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What dictates the costs of creating an options contract? (Commissions breakdown) | I'm not positive my answer is complete, but from information on my broker's website, the following fees apply to a US option trade (which I assume you're concerned with given fee in dollars and the mention of the Options Clearing Corporation): They have more detail for other countries -- see https://www.interactivebrokers.co.uk/en/index.php?f=commission&p=options1 for North America. Use the sub-menu near the top of the page to pick Europe or Asia. The brokerage-charged commission for this broker is as low as $0.25 per contract with a $1.00 minimum. Though I've been charged less than $1 to STO an options position, as well as less than $1 to BTC an options position, so not sure about that minimum. Regarding what I read as your overall underlying question (why are option fees so high), in my research this broker has one of the cheapest commission rates on options I've ever seen. When I participate in certain discussions, I'm routinely told that these fees are unbelievable and that $5.95, $7.95, or even $9.95 are considered low fees. I've heard this so much, and discussed commissions with enough people who've refused to switch brokers, that I conclude there just isn't enough competition to drive prices lower. If most people won't switch brokers to go from $9.95 to $1 per trade, there simply isn't a reason to lower rates. |
What factors should I consider when evaluating index funds? | The idea of an index is that it is representative of the market (or a specific market segment) as a whole, so it will move as the market does. Thus, past performance is not really relevant, unless you want to bank on relative differences between different countries' economies. But that's not the point. By far the most important aspect when choosing index funds is the ongoing cost, usually expressed as Total Expense Ratio (TER), which tells you how much of your investment will be eaten up by trading fees and to pay the funds' operating costs (and profits). This is where index funds beat traditional actively managed funds - it should be below 0.5% The next question is how buying and selling the funds works and what costs it incurs. Do you have to open a dedicated account or can you use a brokerage account at your bank? Is there an account management fee? Do you have to buy the funds at a markup (can you get a discount on it)? Are there flat trading fees? Is there a minimum investment? What lot sizes are possible? Can you set up a monthly payment plan? Can you automatically reinvest dividends/coupons? Then of course you have to decide which index, i.e. which market you want to buy into. My answer in the other question apparently didn't make it clear, but I was talking only about stock indices. You should generally stick to broad, established indices like the MSCI World, S&P 500, Euro Stoxx, or in Australia the All Ordinaries. Among those, it makes some sense to just choose your home country's main index, because that eliminates currency risk and is also often cheaper. Alternatively, you might want to use the opportunity to diversify internationally so that if your country's economy tanks, you won't lose your job and see your investment take a dive. Finally, you should of course choose a well-established, reputable issuer. But this isn't really a business for startups (neither shady nor disruptively consumer-friendly) anyway. |
car loan life insurance | This greatly depends on the local laws and the insurance contract terms. If I remember correctly, my own life insurance policy does also have special terms in case I die within a year of applying, so it doesn't sound totally bogus. For car loan insurance, the amount of coverage and premiums were probably low enough for the insurer not to want to spend the money upfront on the thorough investigation, but they probably do have a clause that covers them in case the insured passes away unreasonably quickly (unreasonably for a healthy person of the given age, that is). |
Facebook buying WhatsApp for 19 Billion. How are existing shareholders affected? | Of course it is a dilution of existing shareholders. When you buy milk in the supermarket - don't you feel your wallet diluted a little? You give some $$$ you get milk in return. You give some shares, you get Watsapp in return. That's why such purchases must go through certain process of approval - board of directors (shareholders' representatives) must approve it, and in some cases (don't know if in this particular) - the whole body of the shareholders vote on the deal. |
How do I protect myself from a scam if I want to help a relative? | Mostly ditto to @grade'eh'bacon, but let me add a couple of comments: Before I did anything, I'd find out more about what's going on. Anytime someone tells me that there's a problem with "security codes or something", I get cautious. Think about what the possibilities are here. Your relative is being scammed. In that case, helping him to transfer his money to the scammer is not the kind of help you really want to give. Despite your firm belief in your relative's integrity, he may have been seduced by the dark side. If he's doing something illegal, I'd be very careful about getting involved. My friends and relatives don't ask me to commit crimes for them, especially not in a way that leaves me holding the bag if things go wrong. Assuming that what is going on here is all legal and ethical, still there is the possibility that you could be making yourself liable for taxes, fees, whatever. At the very least I'd want to know what those are up front. As @Grade'eh'bacon, if he really has a problem with a lost password or expired account, by all means help him fix that problem. But become someone else's financial intermediary has many possible pitfalls. |
Why do UK banks require monthly “pay in” into current account? | Banks are not your friends, they are not performing services for you because they like you. They are a business, and they make money by borrowing money from you at low interest and loaning it out at higher interest. They are trying to persuade you to deposit more money (however briefly) in their bank so they can loan out more money. They are probably also counting on the fact that most folks won't go to the trouble of setting up accounts at multiple banks with the interlocking automatic transfers, in order to meet the required deposit threshold. That lets them save on the interest payments to consumers that are individually tiny, but significant in the aggregate. |
What is the rationale behind stock markets retreating due to S&P having a negative outlook on the USA? | Many of the major indices retreated today because of this news. Why? How do the rising budget deficits and debt relate to the stock markets? It does seem strange that there is a correlation between government debt and the stock market. But I could see many reasons for the reaction. The downgrade by S&P may make it more expensive for the government to borrow money (i.e. higher interest rates). This means it becomes more expensive for the government to borrow money and the government will probably need to raise taxes to cover the cost of borrowing. Rising taxes are not good for business. Also, many banks in the US hold US government debt. Rising yields will push down the value of their holdings which in turn will reduce the value of US debt on the businesses' balance sheets. This weakens the banks' balance sheets. They may even start to unload US bonds. Why is there such a large emphasis on the S&P rating? I don't know. I think they have proven they are practically useless. That's just my opinion. Many, though, still think they are a credible ratings agency. What happens when the debt ceiling is reached? Theoretically the government has to stop borrowing money once the debt ceiling is reached. If this occurs and the government does not raise the debt ceiling then the government faces three choices: |
What is the meaning of “writing put options”? | Writing options means "selling" options and "put" options are contracts to sell a defined security (the underlying), at a specific date (expiration date) and at a specific price (strike price). So, writing put options simply mean selling to others contracts to sell. Your profit is limited to the premium but your loss may be unlimited in a falling market. |
Why would Two ETFs tracking Identical Indexes Produce different Returns? | The top ten holdings for these funds don't overlap by even one stock. It seems to me they are targeting an index for comparison, but making no attempt to replicate a list of holdings as would, say, a true S&P index. |
Why diversify stocks/investments? | Basically, diversifying narrows the spread of possible results, raising the center of the returns bell-curve by reducing the likelihood of extreme results at either the high or low end. It's largely a matter of basic statistics. Bet double-or-nothing on a single coin flip, and those are the only possible results, and your odds of a disaster (losing most or all of the money) are 50%. Bet half of it on each of two coin flips, and your odds of losing are reduced to 25% at the cost of reducing your odds of winning to 25%, with 50% odds that you retain your money and can try the game again. Three coins divides the space further; the extremes are reduced to 12.5% each, with the middle being most likely. If that was all there was, this would be a zero-sum game and pure gambling. But the stock market is actually positive-sum, since companies are delivering part of their profits to their stockholder owners. This moves the center of the bell curve up a bit from break-even, historically to about +8%. This is why index funds produce a profit with very little active decision; they treat the variation as mostly random (which seems to work statistically) and just try to capture average results of a (hopefully) slightly above-average bucket of stocks and/or bonds. This approach is boring. It will never double your money overnight. On the other hand, it will never wipe you out overnight. If you have patience and are willing to let compound interest work for you, and trust that most market swings regress to the mean in the long run, it quietly builds your savings while not driving you crazy worrying about it. If all you are looking for is better return than the banks, and you have a reasonable amount of time before you need to pull the funds out, it's one of the more reliably predictable risk/reward trade-off points. You may want to refine this by biasing the mix of what you're holding. The simplest adjustment is how much you keep in each of several major investment categories. Large cap stocks, small cap stocks, bonds, and real estate (in the form of REITs) each have different baseline risk/return curves, and move in different ways in response to news, so maintaining a selected ratio between these buckets and adding the resulting curves together is one simple way to make fairly predictable adjustments to the width (and centerline) of the total bell curve. If you think you can do better than this, go for it. But index funds have been outperforming professionally managed funds (after the management fees are accounted for), and unless you are interested in spending a lot of time researching and playing with your money the odds of your doing much better aren't great unless you're willing to risk doing much worse. For me, boring is good. I want my savings to work for me rather than the other way around, and I don't consider the market at all interesting as a game. Others will feel differently. |
Working Capital Definition | As you say, if you delay paying your bills, your liabilities will increase. Like say your bills total $10,000 per month. If you normally pay after 30 days, then your short-term liabilities will be $10,000. If you stretch that out to pay after 60 days, then you will be carrying two months worth of bills as a short-term liability, or $20,000. Your liabilities go up. Assume you keep the same amount of cash on hand after you stretch out your payments like this as you did before. Now your liabilities are higher but your assets are the same, so your working capital goes down. For example, suppose you kept $25,000 in the bank before this change and you still keep $30,000 after. Then before your working capital was $25,000 minus $10,000, or $15,000. After it is $25,000 minus $20,000, or only $5,000. So how does this relate to cash flow? While presumably if the company has $10,000 per month in bills, and their bank balance remains at $25,000 month after month, then they must have $10,000 per month in income that's going to pay those bills, or the bank balance would be going down. So now if they DON'T pay that $10,000 in bills this month, but the bank account doesn't go up by $10,000, then they must have spent the $10,000 on something else. That is, they have converted that money from an on-going balance into cash flow. Note that this is a one-time trick. If you stretch out your payment time from 30 days to 60 days, then you are now carrying 2 months worth of bills on your books instead of 1. So the first month that you do this -- if you did it all at once for all your bills -- you would just not pay any bills that month. But then you would have to resume paying the bills the next month. It's not like you're adding $10,000 to your cash flow every month. You're adding $10,000 to your cash flow the month that you make the change. Then you return to equilibrium. To increase your cash flow every month this way, you would have to continually increase the time it takes you to pay your bills: 30 days this month, 45 days the next, 60 the next, then 75, 90, etc. Pretty soon your bills are 20 years past due and no one wants to do business with you any more. Normally people see an action like this as an emergency measure to get over a short-term cash crunch. Adopting it as a long-term policy seems very short-sighted to me, creating a long-term relationship problem with your suppliers in exchange for a one-shot gain. But then, I'm not a big corporate finance officer. |
