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Should you keep your stocks if you are too late to sell? | The price at which a stock was purchased is a sunk cost--that is, you cannot go back in time and reverse the decision you made to purchase that stock. Another example of a sunk cost would be purchasing a non-refundable, non-transferable movie ticket. Sunk costs have the tendency to create a cognitive bias in which we feel that the amount we paid at some point in the past should have some sort of bearing on the decision we make now--the purchaser of the ticket feels he must go see the movie even if he no longer wishes too, lest the ticket "go to waste"... the investor hopelessly clings to a battered stock for that tiny chance that just maybe some day it will return to its former glory. This is referred to as the "sunk cost fallacy" and is considered to be irrational behavior by economists. Keeping this in mind, your hopes and dreams for the stock at the time you purchased it should have no bearing on the decision you make now. Similarly, whether the stock has risen or fallen in price since your purchase date should have no bearing. Instead, you must consider what you expect the stock to do from this very moment on into the future--that is, you must act at the margin. You've indicated that you are faced with two choices--sell the stock now, incur the loss, but benefit from the tax break (Option A). This benefit is quite easily quantifiable--it is your marginal tax rate multiplied by the additive inverse of the loss (assuming you have/will have other gains to offset). Let's just assume that you incurred a $1000 loss, at a marginal tax rate of 20%, which means your tax benefit for the loss is $200. The second choice--to hold the stock in hopes of it rising in price (Option B)--is a bit harder to quantify. You must assume that today is day zero, and that every cent in price the stock rises is a gain to you, and every cent in price the stock looses is a loss to you. If you believe that the stock will rise to a price that will net your more than your tax benefit from option A, then holding the stock is more favorable than selling it at a loss today. Conversely, if you believe this stock will fall even further in the future, or not rise enough to net you $200 (per the example), then Option A is preferable. Granted, there are some additional complications that play into your decision. By selling the stock today, you not only get a tax benefit from the loss, but you've also freed up the funds previously used to purchase that stock to be invested elsewhere (in hopefully a better performing asset). If you choose to stick with your current stock, then the gains you may have netted elsewhere must be considered as an opportunity cost associated with Option B. Finally, the tax benefit is essentially guaranteed (so in our example, a $200 risk free return), while sticking with the stock in Option B still comes with some risk. |
Are prepayment penalties for mortgages normal? | It's not uncommon to have a small penalty if you pre-pay the mortgage in a short time. After all, making the loan isn't free for the bank. But as Nathan says, if a bank is planning to try very hard to stop you from giving them money, there is probably a reason. Try to convince your wife: there is nothing inherently wrong with debt. Like anything, too much can be bad for you, but when debt is deployed wisely -- that is almost always, when it is used to finance a capital asset (an asset that produces value) -- it can be a very good thing. |
What is a good way to save money on car expenses? | Replace your own brake pads Disc brake pads are usually snap-in replacement parts. YouTube has tons of videos showing how to do it. Find one with a car similar to your own. And it cannot be over-emphasized... Keep up on the routine maintenance. You can look up the schedule on your car manufacturer's website. |
How does leverage work? | For sake of simplicity, say the Euro is trading at $1.25. You have leveraged control of $100,000 given the 100x leverage. If you are bullish on the Euro, you are long 80,000 euros. For every 1% it rises, you gain $1000. If it drops by the same 1%, you are wiped out, you lost your $1000. With the contracts I am familiar with, there is a minimum margin, and your account is "marked to market" each night. If your positive balance drops too low, you get the margin call. It's a zero sum game, for every dollar you make, there's a guy on the other side of the trade. Odds are he's doing this full time and is smarter than you. |
How much time would I have to spend trading to turn a profit? | What determines your profitability is not your time, but your TRADES. It is probably a mistake to go into the market and say, I hope to make X% today/this month/this year. As a practical matter, you can make a lot of money in a short period of time, or lose a lot over a long period of time (the latter is more likely). You're better off looking at potential trades and saying "I like this trade" (be sure to know why) and "I dislike that trade." If you're right about your chosen trade, you'll make money. Probably not on your original timetable, because markets react more slowly than individual people do. Then make ONLY those trades that you genuinely like and understand. IF you get into a "rhythm," (rather few people do), your experience might tell you that you are likely to make, say, X% per month or year. But that's ONLY if the market continues to accommodate YOUR style of trading. If the markets change, YOU must change (or get lost in the shuffle). Trading is a risky, if sometimes rewarding business. The operative motto here is: "You pay your money and you take your chances," NOT "You put in your time and eventually rewards will come." |
Does the bid price of a stock change depending on which brokerage I am using? | They could have different quotes as there are more than a few pieces here. Are you talking a Real Time Level II quote or just a delayed quote? Delayed quotes could vary as different companies would be using different time points in their data. You aren't specifying exactly what kind of quote from which system are you using here. The key to this question is how much of a pinpoint answer do you want and how prepared are you to pay for that kind of access to the automated trades happening? Remember that there could well be more than a few trades happening each millisecond and thus latency is something to be very careful here, regardless of the exchange as long as we are talking about first-world stock exchanges where there are various automated systems being used for trading. Different market makers is just a possible piece of the equation here. One could have the same market maker but if the timings are different,e.g. if one quote is at 2:30:30 and the other is at 2:30:29 there could be a difference given all the trades processed within that second, thus the question is how well can you get that split second total view of bids and asks for a stock. You want to get all the outstanding orders which could be a non-trivial task. |
Where do large corporations store their massive amounts of cash? | You can find out the general types of investments by reading the public corporation 10-Q report that is filed with the SEC it can be accessed via the EDGAR system. It will not tell you what securities they have, but it does identify the short term and long term investments categories and their value. |
Why is a stock that pays a dividend preferrable to one that doesn't? | Dividend paying stocks are not "better" In particular shareholders will get taxed on the distribution while the company can most likely invest the money tax free in their operations. The shareholder then has the opportunity to decide when to pay the taxes when they sell their shares. Companies pay dividends for a couple of reasons.... 1.) To signal the strength of the company. 2.) To reward the shareholders (oftentimes the executives of the firm get rather large rewards without having to sell shares they control.) 3.) If they don't have suitable investment opportunities in their field. IE they don't have anything useful to do with the money. |
Snowball debt or pay off a large amount? | You've already received good advice here, pay off the highest rate card first, in this case the Best Buy card. I completely agree. To answer your question about the minimum payment, I can't guarantee that this is how Citi does it on your particular card, but several online calculators seem to use the following formula. Minimum Payment = Fees + (APR / 12) x Balance + 1% x Balance. I plugged in your numbers and got really close to the minimum payment you mentioned. I ran calculations for balances of 8,500 and 6,500 and got payments of $184 and $141. You can use this calculator to plug in some numbers for yourself. I found the formula on this page along with a reference stating that Citi uses the formula. Edited to Add: As Bruce Alderman mentioned in his answer, it's probably not a good idea to just pay the minimum. That calculator I linked to shows the difference between paying the minimum and even a small amount ($50 or so) more than the minimum every month. Something like the difference between 3 and 10 years. |
ISA trading account options for US citizens living in the UK | I am a US citizen by birth only. I left the US aged 6 weeks old and have never lived there. I am also a UK citizen but TD Waterhouse have just followed their policy and asked me to close my account under FATCA. It is a complete nightmare for dual nationals who have little or no US connection. IG.com seem to allow me to transfer my holdings so long as I steer clear of US investments. Furious with the US and would love to renounce citizenship but will have to pay $2500 or thereabouts to follow the US process. So much for Land of the Free! |
Car dealer saying that they cannot see any credit information for my co-applicant. Could this be a scam? | I actually had a similar situation when I tried to buy my house. I paid off all my loans and was proud of my "debt free" status. I had no car note, no student loans... absolutely no debt, but I did have a bank-issued credit card. (USAA, not Chase, but I assume the same may apply). When I tried to get a home loan they told me I had "absolutely no information on my credit report." AKA I had no credit. The mortgage lender had no idea what was going on, nor did I or anybody else. It took a lot of research before I realized that the credit bureaus use a formula for the credit rating that involves a lot of things, but if you haven't had a current line of credit reported to the agency in over a year (maybe it was longer, I didn't have anything for 3 years) you aren't going to have a credit score. Because I was "debt free" I was also credit report free and eventually the credit bureaus had nothing to go on, and my score disappeared. The bank-issued credit card was on my credit report, but they didn't report monthly balances so the bureaus couldn't use it to determine if I was paying off the card or if I even had a balance on it. It was essentially not doing my credit any favors, despite what I had thought. In short, based on the fact that you have no debt in her name, and you have taken on all debt in your own name, its very plausible that she has no credit rating anymore. It won't take long to get it back. Once you have ANYTHING on your credit that's actually reported the formula can kick back in and look at credit history as well as current credit and she'll be fine. |
Should I have a higher credit limit on my credit card? | If you want to stay in the sub 30% range to avoid 'high utilization' on your card, make sure your credit is > 3.33x your usage. For your numbers, a 2500 limit would probably keep you out of 'high utilization'. The primary reason to do this is to stay off your lender's 'high risk' list. Due to the risk perceived by CCC's, accounts with greater than 30% utilization are reported as high utilization. Keep in mind that utilization does not have a history. So you can drop your utilization a couple of billing cycles before you apply for a high cost item (e.g. car or house) and your score should bump up a bit. |
