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Do governments support their own bonds when their value goes down? | who issued stock typically support it when the stock price go down. No, not many company do that as it is uneconomical for them to do so. Money used up in buying back equity is a wasteful use of a firm's capital, unless it is doing a buyback to return money to shareholders. Does the same thing happen with government bonds? Not necessarily again here. Bond trading is very different from equities trading. There are conditions specified in the offer document on when an issuer can recall bonds(to jack up the price of an oversold bond), even government bonds have them. The actions of the government has a bigger ripple effect as compared to a firm. The government can start buying back bonds to increase it's price, but it will stoke inflation because of the increase in the supply of money in the market, which may or mayn't be desirable. Then again people holding the bond would have to incentivized to sell the bond. Even during the Greek fiasco, the Greek government wasn't buying Greek bonds as it had no capital to buy. Printing more euros wasn't an option as no assets to back the newly printed money and the ECB would have stopped them from being accepted. And generally buying back isn't useful, because they have to return the principal(which might run into billions, invested in long term projects by the government and cannot be liquidated immediately) while servicing a bond is cheaper and investing the proceeds from the bond sale is more useful while being invested in long term projects. The government can just roll over the bonds with a new issue and refrain from returning the capital till it is in a position to do so. |
Why is economic growth so important? | nan |
Repaying Debt and Saving - Difficult Situation | Just a thought, but have you considered approaching your sister about assuming the student loans or repaying your mother (even if it is a small amount/month) for financing her college education? If she is in her last year of college, in theory she should be earning at least some income within the next 2 years. Also, it doesn't seem like a lot to ask considering the sacrifices (both financial and otherwise) that a single mom probably made over the years. I'm sure your mom would be hesitant to ask as it seems like she prioritizes her children above herself by your description of the situation, but I bet if you could talk the sister into the mom would grudgingly accept it if she really is in such a tight financial situation. |
Basic questions about investing in stocks | What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment. Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account. Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe. You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later. Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock. Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your "cost basis" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe. Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost. If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules. |
What pension options are there for a 22 year old graduate in the UK? | Major things to consider: If you're expecting to look at the property market: it might prove to be sensible to start doing it now, since the market is just recovering, and (IMHO warning -I'm not a professional investor, just a random guy on the internet) prices still hasn't caught up with value fundamentals. check out cash ISA's for a 24-36 month timeframe; most do a reasonable 3-4% AER, with the current inflation rate being around 4%, this will, at the very least, make sure your money doesn't loose it's purchasing power. Finally, a word of caution: SIPPs have a rather rubbish AER rates. This, by itself, wouldn't be much of a problem on a 30-40 years timeframe, but keep the (current, and historically strictly monotonically increasing) 4% inflation rate in mind: this implies the purchasing power of any money tied in these vehicles will loose it's purchasing power, in a compounding manner. Hope this helps, let me know if you have any questions. |
Personal credit card for business expenses | If you are just starting out, I would say there is no disadvantage to using a personal card for business expenses. In fact, the advantage of doing so is that the consumer protections are better on personal cards than on business cards. One possible advantage to business credit cards, is that many (but not all) will not show up on your personal credit report unless you default. This might help with average age of accounts if you have a thin credit file, but otherwise it won't make much difference. Issuers also expect higher charge volumes on business cards, so as your business grows might question a lot of heavy charges on a personal card. Whether this would ever happen is speculation, but it's worth being aware of it. |
What IT form to use in India? | As you have income from Business / Profession, you would need to use form ITR4S |
Pros/Cons of Buying Discounted Company Stock | Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it. |
Why is auto insurance ridiculously overpriced for those who drive few miles? | Not all miles carry the same amount of risk. A survey by Progressive indicated that accidents are most likely to occur within 5 miles of home, and 77% of accidents occur within 15 miles of home. Only 1% of accidents occurred 50 or more miles from home. That's from 2002, but it seems unlikely to have changed much. Since the miles closest to your home carry more risk, they cost more, and low-mileage discounts reflect that. There are per-mile insurance options in a few states which could save you money, but they do constant monitoring via that ODB2 telematics device, and other insurers offer discounts if you accept their monitoring either in perpetuity or for a limited period of time. Without monitoring, insurers don't know if that 4,000 miles of driving is spread into a few mid-day trips each week, or maybe you're doing all that driving from midnight to 4am on weekends (fatalities far more likely), or from 5-7pm during weekdays (accidents far more likely). Personally, I save ~10% by being a 'low-mileage' driver, and am currently in the middle of a 90-day monitoring, so might go lower, but given that accidents are far more likely close to home, 10% feels pretty significant and appropriate. |
1.4 million cash. What do I do? | Have you considered investing in real estate? Property is cheap now and you have enough money for several properties. The income from tenants could be very helpful. If you find it's not for you, you can also sell your property and recover your initial investment, assuming house prices go up in the next few years. |
Form 1040 - where to place my stipend? | Some of the 45,000 might be taxable. The question is how was the stipend determined. Was it based on the days away? The mile driven? The cities you worked in? The IRS has guidelines regarding what is taxable in IRS Pub 15 Per diem or other fixed allowance. You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. In these cases, your employee is considered to have accounted to you if your reimbursement doesn't exceed rates established by the Federal Government. The 2015 standard mileage rate for auto expenses was 57.5 cents per mile. The rate for 2016 is 54 cents per mile. The government per diem rates for meals and lodging in the continental United States can be found by visiting the U.S. General Services Administration website at www.GSA.gov and entering "per diem rates" in the search box. Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). For information on substantiation methods, see Pub. 463. If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. This excess amount is subject to income tax with-holding and payment of social security, Medicare, and FUTA taxes. Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L" |
Can I pay estimated taxes based on last year's taxes if I anticipate more income this year? | You're interpreting this correctly. Furthermore, if your total tax liability is less than $1000, you can not pay estimates at all, just pay at the tax day. See this safe harbor rule in the IRS publication 17: General rule. In most cases, you must pay estimated tax for 2016 if both of the following apply. You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credits. You expect your withholding plus your refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2016 tax return, or 100% of the tax shown on your 2015 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers , later). Your 2015 tax return must cover all 12 months. |