How to take advantage of record high household debt in Canada? | Some ideas: |
How does stabilization work during an IPO? | There are no "rules" about how the price should act after an IPO, so there are no guarantee that a "pop" would appear at the opening day. But when an IPO is done, it's typically underpriced. On average, the shares are 10% up at the end of the first day after the IPO (I don't have the source that, I just remember that from some finance course). Also, after the IPO, the underwriter can be asked to support the trading of the share for a certain period of time. That is the so called stabilizing agent. They have few obligations like: This price support in often done by a repurchase of some of the shares of poorly performing IPO. EDIT: Informations about the overallotment pool. When the IPO is done, a certain number of client buy the shares issued by the company. The underwriter, with the clients, can decide to create an overallotment pool, where the clients would get a little more shares (hence "overallotment"), but this time the shares are not issued by the company but by the underwriter. To put it another way, the underwriter oversell and becomes short by a certain number of shares (limited to 15% of the IPO). In exchange for the risk taken by this overallotment, the underwriter gets a greenshoe option from the clients, that will allows the underwriter to buy back the oversold shares, at the price of the IPO, from the clients. The idea behind this option is to avoid a market exposure for the underwriter. So, after the IPO: If the price goes down, the underwriter buys back on the market the overshorted shares and makes a profits. If the price goes up, the company exercise the greenshoe option buy the shares at the IPO prices (throught the overallotment pool, that is, the additional shares that the clients wanted ) to avoid suffering a loss. |
Is there any online personal finance software without online banking? | SavingsMap is a web-based personal finance forecasting tool that requires no bank account or personal information other than an email address. As founder of SavingsMap, our goal is to forecast future cash flows based on your current budget, while using strategies to minimize US tax obligations and taking into account expected major life events. |
What does negative Total Equity means in McDonald's balance sheet? | what does negative Total Equity means in McDonald's balance sheet? It means that their liabilities exceed their total assets. Usually is means that a company has accumulated losses over time, but that's just one explanation. But, isn't McDonald a very healthy company, and never lost money? Just because a company has "always" money does not mean it's a healthy company. It may have borrowed a lot of money in order to operate, and now the growth is not able to keep up with the debt load. In McDonald's case, the major driver in the equity change is the fact that they have bought back over $20 Billion in stock over the past few years, which reduces assets and equity. If they had instead paid off debt, their equity would not be negative, but their debt may be so cheap (in terms of interest rate) that it made more financial sense to buy back stock instead of paying off debt. There are too many variables to assess that in this forum. |
How is the Dow divisor calculated? | The details of the DJIA methodology is outlined in the official methodology document on their website. In addition, you will need their index mathematics document, which gives the nitty-gritty details of any type of adjustments that must be made. Between the two you should have the complete picture in as fine a detail as you want, including exactly what is done in response to various corporate actions like splits and structural changes. |
Is it better for a public company to increase its dividends, or institute a share buyback? | In some sense, the share repurchasing program is better if the company does not foresee the same profit levels down the road. Paying a dividend for several years and then suddenly not paying or reducing a dividend is viewed as a "slap in the face" by investors. Executing a share repurchase program one year and then not the next is not viewed as negatively. From an investor's standpoint, I would say a dividend is preferred over a share repurchase program for a similar reason. Typically companies that pay a dividend have been doing so for quite some time and even increasing it over time as the company increases profits. So, it can be assumed that if a company starts paying a dividend, it will do so for the long-run. |
Is there a way to buy raw oil today and sell it in 1 year time? | There are many ways of investing either directly or indirectly in oil: all of these options are ways to invest in an expected change in the price of oil at various degrees of directness and risk profiles. Investing in derivative or derivative-like products such as futures and CFDs is very risky and requires a good degree of sophisticated knowledge to manage. |
Why could rental costs for apartments/houses rise while buying prices can go up and down? | They are two different animals. When you rent you are purchasing a service. The landlord, as your service provider, has to make a profit, pay employees to do maintenance, and buy materials. The price of these things will increase with inflation, and that rolls into your rent price. Taxes also are passed to the tenant, and those tend to only go upward. Market forces of supply/demand will drive fluctuation of prices as well, as other posts have described. When you buy, you are purchasing just the asset - the home. This price will also be driven by supply/demand in the market, but don't try to compare it to buying a service. Cheers! |
Why and why would/wouldn't a company split their stock? | A reason not to split your stock is that the value of the company might fall back again, and if its stock price falls below $1 it will be delisted from the NYSE. So if the value of your company grows tenfold so the shares go from $5 to $50, you do a ten-for-one split, and then its value shrinks back to where it started, you're off the stock exchange. |
Is it possible for the average person to profit on the stock market? | Below is a list of rules that will help you to decide what types of products you should be investing in: |
Debt collector has wrong person and is contacting my employer | From a page on consumerfinance.gov A debt collector generally may not contact your employer or other third-parties about the debt. Debt collectors may ask your employer to verify your employment, or ask for your address or telephone number. Note - they aren't even allowed to tell the employer that they are trying to collect a debt. So - even if you were the guilty party, this isn't allowed. They've already broken very clear laws and thus are probably not trustworthy, so (echoing what others have said) don't give them your own personal information. If they've done one day's research on the law governing their industry they know this is illegal. If they've actually gotten any money from your employer, it's theft. If they haven't then it's just attempted theft. Contact the police regardless. Also - contact a lawyer. You may well have the right to sue them. They've broken Federal laws in a way that causes you injury. Odds are they've broken state laws as well. One last point - do you even have proof that these are debt collectors collecting a real debt, rather than people trying to get you to give them your SSN? Perhaps their business plan is to look at company webpages and send bogus requests to the employers for some random employee and then see what information they get back (I'm not him, here's my personal information). Be very careful to not give any personally identifiable information (date of birth, address, SSN, mother's maiden name, etc). Anything they ask about you don't provide. |
Understanding how this interpretation of kelly criterion helps the trader | Three important things worth remembering about Kelly when applied to real world edges: 1) Full Kelly staking is gut wrenchingly volatile. While it maximises the growth of the bankroll, it does so in a way that still leaves you very likely to experience massive (50%+) reductions in capital. Most long terms users of Kelly tend to stick in the 1/4 to 1/2 Kelly unit range to try and stay sane and retain a margin of error. See below for how large the typical swings can be with full Kelly: 2) Garbage in, garbage out. If you are making errors in pricing your actual edge, Kelly becomes very wrong very fast, easily leading you to a high chance of ruin if you are over estimating your true edge. As most people do massively over estimate their edges, Kelly simply pushes them far into territory where risk of ruin is high. 3) A Kelly user prefers to back likely outcomes over non likely ones, even to the point where they prefer a smaller % edge if the chances of winning are better. Compare the below comparison of growth between two betting scenarios (decimal odds, so for the percantage chances do 1/odds): In this case, despite the percentage edge on the red bet being higher than that of the green, in terms of bankroll growth it ends up only being roughly as good to a kelly gambler as the smaller edge on the more likely event. This has an obvious effect on the types of edges you should be seeking out if given choices between liklihoods. |
How does the Pension system work in Poland? | Pretty simple actually. This is a state-run defined benefit plan, where the benefit is calculated based on the length of the employment and the contributed amounts. This is what in the US is known as the Social Security. This is a defined contribution plan, where the employee can chose the level of risk based on certain pre-defined investment guidelines (more conservative or more aggressive). In Poland, it appears that there's a certain amount of the state-mandated SS tax is transferred to these plans. Nothing in the US is like that, but you can see it as a mandatory IRA with a preset limited choice of mutual funds to invest into, as an analogy. The recent change was to reduce the portion of the madatory contribution that is diverted to this plan from 7+% to 2.3% (on account of expanding the contribution to (1)). Probably the recent crashes of the stock markets that affected these accounts lead to this decision. This is voluntary defined contribution plan, similar to the US 401Ks. This division is actually pretty common, not unique to Poland. I'd say its the "standard" pension scheme, as opposed to what we're used to in the US. |
How do I refinance a car loan into someone else's name so it can be their car? | The other person has to decide that they want to be wholly responsible for the loan, and they have to be able to qualify for the loan. They are in essence purchasing the car from you with the sale price being the remaining balance of the loan. You will then use the processed from the new loan to pay the old loan off completely. They will then take the bill of sale to the state DMV/MVA to register the car in their name. You should have them start with their bank for a new car loan. |
Buying a truck to write off on taxes | Assuming your country is the United States there is. See schedule C line 9 and the corresponding instructions. There are many rules associated with this, in some cases the entire purchase can be written off but typically if the truck is only used for business. Most people write off partial usage in the form of credits for mileage. You are best to consult with a CPA once your business earns a profit. Good luck. |