How to manage paying expenses when moving to a weekly pay schedule and with a pay increase? | This is really just a matter of planning. It's good that you don't want the train to go off the rails but really you just need to budget your fixed expenses. I do this by having two checking accounts. One account gets a direct deposit to cover all of my fixed expenses, the other is my regular checking account. Take your rent and other fixed expenses, if you have any, and total them. Take that total and divide by four. That's how much of each check you should be socking away in to the separate account. Additionally, with a 30% pay increase you can probably start a savings account. You should start to establish an emergency fund so this really never becomes a problem. Take 10% of your pay and put it in savings, this will still leave you with a healthy pay increase to enjoy but you'll keep some of your money for yourself too. |
What happens to an Earnest Money Deposit if underwriting falls through? | Your Purchase and Sale agreement should have a financing contingency. If it doesn't, your money may be at risk, and the agent did you no favor. Edit - I answered when away from computer. This is a snapshot of the standard clause from the Greater Boston Real Estate Board. Each state has its own standard documents. The normal process is to have some level of prequalification, showing a high probability of final approval, make offer, then after it's accepted, this form is part of the purchase and sale process. |
Why is the stock market price for a share always higher than the earnings per share? | What you have to remember is you are buying a piece of the company. Think of it in terms of buying a business. Just like a business, you need to decide how long you are willing to wait to get paid back for your investment. Imagine you were trying to sell your lemonade stand. This year your earnings will be $100, next year will be $110, the year after that $120 and so on. Would you be willing to sell it for $100? |
Does wash sale apply if I buy stock on 2 two different dates and sell it later | Wash sale applies. If you purchase shares within 30 days of that Feb 3 sell date, the wash sale kicks in, preventing the loss on that sale, and deferring it into the new shares. |
Consumer Loans vs Mortgages | I went here: Consumer Loan Law. It seems that a consumer loan is anything other than a business loan or mortgage. However, in California it seems to include a mortgage. It's a bit weird to see that a HEL can be considered a consumer loan even if it is the primary or the only loan on a property. Getting a HEL can be a great low cost way to (re)finance a property as they tend to have low or no closing costs and lower interest rates. |
How does on-demand insurance company Trov prevent insurance fraud or high prices? | Anything can be insured for the right price... this product is offered for devices at higher risk, which would be logical purpose of owner needing coverage for a specific length of time. Typically this would be a type of adverse selection, but TROV targets customers that typically would not require insurance on their device, but as you said they may be traveling and putting their devices at added risk. Like all insurance companies, their Loss Ratio (Losses/Premiums) will depend on the law of large numbers and spread of risk. As we know, the majority of the time trips are taken, electronics make it back home safely. Like many tech companies, their advantage over conventional insurers is likely low overhead costs. Being on a mobile platform, they likely have a fraction of the claims handling cost of a conventional insurer. Payments are likely automated by linking bank accounts, so there is little transaction cost burden on this company. In short, their operation is likely highly automated with few staff and low expenses, allowing them to take on a higher loss ratio than conventional insurers and still leave room for profit. Without having ever used this service, I can tell you they likely price in anticipated fraud, the same way Walmart prices in inventory loss (shoplifting) into their prices. I personally would share your concern that it'd be difficult to combat fraud on such a platform, especially with no claims adjusters whom are typically the first line of defense. Again, I answer this never having used their service, but I work as an Analyst at a large insurer and these would be my assumptions based on what I know of TROV. |
Washington State tax filing extension? | Washington State doesn't have a state income tax for individuals, so unless you've got a business there's nothing to file. Find out more on their website. |
Owning REIT vs owning real estate - which has a better hypothetical ROI? | Your question may have another clue. You are bullish regarding the real estate market. Is that for your city, your state, your nation or for the whole world? Unless you can identify particular properties or neighborhoods that are expected to be better than the average return for your expected bull market in real estate, you will be taking a huge risk. It would be the same as believing that stocks are about to enter a bull market, but then wanting to put 50% of your wealth on one stock. The YTD for the DOW is ~+7%, yet 13 of the 30 have not reached the average increase including 4 that are down more than 7%. Being bullish about the real estate segment still gives you plenty of opportunities to invest. You can invest directly in the REIT or you can invest in the companies that will grow because of the bullish conditions. If your opinion changes in a few years it is hard to short a single property. |
What are the pros and cons of investing in a closed-end fund? | One advantage not pointed out yet is that closed-end funds typically trade on stock exchanges, whereas mutual funds do not. This makes closed-end funds more accessible to some investors. I'm a Canadian, and this particular distinction matters to me. With my regular brokerage account, I can buy U.S. closed-end funds that trade on a stock exchange, but I cannot buy U.S. mutual funds, at least not without the added difficulty of somehow opening a brokerage account outside of my country. |
What are the downsides that prevent more people from working in high-income countries, and then retiring in low-income (and cost of living) ones? | I was at a restaurant in NYC, 1st Avenue and 63rd street. I don't recall how the conversation started, but the woman at the next table remarked how none of her friends from the West side, 9th avenue or thereabout, would visit her. Less than 2 miles away, yet in their minds, too far. Your question isn't likely to be answered with facts, but opinion. In this case an anecdote. Human nature is such that a good number of people have a small geographic circle of comfort. Of course some do exactly as you suggest. But not the majority. |
Should I deduct or capitalize the cost to replace a water heater in my rental property? (details Below) | If you're repairing an existing appliance - its an expense. If you're replacing an existing appliance with a new one - that's disposing of one capital asset and putting in service another. You depreciate the new one and you dispose of the old one (if not fully depreciated - talk to your tax adviser how to handle the remaining value). The additional costs of the fixes that are not related to the installation of the new appliance are regular maintenance expenses, so you have to get an itemized invoice from the plumber to know what to expense and what to capitalize. |
What's the difference between Term and Whole Life insurance? | Just to add to @duffbeer703 comment, additionally, the cash value is NOT part of the death benefit. The policy is intended to grow the cash value to the point where it matches the death benefit and then it 'matures' and you get the cash. My point being, is that since they don't give you both, you are really transferring the reponsiblity from them to you over time, your savings (that you lose) becomes part of the death benefit and they supliment it with less and less over the years so that it would equal the death benefit. @duffbeer703 nailed it right on the head, buy term and invest the difference and once you've got your savings built, really the need for insurance isn't there any longer (if you've got 1/2 million saved, do you really need insurance?) |
How fast does the available amount of gold in the world increase due to mining? | Approximately 5.3 billion ounces have been mined. This puts the total value of all gold in the world at about $9.5 trillion, based on $1800/oz. Total world net worth was $125T in 2006. There's an odd thing that happens when one asset's value is suddenly such a large percent of all assets. (This reminds me of how and why the tech bubble burst. Cisco and EMC would have been worth more than all other stocks combined if they grew in the 00's like they did in the 90's.) Production (in 2005/6) ran about 80 million oz/yr. Just over 1.5% impact to total supply, so you are right in that observation. On the other hand, the limited amount out here, means that if everyone decided to put their wealth in gold, it would be done by driving the price to bubblicious levels. One can study this all day, and parse out how much is in investment form (as compared to jewelry, etc) and realize that a few trillion dollars in value pales in comparison to the wealth of the US alone, let alone the world. Half the world can't buy two oz if they tried. Of course there's pressure to reopen mines that had costs pushing $800/oz. Understand that the supply of $300 gold is long gone. As the easy gold has been mined, and cost goes up, there's a point where mines close. But as the price of gold trades at these levels, the mines that couldn't produce at $600 are now opening. |
Estimating the impact of tax-loss harvesting | When you sell a stock that you own, you realize gains, or losses. Short-term gains, realized within a year of buying and selling an asset, are taxed at your maximum (or marginal) tax rate. Long term-gains, realized after a year, are taxed at a lower, preferential rate. The first thing to consider is losses. Losses can be cancelled against gains, reducing your tax liability. Losses can also be carried over to the next tax year and be redeemed against those gains. When you own a bunch of the same type of stock, bought at different times and prices, you can choose which shares to sell. This allows you to decide whether you realize short- or long-term gains (or losses). This is known as lot matching (or order matching). You want to sell the shares that lost value before selling the ones that gained value. Booking losses reduces your taxes; booking gains increases them. If faced with a choice between booking short term and long term losses, I'd go with the former. Since net short-term gains are taxed at a higher rate, I'd want to minimize the short-term tax liability before moving on to long-term tax liability. If my remaining shares had gains, I'd sell the ones purchased earliest since long-term gains are taxed at a lower rate, and delaying the booking of gains converts short-term gains into long-term ones. If there's a formula for this, I'd say it's (profit - loss) x (tax bracket) = tax paid |
JCI headache part 1: How to calculate cost basis / tax consequences of JCI -> TYC merger? | The $47.67 per share figure is the trading price, or fair market value, of the OLD Johnson Controls, and should not be used to figure your gain nor to figure your basis in the new Johnson Controls International. Your new basis is the total of the gross proceeds received; that is, the cash plus the fair market value of the new shares, which was $45.69 per share. (I am not referring to cash-in-lieu for fractional shares, but the $5.7293 per share received upon the merger.) A person holding 100 shares of the old Johnson Controls would have received $572.93, plus 83.57 shares of the new company. Ignoring the fractional share, for simplicity's sake, gross proceeds would equal 83 x $45.69 = $3792.72 in fair market value of shares, plus the cash of $572.93, for a total of $4365.20. This is your basis in the 83 new shares. Regarding the fractional share, since new basis is at fair market value, there should be no gain or loss recognized upon its sale. |