Why do new car loans, used car loans, and refinanced loans have different rates and terms? | There are normally three key factors that define different kinds of loans, these factors affect the risk that the lender takes on and so the interest rate. The interest rate on any loan is linked to market interest rates; the lender shouldn't be able to receive a higher rate of interest for lending the money at no risk, and the level of risk that the lender believes the borrower to have. The three features of a particular loan are: These reduce the risk of complete or total non-payment (default) of the principal or any missed interest payments. Taken in order: Amortising Here some of the monthly payment pays a proportion of the underlying principal of the loan. This reduces the amount outstanding and so reduces the capacity for default on the full principal as part of the principal has already been paid. Security In a secured loan there is an asset such as a car, house, boat, gold, shares etc. that has a value on resale that is held against the loan. The lender may repossess the security if the borrower defaults and recover their money that way. This also acts as a "stick" using the loss of property to convince the borrower that it is better to keep paying the interest. The future value of the security will be taken into account when deciding how much this reduces the interest rate. Guarantor A guarantor to a loan guarantees that the borrower will repay the loan and interest in full and, if the borrower does not fulfil that obligation, the lender is able to seek legal redress from the guarantor for the borrower's debts. Each of these reduce the risk of the loan as detailed and so reduce the interest rate. The interest rate, then, is made up of three parts; the market interest rate (m) plus the interest rate premium for the borrower's own credit worthiness (c) minus the value of the features of the loan that help to reduce risk (l). The interest rate of the loan (r) is categorised as: r = m + c - l. Credit ratings themselves are an inexact science and even when two lenders are looking at the same credit score for the same person they will give a different interest rate premium. This is mostly for business reasons, and the shape of their loan book, that are too tedious to go through here. All in all the different types of loan give flexibility at the cost of a different interest rate. If you don't want the chance of your car being repossessed you don't take a secured loan, if you have a family member who can help and doesn't mind taking on your risk take a guaranteed loan. |
Why is a stock dividend considered a dividend? What makes it different from a stock split? | The key difference I've found between a stock split and a stock dividend – of the exact same stock and class, as opposed to a spin-off – seems to be from the company's own accounting perspective. There doesn't appear to be any actual transfer of value to the shareholder with either kind of transaction; i.e. in theory, each transaction would be immaterial to the value of your holdings. With respect to the company's accounting, a stock split affects the par value of the shares, whereas a stock dividend reduces the retained earnings account in order to increase paid-in or contributed capital. I found a good online source which explains the history behind this accounting difference: McGraw-Hill - Intermediate Accounting eBook, 6/e - Chapter 18 - Stock Dividends and Splits. Small quote: [...] Besides being based on fallacious reasoning, accounting for stock dividends by artificially reclassifying “earned” capital as “invested” capital conflicts with the reporting objective of reporting shareholders' equity by source. Despite these limitations, this outdated accounting standard still applies. Since neither the corporation nor its shareholders apparently benefits from stock dividends, why do companies declare them?23 Occasionally, a company tries to give shareholders the illusion that they are receiving a real dividend. Another reason is merely to enable the corporation to take advantage of the accepted accounting practice of capitalizing retained earnings. Specifically, a company might wish to reduce an existing balance in retained earnings—otherwise available for cash dividends—so it can reinvest the earned assets represented by that balance without carrying a large balance in retained earnings. [...] There's a lot more on that page, before and after, worth reading. From another book: Google Books - Comparative Income Taxation, a Structural Analysis - page 314 - Stock Dividends. Small quote: The distribution of dividends in the form of stock or "bonus" shares to existing shareholders typically involves a transfer for corporate law purposes of retained earnings into stated capital. It can been [sic] viewed as a deemed distribution of a cash dividend to the shareholders followed by a corresponding contribution to capital or as solely as an event at the corporate level which has no effect on the shareholders whose economic interest in the corporation is unchanged by the receipt of additional shares. The systems have taken varied approaches to the stock dividend problem. The treatment is in part a function of the rules dealing with distributions of stated capital. [emphases above are mine] [... continues w/descriptions of different countries' tax treatments of the kinds of stock dividends. Includes U.S., Sweden, Japan, Netherlands, Canada, Australia, U.K., France, Germany. ...] As far as why a corporation might want to capitalize earnings and reduce the equity otherwise available for dividends, I can only imagine that, ignoring taxes for a moment, that it may have something to do with capital ratios that need to be maintained for financing or regulatory purposes? Yet, I remain curious. If I discover more on this then I'll update my answer. Additional resources: |
Can gold prices vary between two places or country at the same time? | The market prices for futures and depository ETFs like GLD and IAU are pretty consistent. Prices for physical gold at retail can vary dramatically. At a coin store that I was at a few weeks ago, there was a very wide buy/sell spread on commonly available gold coins. |
How do I know when I am financially stable/ready to move out on my own? | I'll just say this. You are in much better shape financially than I was when I moved out on my own and started supporting myself, and I did fine. The 6 month emergency fund is nice, but I'd gamble that most people that have been out on their own for a long time can't match that. The main thing is just to keep a budget that is commensurate with your income and adjust it if you see that emergency fund start to dwindle. Look at it this way, assuming you are wrong and you completely weren't ready for independent living, you could always go back. Nothing ventured nothing gained. |
I am Brasilian resident, how to buy shares on NYSE? | I am not sure what a Brazilian equivalent is but you could just do an ADR. Keep in mind that when you are investing in a foreign company there are certain currency risks that you may need to consider. |
Where can I find filings of HUD-1 statements? | Three companies may have copies of it: the bank, the Title Company (aka settlement company), and perhaps the real estate agent. The bank (assuming you had a mortgage) is usually the easiest one to contact, as you're probably still making payments to them. They may have sent you the form in a large packet when you sold the house and paid off the old mortgage. There is a tradition of sending customers their entire mortgage file once they pay off the mortgage after 30 years - which is very rare nowadays but many banks still adhere to it because the mortgage business is built on momentum and very slow to change. Otherwise, the title company should have a copy of it. If you don't know which company was used, they should be named as Trustee on the Deed Of Trust (which in most states is the official name of the document that we call a "mortgage"). The county recorder's office will have a copy of that Deed Of Trust on record if you can't find it anywhere. Some counties have digitized these so you could find it online, but some would require you to request a copy and pay a small printing fee for it. |
Can one get a house mortgage without buying a house? | I've never heard of a loan product like that. Yes, if they keep the funds in an account, it is no risk to the bank, but they would essentially need to go through the loan process twice for the same loan: when you pick a house, they need to reevaluate everything, along with appraising and approving the house. Even if you did find a bank that would do this for you, there are a few problems with this scheme. You would be paying interest before you have a need for this money, negating the savings you might achieve if the interest rates go up. In addition, your "balance" will go down as "payments" are deducted from your loan, and when you finally find a home to buy, you might not have enough for the house you want. You'll need to borrow more than you need, which will further negate any possible savings. It is impossible to know how fast rates will climb. If I were you, I would stick to saving for your down payment, and just get the best rate you can when you are ready to buy. Another potential idea for you is to lock an interest rate. When you apply for a mortgage, the interest rate is often locked for as much as 60 days, to protect the borrower in the event that the rates go up. You could ask the bank if you can pay a fee to lock the rate even longer. I don't know if that is possible or not. And, of course, the fee would eat into your potential savings. |