How important is disability insurance, e.g. long-term, LTD? Employer offers none | The reason to have disability insurance is to replace your income if you become disabled and are no longer able to work. For this purpose, it is kind of similar to life insurance where you want to replace your income to take care of people that depend on your income if you die, but now you are included in the people that depend on your income. If your employer doesn't provide any disability insurance then it would be wise to look for some Long Term disability insurance. Short Term disability is more expensive than long term and it is USUALLY better and cheaper to have a good emergency fund to provide for a short term disability such as being sick for a month and not able to work than to buy short-term. As a web developer - you should be able to get long term disability insurance at a reasonable cost, unless you have some dangerous hobbies like forest fire fighting or shark juggling. |
How are people able to spend more than what they make, without going into debt? | Rich people use debt for various reasons. The question should not assume that billionaires don't use debt. They also pay lower interest rates on that debt because they have enough collateral that their debt is safer than a typical mortgage. Many rich people will use interest only mortgages on their primary residences so that they can keep their stock earning at higher growth rates than the mortgage interest that they are paying all while writing off a portion of that mortgage interest on their taxes. Taking an artificially low salary and receiving equity for the larger portion of compensation is also a tax strategy to limit the amount of taxes owed on that income. If paid directly in stock grants, that will count as income, but if paid in options, then the purchased stock will only be taxed at the lower capital gains rates if the stock is held for a year after the options are exercised. Every billionaire will have complicated tax avoidance strategies that will require multi-year planning for the best long-term minimization of taxes. Debt is a strategic part of that planning. Also consider that a major part of that upscale lifestyle (corporate jets, fancy meals, etc.) is on the company dime because the CEO is always on the clock. As long as he is meeting with business prospects or doing other company business, those expenses will be justified for the corporation and not attributed as income. |
Is a stock's trade size history publicly available? | You can buy the data and process it on your own. http://www.nyxdata.com/Data-Products/Daily-TAQ |
Canceling credit cards - insurance rate increase? | You don't need to have a bunch of credit cards lying around; just a couple is fine. Get a "rewards" card (without annual fee) that pays you back for use, and use it regularly to buy groceries, for example. Pay it off promptly each month, using the rewards, if you like, to reduce the amount you have to send in. Or you can use the rewards for other purchases; some merchants offer $25 worth of merchandise for $20 in rewards. It used to be the case that you could negotiate a discount for paying cash rather than use a credit card, but that is a lot harder to do now, in many cases because credit-card company contracts with merchants prohibit this practice. Also, merchants often prefer credit cards rather than cash because money-handling is an issue (pay for an armored car to come pick up the day's receipts, or risk getting mugged on the way to the bank, possible burglaries if you leave the money overnight in the store, daily balancing of cash-register trays, etc.) So, not being in debt and being rich enough to not need to be in debt are laudable goals, and you have my best wishes that you will reach them soon, but getting rid of all your credit cards as a part of not being in debt may be more trouble than it is worth. Keep a couple, pay them off promptly, and if you are concerned about being in debt, you can time your charges so that you are in debt at most 2 or 3 days each month. |
Does it make sense to trade my GOOGL shares for GOOG and pocket the difference? | Too much fiddling with your portfolio if the difference is 3-4% or less (as it's become in recent months). Hands off is the better advice. As for buying shares, go for whichever is the cheapest (i.e. Goog rather than Googl) because the voting right with the latter is merely symbolic. And who attends shareholders' meetings, for Pete's sake? On the other hand, if your holdings in the company are way up in the triple (maybe even quadruple) figures, then it might make sense to do the math and take the time to squeeze an extra percentage point or two out of your Googl purchases. The idle rich occupying the exclusive club that includes only the top 1% of the population needs to have somethinng to do with its time. Meanwhile, the rest of us are scrambling to make a living--leaving only enough time to visit our portfolios as often as Buffett advises (about twice a year). |
Should I fund retirement with a static asset allocation or an age based glide path? | I think not. I think a discussion of optimum mix is pretty independent of age. While a 20 year old may have 40 years till retirement, a 60 year old retiree has to plan for 30 years or more of spending. I'd bet that no two posters here would give the same optimum mix for a given age, why would anyone expect the Wall Street firms to come up with something better than your own gut suggests? |
Book or web site resources for an absolute beginner to learn about stocks and investing? | The Winning Investor http://winninginvestor.quickanddirtytips.com/ This is a blog and a podcast. Load a bunch of these onto your iPod and start listening. Stikky Stock Charts http://www.amazon.com/Stikky-Stock-Charts-professionals-smart/dp/1932974008 This is a beginner's guide on how to read charts. Lots of charts, not too many words. |
Is stock trading based more on luck than poker playing? | I'd say that it cannot be meaningfully calculated or measured because the two are just too different in every way. Poker Stock trading I guess the last point (that someone relying on luck is exploitable in poker but not in stock trading) could be interpreted as stock trading being based more on luck, while the second and third points indicated that poker has more true randomness and is thus based more on luck. Something both have in common is that people who have been losing money are often tempted to take stupid risks which lose them everything. |
How long should I keep an uncleared transaction in my checkbook? | Why would you consider it null and void? It might be that something went wrong and the business "lost" the transaction one way or another. It might be something else. It might never appear. It might appear. In one of the questions a while ago someone posted a link of a story where an account was overdrawn because of a forgotten debit card charge that resurfaced months later. Can't find the link right now, but it can definitely happen. |
How are people able to spend more than what they make, without going into debt? | I don't know about Jeff Bezos in particular but, in general, and with a a few other notorious exceptions like Warren Buffet, billionaires also have incomes (salary, dividends, fees to seat on various boards of directors, etc.) in the millions, not the tens of thousand. That's typically still much lower than their wealth but certainly enough to sustain a comfortable lifestyle. However it's still true that some billionaires have so much of their wealth tied up in a single corporation that they could not practically get it all out at once, if they ever wanted to. But they can still typically sell at least some shares, which is exactly what Jeff Bezos has done to buy the Washington Post for example. |
Selling on eBay without PayPal? | It's been a short while since I sold on eBay, but I had a feedback rating of about 4,500 so I've done a lot of transactions. The trump card is, and always will be, the buyer's ability to contact their credit card company and reverse the charges. PayPal has no policy to stop this even though they claim to "vigorously defend Sellers from chargebacks" on their website. You will lose this case 100% of the time. I don't see how that will change if you have your own terminal. The Buyer can still reverse the charges. Since you know the card number maybe you can contact his credit card company but it's probably not going to do much. I've found PayPal is more Seller friendly in terms of PayPal claims. For example, the customer has a duty to pay postage to return the product and that's a cost for him. You also have things like online tracking which shows delivery and PayPal has an IP log to see where the payments are coming from. That helped me when a buyer claimed that someone else made the payment. Because people often break into someone's house and make PayPal payments for them....heh. You really just need to use PayPal. You'll get more customers and better prices and it will offset the losses from scammers. Also, about 99% of buyers are honest people. Consider the scammers a cost of doing business and keep making money off of the good Buyers. If you're just pissed off that people actually scammed you, get over it. Don't cut off your nose to spite your face. It's just part of doing business on eBay. |
Cannot get a mortgage because I work through a recruiter | I think you are running into multiple problems here: All these together look like a high risk to a bank, especially right now with companies being reluctant to hire full-time employees. Looking at it from their perspective, the last thing they need right now is another potential foreclosure on their books. BTW, if it is a consolation, I had to prove 2 years of continuous employment (used to be a freelancer) before the local credit union would consider giving me a mortgage. We missed out on a couple of good deals because of that, too. |
Accepting high volatility for high long-term returns | This is basically what financial advisers have been saying for years...that you should invest in higher risk securities when you are young and lower risk securities when you get older. However, despite the fact that this is taken as truth by so many financial professionals, financial economists have been unable to formulate a coherent theory that supports it. By changing the preferences of their theoretical investors, they can get solutions like putting all your investments in a super safe asset until you get to a minimum survival level for retirement and then investing aggressively and many other solutions. But for none of the typically assumed preferences does investing aggressively when young and becoming more conservative as you near retirement seem to be the solution. I'm not saying there can be no such preferences, but the difficulty in finding them makes me think maybe this idea is not actually correct. Couple of problems with your intuition that you should think about: It's not clear that things "average out" over time. If you lose a bunch of money in some asset, there's no reason to think that by holding that asset for a while you will make back what you lost--prices are not cyclical. Moreover, doesn't your intuition implicitly suggest that you should transition out of risky securities as you get older...perhaps after having lost money? You can invest in safe assets (or even better, the tangency portfolio from your graph) and then lever up if you do want higher risk/return. You don't need to change your allocation to risky assets (and it is suboptimal to do so--you want to move along the CAL, not the curve). The riskiness of your portfolio should generally coincide (negatively) with your risk-aversion. When you are older and more certain about your life expectancy and your assets, are you exposed to more or less risks? In many cases, less risks. This means you would choose a more risky portfolio (because you are more sure you will have enough to live on until death even if your portfolio takes a dive). Your actual portfolio consists both of your investments and your human capital (the present value of your time and skills). When you are young, the value of this capital changes significantly with market performance so you already have background risk. Buying risky securities adds to that risk. When you are old, your human capital is worth little, so your overall portfolio becomes less risky. You might want to compensate by increasing the risk of your investments. EDIT: Note that this point may depend on how risky your human capital is (how likely it is that your wage or job prospects will change with the economy). Overall the answer to your question is not definitively known, but there is theoretical evidence that investing in risky securities when young isn't optimal. Having said that, most people do seem to invest in riskier securities when young and safer when they are older. I suspect this is because with life experience people become less optimistic as they get older, not because it is optimal to do so. But I can't be sure. |
Repaying Debt and Saving - Difficult Situation | Just a thought, but have you considered approaching your sister about assuming the student loans or repaying your mother (even if it is a small amount/month) for financing her college education? If she is in her last year of college, in theory she should be earning at least some income within the next 2 years. Also, it doesn't seem like a lot to ask considering the sacrifices (both financial and otherwise) that a single mom probably made over the years. I'm sure your mom would be hesitant to ask as it seems like she prioritizes her children above herself by your description of the situation, but I bet if you could talk the sister into the mom would grudgingly accept it if she really is in such a tight financial situation. |