Does the CRA reprieve those who have to commute for work? | The answer on the Canadian Government's website is pretty clear: Most employees cannot claim employment expenses. You cannot deduct the cost of travel to and from work, or other expenses, such as most tools and clothing. However, that is most likely related to a personal vehicle. There is a deduction related to Public Transportation: You can claim cost of monthly public transit passes or passes of longer duration such as an annual pass for travel within Canada on public transit for 2016. The second sleeping residence is hard to justify as the individual is choosing to work in this town and this individual is choosing to spent the night there - it is not currently a work requirement. As always, please consult a certified tax professional in your country for any final determinations on personal (and corporate) tax laws and filings. |
Is it accurate to say that if I was to trade something, my probability of success can't be worse than random? | If i do this, I would assume I have an equal probability to make a profit or a loss. The "random walk"/EMH theory that you are assuming is debatable. Among many arguments against EMH, one of the more relevant ones is that there are actually winning trading strategies (e.g. momentum models in trending markets) which invalidates EMH. Can I also assume that probabilistically speaking, a trader cannot do worst than random? Say, if I had to guess the roll of a dice, my chance of being correct can't be less than 16.667%. It's only true if the market is truly an independent stochastic process. As mentioned above, there are empirical evidences suggesting that it's not. is it right to say then that it's equally difficult to purposely make a loss then it is to purposely make a profit? The ability to profit is more than just being able to make a right call on which direction the market will be going. Even beginners can have a >50% chance of getting on the right side of the trades. It's the position management that kills most of the PnL. |
If there's no volume discount, does buying in bulk still make sense? | There is a trade-off. It can be worthwhile because you save those extra trips. (On the other hand, don't you need to go shopping all the time for perishable items anyway?) On the other hand, having those items on stock implies inventory costs (the space they take up might be limited, the money they represent is sleeping and cannot be put to other usage, some of them might break...). This trade-off gives you the economic order quantity. Your stock levels over time based on that would look like a saw-blade. In addition, you might want to keep a safety stock for emergencies (if you use them faster than expected, if there is a supply shortage...). |
How do I track investment performance in Quicken across rollovers? | Hmm, this site says If you use Quicken, you enter a new transaction of type "Corporate Acquisition (stock for stock)." You put investor shares as the "Company acquired", Admiral shares as the "Acquiring company", and the conversion ratio 0.7997754 as the "New shares issued per held share" number. Seems crazy, but maybe that's the way. Edit: This sucks. In the comments, you can see that people have to manually correct the share price for every transaction because of rounding problems. |
Offered a job: Should I go as consultant / independent contractor, or employee? | I think it really depends on what work/lifestyle you are looking for. I'm sure your more than capable of going down either route, but you should weigh up the pros and cons of each A consultant would be great, you'd be your own boss and you have overall say on how your business/career plans out, but be prepared to put in a hell of a lot of work to get it off the ground. Long hours, little time for social/family etc. But in the long run it'll pay off Employee, no worries about running your company, just turn up and perform your duties. You'll get the whole benefit package: healthcare/pension etc. You can probably go on expense paid training courses etc It depends, do you want to just be an employee working "for the man" or do you want to be "the man"? I wish you luck in whatever you do! :D |
Will prices really be different for cash and cards? | There are many gas stations where I live that already have different prices if you pay for cash vs. credit. In addition, some small businesses are doing this as well. My wife bought a birthday cake from a bakery. If you paid with cash, you saved 5%. |
Should I open a credit card when I turn 18 just to start a credit score? | I want to recommend an exercise: Find all the people nearby who you can talk to in less than 24 hours about credit cards: Your family, whoever lives with you, and friends. Now, ask each of them "what's the worst situation you've gotten yourself into with a credit card?" Personally, the ratio of people who I asked who had credit cards to the ratio of people with horror stories about how credit cards screwed up their credit was nearly 1:1. Pretty much, only one of them had managed to avoid the trap that credit cards created (that sole exception had worked for the government at a high paying job and was now retired with adult children and a lucrative pension). Because it's trivially easy over-extend yourself, as a result of how credit cards work (if you had the cash at any second, you would have no need for the credit). But do your own straw poll, and then see what the experience of people around you has been. And if there's a lot more bad than good out there, then ask yourself "am I somehow more fiscally responsible than all of these people?". |
If a company's assets are worth more than its market cap, can one say the shares must be undervalued? | Look at Price/book value and there are more than a few stocks that may have a P/B under 1 so this does happen. There are at least a couple of other factors you aren't considering here: Current liabilities - How much money is the company losing each quarter that may cause it to sell repeatedly. If the company is burning through $100 million/quarter that asset is only going to keep the lights on for another 2.5 years so consider what assumptions you make about the company's cash flow here. The asset itself - Is the price really fixed or could it be flexible? Could the asset seen as being worth $1 billion today be worth much less in another year or two? As an example, suppose the asset was a building and then real estate values drop by 40% in that area. Now, what was worth $1 billion may now be worth only $600 million. As something of a final note, you don't state where the $100 million went that the company received as if that was burned for operations, now the company's position on the asset is $900 million as it only holds a 90% stake though I'd argue my 2 previous points are really worth noting. The Following 6 Stocks Are Trading At or Below 0.5 x Book Value–Sep 2013 has a half dozen examples of how this is possible. If the $100 million was used to pay off debt, then the company doesn't have that cash and thus its assets are reduced by the cash that is gone. Depending on what the plant is producing the value may or may not stay where it is. If you want an example to consider, how would you price automobile plants these days? If the company experiences a reduction in demand, the plant may have to be sold off at a reduced price for a cynic's view here. |
Why call option price increases with higher volatility | Understanding the BS equation is not needed. What is needed is an understanding of the bell curve. You seem to understand volatility. 68% of the time an event will fall inside one standard deviation. 16% of the time it will be higher, 16%, lower. Now, if my $100 stock has a STD of $10, there's a 16% chance it will trade above $110. But if the STD is $5, the chance is 2.3% per the chart below. The higher volatility makes the option more valuable as there's a highr chance of it being 'in the money.' My answer is an over simplification, per your request. |
Why does money value normally decrease? | The reason is governments print extra money to cause inflation (hopefully reasonable) so that people don't just sit comfortably but do something to make money work. Thus inflation is an artificial measure which leads to money value gradually decreasing and causing people invest money in one way or another to beat inflation or maybe even gain some more money. Printing money is super cheap unlike producing any kind of commodity and that makes money different from commodities - commodities have their inherent value, but money has only nominal value, it's an artificial government-controlled product. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | Yes, becoming a millionaire is a reasonable goal. Saving 15% of your income starting at age 25 and investing in the stock market will likely get you there. The CAGR (Compound Annual Growth Rate) of the S&P 500 over the last 35 years has been about 11%. (That 35 years includes at least two fairly serious crashes.) You may get more or less than that number in the future, but let's guess that you'll average 9%. Let's say that you begin with nothing invested, and you start investing $100 per week at age 25. (If your annual income is $35,000, that is about 15% of your income.) You decide to invest your money in an S&P 500 index mutual fund. 35 years from now when you are 60 years old, you would be a millionaire ($1.2 Million, actually). You may earn less than the assumed 9%, depending on how the stock market does. However, if you stick with your 15% investment amount throughout your whole career, you'll most likely end up with more, because your income will probably increase during your career. And you will probably be working past age 60, giving your investments time to earn even more. |
Will progressively investing with moderate-to-high risk help secure a future? | There are a few flaws in your reasoning: I know my portfolio will always keep going up, No, it won't. You'll have periods of losses. You are starting your investing in a bull market. Do NOT be fooled into believing that your successes now will continue indefinitely. The more risky your portfolio, the bigger the losses. The upside of a risky portfolio is that the gains generally outweigh the losses, but there will be periods of losses. I honestly don't believe that it's possible for me to end up losing in the long term, regardless of risk. I think you vastly underestimate the risk of your strategy and/or the consequences of that risk. There's nothing wrong with investing in risky assets, since over time you'll get higher-than-average returns, but unless you diversify you are exposing yourself to catastrophic losses as well. |
Why can't house prices be out of tune with salaries | Your friends are overlooking a couple of problems with house prices and salaries being out of whack: Home 'equity' is a paper gain unless you realize it by selling the house. If you don't, but use the 'home ATM', all you're doing is piling up more debt that's secured on an asset that has downside risk. Ask anybody who's refinanced their house to buy a new boat or SUV in 2006/2007. In other words you're remortgaging the chickens before the eggs hatched. Of course they're also forgetting that all this debt will have to be paid back at some point, and that usually takes income, not equity. In a certain sense the housing market is a pyramid scheme that requires an influx of new buyers to maintain prices. Very simply, if you can't sell your house to buy a bigger one because the first time buyer you're trying to sell it to can't afford the down payment or the payment on the mortgage, then you can't sell your house to buy a bigger/better/nicer one and the next person in the chain can't sell his/hers. Cue the domino effect. House prices are only sustainable if people actually can afford to buy houses and if there's a massive disconnect between house prices and salaries, then house prices will fall eventually. It might just take a little longer depending on the amount of creative financing options that will eventually dry up. |