Should I get a auto loan to diversify my credit lines if I have the cash to pay upfront | There is no need to get an auto loan just to try and affect your credit score. It is possible to have a score over 800 without any sort of auto loan. If you can afford to pay for the vehicle up front that is the better option. Even with special financing incentives it is better to pay up front if you can. Yes it is possible to use the funds to make more if you finance with a silly low interest rate, however it's also possible to lose a job or have some other financial disaster happen and need that money for something else making it more difficult to make the payment. It may be just me but I find the peace of mind not having the payment to be worth a lot. |
Is it ever logical to not deposit to a matched 401(k) account? | Whether or not it is logical probably depends on individual circumstance. When you take on (or maintain) debt, you are choosing to do two things: The first is clear. This is what you describe very well in your answer. It is a straightforward analysis of interest rates. The fixed cost of the debt can then be directly compared to expected return on investments that are made with the newly available cash flow. If you can reasonably expect to beat your debt interest rate, this is an argument to borrow and invest. Add to this equation an overwhelming upside, such as a 401k match, and the argument becomes very compelling. The second cost listed is more speculative in nature, but just as important. When you acquire debt, you are committing your future cash flow to payments. This exposes you to the risk of too little financial margin in the future. It also exposes you to the risk of any negatives that come with non-payment of debt (repossession, foreclosure, credit hit, sleeping at night, family tension, worst-case bankruptcy) Since the future tends to be difficult to predict, this risk is not so easy to quantify. Clearly the amount and nature of the debt is a large factor here. This would seem to be highly personal, with different individuals having unique financial or personal resources or income earning power. I will never say someone is illogical for choosing to repay their debts before investing in a 401k. I can see why some would always choose to invest to the match. |
FOK order type: can they be market or limit orders? | The SEC reference document (PDF) explains order types in more detail. A fill-or-kill order is neither a market order nor a limit order; instead it's something in between. A market order asks to be filled at the best available price, whatever that price might be when the order gets to the exchange. Additionally, if there are not enough counterparties to fill the order at the best available price, then part of the order may be filled at a worse price. This all happens more or less immediately; there's no way to cancel it once it has been placed. A limit order asks to be filled at a particular price, and if no counterparties want to trade at that price right now, then the order will just sit around all day waiting for someone to agree on the price; it can be canceled at any time. A fill-or-kill order asks to be filled at a particular price (like a limit order), but if that price or a better one is not currently available then the order is immediately canceled. It does not accept a worse price (the way a market order does), nor does it sit around waiting (the way a limit order does). Since the exchange computes whether to "fill" or "kill" the order as soon as it is arrives, there's also no way to cancel it (like a market order). |
What's “wrong” with taking money from your own business? | It's wrong in several situations: One, the business owner counts this as a business expense, which it is not, and therefore reduces the company's profit and taxes. That would be tax avoidance and probably criminal. Two, someone who is not the sole owner counts this as a business expense, which it is not, reduces the company's profit and when profits are shared, the company pays out less money to the other owners. That's probably fraud. Third, if the owner or owners of a limited liability company draw out lots of money from the company with the intent that the company should go bankrupt with tons of debt that the owners are not going to pay, while keeping the money they siphoned off for themselves. That would probably bankruptcy fraud. Apart from being wrong, there is the obvious risk that you lose control over your company's and your own expenses, and might be in for a nasty surprise if the company has to pay out money and there's nothing left. That would be ordinary stupidity. If you have to tell your employees that you can't pay their salaries but offer them to admire your brand new Ferrari, that's something I'd consider deeply unethical. |
Is Cost of Living overstated? | I live in Upstate NY. It's a great, reasonable cost place to live -- provided that you have a job. In NYC, there are probably a few hundred jobs with duties similar to mine in a 45-minute radius. Upstate, there may be 5-6. |
Why does selling and then rebuying stock not lead to free money? | You are misunderstanding what makes the price of a stock go up and down. Every time you sell a share of a stock, there is someone else that buys the stock. So it is not accurate to say that stock prices go down when large amounts of the stock are sold, and up when large amounts of the stock are bought. Every day, the amount of shares of a stock that are bought and sold are equal to each other, because in order to sell a share of stock, someone has to buy it. Let me try to explain what actually happens to the price of a stock when you want to sell it. Let's say that a particular stock is listed on the ticker at $100 a share currently. All this means is that the last transaction that took place was for $100; someone sold their share to a buyer for $100. Now let's say that you have a share of the stock you'd like to sell. You are hoping to get $100 for your share. There are 2 other people that also have a share that they want to sell. However, there is only 1 person that wants to buy a share of stock, and he only wants to pay $99 for a share. If none of you wants to sell lower than $100, then no shares get sold. But if one of you agrees to sell at $99, then the sale takes place. The ticker value of the stock is now $99 instead of $100. Now let's say that there are 3 new people that have decided they want to buy a share of the stock. They'd like to buy at $99, but you and the other person left with a share want to sell at $100. Either one of the sellers will come down to $99 or one of the buyers will go up to $100. This process will continue until everyone that wants to sell a share has sold, and everyone who wants to buy a share has bought. In general, though, when there are more people that want to sell than buy, the price goes down, and when there are more people that want to buy than sell, the price goes up. To answer your question, if your selling of the stock had caused the price to go down, it means that you would have gotten less money for your stock than if it had not gone down. Likewise, if your buying the stock had caused it to go up, it just means that it would have cost you more to buy the stock. It is just as likely that you would lose money doing this, rather than gain money. |
Differences in conditions on shares to private vs. public shareholders? | Shares sold to private investors are sold using private contracts and do not adhere to the same level of strict regulations as publicly traded shares. You may have different classes of shares in the company with different strings attached to them, depending on the deals made with the investors at the time. Since public cannot negotiate, the IPO prospectus is in fact the investment contract between the company and the public, and the requirements to what the company can put there are much stricter than private sales. Bob may not be able to sell his "special" stocks on the public exchange, as the IPO specifies which class of stock is being listed for trading, and Bob's is not the same class. He can sell it on the OTC market, which is less regulated, and then the buyer has to do his due diligence. Yes, OTC-sold stocks may have strings attached to them (for example a buy back option at a preset time and price). |
How can I figure out how a stock's price would change after I buy shares? | Stock price is based on supply and demand. Unless the stock you are looking to buy usually has very low volume trading 100 shares isn't likely to have any effect on price. There are many companies that have millions or tens of millions of shares trade daily. For stocks like that 100 shares is barely a trivial percentage of the daily volume. For thinly traded stocks you can look at the bid and ask size but even that isn't likely to get you an exact answer. Unless you are trading large volumes your trade will have no effect on the price of shares. |
Pros/Cons of Buying Discounted Company Stock | Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years. If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly. |