Making a big purchase over $2500. I have the money to cover it. Should I get a loan or just place it on credit? | You want to know if you should pay cash or use a credit card like cash? There are so many benefits to the card, like purchase protection, cash back, and postponed payments, that there needs to be a really good reason to pay cash. If you are concerned about the 10% threshold, ask your credit card company to raise your limit. If you are indifferent, let the merchant decide for you by asking for a discount if you pay cash. The biggest reason is that credit cards, when handled shrewdly, make your money work for you by keeping it in less liquid / higher interest investments like inflation-adjusted T-bills. You will still be able to access it by using the credit card to float large expenses without liquidating at a loss. Investment Accounts like Schwab One are great for this since you can "borrow" cash at a low interest rate against your securities, until your security sale clears. |
What margin is required to initiate and maintain a short sale | Depends on the stock involved, but for the most part brokerages allow you gain entry at 50%, meaning you can short twice the cash on hand you have. Going forward, you need to maintain 30%, so on a $10,000 short, you'd have to maintain $3000 in your account. Example, an account with $5000 cash - You can short $10,000 securities. Let say 100 shares of xyz at $100 per share. After trade settles, you won't receive a margin call until your balance falls to $3000, probably right around the time xyz rises to $120 per share. Riskier stocks will have higher margin maintenance requirements - leveraged vehicles like FAS/FAZ (triple leveraged) require 90% margin (3x30%) if they are allowed to be 'shorted' at all. |
What is an exercise price in regards to restricted stock awards? | It's still the purchase price or the price at which the shares are purchased or granted. This Investopedia article describes how the price is used for tax purposes: The amount that must be declared [for tax purposes] is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested. Restricted stock awards are similar to stock options. The employer promises to grant the employee a certain number of shares upon the completion of the vesting schedule. The price at which the shares are purchased (or granted, if the price is zero) is the exercise price. |
Do I have to pay a capital gains tax if I rebuy different stocks? | Yes. As long as the stock is in a taxable account (i.e. not a tax deferred retirement account) you'll pay gain on the profit regardless of subsequent purchases. If the sale is a loss, however, you'll risk delaying the claim for the loss if you repurchase identical shares within 30 days of that sale. This is called a wash sale. |
How can I buy government bonds from foreign countries? | Significantly less effort to buy into any of several international bond index funds. Off the top of my head, VTIBX. |
Low risk withdrawal from market. Is there a converse to dollar-cost-averaging? | When you are a certain age you will be able to tap into your retirement accounts, or start receiving pension and social security funds. In addition you may be faced with required minimum distributions from these accounts. But even before you get to those points you will generally shift the focus of new funds into the retirement account to be more conservative. Depending on the balances in the various accounts and the size of the pension and social security accounts you may even move invested funds from aggressive to conservative investments. The proper proportion of the many different types of investments and revenue streams is open to much debate. During retirement you will be pulling money out of retirement accounts either to support your standard of living or to meet the required minimum distributions. What to sell will be based on either the tax implications or the required distributions that will still maintain the asset allocation you desire. If your distributions are driven by the law you will be selling enough to meet a specific required $ figure. You will either spend that money or move it into a low interest savings account or a non-retirement investment account. If trying to meet your standard of living expectations you will be selling funds that allow you to keep your desired asset allocation but still have enough to live on. Again you will be trying to meet a specific $ figure. Of course you may decide at anytime in retirement to rebalance based on changes to your lifestyle, family obligations, or winning the lottery. |
Under what circumstance will the IRS charge you a late-payment penalty for taxes? | In practice the IRS seems to apply the late payment penalty when they issue a written paper notice. Those notices typically have a pay-by date where no additional penalty applies. The IRS will often waive penalties, but not interest or tax due, if the taxpayer presses the issue. |
How much of each stock do index funds hold? | Note that an index fund may not be able to precisely mirror the index it's tracking. If enough many people invest enough money into funds based on that index, there may not always be sufficient shares available of every stock included in the index for the fund to both accept additional investment and track the index precisely. This is one of the places where the details of one index fund may differ from another even when they're following the same index. IDEALLY they ought to deliver the same returns, but in practical terms they're going to diverge a bit. (Personally, as long as I'm getting "market rate of return" or better on average across all my funds, at a risk I'm comfortable with, I honestly don't care enough to try to optimize it further. Pick a distribution based on some stochastic modelling tools, rebalance periodically to maintain that distribution, and otherwise ignore it. That's very much to the taste of someone like me who wants the savings to work for him rather than vice versa.) |
Is this mortgage advice good, or is it hooey? | add the interest for the next 5 payments and divide that by how much you paid on the principal during that time Let's see - on a $200K 6% loan, the first 5 months is $4869. Principal reduction is $1127. I get 4.32 or 432%. But this is nonsense, you divide the interest over the mortgage balance, and get 6%. You only get those crazy numbers by dividing meaningless ratios. The fact that early on in a mortgage most of the payment goes to interest is a simple fact of the the 30 year nature of amortizing. You are in control, just add extra principal to the payment, if you wish. This idea sounds like the Money Merge Account peddled by UFirst. It's a scam if ever there was one. I wrote about it extensively on my site and have links to others as well. Once you get to this page, the first link is for a free spreadsheet to download, it beats MMA every time and shows how prepaying works, no smoke, no mirrors. The second link is a 65 page PDF that compiles nearly all my writing on this topic as I was one of the finance bloggers doing what I could to expose this scam. I admit it became a crusade, I went as far as buying key word ads on google to attract the search for "money merge account" only to help those looking to buy it find the truth. In the end, I spent a few hundred dollars but saved every visitor the $3500 loss of this program. No agent who dialoged with me in public could answer my questions in full, as they fell back on "you need to believe in it." I have no issue with faith-based religion, it actually stands to reason, but mortgages are numbers and there's order to them. If you want my $3500, you should know how your system works. Not one does, or they would know it was a scam. Nassim Taleb, author of "The Black Swan" offered up a wonderful quote, "if you see fraud, and do not say 'fraud,' you are a fraud." The site you link to isn't selling a product, but a fraudulent idea. What's most disturbing to me is that the math to disprove his assertion is not complex, not beyond grade school arithmetic. Update 2015 - The linked "rule of thumb" is still there. Still wrong of course. Another scam selling software to do this is now promoted by a spin off of UFirst, called Worth Unlimited. Same scam, new name. |
What are the economic benefits of owning a home in the United States? | Is all interest on a first time home deductible on taxes? What does that even mean? If I pay $14,000 in taxes will My taxes be $14,000 less. Will my taxable income by that much less? If you use the standard deduction in the US (assuming United States), you will have 0 benefit from a mortgage. If you itemize deductions, then your interest paid (not principal) and your property tax paid is deductible and reduces your income for tax purposes. If your marginal tax rate is 25% and you pay $10000 in interest and property tax, then when you file your taxes, you'll owe (or get a refund) of $2500 (marginal tax rate * (amount of interest + property tax)). I have heard the term "The equity on your home is like a bank". What does that mean? I suppose I could borrow using the equity in my home as collateral? If you pay an extra $500 to your mortgage, then your equity in your house goes up by $500 as well. When you pay down the principal by $500 on a car loan (depreciating asset) you end up with less than $500 in value in the car because the car's value is going down. When you do the same in an appreciating asset, you still have that money available to you though you either need to sell or get a loan to use that money. Are there any other general benefits that would drive me from paying $800 in rent, to owning a house? There are several other benefits. These are a few of the positives, but know that there are many negatives to home ownership and the cost of real estate transactions usually dictate that buying doesn't make sense until you want to stay put for 5-7 years. A shorter duration than that usually are better served by renting. The amount of maintenance on a house you own is almost always under estimated by new home owners. |
Is it legal to not get a 1099-b until March 15? | The deadline to mail is February 15. However, if the form is being prepared by a middleman (i.e. Wells Fargo) then they have until March 15th (on page 24). Also, if you haven't received your 1099 form by February 14, you may contact the IRS and they will contact and request the missing form on your behalf. I know that's a lot of information, but to answer your question, yes, there are situations where March 15th is the deadline instead of February 15th. |
Who owned my shares before me? | A lot will depend on wether you have in your possession the physical share documents or just numbers in your brokerage portfolio. Electronic shares are not traceable as they do not exist as individual entities. ETrade certainly knows who bought how much, but no concept of which ones. Lets say ET buys 1000 shares of Acme, their database looks like this: Now they sell 400 shares to Bob: Bob sells 200, Alice buys 100: ( skipped one transaction for brevity ) Did Alice get 100 shares out of ET's original 1000, or did she get 100 shares that were previously owned by Bob? Or 27 from ET and 73 from ET? Another, less exact way to picture the process is one share is 1ml of liquid. If you return 50ml to the pot it becomes indistinguishable from the rest. |
Multi-Account Budgeting Tools/Accounts/Services | IngDirect has this concept of sub accounts inside a main account - that might be perfect for what you are looking for. To clarify, you basically have one physical account with logical sub account groupings. |
Why is a stock dividend considered a dividend? What makes it different from a stock split? | A stock dividend isn't exactly a split. Example: You have 100 shares of stock worth $5 a share (total value $500). The company wants to distribute a dividend worth 1%. You could expect a check for $5. But If they wanted to do a stock dividend they could send you 0.01 shares for every share you own, in your case you will be given a single share worth $5. Now you own 101 shares. Why a share dividend? It doesn't take cash to give the dividend. It keeps the money invested in the company. Some investors re-invest a cash dividend, some don't. A cash dividend is generally taxable income for the investor; a stock dividend isn't. Some investors prefer one over the other, but it depends on their specific financial picture. Neither a stock dividend, a cash dividend or split changes anything. The split changes the price to meet a goal. The cash dividend lowers the price by sending excess cash to the investors. The stock dividend lowers the price by creating new shares and retaining cash. It company picks the message and the method. depending on their goals and situation. Remember that a company may want to give a dividend because they have a history of doing so, but not have the cash to do so. It is like a split because the number of shares you own will go up, and the price per share will go down. But a split is generally done to bring the price of a share to within a specific range. The company sees a benefit to having a stock mid priced, instead of very high or very low. |