Why do stores and manufacturers use mail in rebates? A scam, or is there a way to use them effectively? | I've had positive experiences and negative ones. One key is to be sure you have followed ALL of the instructions. Once I forgot a small piece of information and lost out on $40. I was not happy. A few weeks ago I got a rebate for $50 from Staples, and it couldn't have been simpler. Stick with big companies and make sure you do everything on time. Companies use rebates because they know some people will forget, mess up, or not use the rebate. They make a ton of money off of unused rebates. |
Does doing your “research”/“homework” on stocks make any sense? | In fact markets are not efficient and participants are not rational. That is why we have booms and busts in markets. Emotions and psychology play a role when investors and/or traders make decisions, sometimes causing them to behave in unpredictable or irrational ways. That is why stocks can be undervalued or overvalued compared to their true value. Also, different market participants may put a different true value on a stock (depending on their methods of analysis and the information they use to base their analysis on). This is why there are always many opportunities to profit (or lose your money) in liquid markets. Doing your research, homework, or analysis can be related to fundamental analysis, technical analysis, or a combination of the two. For example, you could use fundamental analysis to determine what to buy and then use technical analysis to determine when to buy. To me, doing your homework means to get yourself educated, to have a plan, to do your analysis (both FA and TA), to invest or trade according to your plan and to have a risk management strategy in place. Most people are too lazy to do their homework so will pay someone else to do it for them or they will just speculate (on the latest hot tip) and lose most of their money. |
Can I invest in the London stock market when resident on a visa? | There are no legal restrictions on doing this. If you're living in the UK, just open an account like any other resident of the UK would. |
Why might it be advisable to keep student debt vs. paying it off quickly? | I have never double-answered till now. This loan can't be taken out of context. By the way, how much is it? What rate? "Debt bad." Really? Line the debt up. This is the highest debt you have. But, you work for a company that offers a generous match, i.e. the match to your 401(k). Now, it's a choice, pay off 6% debt or deposit that money to get an immediate 100% return. Your question has validity. In the end, we can tell you when to pay off the debt. After - The issue is that you are quoting a third party without having the discussion or ever being privy to it. In court, this is called 'hearsay.' The best we can do is offer both sides of the issue and priority for the payments. Welcome to Money.SE, nice first question. |
Can dividends be exploited? | No, the dividends can't be exploited like that. Dividends settlement are tied to an ex-dividend date. The ex-dividend, is the day that allows you to get a dividend if you own the stock. Since a buyer of the stock after this date won't get the dividend, the price usually drop by the amount of the dividend. In your case the price of a share would lose $2.65 and you will be credited by $2.65 in cash such that your portfolio won't change in value due to the dividend. Also, you can't exploit the drop in price by short-selling, as you would be owing the dividend to the person lending you the stock for the short sale. Finally, the price of the stock at the ex-dividend will also be affected by the supply and demand, such that you can't be precisely sure of the drop in price of the security. |
Error in my car loan papers, what do I do? | The absolute first thing you need to do is contact the bank. Also, do you have a copy of the loan papers you signed? You should look over those as soon as possible as well. I'm sure you want these payments going toward your FICO score and not your mothers. |
What exactly is the interest rate that the Fed is going to adjust? | While it is true that if the Federal reserve bank makes a change in their rate there is not an immediate change in the other rates that impact consumers; there is some linkage between the federal rate, and the costs of banks and other lenders regarding borrowing money. Of course the cost of borrowing money does impact the costs for businesses looking to expand, which does impact their ability to hire more workers and expand capacity. A change in business expansion does impact employment and unemployment... Then changes in employment can cause a change in raises, which can cause changes in prices which is inflation... Plus the lenders that lend to business see the flow of new loans change as the employment outlook change. If the costs of doing business for the bank changes or the flow of loans change, they do adjust the rates they pay depositors and the rates they charge borrowers... How long it will take to change the cost of an auto loan? No way to tell. Keep in mind that in complex systems, change can be delayed, and won't move in lock step. For example the price of gas\s doesn't always move the same way a price of a barrel of oil does. |
Multiple accounts stagnant after quitting job. | Adapted from an answer to a somewhat different question. Generally, 401k plans have larger annual expenses and provide for poorer investment choices than are available to you if you roll over your 401k investments into an IRA. So, unless you have specific reasons for wanting to continue to leave your money in the 401k plan (e.g. you have access to investments that are not available to nonparticipants and you think those investments are where you want your money to be), roll over your 401k assets into an IRA. But I don't think that is the case here. If you had a Traditional 401k, the assets will roll over into a Traditional IRA; if it was a Roth 401k, into a Roth IRA. If you had started a little earlier, you could have considered considered converting part or all of your Traditional IRA into a Roth IRA (assuming that your 2012 taxable income will be smaller this year because you have quit your job). Of course, this may still hold true in 2013 as well. As to which custodian to choose for your Rollover IRA, I recommend investing in a low-cost index mutual fund such as VFINX which tracks the S&P 500 Index. Then, do not look at how that fund is doing for the next thirty years. This will save you from the common error made by many investors when they pull out at the first downturn and thus end up buying high and selling low. Also, do not chase after exchange-traded mutual funds or ETFs (as many will likely recommend) until you have acquired more savvy or interest in investing than you are currently exhibiting. Not knowing which company stock you have, it is hard to make a recommendation about selling or holding on. But since you are glad to have quit your job, you might want to consider making a clean break and selling the shares that you own in your ex-employer's company. Keep the $35K (less the $12K that you will use to pay off the student loan) as your emergency fund. Pay off your student loan right away since you have the cash to do it. |
Best way to pay off debt? | The key phrase in your post is that the options are "in a good position now". They may be worthless in three months or a year. If I was you I would cash in the options and pay off the debt. Cash in enough to also cover taxes. You may want to cash them all in. |
Does it make any sense to directly contribute to reducing the US national debt? | No, it makes no sense. The US national debt is different from other debt on TWO KEY WAYS : 1.) The national debt is not money we owe to our government IT IS MONEY WE OWE TO OURSELVES. 2.) If the GNP of our country can grow at a rate equal to or greater than the national debt interest, then the figure of national debt has no bearing on anything. So a more philanthropic endeavor would be to help grow the economy. |
Why can I see/trade VIX but not S&P/TSX 60 VIX? | You can trade VXX, but VIX is only an index. http://www.marketwatch.com/investing/stock/VXX?CountryCode=US |
Tax implications of exercising ISOs and using proceeds to exercise more ISOs | That is a weird one. Typically one never needs to layout cash to exercise an option. One would only choose to use option 1, if one is seeking to buy the options. This would occur if an employee was leaving a company, would no longer be eligible for the ISO (and thereby forfeit any option grant), and does not want to exercise the options. However, what is not weird is the way income tax works, you are taxed on your income in the US. I assume you are talking about the US here. So if you exercise 10K shares, if under either option, you will be taxed on the profit from those share. Profit = (actual price - strike price) * shares - fees |
What can I replace Microsoft Money with, now that MS has abandoned it? | I use GnuCash which I really like. However, I've never used any other personal finance software so I can't really compare. Before GnuCash, I used an Excel spreadsheet which works fine for very basic finances. Pros Cons |
Borrowing money for a semi-urgent medical expense | The best option would be to have the dental office allow you pay in installments. That would be probably the cheapest and most convenient way. When high amounts are involved - many medical offices are flexible with payments and allow spreading over long period of time, so you should check it out. Otherwise, credit cards would probably be the most expensive loan, but you should shop around and compare the rates offered to you, it is hard to guess would you may get. |
What intrinsic, non-monetary value does gold have as a commodity? | Borrowing Wikipedia for a bit, it seems like the intrinsic uses are these. I've ordered these approximately in technology-level order: The importance of any of these uses largely depends on the state of a civilization and the level of technology of that civilization. However, most of these applications have far cheaper substitutes available. |
If I deposit money as cash does it count as direct deposit? | Well, it's directly depositing money in your account, but Direct Deposit is something completely different: https://en.wikipedia.org/wiki/Direct_deposit Direct deposits are most commonly made by businesses in the payment of salaries and wages and for the payment of suppliers' accounts, but the facility can be used for payments for any purpose, such as payment of bills, taxes, and other government charges. Direct deposits are most commonly made by means of electronic funds transfers effected using online, mobile, and telephone banking systems but can also be effected by the physical deposit of money into the payee's bank account. Thus, since the purpose of DD is to eliminate checks, I'd say, "no", depositing cash directly into your account does not count as the requirement for one Direct Deposit within 90 days. |
Are Index Funds really as good as “experts” claim? | Picking yourself is just what all the fund managers are trying to do, and history shows that the majority of them fails the majority of the time to beat the index fund. That is the core reason of the current run after index funds. What that means is that although it doesn’t sound so hard, it is not easy at all to beat an index consistently. Of course you can assume that you are better than all those high-paid specialists, but I would have some doubt. You might be luckier, but then you might be not. |