How should one structure a portfolio given the possibility that a Total Stock Market Index might decline and not recover for a long time? | Common financial advice is just that - it is common and general in nature and not specific for your financial needs, your goals and your risk tolerance. Regarding the possibility of a US market not going anywhere over a long period of time, well it is not a possibility, it has happened. See chart below: It took 13 years for the S&P 500 to break through 1550, a level first reached in March 2000, tested in October 2007 (just before the GFC) and finally broken through in March 2013. If you had bought in early 2000 you would still be behind when you take inflation into account. If you took the strategy of dollar cost averaging and bought the same dollar value (say $10,000) of the index every six months (beginning of each January and each July) starting from the start of 2000 and bought your last portion in January 2013, you would have a return of about 35% over 13.5 years (or an average of 2.6% per year). Now lets look at the same chart below, but this time add some trend lines. If we instead bought whenever the price crossed above the downtrend-line and sold whenever the price crossed below the uptrend-line (with the first purchase at the start of January 2000), we would have a return of 93% over the 13.5 years (or an average of 6.9% per year). Another more aggressive option (but manageable if you incorporate a risk management strategy) is to buy long when the price crosses the downtrend-line and sell your existing long position and sell short when the price drops below the uptrend-line. That is profiting both up-trending and down-trending markets. Again we start our buying at the start of January 2000. By shorting the index when the market is in a down-trend you could increase the above returns of 93% by another 54%, for a total return of 147% over 13.5 years (or an average of 10.9% per year). To conclude, using a simple long term strategy to time the markets may result in considerably higher returns than dollar cost averaging over the medium to long term, and I know which strategy would help me sleep better at night. |
How much accounting knowledge is needed to read financial statements of publicly traded companies? | From my experience you don't need knowledge of accounting to pick good stocks. The type of investing you are referring to is fundamental. This is finding out about the company, this websites should help you start off: http://en.tradehero.mobi/how-to-choose-a-stock-fundamental-analysis/ Investopedia will also be a useful website in techniques. A bit of knowledge in economics will be helpful in understanding how current affairs will affect a market, which will affect stock prices. However you need neither economics or accounting knowledge if you were to learn technical analysis, many doubt the workings of this technique, but in my experience it is easier to learn and practise. For example looking at charts from previous years it shows the last time there was a huge recession the dollar did well and commodities didn't. In this recession we are entering you can see the same thing happening. Read about the different techniques before limiting yourself to just looking at financial statements you may find a better technique suited to you, like these technical analysts: http://etfhq.com/blog/2013/03/02/top-technical-analysts/ Hope this helps. |
Creating a personal company | You're confusing so many things at once here...... First thing first: we cannot suggest you what to do business-wise since we have no idea about your business. How on Earth can anyone know if you should sell the software to someone or try to distribute to customers yourself? How would we know if you should hire employees or not? If you say you don't need employees - why would you consider hiring them? If you say you want to sell several copies and have your own customers - why would you ask if you should sell your code to someone else? Doesn't make sense. Now to some more specific issues: I heard sole proprietary companies doesn't earn more than 250k and it's better to switch to corporation or LLC etc. because of benefits. I heard it was snowing today in Honolulu. So you heard things. It doesn't make them true, or relevant to you. There's no earning limit above which you should incorporate. You can be sole proprietor and make millions, and you can incorporate for a $10K/year revenue business. Sole proprietorship, incorporation (can be C-Corp or S-Corp), or LLC - these are four different types of legal entity to conduct business. Each has its own set of benefits and drawbacks, and you must understand which one suits you in your particular situation. For that you should talk to a lawyer who could help you understand what liability protection you might need, and to a tax adviser (EA/CPA licensed in your state) who can help you understand the tax-related costs and benefits of each choice. On the other hand I heard that if I create LLC company, in case of failure, they can get EVERYTHING from me, what's this all about? No. This is not true. Who are "they", how do you define "failure", and why would they get anything from you at all? Even without knowing all that, your understanding is wrong, because the "LL" in LLC stands for LIMITED liability. The whole point of forming LLC or Corporation is to limit your own personal liability. But mere incorporation or forming LLC doesn't necessarily mean your liability is limited. Your State law defines what you must do for that limited liability protection, and that includes proper ways to run your business. Again - talk to your lawyer and your tax adviser about what it means to you. I'm totally unfamiliar with everything related to taxes/companies/LLC/corporation etc Familiarize yourself. No-one is going to do it for you. Start reading, ask specific questions on specific issues, and get a proper legal and tax advice from licensed professionals. |
Do rental car agencies sell their cars at a time when it is risky for the purchaser? | A premium car rental agency will sell a car which is working very well and quite far from the verge of breaking apart. They don't want to take the risk that one of their premium customers paying premium rates receives a worn-looking car which runs less than absolutely perfect (or even breaks down). They need to keep up their premium reputation. These premium agency also have a major marketing impact for the car industry. That's probably the main reason why they receive such massive discounts (see thelem's post). Obviously, the Mercedes Benz AMG Edition rental car will have a lasting impression on the driver (and the people not renting it, but seeing the boastful ads of the car rental company). So both the car industry and the rental company want this lasting impression to be a perfect one. A holiday car rental agency may have much lower standards. They often don't have recurring customers. They don't rent premium cars to premium customers but cheap cars to cheap customers.They don't receive the discounts the premium agencies receive. And they will milk their car to the max. You will notice that they windows fall out of the car when you bang the door shut. You will find that opening the door will be more difficult than breaking into the car. The seats may be stained - at least in the spots where some of the upholsters is still present. On the plus side, if you are lucky, the heating still works. On the minus side, you might not be able to turn it off. Water might leak into the car when it's raining, but that's not much of a problem as it will drain out through the holes in the bottom. No fear that water might rush in through these holes when driving though a puddle - the engine will not start during humid weather, so that's a non-issue. In any case, car rental customer might have mistreated the car. The engine has most probably not been run in. However, this appears to be less than an issue with modern car than it has been in the past. And very very few rental car drivers think that they really have to absolutely emulate Michael Schumacher just because they drive a car which is not their own. And anyway, that is a risk you take with about any used car. |
How to approach building credit without a credit card | One possible route is to try to have no credit. This is different than bad credit. If you build up a good downpayment (20%), a number of banks would do manual underwriting for you. |
