are legitimate complaints. Banks make mistakes (I know right!). Anyway, good luck and let me know if you find out anything different. |
Effective returns on investment in housing vs other financial instruments | Then at the end, if you decide to cash in your house, you can roll the proceeds into a fancier house to avoid paying taxes on your profit. The problem is that the book was written in 1989. That comment is no longer true; that part of the tax law changed in the 1990's. Also in 1989 the maximum amount that person could put in an IRA was $2,000 and hadn't been raised for almost a decade and wouldn't be raised for another decade. Roth accounts didn't exist; nor did HSA's or 529's. Most people didn't have a 401K. You are asking to compare what options we have today compared to what was available in the late 1980's. For me except, for the years 2001-2005 and 2010-2015, the period from 1988 until now has had flat real estate values. Still the current values haven't returned to the peak in 2005. The score is 11 great years, 17 flat or negative. I know many people who during the 1990's had a zero return on their real estate. |
Is there any reason not to put a 35% down payment on a car? | I somewhat agree to Alex B's post. I was a finance manager for 7 years both prime and sub-prime(special)(in other words bad). The parts he's 100% right on. Hit up you local credit union then your bank. Get your financing done first if you can. Now 690 credit score is one of 3 bureaus, not all banks and lending institutions use all three or the same one. Also the score isn't everything. That could be good or bad. The 2-3% range is normally for the 720+ crowd unless its a manufacture. (GM, Ford, so on) With rates capping out at around 30% depending on state laws. However 690 should not be 19% on a new or late model car. At 690 at 19% you would have be going for a 70,000+ mile 6 year or older car if I had to guess. Assuming you have no BK's and repos. Some times dealerships have to pay banks to get people financed. Its hidden in the cost and they by law are not allowed to tell you about it because it cannot be passed on to you. However the banks don't just fund any crazy amount of money either say like 115% of book and that it. That is where and why they want that big down payment because that is used to off set the finance amount and what you pay. Making the dealership money. and i can go on and on and on... But you should always try to get the funding prior. Your credit union won't charge the hidden fees and they only care about your down payment to see that you are making a commitment. If you are buying used. Save out 1500 for future repairs and tires and such. Don't buy paint protectant and such. If you finance thru the dealership and put less than 20% down DO buy Gap Insurance but thats it. I can go on and on but I won't. Feel free to ask though. And to answer your original only question with not context. "Is there any reason not to put a 35% down payment on a car?" Yes if the money is better served paying off credit cards or long term mortgage, assuming you don't need the write off. |
Pension or Property: Should I invest in more properties, or in a pension? | Diversification is one aspect to this question, and Dr Fred touches on its relationship to risk. Another aspect is leverage: So it again comes down to your appetite for risk. A further factor is that if you are successfully renting out your property, someone else is effectively buying that asset for you, or at least paying the interest on the mortgage. Just bear in mind that if you get into a situation where you have 10 properties and the rent on them all falls at the same time as the property market crashes (sound familiar?) then you can be left on the hook for a lot of interest payments and your assets may not cover your liabilities. |
The Benefits/Disadvantages of using a credit card | In the UK, using a credit card adds a layer of protection for consumers. If something goes wrong or you bought something that was actually a scam, if you inform the credit card company with the necessary documents they will typically clear the balance for that purchase (essentially the burden of 'debt' is passed to them and they themselves will have to chase up the necessary people). Section 75 of the Consumer Credit Act I personally use my credit card when buying anything one would consider as "consumer spending" (tvs, furniture ect). I then pay off the credit card immediately. This gives me the normal benefits of the credit card (if you get cashback or points) PLUS the additional consumer credit protection on all my purchases. This, in my opinion is the most effective way of using your credit card. |
How Is the Price of a Stock Determined? [duplicate] | The market price of a stock is based on nothing at all more than what two parties were last willing to transact for it. The stock has a "bid" and an "ask" each is the value placed by a counterparty. For the sale to occur, one party must meet the other. The stock transacts and that is the price. For a stock to "go up" people must be willing to pay more for it. Likewise, for it to "go down" people must be willing to accept less for it. |
Are market orders safe? | A market sell order will be filled at the highest current "bid" price. For a reasonably liquid stock, there will be several buy orders in line, and the highest bid must be filled first, so there should a very short time between when you place the order and when it is filled. What could happen is what's called front running. That's when the broker places their own order in front of yours to fulfill the current bid, selling their own stock at the slightly higher price, causing your sale to be filled at a lower price. This is not only unethical but illegal as well. It is not something you should be concerned about with a large broker. You should only place a market order when you don't care about minute differences between the current ask and your execution price, but want to guarantee order execution. If you absolutely have to sell at a minimum price, then a limit order is more appropriate, but you run the risk that your limit will not be reached and your order will not be filled. So the risk is a tradeoff between a guaranteed price and a guaranteed execution. |