Apartment lease renewal - is this rate increase normal? | What happened in the past, the rent you paid last year, is in the past. You shouldn't be concerned with the percentage increase, but with whether you want that apartment at the new rent for the coming year. If your rent had been half what it was last year and the new proposal were to double it, you would be outraged at the doubling, but really you got a steal last year. Going forward, you have three options. You can accept the new rent, you can decline it and move, or you can try to negotiate a better rate. It sounds like the landlord is hoping you will find the hassle of moving enough to accept the new rent. If you do negotiate, you should know what your preferred alternative is, which you should use to set your walkaway point. If you make a counterproposal, it is often useful to show what a comparable apartment is renting for to justify the rent you suggest. |
How to find historical stock price for a de-listed or defunct company? | http://www.euroinvestor.com/exchanges/nasdaq/macromedia-inc/41408/history will work as DumbCoder states, but didn't contain LEHMQ (Lehman Brother's holding company). You can use Yahoo for companies that have declared bankruptcy, such as Lehman Brothers: http://finance.yahoo.com/q/hp?s=LEHMQ&a=08&b=01&c=2008&d=08&e=30&f=2008&g=d but you have to know the symbol of the holding company. |
Why isn't money spent on necessities deductible from your taxes? | You could debate the "why"s of tax policy endlessly. There are lots of things in tax law that I think are bad ideas, and probably a few here and there that I think are good ideas. I am well aware that there are things that I think are good ideas that others think are bad ideas and vice versa. To your specific point: I suppose you could say that having a place to live is a necessity. But most people do not live in the absolute minimum necessary to give them a place to sleep and protection from the weather. You could survive with a one-room apartment with a bed on one side and a toilet and some minimal cooking facilities on the other. Most people have considerably more than that. At some point that's luxury and not necessity. And if you want to push it, you COULD live in a cardboard box under a bridge, you don't NEED a house or apartment to survive. Personally I think it's absurd that as a home-owner I get a deduction for my mortgage interest, while if someone were to rent an identical house with a monthly rental equal to exactly the same amount that I am paying on my mortgage, he would receive no deduction. The stated goal of that one was to encourage home ownership. But people who own homes are generally richer than those who rent, so the net result is that the poor are paying higher taxes to help subsidize the homes of the rich. And then the rich congratulate themselves on how they are giving these tax breaks to help make housing more affordable for poor people. To reiterate @keshlam, tax laws only makes sense when understood politically. Yes, some people have fine ideas about what is fair and just. Others simply want tax breaks that benefit their business or people with tough financial situations that just happen by chance to resemble their own. Many of the people with noble ideas have little concept of what the implications of the policies they push are. Many of the ideas that some people view as worthy and noble, others view as frivolous, counter-productive, or even evil. Then you mash all these competing groups and interest together and see what comes out. |
Strategy for investing large amount of cash | Dollar Cost Averaging would be the likely balanced approach that I'd take. Depending on the size of the sum, I'd likely consider a minimum of 3 and at most 12 points to invest the funds to get them all working. While the sum may be large relative to my net worth, depending on overall scale and risk tolerance I could see doing it in a few rounds of purchasing or I could see taking an entire year to deploy the funds in case of something happening. I'd likely do monthly investments myself though others may go for getting more precise on things. |
If a trendline or pattern breaks due to some bad news but it returns back what to do? | There is a technique called the Elliott wave which explains these 'shocks'. The reversal directions you are questioning are part of the pattern, it is known as corrections. The Elliott wave is an indicator based on psychology of investors. Think about it this way, if you see a huge up trend what are you most likely to do, sell and make profit or continue, this is why there is a shock before it continues. Many people will sell to be safe, especially after hearing the bad news they won't risk it. By learning the Elliott wave you'll be able to make an educated decision on whether or not to stay or leave. Here are websites on the Elliott wave: http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory http://www.swing-trade-stocks.com/elliott-wave.html The Elliott wave is helpful in any time frame and works well with momentum. Hope this helps. |
Premium classification when selling covered calls in a traditional IRA? | If you hold stock in a traditional IRA and sell a covered call against that stock, the premium received for writing that call belongs to the IRA just as would any other gain, dividend, or interest. It is not a contribution but simply adds to the balance in the IRA. The nature of the gain (capital or ordinary) is not relevant since all parts of the IRA balance are treated the same when funds are (eventually) withdrawn. |
How to protect a Stock you still want to own from a downturn? | Of the two, an option is a more reliable but more expensive means to get rid of a stock. As sdg said, a put option is basically an insurance policy on the stock; you pay a certain price for the contract itself, which locks in a sale price up to a particular future date. If the stock depreciates significantly, you exercise the option and get the contract price; otherwise you let the contract expire and keep the stock. Long-term, these are bad bets as each expired contract will offset earnings, but if you foresee a near-term steep drop in the stock price but aren't quite sure, a put option is good peace of mind. A sell stop order is generally cheaper, but less reliable. You set a trigger price, say a loss of 10% of the stock's current value. If that threshold is reached, the stop order becomes a sell order and the broker will sell the stock on the market, take his commission (or a fixed price depending on your broker) and you get the rest. However, there has to be a buyer willing to buy at that price at the moment the trigger fires; if a stock has lost 10% rapidly, it's probably on the way down hard, and the order might not complete until you realize a 12% loss, or a 15%, or even 20%. A sell stop limit (a combination stop order and limit order) allows you to say that you want to sell if the stock drops to $X, but not sell if it drops below $X-Y. This allows you to limit realized losses by determining a band within which it should be sold, and not to sell above or below that price. These are cheaper because you only pay for the order if it is executed successfully; if you never need it, it's free (or very cheap; some brokers will charge a token service fee to maintain a stop or stop limit). However, if the price drops very quickly or you specify too narrow a band, the stock can drop through that band too quickly to execute the sell order and you end up with a severely depreciated stock and an unexercised order. This can happen if the company whose stock you own buys another company; VERY quickly, both stocks will adjust, the buying company will often plummet inside a few seconds after news of the merger is announced, based on the steep drop in working capital and/or the infusion of a large amount of new stock in the buying company to cover the equity of the purchased company. You end up with devalued stock and a worthless option (but one company buying another is not usually reason to sell; if the purchase is a good idea, their stock will recover). Another option which may be useful to you is a swaption; this basically amounts to buying a put option on one financial instrument and a call on another, rolled into one option contract specifying a swap. This allows you to pick something you think would rise if your stock fell and exchange your stock for it at your option. For example, say the stock on which you buy this swaption is an airline stock, and you contract the option to swap for oil. If oil surges, the airline's stock will tank sharply, and you win both ways (avoiding loss and realizing a gain). You'd also win if either half of this option realized a gain over the option price; oil could surge or the airline could tank and you could win. You could even do this "naked" since its your option; if the airline's stock tanks, you buy it at the crashed price to exercise the option and then do so. The downside is a higher option cost; the seller will be no fool, so if your position appears to be likely, anyone who'd bet against you by selling you this option will want a pretty high return. |
When will Canada convert to the U.S. Dollar as an official currency? | I don't see countries switching to the USD, I see countries moving away from it. The US has the largest peace time debt ever, is not being even close to fiscally responsible (approving ~4 trillion budget!) and is faced with 100 trillion in future commitments (social security, medicare) with a workforce (tax base) that is decreasing as the baby boomers retire. When the US cannot meet those obligations (and most experts agree there is no hope of that anymore) they will have to print money and devalue the currency. |
Is working on a W2 basis, with benefits paid to me, a good idea? | It's hard to answer without knowing all of the details (i.e. what was your salary for each of the options), but I think you probably made a good choice. 1099: Would have required you to pay self-employment tax, but also would have allowed you to deduct business expenses. W2 with benefits: Likely would have been beneficial if you needed healthcare (since group plans can be cheaper than individual plans, and healthcare payments aren't taxed), but if you don't use the healthcare, that would have been a waste. W2, no benefits: Assuming your salary here falls between the 1099 and the W2 with benefits, it seems like a good compromise for your situation. |
Effective returns on investment in housing vs other financial instruments | The assumption that house value appreciates 5% per year is unrealistic. Over the very long term, real house prices has stayed approximately constant. A house that is 10 years old today is 11 years old a year after, so this phenomenon of real house prices staying constant applies only to the market as a whole and not to an individual house, unless the individual house is maintained well. One house is an extremely poorly diversified investment. What if the house you buy turns out to have a mold problem? You can lose your investment almost overnight. In contrast to this, it is extremely unlikely that the same could happen on a well-diversified stock portfolio (although it can happen on an individual stock). Thus, if non-leveraged stock portfolio has a nominal return of 8% over the long term, I would demand higher return, say 10%, from a non-leveraged investment to an individual house because of the greater risks. If you have the ability to diversify your real estate investments, a portfolio of diversified real estate investments is safer than a diversified stock portfolio, so I would demand a nominal return of 6% over the long term from such a diversified portfolio. To decide if it's better to buy a house or to live in rental property, you need to gather all of the costs of both options (including the opportunity cost of the capital which you could otherwise invest elsewhere). The real return of buying a house instead of renting it comes from the fact that you do not need to pay rent, not from the fact that house prices tend to appreciate (which they won't do more than inflation over a very long term). For my case, I live in Finland in a special case of near-rental property where you pay 15% of the building cost when moving in (and get the 15% payment back when moving out) and then pay a monthly rent that is lower than the market rent. The property is subsidized by government-provided loans. I have calculated that for my case, living in this property makes more sense than purchasing a market-priced house, but your situation may be different. |