The Benefits/Disadvantages of using a credit card | There are a couple of things to consider. First, in order to avoid interest charges you generally just need to pay the statement balance before the statement due date. This is your grace period. You don't need to monitor your activity every day and send immediate payments. If you're being really tight with money, you can actually make a little profit by letting your cash sit in an interest bearing account before you pay your credit card before the due date. Second, credit card interest rates are pretty terrible, and prescribed minimum payments are comically low. If you buy furniture using your credit card you will pay some interest, be sure to pay way more than the minimum payment. You should avoid carrying a balance on a credit card. At 20% interest the approximate monthly interest charge on $1,000 is $16.67. Third, if you carry a balance on your credit card you lose the interest grace period (the first point above) on new charges. If you buy your couch, and carry the balance, when you buy a soda at 7-11, the soda begins to accrue interest immediately. If you decide to carry a balance on a credit card, stop using that card for new charges. It generally takes two consecutive billing period full balance payments to restore the grace period. Fourth, to answer your question, using a credit card to carry a balance has no impact on your score. Make your payments on time, don't exceed your limits, keep your utilization reasonable. The credit agencies have no idea if you're carrying a balance or how much interest you're paying. To Appease the people who think point four needs more words: Your credit report contains your limit, your reported balance (generally your statement balance), and approximate minimum payment. There is no indication related to whether or not the balance contains a carried balance and/or accrued interest. The mere fact of carrying a balance will not impact your credit score because the credit reporting bureaus don't know you're carrying a balance. Paying interest doesn't help or hurt your score. Obviously if your carried balance and interest charges push your utilization up that will impact your score because of the increased utilization. Make your payments on time, don't exceed your limits, keep your utilization reasonable and your score will be fine. |
When is it better to rent and when is better buy in a certain property market? | The first question is low long will you wish to stray there? It costs of lot in legal changes other changes plus taxes to buy and sell, so if you are not going to wish to live somewhere for at least 5 years, then I would say that renting was better. Do you wish to be able to make changes? When you rent, you can’t change anything without getting permission that can be a pain. Can you cope with unexpected building bills? If you own a home, you have to get it fixed when it breaks, but you don’t know when it will break or how much it will cost to get fixed. Would you rather do a bit of DIY instead of phone up a agent many times to get a small problem fixed? When you rent, it can often take many phone calls to get the agent / landlord to sort out a problem, if own your home, out can do yourself. Then there are the questions of money that other people have covered. |
How to invest 10k dollars, at the age of 23? | An investment in knowledge always pays the best interest, as Ben Franklin said. However, this is not a question I can answer for you, as it depends on the opportunities that are specifically available to you as an individual. Sometimes opportunities will knock on your door and you can take advantage, other times you have to create that door to allow opportunities to knock. Maybe you have a friend that is opening a side business, maybe there is a class you can get into at a trivial cost. What I suggest is to start investing just to get into the habit of it, not so much for the returns. Before you do, however, any financial advisor will advise you to begin with a emergency fund, worth about 3-6 months of your expenses for that time. I wanted to hit the ground running and start investing in stocks, but first things first I guess. "Millionaire Next Door" will help you get into a saving mindset, "I will teach you to be rich" is ok, plenty of other books. My advice is keep doing what you're doing, learn to start saving, and once you have obtained an emergency fund of the amount of your choosing, start looking to invest in Index Funds or ETFs through any platform that has LOW FEES!! I use Betterment, but Vanguard is good too, as they allow you to get your feet wet and it's passive. Hope this helps. |
Do “Instant Approved” credit card inquires appear on credit report? | Yes, they do. Generally though you'll only see it on one or two reports. With regards to the impact on your credit score. Hard inquiries only stay on your credit for 2 years, after that they fall off. For most credit scores (specifically FICO) they only have an impact for 1 year after their date. If you have a few in the same 30 day period FICO will lump these into 1 pull to allow you to shop around for credit/loans. They also have a low to medium impact on your score. |
Reducing taxable income in US in December | Assuming that what you want to do is to counter the capital gains tax on the short term and long term gains, and that doing so will avoid any underpayment penalties, it is relatively simple to do so. Figure out the tax on the capital gains by determining your tax bracket. Lets say 25% short term and 15% long term or (0.25x7K) + (0.15*8K) or $2950. If you donate to charities an additional amount of items or money to cover that tax. So taking the numbers in step 1 divide by the marginal tax rate $2950/0.25 or $11,800. Money is easier to donate because you will be contributing enough value that the IRS may ask for proof of the value, and that proof needs to be gathered either before the donation is given or at the time the donation is given. Also don't wait until December 31st, if you miss the deadline and the donation is counted for next year, the purpose will have been missed. Now if the goal is just to avoid the underpayment penalty, you have two other options. The safe harbor is the easiest of the two to determine. Look at last years tax form. Look for the amount of tax you paid last year. Not what was withheld, but what you actually paid. If all your withholding this year, is greater than 110% of the total tax from last year, you have reached the safe harbor. There are a few more twists depending on AGI Special rules for farmers, fishermen, and higher income taxpayers. If at least two-thirds of your gross income for tax year 2014 or 2015 is from farming or fishing, substitute 662/3% for 90% in (2a) under the General rule, earlier. If your AGI for 2014 was more than $150,000 ($75,000 if your filing status for 2015 is married filing a separate return), substitute 110% for 100% in (2b) under General rule , earlier. See Figure 4-A and Publication 505, chapter 2 for more information. |
Why is property investment good if properties de-valuate over time? | Real estate is not a good investment. In fact, it's easy to make a case for it being the worst possible investment imaginable: Imagine over a cup or coffee or a glass of wine we get to talking about investments. Then maybe one of us, let’s say you, says: “Hey I’ve got an idea. We’re always talking about good investments. What if we came up with the worst possible investment we can construct? What might that look like?” Well, let’s see now (pulling out our lined yellow pad), let’s make a list. To be really terrible: -- Why Your House Is A Terrible Investment There are plenty of good reasons to own a home, but the key word there is "home". Owning housing as an investment property is a horrible idea, and anyone who does it, especially right now with as bubbly as the market is looking again, (or, better put, still, since the last bubble never did fully pop and clear out the underlying systemic instability,) is an idiot. And even after the current housing market bubble pops, it's likely to remain a bad idea for decades. We're never getting the early 2000s back, for basic supply-and-demand reasons: with the Baby Boom generation retiring, aging and dying off, they're not likely to do much more home-buying, and no generation after them is as big as they are, which means a glut of oversupply and weak demand for the entirety of the foreseeable future. |
Why adjust for inflation annually, as opposed to realising it after the holding period? | I would use neither method. Taking a short example first, with just three compounding periods, with interest rate 10%. The start value y0 is 1. So after three years the value is 1.331, the same as y0 (1 + 0.1)^3. Depreciating (like inflation) by 10% (to demonstrate) gets us back to y0 = 1 Appreciating and depreciating by 10% cancels out: Appreciating by 10% interest and depreciating by 3% inflation: This is the same as y0 (1 + 0.1)^3 (1 + 0.03)^-3 = 1.21805 So for 50 years the result is y0 (1 + 0.1)^50 (1 + 0.03)^-50 = 26.7777 Note You can of course use subtraction but the not using the inflation figure directly. E.g. (edit: This appears to be the Fisher equation.) 2nd Note Further to comments, here is a chart to illustrate how much the relative performance improves when inflation is accounted for. The first fund's return is 6% and the second fund's return varies from 3% to 6%. Inflation is 3%. |
How do disputed debts work on credit reports? | You're not missing anything. Consumer protection in the US is very basic and limited, if at all. So if someone claims you owe them something, it would be really hard for you to prove otherwise unless you actually drag them to court. Especially if there actually was a relationship, and there probably is some paperwork to substantiate the claim. I suggest talking to a consumer issues attorney. |
Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? | When you can exercie your option depends on your trading style. In the american options trading style (the most popular) you're allowed to exercice your options and make profit (if any) whenever you want before the expiration date. Thus, the decision of exercising your option and make a profit out of it does not rely only on the asset price. The reason is, you already paid for the premium to get the option. So, if taken into account the underlying price AND your premium, your investment is profitable then you can exercice your contract anytime. |