Refinance a land loan into a mortgage loan | The Answer is yes according to multiple online sources and my local bank. This approach is a common technique to building your own home. You finance the land, build the simplest possible dwelling (say a garage with 1 bathroom/bedroom), refi into a mortgage and get cash back and then build your "real house" or add on, etc. This eliminates the banks demands that come with a "construction loan" and saves you 10s of thousands in the process (fees, contractors, scheduling, design, etc) |
Tracking down forgotten brokerage account | A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there. |
Why is mortgage interest deductible in the USA for a house you live in? | Well quite a few countires have tax breaks on the first house you own ... this is typically to promote people to have atleast one house of their own ... having a house of your own provides lot more stability in the long run ... and without tax breaks it makes it difficult for quite a few to own a house ... the tax breaks form a motiviation as well ... There are at times other effects of this breaks, people buying houses beyond their need [bigger house than required] or capacity [buying in a central / expensive location] by maximizing the breaks ... |
Return of value to shareholders in an ISA | You will receive a combination of Verizon shares and cash whether you chose option B or C. Option B means that your "Return of Value" will be treated as capital - ie: as a capital gain. Option C means that your "Return of Value" will be treated as income - ie: as a dividend. As your ISA has favourable tax status, you don't end up paying any capital gain tax or income tax on dividend income. So it won't matter which option you chose. |
How did this day trader lose so much? | He didn't sell in the "normal" way that most people think of when they hear the term "sell." He engaged in a (perfectly legitimate) technique known as short selling, in which he borrows shares from his broker and sells them immediately. He's betting that the price of the stock will drop so he can buy them back at a lower price to return the borrowed shares back to his broker. He gets to pocket the difference. He had about $37,000 of cash in his account. Since he borrowed ~8400 shares and sold them immediately at $2/share, he got $16,800 in cash and owed his broker 8400 shares. So, his net purchasing power at the time of the short sale was $37,000 + $16,800 - 4800 shares * $2/share. As the price of the stock changes, his purchasing power will change according to this equation. He's allowed to continue to borrow these 8400 shares as long as his purchasing power remains above 0. That is, the broker requires him to have enough cash on hand to buy back all of his borrowed shares at any given moment. If his purchasing power ever goes negative, he'll be subject to a margin call: the broker will make him either deposit cash into his account or close his positions (sell long positions or buy back short positions) until it's positive again. The stock jumped up to $13.85 the next morning before the market opened (during "before-hours" trading). His purchasing power at that time was $37,000 + $16,800 - 8400 shares * $13.85/share = -$62,540. Since his purchasing power was negative, he was subject to a margin call. By the time he got out, he had to pay $17.50/share to buy back the 8400 shares that he borrowed, making his purchasing power -$101,600. This $101,600 was money that he borrowed from his broker to buy back the shares to fulfill his margin call. His huge loss was from borrowing shares from his broker. Note that his maximum potential loss is unlimited, since there is no limit to how much a stock can grow. Evidently, he failed to grasp the most important concept of short selling, which is that he's borrowing stock from his broker and he's obligated to give that stock back whenever his broker wants, no matter what it costs him to fulfill that obligation. |
No-line-of-credit debit card? | We have a pre-paid mastercard. This will only allow the spending up to the amount already paid into the card account. Visa Electron is a bank account linked debit card that will not allow the account to go overdrawn but this card type is getting quite rare. |
Do I need to invest to become millionaire? | You're ignoring inflation. Even if we assume the ECB sticks to its 2% inflation target, and your salary only rises in line with inflation, you will be saving considerably more in forty years' time than you are today. In fact, an interest rate of 2% and an inflation rate of 2% make the sums exceptionally easy. You need to save €25,000 per year in 2057 euros to be a millionaire by 2057, which is €11,322 in 2017 euros. Challenging, but achievable. Of course, you'll only be a millionaire in 2057 euros, which will be worth less than half as much as a euro is worth right now. |