How are ADRs priced? | Academic research into ADRs seems to suggest that pairs-trading ADRs and their underlying shares reveals that there certainly are arbitrage opportunities, but that in most (but not all cases) such opportunities are quickly taken care of by the market. (See this article for the mexican case, the introduction has a list of other articles you could read on the subject). In some cases parity doesn't seem to be reached, which may have to do with transaction costs, the risk of transacting in a foreign market, as well as administrative & legal concerns that can affect the direct holder of a foreign share but don't impact the ADR holder (since those risks and costs are borne by the institution, which presumably has a better idea of how to manage such risks and costs). It's also worth pointing out that there are almost always arbitrage opportunities that get snapped up quickly: the law of one price doesn't apply for very short time-frames, just that if you're not an expert in that particular domain of the market, it might as well be a law since you won't see the arbitrage opportunities fast enough. That is to say, there are always opportunities for arbitrage with ADRs but chances are YOU won't be able to take advantage of it (In the Mexican case, the price divergence seems to have an average half-life of ~3 days). Some price divergence might be expected: ADR holders shouldn't be expected to know as much about the foreign market as the typical foreign share holder, and that uncertainty may also cause some divergence. There does seem to be some opportunity for arbitrage doing what you suggest in markets where it is not legally possible to short shares, but that likely is the value added from being able to short a share that belongs to a market where you can't do that. |
Negatives to increased credit card spending limit? [duplicate] | https://money.stackexchange.com/a/79252/41349 https://money.stackexchange.com/a/79261/41349 Adding to @Chris H answer about damage limitation Online purchases could include phone/tablet app purchases, which could be an issue if you have children or you are a victim of fraud. First link from googling "Kid racks up almost $6,000 on Jurassic World in-app purchases" Adding to @Michael C. Answer I think credit cards perhaps can make it more difficult to budget, if you are more lazy/have limited savings. These might happen more long term if you don't keep track of your spending. I.e. If your credit limit matches your monthly income, and if you pay off your card each month, I think it is harder to overspend as you don't have more credit available than you can afford to spend. However this is countered by that, a slightly higher credit limit may help to avoid fees from exceeding your credit card limit. I think due to that some/not all purchases are instantly "banked", i.e. the shop might send all of its monies to its bank at the end of the day or something like this, so you can just keep spending not realising you have exceeding your credit limit and get hit by fees. |
What is the best way to get a “rough” home appraisal prior to starting the refinance process? | It's extremely easy to get a rough valuation of your home. Just phone a real estate agent. Virtually any real estate agent will come and value your home free. Even if you say outright "I'm not considering selling, I just want a valuation" they will probably do it, because for them getting contacts of people who might one day want to sell their home is all-important. Even if a few turn you down, some will do it. You might say that an agent isn't going to be as accurate as an appraiser, and you are right. There is also an expectation that they will evaluate higher than the real value, to persuaade you to sell. That probably isn't a big issue, and it's something you can compensate for. And even an appraiser is going to be based somewhat on speculation. You might try to do this calculation yourself, but an agent has access to the actual sale prices of nearby houses - you can't get that information. You only have access to the asking prices. And did I mention they will do it for free? |
What does “a stock pays a dividend of 3%” mean? | It means a 3% return on the value of the stock. If a stock has a $10 share price, the dividend would be $0.30. Normally though, the dividends are announced as a fixed amount per share, because the share price fluctuates. If a percentage were announced, then the final cost would not be known as the share priced could change radically before the dividend date. |
What one bit of financial advice do you wish you could've given yourself five years ago? | Get an advanced degree. This should increase your earning power. Also learn how to use a computer, this should also tend to increase your earning power. |
When to start investing in an index fund? Wait for a bear market, use dollar cost-averaging, or another approach? | The fact that you are choosing index fund means you are surely not one of those investors who can correctly judge dips. But buying on dips is still important. You can use a method called Dollar Value Averaging. It is better than Dollar Cost Averaging. Just make sure you apply a lower limit and an upper limit to be more predictable. Suppose you have 10000 to invest. Use limits like minimum 200 investment when index is high, maximum 600 investment when index is down and when index gives normal returns, invest 400. Do this for about 2 years. More than 2 years is not recommended. I myself use this method and benefit a lot. |
Is an interest-only mortgage a bad idea? | Really the question you need to ask yourself is how much Risk you want to take in order to save a little on interest for 5 years. Rates are pretty close to a historic low, and if you have good credit you should shop around a bit to get a good ideal of what a 15 or 30 year fixed loan would go for. For people that are SURE they will be selling a property in a few years, a 5-yeah balloon, or ARM might not be a bad thing. OTOH, if their plans change, or if you plan to stay in the property for longer (e.g. 10-15 years) then they have the potential to turn into a HUGE trap, and could have the effect of forcing you to sell your house. The most likely people to fall into such a trap are those who are trying to buy more house than they can really afford and max out what they can pay using a lower rate and then later cannot afford the payments if anything happens that makes the rate go up. Over the last three years we've seen a large number of foreclosures and short-sales taking place are because of people who fell into just this kind of trap.. I strongly advise you learn from their mistakes and do NOT follow in their footsetps You need to consider what could happen in 5 years time. Or if the economy takes off and/or the Fed is not careful with interest rates and money supply, we could see high inflation and high interest rates to go along with it. The odds of rates being any lower in 5 years time is probably pretty low. The odds of it being higher depends on who's crystal ball you look at. I think most people would say that rates are likely to increase (and the disagreement is over just how much and how soon). If you are forced to refinance in 5 years time, and the rates are higher, will you be able to make the payments, or will you potentially be forced out of the house? Perhaps into something much smaller. What happens if the rates at that time are 9% and even an ARM is only 6%? Could you make the payments or would you be forced to sell? Potentially you could end up paying out more in interest than if you had just gotten a simple fixed loan. Myself, I'd not take the risk. For much of the last 40 years people would have sold off their children or body parts to get rates like we have today on a standard fixed loan. I'd go for a standard fixed loan between 15 and 30 years duration. If you want to pay extra principle to get it paid off earlier in order to feel more secure or just get out from under the debt, then do so (personally, I wouldn't bother, not at today's rates) |
Should I open a credit card when I turn 18 just to start a credit score? | Yes, it is a very good idea to start your credit history early. It sounds like you have a good understanding of the appropriate use of credit, as a substitute for cash rather than a supplement to income. As long as you keep your expenses under control and pay off your card each month, I see no problems with the idea. Try to find a card with no annual fees, a low interest rate if possible (which will be difficult at your age), and with some form of rewards such as cash back. Look for a reputable issuing bank, and keep the account open even after you get a new card down the road. Your credit score is positively correlated with having an account open for a long time, having a good credit usage to credit limit ratio, and having accounts in good standing and paid on time. |
What is the difference between fund and portfolio? | A fund is a portfolio, in that it is a collection, so the term is interchangeable for the most part. Funds are made up of a combination of equities positions (i.e., stocks, bonds, etc.) plus some amount of un-invested cash. Most of the time, when people are talking about a "fund", they are describing what is really an investment strategy. In other words, an example would be a "Far East Agressive" fund (just a made up name for illustration here), which focuses on investment opportunities in the Far East that have a higher level of risk than most other investments, thus they provide better returns for the investors. The "portfolio" part of that is what the stocks are that the fund has purchased and is holding on behalf of its investors. Other funds focus on municipal bonds or government bonds, and the list goes on. I hope this helps. Good luck! |
Forex independent investments | Unless you are buying a significant value of your goods in USD then the relative strength of USD versus your local currency will have little to no effect on what the value of your investments is worth to you. In fact only (de|in)flation will effect your purchasing power. If your investments are in your local currency and your future expenses (usage of the returns on the investments) will be in your local currency FX has no effect. To answer your question, however, since all investments involve flows of money there can be no investment (other than perhaps gold which is really a form of currency) that isn't bound to at least one currency. In general investments are expected to be valued against the investor's home currency (I tend to call it "fund currency" as I work with hedge funds) as the return on the investment will be paid out in the fund currency and returns will be compared on the same basis. If investments are to be made internationally then it is necessary to reduce, or "hedge" the exchange rate risk. This is normally done using FX swaps or futures that allow an exchange rate in the future to be locked in today. Far from being unbound from FX moves these derivatives are closely bound to any moves but crucially are bound in the opposite direction to the hoped for FX move. an example of this would be if I'm investing 100GBP (my local currency) in a US company XYZ corp which I expect to do well. Suppose I get 200USD for my 100GBP and so buy 1 * 200USD shares in XYZ. No matter what happens to XYZ stock any move in GBP/USD will affect my P&L so I buy a future that allows me to exchange 200USD for 100GBP in 6 month's time. If GBP rises I can sell the future and make money on both the higher exchange rate and the increase in XYZ corp. If GBP falls I can keep the future until maturity and exchange the 200USD from XYZ corp for 100GBP so I only take the foreign exchange hit on any profits. If I expect my profits to be 10USD I can even buy futures such that I can lock in the exchange rate for 110USD in 6 months so that I will lose even less of my profit from the exchange rate move. |