In the USA, why is the Free File software only available for people earning less than $62k? | Regardless of the source of the software (though certainly good to know), there are practical limits to the IRS 1040EZ form. This simplified tax form is not appropriate for use once you reach a certain level of income because it only allows for the "standard" deduction - no itemization. The first year I passed that level, I was panicked because I thought I suddenly owed thousands. Switching to 1040A (aka the short form) and using even the basic itemized deductions showed that the IRS owed me a refund instead. I don't know where that level is for tax year 2015 but as you approach $62k, the simplified form is less-and-less appropriate. It would make sense, given some of the great information in the other answers, that the free offering is only for 1040EZ. That's certainly been true for other "free" software in the past. |
Super-generic mutual fund type | You can also create a CD ladder (say 1/3 in a 6 month CD, 1/3 in a 1 year CD, 1/3 in a 2 year CD) with half of your emergency fund money. You always want to leave some of it in a liquid account so you can get at it immediately without any interest penalty. CD's provide higher interest than a savings account. By staggering the lengths of the CD's, you give yourself more options, and can roll them over into CD's with higher rates (since interest rates are soooo low right now) as the CD's mature. |
What is your effective tax rate if you work from home in Montreal for a company in Toronto? | For tax purposes, what matters is your province of residence at December 31st. Quebec Tax abatement therefore applies if you were living in Quebec, regardless of your employer, assuming you are an employee. As for effective tax, your question misses some data and does not quite make sense as effective tax is the result of dividing your total taxes paid after deductions and tax credits by your total income. As such, one cannot tell you your effective tax rate without knowing taxes paid after deductions and tax credits and total income. |
First time homeowner and getting a mortgage? | If you have good credit, you already know the rate -- the bank has it posted in the window. If you don't have good credit, tell the loan officer your score. Don't have them run your credit until you know that you're interested in that bank. Running an application or prequal kicks off the sales process, which gets very annoying very quickly if you are dealing with multiple banks. A few pointers: You're looking for a plain vanilla 30 year loan, so avoid mortgage brokers -- they are just another middleman who is tacking on a cost. Brokers are great when you need more exotic loans. Always, always stay away from mortgage brokers (or inspectors or especially lawyers) recommended by realtors. |
Why does FlagStar Bank harass you about payments within grace period? | A quick Google search for FlagStar Bank shows that this is their standard practice. Quite a few people are complaining about the robo-calls they start receiving on the 5th of every month and FlagStar's response is usually something along the lines of "we're required to do so". First and foremost, confirm the terms of your mortgage. Based on your story and information provided so far, it sounds like you're legally in the clear to pay as you have been. It appears that they have an internal policy of firing off robo-caller on the 5th for anyone who hasn't paid their mortgage yet. With the number of individuals defaulting on loans over the past decade, this was probably a simple business decision to aid in reminding people to pay up. Your 3.5 choices as I see it are: 2a. A variation of #2: set up a phone number just for that bank using a service like Google Voice and filter your calls so you don't have to deal with them on your primary line. |
How websites like Google have access to stock market data? | At the bottom of Yahoo! Finance's S & P 500 quote Quotes are real-time for NASDAQ, NYSE, and NYSE MKT. See also delay times for other exchanges. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein. Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fund summary, fund performance, dividend data and Morningstar Index data provided by Morningstar, Inc. Orderbook quotes are provided by BATS Exchange. US Financials data provided by Edgar Online and all other Financials provided by Capital IQ. International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon. Thus, yes there is a DB being accessed that there is likely an agreement between Yahoo! and the providers. |
What are the marks of poor investment advice? | (1) I think the phrase "Variable Annuity" is a glowing red flag. A corollary to that is that any strategy that uses insurance for a purpose (e.g. tax avoidance) other than protecting against loss rates at least a yellow flag. (2) The other really obvious indicator is a return that is completely out of whack with the level of risk they are saying the investment has. For example, if someone promises a 10% annual return that is "Completely Safe" or "Very low risk", Run. (3) If it is advertised on tv/radio, or all your friends are talking about it at parties. Stay away. Example: Investing in Gold Coins or the hot Tech IPO. (4) The whole sales pitch relies on past returns as proof that the investment will do well without any real discussion of other reasons it will continue to to well. Beware the gambler's fallacy. (5) Finally, be very wary of anyone who has some sort of great investment plan that they will teach you if you just pay $X or go to their seminar. Fee based advice is fine, but people selling a get rich quick vehicle typically know the real way to get rich is to get suckers to pay for their seminars. |
A friend wants to use my account for a wire transfer. Is this a scam or is it legitimate? | 100% scam. This is classic of mixing real (Exxon) with fiction. This gives credibility to story. Don't give any thing, there is no damage yet. If you take the bait, there are multiple ways to get money from you. |
How to calculate money needed for bills, by day | Trying to figure out how much money you have available each day sounds like you're making this more complicated than it needs to be. Unless you're extremely tight and you're trying to squeeze by day by day, asking "do I have enough cash to buy food for today?" and so on, you're doing too much work. Here's what I do. I make a list of all my bills. Some are a fixed amount every month, like the mortgage and insurance premiums. Others are variable, like electric and heating bills, but still pretty predictable. Most bills are monthly, but I have a few that come less frequently, like water bills in my area come every 3 months and I have to pay property taxes twice a year. For these you have to calculate how much they cost each month. Like for the water bill, it's once every 3 months so I divide a typical bill by 3. Always round up or estimate a little high to be safe. Groceries are a little tricky because I don't buy groceries on any regular schedule, and sometimes I buy a whole bunch at once and other times just a few things. When groceries were a bigger share of my income, I kept track of what I spent for a couple of months to figure out an average per month. (Today I'm a little richer and I just think of groceries as coming from my spending money.) I allocate a percentage of my income for contributions to church and charities and count this just like bills. It's a good idea to put aside something for savings and/or paying down any outstanding loans every month. Then I add these up to say okay, here's how much I need each month to pay the bills. Subtract that from my monthly income and that's what I have for spending money. I get paid twice a month so I generally pay bills when I get paid. For most bills the due date is far enough ahead that I can wait the maximum half a month to pay it. (Worst case the bill comes the day after I pay the bills from this paycheck.) Then I keep enough money in my checking account to, (a) Cover any bills until the next paycheck and allow for the particularly large bills; and (b) provide some cushion in case I make a mistake -- forget to record a check or make an arithmetic error or whatever; and (c) provide some cushion for short-term unexpected expenses. To be safe, (a) should be the total of your bills for a month, or as close to that as you can manage. (b) should be a couple of hundred dollars if you can manage it, more if you make a lot of mistakes. If you've calculated your expenses properly and only spend the difference, keeping enough money in the bank should fall out naturally. I think it's a lot easier to try to manage your money on a monthly basis than on a daily basis. Most of us don't spend money every day, and we spend wildly different amounts from day to day. Most days I probably spend zero, but then one day I'll buy a new TV or computer and spend hundreds. Update in response to question What I do in real life is this: To calculate my available cash to spend, I simply take the balance in my checking account -- assuming that all checks and electronic payments have cleared. My mortgage is deducted from my checking every month so I post that to my checking