With respect to insider trading, what is considered “material information”? | Some history: In the US, this is very tightly controlled and regulated. Although stock market securities insider trading is a relatively new crime around the world (20-30 year old), the United States is exceptional for offering the longest sentences for it, although it is still far more lucrative than and carries lower sentences than something like petty larceny. The perception of illegal insider trading has changed in the US over the years, although it is based on much older fraud statutes the regulators and the courts have only really developed modern case law against insider trading in the past 20-30 years. The US relies on its vast network of registered broker-dealers to detect and report abnormal trading activity and the regulator (SEC) can quickly obtain emergency court orders from rent-a-judges (Administrative Law Judges) to freeze trader's assets to prevent them from withdrawing, or quickly enacting sanctions. So this reality helps deter trading on material inside information. So for someone that needs to get an information advantage on the market, it is [simply] necessary for them to rationalize how this information could be inferred from public sources. Similarly there is a thin line between non-public information and public information, the "lab experiment" example would be material insider information, but the fact that there will be litigation over a company's key patents may be "public" as soon as the lawyer submits the complaint to the court system. It is also worth noting that there are A LOT of financial products trading in the capital markets, and illegal insider trading laws only applies to trading of shares of a company. So if a major holder in gold is about to liquidate all their holdings, being short gold futures is not subject to civil and criminal sanctions. Hope this helps. The above examples should help you understand what kind of information is material inside information and what kind is not, and how it is relevant to trading decisions. |
How does a bank make money on an interest free secured loan? | Other answers didn't seem to cover it, but most "0%" bank loans (often offered to credit card holders in the form of balance transfer checks), aside from less-obvious fees like already-mentioned late fees, also charge an actual loan fee, typically 2-3% (or a minimum floor amount) - that was the deal with every single transfer 0% offer I ever saw from a bank. So, effectively, even if you pay off the loan perfectly, on time, and within 0% period, you STILL got a 3% loan and not 0% (assuming 0% period lasts 12 months which is often the case). |
What are some good ways to control costs for groceries? | This may not help with the overall grocery issue, but I find that there are items that I can do without the name brand version of. A handy rule-of-thumb is to start with the least-expensive brand and work your way up, until you find one that your family likes. For instance, I've learned I can do without French's mustard in favour of no-name, but there's no way I can live without Kraft peanut butter. |
Schedule C: where to deduct service fees on income? | Putting them on line 10 is best suited for your situation. According to Quickbooks: Commissions and Fees (Line 10) Commissions/fees paid to nonemployees to generate revenue (e.g. agent fees). It seems like this website you are using falls under the term "nonemployees". |
How much more than my mortgage should I charge for rent? | I just wanted to add one factor to the other answers. The cost of maintenance etc. is not a fraction of the cost of financing - it is more likely a fraction of the value of the house, and a function of its age. If you say you need to replace a roof every 25 years, and that costs $10,000 (depends on the size of the house, obviously), then you need to set aside $400 a year for roof repair. Other costs (painting, flooring, kitchen, bathrooms, water heaters, heating, AC, yard upkeep etc) can be roughly estimated in the same way. A rule of thumb is 1% of the value of the house per year to cover all big-ticket maintenance. If you pay 4% mortgage, that would increase the reserve by 25%; but if interest rates rise, the fraction may be smaller (I remember paying over 10% mortgage...). In general, whether keeping a property for long term rental income (with the potential for appreciation - but prices can go up and down) is a good idea will largely depend on your ability to predict future costs and value. If you have a variable mortgage, that will be harder to do. |
Why do stores and manufacturers use mail in rebates? A scam, or is there a way to use them effectively? | Rebates are a great way to give discounts to customers who are cost sensitive. A long time ago, I worked for a retailer that extensively used rebates as a marketing tool. From my point of view, about 90% of the complaints that I investigated were a result of people not following directions. Biggest single thing was not sending original documentation when it was called for. |
How do stocks like INL (traded in Frankfurt) work? | They don't have to track each other, it could just be listed on more than one exchange. The price on one exchange does not have to match or track the price on the other exchange. This is actually quite common, as many companies are listed on two or more exchanges around the world. |
Working for recruiter on W-2 vs. working for client on 1099? | I don't think anyone can give you a definitive answer without knowing all about your situation, but some things to consider: If you are on a 1099, you have to pay self-employment tax, while on a W-2 you do not. That is, social security tax is 12.4% of your income. If you're a 1099, you pay the full 12.4%. If you're W-2, you pay 6.2% and the employer pays 6.2%. So if they offer you the same nominal rate of pay, you're 6.2% better off with the W-2. What sort of insurance could you get privately and what would it cost you? I have no idea what the going rates for insurance are in California. If you're all in generally good health, you might want to consider a high-deductible policy. Then if no one gets seriously sick you've saved a bunch of money on premiums. If someone does get sick you might still pay less paying the deductible than you would have paid on higher premiums. I won't go into further details as that's getting off into another question. Even if the benefits are poor, if there are any benefits at all it can be better than nothing. The only advantage I see to going with a 1099 is that if you are legally an independent contractor, then all your business expenses are deductible, while if you are an employee, there are sharp limits on deducting employee business expenses. Maybe others can think of other advantages. If there is some reason to go the 1099 route, I understand that setting up an LLC is not that hard. I've never done it, but I briefly looked into it once and it appeared to basically be a matter of filling out a form and paying a modest fee. |
Isn't an Initial Coin Offering (ICO) a surefire way to make tons of money? | My big gripe with the ICO name and corresponding mania is that it has no similarity to an IPO. At best an ICO is a seed stage investment in a wholly unproven technology/idea/theoretical use. A developer team gets together to write a fancy whitepaper, then build out a nifty website to display the idea they are working on. Generally this idea has no practical immediate use. Generally this idea is still nothing more than an idea. At best the idea will be realized by substantially reusing the open source codebase of a different coin with slight tweaks. The developers then go get an exchange or two involved to begin trading the tokens. One exchange even goes so far as to begin trading IOUs for the tokens before the ICO takes place. It's shear insanity driven by this mania to have the next bitcoin for $0.00001 each. When a real organization goes through the real, regulated, IPO process it has already had its seed funding then subsequent equity financing rounds, THEN once the company has demonstrated that it has a valuable product or service and a competent management team shares are allowed to be sold to the public. By US law, seed stage companies are forbidden from seeking investment from unaccredited investors (this doesn't mean unaccredited investors are forbidden from investing). An accredited investor is someone with over $200,000 per year of income or a net worth of over $1,000,000. Seed stage organizations have an exceptionally high rate of failure, no matter the proposed business. These ICOs are little more than developers fleecing naive "investors" by selling them the pipe dream of being on the ground floor of the next bitcoin. It's really appalling. You should stay away from them, everyone should stay away from them, and the people running them should be punished. |
Is it necessary to pay tax if someone lends me money to put into my mortgage? | A revocable trust? Else the title would be his...vs recieving a gift that large. Make it a business investment like a holding company. And use the trust as agreement to shares. |
Freelancing Tax implication | If you have income in the US, you will owe US income tax on it, unless there is a treaty with your country that says otherwise. |
What are the implications of a corporate stock repurchase or share buyback program? | A stock buy back reduces the number of stocks available on the open market. Since stocks are literally a share in ownership a buy back of the stock then when the company repurchases it has the effect of increasing the percent of ownership of the company of each stock. Zynga has a Market Cap of ~1810M so a 200M buy back will increase the ownership value of each stock by ~12%. This has had the effect of an immediate stock price bump of around 12% which is to be expected as the value becomes the expected post buyback value. However long term gains will require Zynga to turn around their business. This bump will only be sustainable if they can. If their business continues to decline then its stock price will continue to slide. There are some who would rather see Zynga invest that 200m in getting a new product to market to bring revenues up rather than spending precious capital on a plan to temporarily bump a stock that is headed towards the floor. If on the other hand the revenue is poised to recover and the company has the excess capitol buying back stock low is a great way to get the most back for your shareholders bucks. Can they repurchase at any price and any time? They can write a buy order for any price at any time in the future, though they have some restrictions from the SEC mostly involving disclosures. But it is up to the sellers to choose to sell at that price. If they execute the buy back at a rate comparable to market rate then they are more likely to get takers than if they attempt to buy it back at a significant reduction from market price. So since today(10-25-2012) the it is selling for ~2.30 A buy order for 2.30 is going to get more action than one at 2.00. Investors will often look at the companies buy back offer for a company in decline(like Zynga has been) as the true value of the company. If so then a lowball buyback offer could add downward pressure on the stock price. |
What publicly available software do professional stock traders use for stock analysis? | Bloomberg is very popular, especially for researching individual companies. Market QA and Factset are popular for analyzing data. Microsoft Excel and Matlab are very common for analyzing the data. Lots of time traders will take data from Bloomberg, Market QA, Factset or where ever, and then actually preform their analytics in Excel or Matlab. A lot of the brokers provide their own software to traders using their platform, and that software can also contain different tools to help the traders as well. |
5/1 ARM: Lifetime cap, First Adjustment Cap, Margin, and Annual Cap? | Interest rates are at a record low and the government is printing money. You can get a fixed rate loan at a rate equal to inflation in a healthy economy. Unless you know that you are moving in < 5 years, why would you expose yourself to interest rate risk when rates are about as close to zero as they can be? If your thought with respect to mitigating interest rate risk is: "What's the big deal, I'll just refinance!", think again, because in a market where rates are climbing, you may not be able to affordably refinance at the LTV that you'll have in 5-7 years. From 1974-1991, 30 year mortgages never fell below 9%, and were over 12% from 1979 to 1985. Think about what those kinds of rates -- which reduce a new homeowner's buying power by over 40%, would do to your homes value. |