Ways to save for child's college education where one need not commit to set contributions? [duplicate] | 529 plans. They accumulate earnings over time and by the time your child goes to college you will be able to withdraw funds for college TAX FREE. The best part about 529s is that there are several different options you can choose from, and you aren't limited to the plans sponsored by your state, you can use whichever plan works best for you. For example, I live in South Carolina and use Utah's Educational Savings Plan because it has no minimum amount to open one up and it has low fees. Hope this helped. Good luck with your search! |
How to properly do background check for future tenant in my own house? | If you can find a tenant by networking -- co-worker, friend of a friend, etc. -- rather than openly advertising, that often gives you a better pool. Side advice: Check what local housing laws apply to renting a room rather than having a housemate. Once you start advertising this you may be subject to fair housing laws, additional code requirements, and so on. |
How does the importance of a cash emergency fund change when you live in a country with nationalized healthcare? | Unanticipated unemployment is usually the triggering factor for drawing on an emergency fund. Ask yourself: what happens if I lose my job tomorrow? Or my spouse becomes unemployed? What happens if I become disabled and can't work for x amount of time? Sure, you can discount your chances of needing such a fund if you have free health care. But having health insurance doesn't change the fact that an emergency fund is a good idea. There are many ways to go broke! |
What is the best credit card for someone with no credit history | Consider getting yourself a gas card. Use it for a year. Make your payments on time. Then reapply for a credit card. |
Are warehouse clubs like Costco and Sam's Club worth it? | We were members at costco, but decided not to renew. Meat was a definite cost savings, and laundry detergent as well. Diapers used to be a huge savings, but loblaws seems to be pricing things better now. We did by a bunch of Kirkland brand diapers and wipes before the membership ended. The problem we had was that you just get too much stuff - you save a bunch on that laundry detergent that you buy once every two years, or the chicken you have in your freezer forever. In Canada, the basic membership is $55 and we could not be certain we made that back, nor that we weren't over consuming as we walked the aisles. I have heard that the more expensive membership ($100) which gives you 2% back on purchases is a good way to gauge your usage and determine if it is worth it. It also costs nothing to give it a try - their policy is a full refund at any time, so in theory you could go in on your 364th day and get a refund. |
Why is the stock market price for a share always higher than the earnings per share? | Stock prices are set by supply and demand. If a particular stock has a high EPS, say, $100, then people will bid more for that stock, driving up its price over one with a $10 EPS. Your job as an investor is to find stocks with low share prices, but which will give you high earnings (either in dividends, our future share price). This means finding stocks which you believe the market has priced incorrectly, for whatever reason (as an example, many bank stocks are being punished right now, even if the underlying banks are in good shape financially). If you want to beat the market indices, be prepared to do a lot of research, because you're trying to outsmart the market as a whole. |
How to start investing/thinking about money as a young person? | nan |
What's the best way to make money from a market correction? | What's the best strategy? Buy low and sell high. Now. A lot of people try to do this. A few are successful, but for the most part, people who try to time the market end up worse. A far more successful strategy is to save over your entire lifetime, put the money into a very low-cost market fund, and just let the average performance take you to retirement. Put another way, if you think that there is an obvious, no-fail, double-your-money-due-to-a-correction strategy, you're wrong. Otherwise everyone would do it. And someone who tells you that there is such a strategy almost surely will be trying to separate you from a good amount of your money. In the end, $80K isn't a life-altering, never-have-to-work-again amount of money. What I think you ought to do with it is: pay off any credit card debts you may have, pay a significant chunk of student loan or other personal loan debts you may have, make sure you have a decent emergency fund set aside, and then put the rest into diversified low-cost mutual funds. Think of it as a nice leg-up towards your retirement. |
How can I live outside of the rat race of American life with 300k? | Consider buying a legal "mother daughter" property, rent out the top part, and live in the "mother" component. |
A calculator that takes into account portfolio rebalancing? | Note that if 1) The stock prices are continuously differentiable (they aren't) 2) You rebalance continuously in the absence of trading fees and taxes then the return fraction (future price / original price) will be the geometric mean of the return fractions for each investment. If you don't rebalance then the return fraction will be the arithmetic mean. But the arithmetic mean is ALWAYS greater than or equal to the geometric mean, so continuous rebalancing in the case of continuously differentiable prices will always hurt you, even abscent trading costs/taxes. Any argument in favor of blind rebalancing which does not somehow fail in the continuously differentiable case is simply wrong. See https://dl.dropboxusercontent.com/u/38536036/to%20karim.pdf -JT |
If someone gives me cash legally, can my deposit trigger an audit for them? | Yes you should worry and take care not to violate the law or provide any appearance of impropriety. Every bank in the USA is required under the Bank Secrecy Act to report cash transactions over $10,000 the same day to the IRS -- and here's the fun secret part -- without notification to the depositor. But splitting the deposits up into smaller amounts is also a crime, called "structuring". On occasion there is a news story where a retail business that naturally must deposit cash from customers will be (falsely?) accused of structuring, e.g.: Feds seize grocery store's entire bank account -- Institute for Justice defends grocer Under the legal doctrine of civil asset forfeiture, your money can be accused of a crime, seized, and tried separately from its owner. The actual cases indicate the money as defendant, i.e. "US v $124,700" In this somewhat bizarre system of "justice", the owner need not be charged with a crime, and is not in immediate peril of going to prison (about the only upside in this, but might be temporary because the authorities haven't charged the owner yet). When only the money is charged with a crime, there is no requirement for the government to supply a public defender for the owners who can not afford a lawyer.... can not afford a lawyer, because the government took all their money.... |
How do you calculate the rate of return (ROR) when buying and selling put options? | RoR for options you bought is fairly easy: (Current Value-Initial Cost)/Initial Cost gives you the actual return. If you want the rate of return, you need to annualize that number: You divide the return you got above by the number of days the investment was in place, and then multiply that number by the number of days in a year. (365 if you're using calendar days, about 255 if you're using trading days.) RoR for options you sold is much more complex: The problem is that RoR is basically calculating the size of your return relative to the capital it tied up to earn it. That's simple when you bought something; the capital tied up is the money you put up. It's more complex on a position like a short option, where the specific transaction in question generates cash when it's put on. The correct way to deal with this is to A) Bundle your strategy (options, stock and collateral) into one RoR where appropriate, and B) include any needed collateral to support the short option in the calculation. So, if you sell a "cash-secured" put, where you have to post the money that you'd need to take delivery of the shares if they were put to you, the initial cost is the total amount you'd need to put the trade on: in this case, it's the cash amount, less the premium you collected for selling the put. That's just one example. But the approach holds more broadly: if you're using covered calls, your original cost is the cost of the stock less the premium generated by the sale of the call. |
How is taxation for youtube/twitch etc monetization handled in the UK? | The HMRC has a dedicated self-help/learning site that is helpful here: It's important to tell HMRC that you are self-employed as soon as possible. If you don't, you may have to pay a penalty. You don't want to pay more to HMRC than you have to as it is a waste of your money. Your business has started when you start to advertise or you have a customer to buy your goods or services. It is at this point that your business is 'trading'. You cannot register before you start trading. For example, if you advertise your business in the local newspaper on 15 January but do not get your first customer until 29 March; in this case, you have been trading since 15 January. You must tell HMRC within six months of the end of the tax year in which you start self-employment. You must therefore register by 5 October. But it's best to register well before this so that you do not forget to do so. The HMRC also has a YouTube channel with help videos, and "Am I Trading or Not?" might be of particular interest to you. Most of the registration is based around the concept of starting to work with the intent to make a profit. By the letter of law and regulations, you should register within six months of the end of the tax year you started to avoid any potential penalty. However note that the situation is different based upon your intent. If you begin making/putting up videos online as a hobby with the hope that you can make something to help you defray the basic costs involved, and the total amount you make is relatively small (say, less than 500 pounds), you will not be classified as "trading" and likely have no need to register with HMRC. As soon as you begin to get in regular payments, maybe a single payment of a significant size, or multiple payments for a similar service/item, you are vastly more likely to need to register. From my reading you would likely be safe to begin putting up videos without registration, but if you begin spending a large portion of your time over an extended period (multiple months) and/or begin getting payments of any notable size then you should likely register with the appropriate services (HMRC, etc). As is the case in both the USA and UK, simple registration is pretty cheap and the costs of little/no income are usually pretty minor. Also note that the HMRC trading and self-employment regulations are unusual compared to many US laws/institutions, in that you are explicitly permitted to begin doing something and only register later. So if you start doing videos for an entire tax year + 5 months and make nothing significant, you'd seemingly be fine to never register at all. |