a month in advance. I pay a lot of things with automatic charges to a credit card these days, so my credit card bills are large and can't be ignored. So subtract my credit card balances. Subtract my reserve amount. What's left is how much I can afford to spend. So for example: Say I look at the balance in my checkbook today and it's, say, $3000. That's the balance after any checks and other transactions have cleared, and after subtracting my next mortgage payment. Then I subtract what I owe on credit cards. Let's say that was $1,200. So that leaves $1,800. I try to keep a reserve of $1,500. That's plenty to pay my routine monthly bills and leave a healthy reserve. So subtract another $1,500 leaves $300. That's how much I can spend. I could keep track of this with a spreadsheet or a database but what would that gain? The amount in my checking account is actual money. Any spreadsheet could accumulate errors and get farther and farther from accurate values. I use a spreadsheet to figure out how much spending money I should have each month, but that's just to use as a guideline. If it came to, say, $100, I wouldn't make grandiose plans about buying a new Mercedes. If it came to $5,000 a month than buying a fancy new car might be realistic. It also tells me how much I can spend without having to carefully check balances and add it up. These days I have a fair amount of spending money so when, for example, I recently decided I wanted to buy some software that cost $100 I just bought it with barely a second thought. When my spending money was more like $100 a month, lunch at a fast food place was a big event that I planned weeks in advance. (Obviously, I hope, don't get stupid about "small amounts". If you can easily afford $100 for an impulse purchase, that doesn't mean that you can afford $100 five times a day every day.) Two caveats: 1. It helps to have a limited number of credit cards so you can keep the balances under control. I have two credit cards I use for almost everything, so I only have two balances to keep track of. I used to have more and it got confusing, it was easy to lose track of how much I really owed, which is a set up for getting in trouble. |
2 houses 450k each or one 800k? | Having someone else paying you rent is always going to be the better deal financially. The question is, what does $450k buy in the neighborhood in which you want to live, vs $800k? I'm going to assume you can afford either option (buying a $450k home and not selling, or an $800k home and selling your current one) whether someone's paying you rent or not. Let's make up some numbers here; a $450k home, financed 80/20 (360k principal) at 4% for 30 years will cost you about $1720 in P&I payments per year (plus escrows such as RE taxes, PMI, and homeowners insurance where applicable). An $800k home financed 80/20 (640k principal) at 4% for 30yr will give you payments of about $3,055/mo before taxes and insurance. So, the worst case overall is that you buy a 450k home in the new neighborhood and are not, at any given time, collecting rent on the old property. That would (assuming the mortgage terms on both home loans were comparable) cost you $3440/mo and you'd be living in a $450k home in a neighborhood where 450k may not buy a home as nice as the one you moved out of. The question as I stated above is this; assuming you had a reliable tenant in your home for the entire remaining life of the loan on your current home, which is more acceptable to you: buying $450k of home (which might be a downgrade in sqft or amenities) and paying $2020 in P&I, or paying about a grand more ($3055/mo) for a much nicer home in the new location? Strictly from a money perspective, the renter is going to be the best option, IF you get reliable tenancy for the entire life of the mortgage on that house; you'll be paying $2020/mo for 30 years, which is $727,200, to end up with $950k of total home value (plus adjustments for actual home value appreciation/depreciation). That's the only way you'll come out ahead on any mortgage; have someone else pay most of it for you. If you don't rent, the $800k home will cost you $1,099,800, while two $450k homes will cost you $1,454,400. The percentage of home value over total payments for the 800k home would be 72% (you will have paid 137% of the value of the home), while you will have paid 153% of the value of two 450k homes. |
Any advantage to exercising ISO's in company that is not yet public? | As I recall from the documentation presented to me, any gain over the strike price from an ISO stock option counts as a long term capital gain (for tax purposes) if it's held from 2 years from the date of grant and 1 year from the date of exercise. If you're planning to take advantage of that tax treatment, exercising your options now will start that 1-year countdown clock now as well, and grant you a little more flexibility with regards to when you can sell in the future. Of course, no one's renewed the "Bush tax cuts" yet, so the long-term capital gains rate is going up, and eventually it seems they'll want to charge you Medicare on those gains as well (because they can... ), soo, the benefit of this tax treatment is being reduced... lovely time to be investing, innnit? |
One of my stocks dropped 40% in 2 days, how should I mentally approach this? | The mental approach should be that you always knew the risk of gambling and it was extra money that you had (or should have had). Now think that the 'horse' race is not over and in the near future it will pick up pace against the others and be back on track. |
Is it possible to sell a stock at a higher value than the market price? | Yes You could write a covered call and the stock gets called away at the price + premium. You could convince someone to buy it regardless of the market price. |
In US, is it a good idea to hire a tax consultant for doing taxes? | Good professional tax advice is expensive. If your situation is simple, then paying someone doesn't give you more than you could get from a simple software package. In this case, doing your own taxes will save you money this year, and also help you next year, as your situation grows steadily more complex. If you don't do your own taxes when you're single with a part time job, you'll never do it when you have a family, a full time job, a side business, and many deductions. Learning how to do your taxes over time, as your 'tax life' becomes complex, is a valuable skill. If your situation is complex, you will need pay a lot to get it done correctly. Sometimes, that cost is worthwhile. At bare minimum, I would say 'attempt to do your taxes yourself, first'. This will force you to organize your files, making the administrative cost of doing your return lower (ie: you aren't paying your tax firm to sort your receipts, because you've already ordered them nicely with your own subtotals, everything perfectly stapled together). If your situation is complex, and you find a place to get it done cheaply (think H&R Block), you will not be getting value for service. I am not saying a low-end tax firm will necessarily get things wrong, but if you don't have a qualified professional (read: university educated and designated) doing your return, the complexities can be ignored. Low-end tax firms typically hire seasonal staff, train them for 1-2 weeks, and mostly just show them how to enter tax slips into the same software you could buy yourself. If you underpay for professional services, you will pay the price, metaphorically speaking. For your specific situation, I strongly recommend you have a professional service look at your returns, because you are a non-resident, meaning you likely need to file in your home country as well. Follow what they do with your return, and next year, see how much of it you can do yourself. Before you hire someone, get a fee quote, and shop around until you find someone you are comfortable with. $1k spent now could save you many headaches in the future. |
Paying taxes on dividends even though your capital gains were $0? | You are incorrect in saying that you have a capital gains of $0. You either have no capital gains activity, because you haven't realized it or you have an unrealized capital gains of -$10k. If you were to sell immediately after receiving the dividend you would end up as a wash investment wise - the 10k of dividend offsetting the 10k capital wash. Though due to different tax treatments of money you may be slightly negative with respect to taxes. You are taxed when you receive the money. And you realized that 10k in dividends - even if you didn't want too. In the future if this bothers you. You need to pay attention to the dividend pay out dates for funds. But then just after they payout a dividend and have drain their cash account. The issue is that you unknowingly bought 90k of stock and 10k of cash. This information is laid out in the fund documentation, which you should be reviewing before investing in any new fund. |