What's “wrong” with taking money from your own business? | I'm no expert on this, but I would say that, if you own the business entirely yourself, there is nothing terribly wrong with using it for your own purposes as you would any other asset that you own. What is wrong is not keeping accurate records that distinguish between your money and the business's. As you say, this is wrong strategically, but it can also be dangerous legally, because if you mix your money and the business's money and don't keep track, you could find, for instance, that you've failed to pay the taxes you were supposed to. There is also a concern that might not fall under what people refer to as "ethics" but more "good corporate citizenship". Basically, people tend not to like companies that just shovel all their gains into the owners' pockets. This is especially true if there are ways the money could be used to improve the business. In other words, if you're able to live high on the hog with the profits while paying all your employees a pittance, the public may not look favorably on your business. |
Micro-investing: How to effectively invest frequent small amounts of money in equities? | (For people looking at this question many years later...) Schwab and Fidelity offer a wide selection of commission-free ETFs. You need an initial purchase amount, though, of (when last I checked at Schwab) $1,000. |
Basic Info On Construction Loans | Construction loans are typically short term that then get rolled into conventional mortgages at the end of the construction period. Since the actual construction loan is short term, you cannot combine it with a long-term land loan as well. You could do the two separate loans up front to buy the land and finance the construction, then at the end roll both into a conventional mortgage to close out the land and construction loans. This option will only work if you do all three through the same lender. Trying to engage various lenders will require a whole new refinance process, which I very much doubt you would want to go through. These are sometimes called combo loans, since they aggregate several different loan products in one "transaction." Not a lot of places do land loans, so I would suggest first find a lender that will give you a land loan and set an appoint with a loan representative. Explain what you are trying to do and see what they can offer you. You might have better luck with credit unions as well instead of traditional banks. |
Why have I never seen a stock split? | Are you sure you're not just looking at prices that are adjusted for the split, e.g. Yahoo? For example, Gilead Sciences (GILD) split a few months ago, but if you look at a price chart, there isn't an interruption even though the split is clearly marked. (Look in the past six months; it split in January). However, you could also simply be watching companies that happen to not split, for a variety of reasons. This isn't a criticism, but rather just a consequence of whatever stocks you happen to be watching. However, a quick search for information on stock splits yields a few articles (mainly from the Motley Fool) that argue that fewer companies are performing stock splits in recent years; the articles mainly talk about tech companies, and they make the argument that even though the shares in Google and Apple have a high stock price: Google and Apple aren't all that expensive by traditional valuation metrics. Google trades at just 15 times next year's projected profitability. Apple fetches a mere 13 times fiscal 2012's bottom-line estimates. These articles are a bit dated in terms of the stock prices, but the rationale is probably still good. Similar logic could apply for other companies; for example, since May 2009, Panera's stock price has climbed by almost a factor of 4 without splitting. The articles also make the point that stock splits were traditionally seen as bullish signs because: Companies splitting to bring their share prices back down to more accessible levels were optimistic in building those sand castles back up. One could make a fair argument that the overall economic climate isn't as bullish as it used to be, although I would only be convinced that this was affecting stock splits if data could be gathered and tested. A stock split can also raise the price of a stock because if small investors feel the stock is suddenly more accessible to them, they purchase more of it and might therefore drive up the price. (See the Investopedia article on stock splits for more information). Companies might not see the necessity in doing this because their stock price isn't high enough to warrant a split or because the price isn't high enough to outprice smaller investors. One interesting point to make, however, is that even though stock splits can drive small investors to buy more of the stock, this isn't always a gain for the company because professional investors (firms, institutions, etc.) have a tendency to sell after a split. The paper is a bit old, but it's still a very neat read. It's possible that more and more companies no longer see any advantage to splitting because it might not affect their stock price in the long run, and arguably could even hurt it. Considering that large/professional investors likely hold a higher percentage of a company's shares than smaller investors, if a stock split triggers a wave of selling by the former, the increasing propensity to buy of the latter may not be enough to offset the decline in price. Note: My answer only refers to standard stock splits; the reasons above may not apply to a decrease in the number of reverse stock splits (which may not be a phenomenon; I don't know). |
Withdrawing cash from investment: take money from underperforming fund? | The root of the advice Bob is being given is from the premise that the market is temporarily down. If the market is temporarily down, then the stocks in "Fund #1" are on-sale and likely to go up soon (soon is very subjective). If the market is going to go up soon (again subjective) you are probably better in fictitious Fund #1. This is the valid logic that is being used by the rep. I don't think this is manipulative based on costs. It's really up to Bob whether he agrees with that logic or if he disagrees with that logic and to make his own decision based on that. If this were my account, I would make the decision on where to withdraw based on my target asset allocation. Bob (for good or bad reasons) decided on 2/3 Fund 1 and 1/3 Fund 2. I'd make the withdraw that returns me to my target allocation of 2/3 Fund 1 and 1/3 Fund 2. Depending on performance and contributions, that might be selling Fund 1, selling Fund 2, or selling some of both. |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | Some things are nearly universal, and have been mentioned already. My "favorite" forseeable expenses in this category are: However, I also advocate saving for expenses that are specific to you. Look back on your expenses for the last 12 months, minimum (18 or 24 may be better). Ask yourself these questions: I ask about large expenditures because you may make enough that you can "eat" these lapses in budgeting, as I did for many years. It is not an emergency now, but it turned into an emergency down the road as my spending went out of control. Look at all expenditures over a certain level, say $100 or $200. Some personal examples of expenses that aren't quite so universal, but turned into small emergencies: This last one was rather unexpected. It is the reason why I ask the question "why didn't I budget for it?" These fees and dues are for my professional-level certifications. In my industry, they are "always" paid for by the company. A year ago, they weren't paid by my former employer because they planned to lay me off. This year, they weren't paid by my present employer because I am technically a temporary worker (4 years is temporary?). So, from now on, I plan to save for this expense. If my employer pays my dues, then I stop saving for the expense, but keep the money I've saved. |
How an ETF pays dividend to shareholders if a holding company issues dividend | Dividends are not paid immediately upon reception from the companies owned by an ETF. In the case of SPY, they have been paid inconsistently but now presumably quarterly. |
Why are some long term investors so concerned about their entry price? | This is not hypothetical, this is an accurate story. I am a long-term investor. I have a bunch of money that I'd like to invest and I plan on spreading it out over five or six mutual funds and ETFs, roughly according to the Canadian Couch Potato model portfolio (that is, passive mutual funds and ETFs rather than specific stocks). I am concerned that if I invest the full amount and the stock market crashes 30% next month, I will have paid more than I had to. As I am investing for the long term, I expect to more than regain my investment, but I still wouldn't be thrilled with paying 30% more than I had to. Instead, I am investing my money in three stages. I invested the first third earlier this month. I'll invest the next third in a few months, and the final third a few months after that. If the stock market climbs, as I expect is more likely the case, I will have lost out on some potential upside. However, if the stock market crashes next month, I will end up paying a lower average cost as two of my three purchases will occur after the crash. On average, as a long-term investor, I expect the stock market to go up. In the short term, I expect much more fluctuation. Statistically speaking, I'd do better to invest all the money at once as most of the time, the trend is upward. However, I am willing to trade some potential upside for a somewhat reduced risk of downside over the course of the next few months. If we were talking a price difference of 1% as mentioned in the question, I wouldn't care. I expect to see average annual returns far above this. But stock market crashes can cause the loss of 20 to 30% or more, and those are numbers I care about. I'd much rather buy in at 30% less than the current price, after all. |
Is there anything I can do to prepare myself for the tax consequences of selling investments to buy a house? | If you need less than $125k for the downpayment, I recommend you convert your mutual fund shares to their ETF counterparts tax-free: Can I convert conventional Vanguard mutual fund shares to Vanguard ETFs? Shareholders of Vanguard stock index funds that offer Vanguard ETFs may convert their conventional shares to Vanguard ETFs of the same fund. This conversion is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain. (Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—do not allow the conversion of bond index fund shares to bond ETF shares of the same fund; the other eight Vanguard bond ETFs allow conversions.) There is no fee for Vanguard Brokerage clients to convert conventional shares to Vanguard ETFs of the same fund. Other brokerage providers may charge a fee for this service. For more information, contact your brokerage firm, or call 866-499-8473. Once you convert from conventional shares to Vanguard ETFs, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to Vanguard ETFs. https://personal.vanguard.com/us/content/Funds/FundsVIPERWhatAreVIPERSharesJSP.jsp Withdraw the money you need as a margin loan, buy the house, get a second mortgage of $125k, take the proceeds from the second mortgage and pay back the margin loan. Even if you have short term credit funds, it'd still be wiser to lever up the house completely as long as you're not overpaying or in a bubble area, considering your ample personal investments and the combined rate of return of the house and the funds exceeding the mortgage interest rate. Also, mortgage interest is tax deductible while margin interest isn't, pushing the net return even higher. $125k Generally, I recommend this figure to you because the biggest S&P collapse since the recession took off about 50% from the top. If you borrow $125k on margin, and the total value of the funds drop 50%, you shouldn't suffer margin calls. I assumed that you were more or less invested in the S&P on average (as most modern "asset allocations" basically recommend a back-door S&P as a mix of credit assets, managed futures, and small caps average the S&P). Second mortgage Yes, you will have two loans that you're paying interest on. You've traded having less invested in securities & a capital gains tax bill for more liabilities, interest payments, interest deductions, more invested in securities, a higher combined rate of return. If you have $500k set aside in securities and want $500k in real estate, this is more than safe for you as you will most likely have a combined rate of return of ~5% on $500k with interest on $500k at ~3.5%. If you're in small cap value, you'll probably be grossing ~15% on $500k. You definitely need to secure your labor income with supplementary insurance. Start a new question if you need a model for that. Secure real estate with securities A local bank would be more likely to do this than a major one, but if you secure the house with the investment account with special provisions like giving them copies of your monthly statements, etc, you might even get a lower rate on your mortgage considering how over-secured the loan would be. You might even be able to wrap it up without a down payment in one loan if it's still legal. Mortgage regulations have changed a lot since the housing crash. |