If a stock has only buyers and no sellers how does its price go up? | You can, in theory, have the stock price go up without any trading actually occurring. It depends on how the price is quoted. The stock price is not always quoted as the last price someone paid for it. It can also be quoted as the ask price, which is the price a seller is willing to sell at, and the price youd pay if you bought at market. If I am a seller, I can raise the asking price at any time. And if there are no other sellers, or at least none that are selling lower than me, it would look like the price is going up. Because it is, it now costs more to buy it. But no trading has actually occurred. |
What home improvements are tax deductible? | Home Improvements that improve the home's Energy Efficiency are currently eligible for federal tax credits. This includes renewable energy equipment (solar panels, etc.) and Nonbusiness Energy Property Tax Credit. The credit is 30% of the cost. From Intuit Turbo Tax: Energy Tax Credit: Equipment and materials can qualify for the Nonbusiness Energy Property Credit only if they meet technical efficiency standards set by the Department of Energy. The manufacturer can tell you whether a particular item meets those standards. For this credit, the IRS distinguishes between two kinds of upgrades. The first is "qualified energy efficiency improvements," and it includes the following: •Home insulation •Exterior doors •Exterior windows and skylights •Certain roofing materials The second category is "residential energy property costs." It includes: •Electric heat pumps •Electric heat pump water heaters •Central air conditioning systems •Natural gas, propane or oil waterheaters •Stoves that use biomass fuel •Natural gas, propane or oil furnaces •Natural gas, propane or oil hot water boilers •Advanced circulating fans for natural gas, propane or oil furnaces |
How to calculate 1 share movement | The price of a share has two components: Bid: The highest price that someone who wants to buy shares is willing to pay for them. Ask: The lowest price that someone who has a share is willing to sell it for. The ask is always higher than the bid, since if they were equal the buyer and seller would have a deal, make a transaction, and that repeats until they are not equal. For stock with high volume, there is usually a very small difference between the bid and ask, but a stock with lower volume could have a major difference. When you say that the share price is $100, that could mean different things. You could be talking about the price that the shares sold for in the most recent transaction (and that might not even be between the current bid and ask), or you could be talking about any of the bid, the ask, or some value in between them. If you have shares that you are interested in selling, then the bid is what you could immediately sell a share for. If you sell a share for $100, that means someone was willing to pay you $100 for it. If after buying it, they still want to buy more for $100 each, or someone else does, then the bid is still $100, and you haven't changed the price. If no one else is willing to pay more than $90 for a share, then the price would drop to $90 next time a transaction takes place and thats what you would be able to immediately sell the next share for. |
Mutual fund value went down, shares went up, no action taken by me | You did something that you shouldn't have done; you bought a dividend. Most mutual fund companies have educational materials on their sites that recommend against making new investments in mutual funds in the last two months of the year because most mutual funds distribute their earnings (dividends, capital gains etc) to their shareholders in December, and the share price of the funds goes down in the amount of the per share distribution. These distributions can be taken in cash or can be re-invested in the fund; you most likely chose the latter option (it is often the default choice if you ignored all this because you are a newbie). For those who choose to reinvest, the number of shares in the mutual fund increases, but since the price of the shares has decreased, the net amount remains the same. You own more shares at a lower price than the day before when the price was higher but the total value of your account is the same (ignoring normal market fluctuations in the price of the actual stocks held by the fund. Regardless of whether you take the distributions as cash or re-invest in the fund, that money is taxable income to you (unless the fund is owned inside a 401k or IRA or other tax-deferred investment program). You bought 56 shares at a price of $17.857 per share (net cost $1000). The fund distributed its earnings shortly thereafter and gave you 71.333-56= 15.333 additional shares. The new share price is $14.11. So, the total value of your investment is $1012, but the amount that you have invested in the account is the original $1000 plus the amount of the distribution which is (roughly) $14.11 x 15.333 = $216. Your total investment of $1216 is now worth $1012 only, and so you have actually lost money. Besides, you owe income tax on that $216 dividend that you received. Do you see why the mutual fund companies recommend against making new investments late in the year? If you had waited till after the mutual fund had made its distribution, you could have bought $1000/14.11 = 70.871 shares and wouldn't have owed tax on that distribution that you just bought by making the investment just before the distribution was made. See also my answer to this recent question about investing in mutual funds. |
What are the pitfalls of loaning money to friends or family? Is there a right way to do it? | There are two levels to consider here: That said, before loaning/giving anyone money ask yourself if it is good for them. If they have problems managing their money, or holding down a job, and you give them money, they are just going to come back for more later. In this type of situation, you shouldn't give/loan them money. But on the other hand, if a friend or family member has hit a rough patch and you know they are the kind of person that will be on their feet again soon, and you have nothing to lose, give them the money. |
Does my net paycheck decrease as the year goes on due to tax brackets filling up? | Most countries with income tax, including the USA, design their withholding system so that in straightforward cases, tax is withheld from each month's paycheck on an annualized basis: tax for a month is calculated on the assumption that you will keep earning the same monthly amount for the rest of the year, and the withholding is set so that the tax is spread evenly across the year. Another way of putting that is that in practice you only get the tax brackets allocated proportionately throughout the year - so up till the end of August you'll only have been assigned 8/12 of the $37450 bracket, and so on. So if your income doesn't change and your general tax affairs don't change, your paycheck also shouldn't change. If your income is irregular or changes during the year then things can get more complicated. As other answers have noted, withholdings are calculated according to tables that normally just take into account that specific month's income. There are various possible changes to your tax affairs that might cause the withholdings to change. For example there'd be an impact from any change in your contributions to tax advantaged things like health insurance or retirement, health or education savings. You might also use form W-4 to change your withholdings yourself. Note that even with a regular income that doesn't change through the year, you might find yourself either owing money or being owed a refund when you file your taxes after the end of the year. It's worth making sure that your W-4 accurately records the allowances you are entitled to, to minimize or eliminate this adjustment. |
Long term investing alternative to mutual funds | Typically mutual funds will report an annualized return. It's probably an average of 8% per year from the date of inception of the fund. That at least gives some basis of comparison if you're looking at funds of different ages (they will also often report annualized 1-, 3-, 5-, and 10- year returns, which are probably better basis of comparison since they will have experience the same market booms and busts...). So yes, generally that 8% gets compounded yearly, on average. At that rate, you'd get your investment doubled in roughly 9 years... on average... Of course, "past performance can't guarantee future results" and all that, and variation is often significant with returns that high. Might be 15% one year, -2% the next, etc., hence my emphasis on specifying "on average". EDIT: Based on the Fund given in the comments: So in your fund, the times less than a year (1 Mo, 3 Mo, 6 Mo, 1 Yr) is the actual relative change that of fund in that time period. Anything greater is averaged using CAGR approach. For example. The most recent 3 year period (probably ending end of last month) had a 6.19% averaged return. 2014, 2015, and 2016 had individual returns of 8.05%, 2.47%, and 9.27%. Thus that total return over that three year period was 1.0805*1.0247*1.0927=1.21 = 21% return over three years. This is the same total growth that would be achieved if each year saw consistent 6.5% growth (1.065^3 = 1.21). Not exactly the 6.19%, but remember we're looking at a slightly different time window. But it's pretty close and hopefully helps clarify how the calculation is done. |
Does the stock market create any sort of value? | When you own stock in a company, you do literally own part of the business, even if it's a small portion. Anyone amassing over 50% of shares really does have a controlling interest. No, you can't trade a handful of AAPL shares back to Apple for an iPod, but you can sell the shares and then go buy an iPod with the proceeds. Stock prices change over time because the underlying companies are worth more or less and people are willing to pay more or less for those shares. There is no Ponzi scheme because each share you own can be bought or sold on the open market. Dividends come from the company profits, not from other investors. On the other hand, money only has value because everyone believes it has value. There's the real conspiracy. |
Investment Options for 14-year old? | 5 years is a reasonable time period to invest in a stock which will give you a decent return and will generally not lose too much value except in case of 2008 kinda downturn. I would advise you to invest in a large cap stock/s like BP, Royal Dutch or HSBC (Your parents of course can buy them for you). |
Is keeping track of your money and having a budget the same thing? | The two are closely related. A budget is a detailed plan for how to spend. Expense tracking is a tool to analyze your previous spending performance. Creating a plan for how to spend your money without any record of your previous spending--is an empty promise to yourself that you will never follow up on. Did I stay within my budget? Doesn't matter, I didn't track the spending anyway. Even if you do plan to track your performance, if you have not previously done so, you won't have a good basis for how much to expect in each category. Most people have a general idea of how much they have spent and many budgets are formed based on that general intuition, but they are often surprised when they track how every penny is spent and look at the totals from month to month and over years. By actually seeing how much has been spent it's easier to pick the big financial drains and target them for reduction, if your desire is more savings, for example. I know people who keep a close eye on what they spend each month, but they don't allocate money in categories for the next month. They don't perform as well on reducing spending, but they often don't care. They feel like they make enough and they save enough, so why worry? I also know people who create an unrealistic budget each month because they haven't done a good job tracking their previous spending. They know what the monthly bills are, but they don't account well for variable or cyclical expenses like repairs, Christmas, etc. Both tools are essential for maximizing your own personal finance. |
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