Selling equities for real-estate down payment | My suggestion would be to do the math. That is the best advice you can get when considering any investment. There are other factors you haven't considered, too... like the fact that interest rates are at extremely low levels right now, so borrowing money is relatively cheap. If you're outside the US though, that may be less of a consideration as the mortgage lending institutions in Europe only tend to give 5-year locks on loan rates without requiring a premium. You may be somewhere else in the world. You will probably struggle to do the actual math about the probability of the market going down or up, but what you can do is this: Figure out what it would cost you to cash out the investments. You say your balance is $53,000 in various items. (Congrats! That's a nice chunk of money.) But with commissions and taxes and etc., it may reduce the value of your investments by 10% - 25% when you try to cash out those investments. Paying $3,000 to get that money out of the investments is one thing... but if you're sending $10,000 to the tax man when you sell this all off, that changes the economics of your investments a LOT. In that case you might be better off seeing what happens if the markets correct by 10%... you'd still have more than if you sold out and paid major taxes. Once you know your down payment, calculate the amount of property you could afford. You know your down payment could be somewhere around $50,000 after taxes and other items... At an 80:20 loan-to-value ratio that's about $250,000 of a property that you can qualify for, assuming you could obtain the loan for $200,000. What could you buy for that? Do some shopping and figure out what your options are... Once you have two or three potential properties, figure out the answer to "What would the property give you?" Is it going to be rented out? Are you going to live there? Both? If you're living in it, then you come out ahead if the costs for the mortgage debt and the ongoing maintenance and repairs are less than what you currently pay in rent. Figure out what you pay right now to put a roof over your head. Will the place you could buy need repairs? Will you pay more on a mortgage for $200,000 USD (in your local currency) than what you currently do for housing? Don't even factor in the possible appreciation of a house you inhabit when you're making this kind of investment decision... it could just as easily burn down as go up in value. If you would rent it, what kind of rental would that be? Long-term rental? Expect to pay for other people to break your stuff. Short-term rental? You can collect more money per tenant per day, but you'll end up with higher vacancy rates. And people still break your stuff. But do the math and see if you could collect enough in rent from a tenant (person or business or whatever the properties are you could buy) to cover the amount you are paying in debt, plus what you would pay in taxes (rent is income), plus what you would need for maintenance, plus insurance. IF the numbers make sense, then real estate can be a phenomenally lucrative investment. I own some investment properties myself. It is a great hedge against inflation (you can raise rents when contracts lapse... usually) and it is an excellent way to own a tangible item. But if you don't know the numbers and exactly how it would make you better off than sitting and hoping that the markets go up, because they generally do over time, then don't take the jump. |
Where should I invest to hedge against the stock market going down? | If you believe the stock market will be down 20-30% in the next few months, sell your stock holdings, buy a protective put option for the value of the holdings that you want to keep. That would be hedging against it. Anything more is speculating that the market will fall. |
Where do web sites get foreign exchange currency rate / quote information? | The prices quoted are for currency pairs traded on the foreign exchange market. For currencies traded on these exchanges, the exchange rates of a given currency pair are determined by the market, so supply and demand, investor confidence, etc. all play a role. EBS and Reuters are the two primary trading platforms in the foreign exchange market, and much of the data on exchange rates comes from them. Websites will usually get their data either from these sources directly or from a data provider that in turn gets it from EBS, Reuters, or another data source like Bloomberg or Haver Analytics. These data sources aren't free, however. In the US, many contracts, transactions, etc. that involve exchange rates use the exchange rate data published by the Federal Reserve. You might see this in contracts that specify to use "the exchange rate published by the Federal Reserve at 12 pm (noon) on date --some date--". You can also look at the Federal Reserve Economic Data, which maintains data series of historical daily, weekly, and monthly exchange rates for major currency pairs. These data are free, although they aren't realtime. Data for each business day is mostly updated the next business day. |
Which is the better strategy for buying stocks monthly? | Powers makes a good point: trading costs may eat up a significant portion of your ROI. A fee as little as 2% can consume more than 50% of your long-term ROI! A rule of thumb is keep your fees to less than 1%. One way to do that is to buy stock in companies that have a DRIP with a Share Purchase Plan (SPP). Often the SPP allows investors to purchase shares for low fees or free. Once you have the ability to purchase shares for (virtually) free, you can use InvestMete. Roughly, you send more money to the companies whose share prices are near their 52-week low, and less money to those who are near their 52-week high. Getting back to your original question... |