How can I stop wasting food? | Most basic tip: Don't go to the grocery store hungry. What we do to minimize food waste: On Sunday when my wife and I go grocery shopping, we figure out what meals we are going to have for dinner that week, and we only buy what we need for those meals. We also try to decide in advance what night(s) we are going out for dinner. For example, we know we have to take the in-laws out for dinner on Wednesday, so we don't buy a dinner for that night. As part of our weekly planning, we figure out the lunches we will take to work based on our dinners. For example, if we plan to make a big pot of pasta for dinner one night, we know we'll have leftovers for lunch, so we won't buy a lunch for the following day. Basically, we try to match our food purchasing to our food consumption. During the week, we generally try to cook the dinner that uses the most perishable items first. If we buy seafood, that will be Monday night's dinner. The frozen pizza can wait until the end of the week. My wife an I both have to deal with the occasional unexpected late night at work, which can mess up our cooking plans. As a result, it is not uncommon for us to be too tired to cook, so we skip a dinner. It is less wasteful to do that with something frozen/preserved. Also, we try to consider cooking time vs our work schedule. We don't pick a complex dinner for a night that we know in advance will be a long work day. |
Shorting stocks: Indicators that a stock will drop? | The Art of Short Selling by Kathryn Stanley providers for many case studies about what kind of opportunities to look for from a fundamental analysis perspective. Typically things you can look for are financing terms that are not very favorable (expensive interest payments) as well as other constrictions on cash flow, arbitrary decisions by management (poor management), and dilution that doesn't make sense (usually another product of poor management). From a quantitative analysis perspective, you can gain insight by looking at the credit default swap rate history, if the company is listed in that market. The things that affect a CDS spread are different than what immediately affects share prices. Some market participants trade DOOMs over Credit Default Swaps, when they are betting on a company's insolvency. But looking at large trades in the options market isn't indicative of anything on its own, but you can use that information to help confirm your opinion. You can certainly jump on a trend using bad headlines, but typically by the time it is headline news, the majority of the downward move in the share price has already happened, or the stock opened lower because the news came outside of market hours. You have to factor in the short interest of the company, if the short interest is high then it will be very easy to squeeze the shorts resulting in a rally of share prices, the opposite of what you want. A short squeeze doesn't change the fundamental or quantitative reasons you wanted to short. The technical analysis should only be used to help you decide your entry and exit price ranges amongst an otherwise random walk. The technical rules you created sound like something a very basic program or stock screener might be able to follow, but it doesn't tell you anything, you will have to do research in the company's public filings yourself. |
Isn't an Initial Coin Offering (ICO) a surefire way to make tons of money? | Given your premise is correct: How do you cash in a large sum of YetAnotherCryptoCoin shortly after it´s ICO? The crypto-exchanges take some time to add a new currency, if they do at all. And even if they already have, trading volume is usually low. I think that´s what really makes it unattractive for Investors as opposed to tec-enthusiasts (aside from the high volatility). Total lack of any reliable trading capability. |
How do dividends of the underlying security in a security futures contract affect the security futures price? | The owner of a long futures contract does not receive dividends, hence this is a disadvantage compared to owning the underlying stock. If the dividend is increased, and the future price would not change, there is an arbitrage possibility. For the sake of simplicity, assume that the stock suddenly starts paying a dividend, and that the risk free rate is zero (so interest does not play a role). One can expect that the future price is (rougly) equal to the stock price before the dividend announcment. If the future price would not change, an investor could buy the stock, and short a futures contract on the stock. At expiration he has to deliver the stock for the price set in the contract, which is under the assumptions here equal to the price he bought the stock for. But because he owned the stock, he receives the announced dividend. Hence he can make a risk-free profit consisting of the divivends. If interest do play a role, the argument is similar. |
Has anyone created a documentary about folks who fail to save enough for retirement? | Since your question was first posted, I happened to watch PBS FRONTLINE's The Retirement Gamble, about "America's Retirement Crisis" and the retirement industry. You can watch the entire episode online at the previous link, and it's also available on DVD. Here's a link to the episode transcript. Here's a partial blurb from a post at PBS that announced the episode: If you’ve been watching any commercial television lately, you are well aware that the financial services industry is very busy running expensive ads imploring us to worry about our retirement futures. Open a new account today, they say. They are not wrong that we should be doing something: America is facing a retirement crisis. One in three Americans has no retirement savings at all. One in two reports that they can’t save enough. On top of that, we are living longer, and health care costs, as we all know, are increasing. But, as I found when investigating the retirement planning and mutual funds industries in The Retirement Gamble, which airs tonight on FRONTLINE, those advertisements are imploring us to start saving for one simple reason. Retirement is big business — and very profitable. (... more... ) There's another related PBS FRONTLINE documentary from back in 2006, Can You Afford To Retire? You'll find a link on that page to watch the program online. Finally, I'm also aware of but haven't yet seen a new documentary called Broken Eggs: The Looming Retirement Crisis in America. Looks like it isn't available for online streaming or on DVD yet, but I expect it would be, eventually. |
What does the phrase “To make your first million” mean? | When people are crowing about their achievements, they often take liberties with those achievements. Vitalik's interpretation -- net worth, is probably what you would naturally come to mind. But when someone is bragging, that could mean anything -- $1M of total revenue. |
I received $1000 and was asked to send it back. How was this scam meant to work? | Most answers have concentrated on this being a scam, however, it is possible this is an innocent mistake. Australian bank account numbers do not have redundant digits to be used to validate an account number; all of the numbers are data and uniquely identify a bank and branch (the BSB number) and an account (the Account number). Computer check digits are not part of bank account numbers because bank account numbers pre-date computers. It is entirely possible that someone entering an incorrect number can, by chance, hit upon an existing account. As the bank clearance system in Australia is entirely automatic there is no cross-checking of account numbers with account names. Internet banking in Australia is not a wire-transfer as is common in places like the USA (although these can be done): here you are effectively accessing your bank's "back office". Nor is it like the BPay service which is used primarily by B to C businesses as a way for their customers to pay their bills; when using this service the biller code will show you who you are paying and the customer number does have check digit validation. I run a business in Australia and it has happened to us on several occasions than an employee or supplier has given us incorrect numbers. Usually, it is not a real account and after a week or so the money makes its way back to us with a message like NO ACCOUNT or A/C CLOSED. Very occasionally, however, the wrong number hits a live account: when that happens the person who f*&ked up needs to contact their bank and try and get the transaction reversed. If there is money in the destination account this usually happens with little fuss, however, if the destination account has been closed or emptied things get problematic. Of course, taking money that isn't yours is stealing even if it happens to be sitting in your bank account. However, unless the sum involved is significant the police are usually not interested in diverting their attention away from "serious" crimes like homicide, armed robbery and terrorism so the aggrieved party is usually on their own. That said, this is probably a scam because they called you rather than your bank doing so. They cannot get your phone number from your account number: they have to know who you are and what your account number is. This is not as hard to do as it sounds since both your name and account number are prominently printed on your cheques and deposit books (possibly your phone number as well which saves them looking it up in the White Pages). |
If a company has already IPO'ed and sold its shares, what is the incentive to keep making money? | A company doesn't offer up 100% of its shares to the market. There's a float amount of varying significance, maybe 30% of the shares are put up for public offer. Generally some amount of current shareholders will pledge some or all of their shares for offer to the public. This may be how the venture capital, private equity or other current investors cash out their initial investment. The company may issue new shares in order to raise money for some initiative. It may be a combination of existing shares and new. Additionally, a company may hold some "treasury shares" on its balance sheet. In this instance fluctuations in the share price directly affect the health of the balance sheet. As far as incentive goes, stock options to management and C-Suite employees keep everyone interested in an increasing stock price. |
Is it wise to invest in a stock with a large Div yield? | IMO, what it seems like you've done is nothing more than having screened out a company worth further investigation. The next step would be a thorough analysis of the company's past financials and current statements to arrive at your own opinion / forecast of the immediate and far future of the company's prospects. Typically, this is done by looking at the company's regulatory filings, and maybe some additional searching on comparison businesses. There are many sources of instruction for how one might "value" or "analyze" a company, or that provide help on "reading a balance sheet". (This is not an easy skill to learn, but it is one that will prove invaluable over a lifetime of investing.) It is possible that you'll uncover a deteriorating business where the latest selling, and subsequent drop in price that caused the high yield, is well-deserved. In which case, you know to stay away and move on to the next idea. On the other hand, you might end up confident that the company is not suffering from a drop in sales, rise in expenses, growing debt payments, loss of "moat", etc. In which case, you've found a great investment candidate. I say candidate because you still may decide this company isn't for you, even if the financials are right, because you might find better opportunities for an equal, or acceptable, return at lower risk while you're researching. As to the yield being high when there are no problems with the fundamentals of the business, this may simply be because of panic selling during this past few week's downturn, or some other sort of temporary and superficial scare. However, be warned that the masses can remain irrational, and thus the price stay suppressed or even drop further, for longer than you're willing to wait for your ROI. The good news is that in that case, you're being well compensated to wait at a 11+% yield! |
What's a reliable way for a non-permanent resident alien in the USA to get an auto loan? | You have figured out most of the answers for yourself and there is not much more that can be said. From a lender's viewpoint, non-immigrant students applying for car loans are not very good risks because they are going to graduate in a short time (maybe less than the loan duration which is typically three years or more) and thus may well be leaving the country before the loan is fully paid off. In your case, the issue is exacerbated by the fact that your OPT status is due to expire in about one year's time. So the issue is not whether you are a citizen, but whether the lender can be reasonably sure that you will be gainfully employed and able to make the loan payments until the loan is fully paid off. Yes, lenders care about work history and credt scores but they also care (perhaps even care more) about the prospects for steady employment and ability to make the payments until the loan is paid off. Yes, you plan on applying for a H1-B visa but that is still in the future and whether the visa status will be adjusted is still a matter with uncertain outcome. Also, these are not matters that can be explained easily in an on-line application, or in a paper application submitted by mail to a distant bank whose name you obtained from some list of "lenders who have a reliable track record of extending auto loans to non-permanent residents." For this reason, I suggested in a comment that you consider applying at a credit union, especially if there is an Employees' Credit Union for those working for your employer. If you go this route, go talk to a loan officer in person rather than trying to do this on the phone. Similarly, a local bank,and especially one where you currently have an account (hopefully in good standing), is more likely to be willing to work with you. Failing all this, there is always the auto dealer's own loan offers of financing. Finally, one possibility that you might want to consider is whether a one-year lease might work for you instead of an outright purchase, and you can buy a car after your visa issue has been settled. |
Is there a standard check format in the USA? | No, there is no standard. I see all kinds of paper sizes, and the amount, date, etc. is all over the place. They are all rectangular, but otherwise there seems to be a lot of freedom. |
What is the best way to stay risk neutral when buying a house with a mortgage? | It is pretty simple to avoid risk in home ownership: Do those things and your risk of home ownership is about nil. |
Options for dummies. Can you explain how puts & calls work, simply? | An Xbox currently sells for $200 but you don't have the money right now to buy it. You think the price of the xbox is going up to $250 next month. Your friend works at BestBuy and says he has a "raincheck" that allows you to buy the Xbox for $200 but the raincheck expires next month. He offers to sell you the "raincheck" for $5. When you buy his raincheck for $5 you are locking in the right to buy the Xbox for $200. It is like an option because it locks in the purchase price, it has an expiration date, it locks in a purchase price, and it is not mandatory that you redeem it. That's an explanation for a call option in kids terms. For more easy answers to the question what is a call option click now. A put can be answered in a similar way. Suppose you bought the Xbox for $250 and then the price drops back to $200. If you keep your receipt, you have the right to return (sell the Xbox back) for $250 even though the current price is only $200. Bestbuy has a 30 day return policy so your receipt is like a put option in that you can sell the Xbox back for a price higher than the current market price. That's a simple example of a put option in kids terms. For more easy answers to the question what is a put click now. |
What US taxes are due for US stock bought via ESPP when I was in USA and sold after I returned to India? | From an Indian Tax point of view, you can bring back all the assets acquired during the period you were NRI back to India tax free. Subject to a 7 years period. i.e. all the assets / funds / etc should be brought back to India within 7 years. It would still be treated as There are certain conditions / paperwork. Please consult a CA. |
What's an economic explanation for why greeting cards are so expensive? | It'll all about the marketing. If you don't get a "real" greeting card for that important birthday or anniversary or whatever, the recipient may thing you're being cheap for using a card you printed out yourself. So you pay $6 for a card because you feel like you have to. Hallmark advertises with those sappy TV commercials for a very good reason. The margins on the product are sky-high, and they spend a good chunk of that money on marketing the product. Perfume is the same way: super cheap to make, low barrier to entry, and the popular ones command a high price. |
I'm about to be offered equity by my employer. What should I expect? | Yes, what they said. You don't mention where you are on the totem pole. Are you reporting to the top dog, or are you 3 levels down? Not to be a downer, but until you know your cut, I'd not get too excited either way. 1000 shares/options of a LinkedIn turned to nearly $100K. Nothing to sneeze at, to be sure, but not enough to retire, nor bother contacting a lawyer. The details of the equity should be spelled out clearly, nothing against Lawyers, but it's likely to be wasted money. |
What does “no adjustments” mean? | Typically that applies if the broker Form 1099-B reports an incorrect basis to the IRS. If the Form 1099-B shows incorrect basis relative to your records, then you can use 8949, column (g) to report the correct basis. The 8949 Instructions provide a brief example. http://www.irs.gov/pub/irs-prior/i8949--2013.pdf Although you have an obligation to report all income, and hence to report the true basis, as a practical matter this information will usually be correct as presented by the broker. If you have separate information or reports relating to your investments, and you are so inclined, then you can double-check the basis information in your 1099-B. If you aren't aware of basis discrepancies, then the adjustments probably don't apply to you and your investments can stick to Schedule D. |
Pay off mortgage or invest in high value saving account | Basically, the easiest way to do this is to chart out the "what-ifs". Applying the amortization formula (see here) using the numbers you supplied and a little guesswork, I calculated an interest rate of 3.75% (which is good) and that you've already made 17 semi-monthly payments (8 and a half months' worth) of $680.04, out of a 30-year, 720-payment loan term. These are the numbers I will use. Let's now suppose that tomorrow, you found $100 extra every two weeks in your budget, and decided to put it toward your mortgage starting with the next payment. That makes the semi-monthly payments $780 each. You would pay off the mortgage in 23 years (making 557 more payments instead of 703 more). Your total payments will be $434,460, down from $478.040, so your interest costs on the loan were reduced by $43,580 (but, my mistake, we can't count this amount as money in the bank; it's included in the next amount of money to come in). Now, after the mortgage is paid off, you have $780 semi-monthly for the remaining 73 months of your original 30-year loan (a total of $113,880) which you can now do something else with. If you stuffed it in your mattress, you'd earn 0% and so that's the worst-case scenario. For anything else to be worth it, you must be getting a rate of return such that $100 payments, 24 times a year for a total of 703 payments must equal $113,880. We use the future value annuity formula (here): v = p*((i+1)n-1)/i, plugging in v ($113880, our FV goal), $100 for P (the monthly payment) and 703 for n (total number of payments. We're looking for i, the interest rate. We're making 24 payments per year, so the value of i we find will be 1/24 of the stated annual interest rate of any account you put it into. We find that in order to make the same amount of money on an annuity that you save by paying off the loan, the interest rate on the account must average 3.07%. However, you're probably not going to stuff the savings from the mortgage in your mattress and sleep on it for 6 years. What if you invest it, in the same security you're considering now? That would be 146 payments of $780 into an interest-bearing account, plus the interest savings. Now, the interest rate on the security must be greater, because you're not only saving money on the mortgage, you're making money on the savings. Assuming the annuity APR stays the same now vs later, we find that the APR on the annuity must equal, surprise, 3.75% in order to end up with the same amount of money. Why is that? Well, the interest growing on your $100 semi-monthly exactly offsets the interest you would save on the mortgage by reducing the principal by $100. Both the loan balance you would remove and the annuity balance you increase would accrue the same interest over the same time if they had the same rate. The main difference, to you, is that by paying into the annuity now, you have cash now; by paying into the mortgage now, you don't have money now, but you have WAY more money later. The actual real time-values of the money, however, are the same; the future value of $200/mo for 30 years is equal to $0/mo for 24 years and then $1560/mo for 6 years, but the real money paid in over 30 years is $72,000 vs $112,320. That kind of math is why analysts encourage people to start retirement saving early. One more thing. If you live in the United States, the interest charges on your mortgage are tax-deductible. So, that $43,580 you saved by paying down the mortgage? Take 25% of it and throw it away as taxes (assuming you're in the most common wage-earner tax bracket). That's $10895 in potential tax savings that you don't get over the life of the loan. If you penalize the "pay-off-early" track by subtracting those extra taxes, you find that the break-even APR on the annuity account is about 3.095%. |
How to increase my credit score | You need to get yourself a credit card, and use it regularly and also repay on time. This will help increase your credit score. Hope you have a regular job which is bringing in money every month, but having just this isnt enough, get a credit card. |
Calculating the cost of waiting longer for money | The cost of an extra 30 days is $1459.80 |
What are the common income tax deductions used by “rich” salaried households? | From Rich Dad, Poor Dad. 3 Major Things: With rental real estate, in addition to mortgage interest, you also deduct property taxes, and must claim depreciation (cost of house / 27.5 years) Business Expenses. For example, buy a yacht and put it in a charter fleet. Deduct interest on the loan, depreciation of the asset, property taxes, upkeep of the boat. Your "business" earns profit from chartering the boat, which if I recall correctly is taxed at a lower rate. You get to go sailing for free. Then there was the concept of subdividing the businesses. If you own a restaurant, create another business to own the property, and the equipment used in the company. Then lease the equipment and rent the land to the restaurant. Now admittedly I thought this was like the Daylight Savings plan of tax avoidance, I mean now aren't you essentially having two companies paying half the taxes. I am sure there are well paid CPAs that make the math happen, perhaps using insurance plans.. Perhaps each business funds a "whole life" insurance account, and contributes vast amounts into that. Then you take a loan from your insurance account. Loans of course are not income, so not taxed. The third way is to create your own bank. Banks are required to have reserves of 9%. Meaning if I have $100 dollars, the FDIA allows me to loan $1,111. I then charge you 20% interest, or $222/yr. Now how much can I loan? ...well you can see how profitable that is. Sure you pay taxes, but when you print your own money who cares? Most of this is just gleamed from books, and government publications, but that was my general understanding of it. Feel free to correct the finer points. |
Should we prepay our private student loans, given our particular profile? | Just for another opinion, radio host Clark Howard would suggest killing the private student loans as quickly as possible. The only reason is the industry around private student loans has fewer rules as to how they interact with you, and they have historically been very unpleasant if you have to deal with them in bad financial times. As a safety net, get rid of the private student loans as your main focus while you have the money and rates are low. Not for financial reasons per se, but for peace of mind. The other advice in this question are great, but nobody mentioned the potential dark side of private student loans. |
Do I need a business credit card? | I would try to avoid mixing business expenditure with personal expenditure so a second credit card might be a good idea. That said, I did get a business credit card for my company in the UK as I didn't want to be personally liable for the money that was spent on the business card (even though I owned 100% of the business) in case things went horribly wrong. As I didn't fancy signing a personal guarantee, this meant that the limit was quite low but it was good enough in most cases. |
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