Why do some services list an IPO date that is well after historical price data you can find elsewhere? | The Minnesota Mining and Manufacturing Company was established in 1902 as a private company. It first raised public funds around 1903 but had a limited shareholder base. By around 1929, it was reported as being tradeable as an OTC (over-the-counter) stock but it's likely that shares were traded well before this. On 14 Jan 1946, the stock was listed on NYSE. On 26 Sep 1962 it became a constituent of the the S&P 500 index. On 9 Aug 1976 it became a constituent of the Dow Jones Industrial Average. In 2002, the company's name changed to 3M Co. It appears that the data on Crunchbase's "IPO Date" is wrong on this one. However, there are several companies that appear to do an "IPO" and have trading prices prior. This is quite typical of early-stage biotech companies that trade OTC prior to a major exchange listing and "IPO". An example of an IPO happening after a company became publicly tradeable is NASDAQ:IMRN (Immuron). They had an "IPO" on Nasdaq on 9 Jun 2017, yet they had been trading as an OTC/Pink Sheet stock for months prior. They also have been listed in Australia since 30 Apr 1999. http://www.nasdaq.com/markets/ipos/activity.aspx?tab=pricings&month=2017-06 Another example is NASDAQ:GNTY (Guaranty Banchshares Inc) which had an "IPO" and NASDAQ listing in May 2017. This was a Nasdaq stock in 1998, went OTC/pink sheet stock in 2005. It has been paying regular dividends since that time. Clearly the word "Initial" is subjective! http://www.nasdaq.com/markets/ipos/activity.aspx?tab=pricings&month=2017-05 |
Is it possible for me to keep my credit card APR at 0% permanently? | Banks don't care that you are responsible cardholder. They care to make money. Interest rates are basically 0% by government policy and the banks charge their responsible cardholders 20% interest rates. Think about that for one second, and realize they really do not care about your ability to avoid paying interest, they only need you to 'slip up' one month during your entire lifetime to make a profit from you. It is in their interest for you to get into a spending habit, from 0% promo rates, so that eventually a frivolous purchase or life changing event causes a balance to stay on the card for over one month. |
Legal documents required for managing an investment portfolio among friends? | Sounds like you are starting an investment club. What you need is an investment club partnership agreement. Have a look at this free document. EDIT Based on OP's comments, it appears that the OP will be acting as an adviser/manager of a private investment fund. If the fund is not open to the public, it may still be treated as a type of investment club, but different rules -- including possibly having to register with the SEC -- may apply (quoted from the first link): If the adviser is compensated for providing the advice regarding the club's investments, the adviser may need to register according to the Investment Advisers Act of 1940. Also, if one person selects investments for the club, that person may have to register as an investment adviser. In general, a person who has $25 million or more in assets under management is required to register with the SEC under the Investment Advisers Act of 1940. A person managing less than $25 million may be required to register under the securities laws of the state or states in which the adviser transacts business. |
Is it worth working at home to earn money? Can I earn more money working at home? | I don't mean to be rude, but if you have to ask if you can earn a living from home, the answer is 'probably not.' Most people are more financially productive at a traditional workplace, otherwise more people would quit the jobs they hate and work at home or develop their hobbies into businesses. Making a living from home requires being a self-starter and finding clients/customers who accept such arrangements. First, be assured no one earns a living stuffing envelopes, being a mystery online shopper, or selling low to moderate quantities of stuff to their circle of friends. A few earn a living flipping houses, cars, or shares, or stuff on eBay, but with considerable risk, capital, effort, luck, contacts, and experience/skill. A few more find success by inventing something or developing a business. Once again, not as easy as it sounds. You can look for professional work freelancing, or find grunt work on something like vWorker. But these are easily as competitive as the job market, perhaps moreso. In the case of vWorker you are competing against people in southern asia who almost surely can beat you on price. |
I bought a new car for a month and wanted to return it | My assumption here is that you paid nearly 32K, but also financed about 2500 in taxes/fees. At 13.5% the numbers come out pretty close. Close enough for discussion. On the positive side, you see the foolishness of your decision however you probably signed a paper that stated the true cost of the car loan. The truth in lending documents clearly state, in bold numbers, that you would pay nearly 15K in interest. If you pay the loan back early, or make larger principle payments that number can be greatly reduced. On top of the interest charge you will also suffer depreciation of the car. If someone offered you 31K for the car, you be pretty lucky to get it. If you keep it for 4 years you will probably lose about 40% of the value, about 13K. This is why it is foolish for most people to purchase a new vehicle. Not many have enough wealth to absorb a loss of this size. In the book A Millionaire Next Door the author debunks the assumption that most millionaires drive new cars. They tend to drive cars that are pretty standard and a couple of years old. They pay cash for their cars. The bottom line is you singed documents indicating that you knew exactly what you were getting into. Failing any other circumstances the car is yours. Talking to a lawyer would probably confirm this. You can attempt to sell it and minimize your losses, or you can pay off the loan early so you are not suffering from finance charges. |
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