Are RSUs ever taxed as long term capital gains? | I don't know the legal framework for RSUs, so I'm not sure what is mandatory and what is chosen by the company issuing them. I recently reviewed one companies offering and it basically looked like a flat purchase of stock on the VEST date. So even if I got a zillion shares for $1 GRANTED to me, if it was 100 shares that vested at $100 on the 1st, then I would owe tax on the market value on the day of vest. Further, the company would withhold 25% of the VEST for federal taxes and 10% for state taxes, if I lived in a state with income tax. The withholding rate was flat, regardless of what my actual tax rate was. Capital gains on the change from the market value on the VEST date was calculated as short-term or long-term based on the time since the VEST date. So if my 100 shares went up to $120, I would pay the $20 difference as short term or long term based on how long I had owned them since the VEST. That said, I don't know if this is universal. Your HR folks should be able to help answer at least some of these questions, though I know their favorite response when they don't know is that you should consult a tax professional. Good luck. |
For very high-net worth individuals, does it make sense to not have insurance? | It depends. "High net worth individuals" is very subjective. Lets say a person is worth 1.5 million. High, but not super high. For one, they should have an umbrella policy. Until your net worth is above 300K, you really don't need an umbrella policy. They should insure their home and cars, but should probably have high deductibles. Health insurance is a must as a bad illness can wipe them out. They should have long term care insurance when they reach age 60. Now lets say a person is worth about 10 million. They might be able to self insure basic transportation and probably don't need long term care insurance. However, they may choose to carry the full coverage car insurance, or other lines, because it is a value. In conclusion insurance needs change based on a person's net worth and income. It is very hard to make a blanket statement without details of the makeup of one's net worth and how they earn their income. Having said all of that, a high net worth (HNW) individual may never be able to drop certain coverage. Lets say that a HNW owns a 50K condo, 1K square foot condo. Given that the outside structure is covered by the HOA the insurance on such a unit only covers the contents and liability. The contents could easily be floated by the HNW individual, but not the liability. It is probably a requirement, on their umbrella policy, that they carry the maximum liability protection on their vehicles and properties. In the case above they would carry a policy for the purposes of liability protection. This could also be true of their dependents. Say for example, their adult child receives some financial assistance from their parents (like college being paid for). The HNW individuals should have their child cover the maximum liability on the auto policy. According to this site: A person with a net worth of 1.5 million would be in the 90-95 percentile, a person with 10 million in the 99th. This article does a decent job of describing what constitutes a HNW person or household. Namely 1 million in investable assets, which is of course a bit different then net worth. |
Is it legal if I'm managing my family's entire wealth? | There are two issues. The first is that you can manage all of your family's money. The second issue arises if you now "own" all of your family's money. As far as entities go, it is best to keep money or assets in as many different hands as possible. Right now, if someone sued you and won, they could take away not only your money, but your parents' and brother's money, under your name. Also, there are gift, estate and inheritance tax consequences to your parents and brother handing all their money to you. You should have three or four separate "piles" of money, one for yourself, one for your brother and one for each of your parents, or at least both of them as a couple. If someone sued one parent, the other parent, your brother and you are protected. You can have all these piles of money under your management. That is, your parents and brother should each maintain separate brokerage accounts from yours, and then give you the authorization to trade (but not withdraw from) their accounts. This could all be at the same brokerage house, to make the reporting and other logistics relatively easy. |
What does it mean to long convexity of options? | Long convexity is achieved by owning long dated low delta options. When a significant move occurs in the underlying the volatility curve will move higher. Instead of a linear relationship between your long position and it's return, you receive a multiple of the linear return. For example: Share price $50 Long 1 (equals 100 shares) contract of a 2 year 100 call Assume this is a 5 delta option If the stock price rises to $70 the delta of the option will rise because it is now closer to the strike. Lets assume it is now a 20 delta option. Then Expected return on a $20 price move higher, 100 shares($20)(.20-.05)=$300 However what happens is the entire volatility surface rises and causes the 20 delta option to be 30 delta option. Then The return on a $20 price move higher, 100 shares($20)(.30-.05)=$500 This $200 extra gain is due to convexity and explains why option traders are willing to pay above the theoretical price for these options. |
How to calculate/reconcile conflicting P/E ratios? | The user who wrote the Zerohedge item: The CBS article: The Quora estimate is similar to the Zerohedge one (estimated a round value of 1000 PE and a price of 70-80). Note that it was 30 days after the first 2 items you quoted. You used the CBS numbers except you used the zerohedge price. It depends on which earnings were for each calculation. Past or future. The CBS numbers make the most sense because you can trace where they come from based on the links in their article. CBS based their price on the estimates made the day before the stock went on sale. The price in the zerohedge item was based on the early trading numbers. |
CD interest rate US vs abroad, is there a catch? | I think your approach of looking exclusively at USD deposits is a prudent one. Here are my responses to your questions. 1) It is highly unlikely that a USD deposit abroad be converted to local currency upon withdrawal. The reason for offering a deposit in a particular currency in the first place is that the bank wants to attract funds in this currency. 2) Interest rate is a function of various risks mostly supply and demand, central bank policy, perceived risk etc. In recent years low-interest rate policy as led by U.S., European and Japanese central banks has led particularly low yields in certain countries disregarding their level of risk, which can vary substantially (thus e.g. Eastern Europe has very low yields at the moment in spite of its perceived higher risk). Some countries offer depository insurance. 3) I would focus on banks which are among the largest in the country and boast good corporate governance i.e. their ownership is clean and transparent and they are true to their business purpose. Thus, ownership is key, then come financials. Country depository insurance, low external threat (low war risk) is also important. Most banks require a personal visit in order to open the account, thus I wouldn't split much further than 2-3 banks, assuming these are good quality. |
Is it true that Income Tax was created to finance troops for World War I? | The Income Tax was put into effect during the Civil War, but was later revoked because it was deemed "Unconstitutional". It was re-instated in 1913, just one year before World War 1. This is largely the reason why people think it was created "for the war", when it actually pre-dated World War 1. Edit: I don't have any sources, per-se. This is just what little information I remember from Grade 10 History class. I remember this because I had a real ethical problem with how the government instituted the Income Tax, since it is effectively a tax on Productivity. I find this absurd, since it motivates people to do less, in an effort to be taxed less. This in turn promotes workers doing "cash jobs" and other such things to get around it. I personally have refused a raise because it would put me into a higher tax bracket, and I wouldn't actaully see the new money. In exchange, I asked for other non-monetary perks instead. I personally think this situation should not exist. ...however, I don't have a better solution. So I suppose I can't really pass judgment. :) |
How much time would I have to spend trading to turn a profit? | Sounds like you are a candidate for stock trading simulators. Or just pick stocks and use Yahoo! or Google finance tools to track and see how you do. I wouldn't suggest you put real money into it. You need to learn about research and timing and a bunch of other topics you can learn about here. I personally just stick to life cycle funds that are managed products that offer me a cruise control setting for investing. |
What part of buying a house would make my net worth go down? | Cosigning a loan for someone else will make net worth decrease, whether backed by security or not. |
Can a company charge you for services never requested or received? | In general, you can only be charged for services if there is some kind of contract. The contract doesn't have to be written, but you have to have agreed to it somehow. However, it is possible that you entered into a contract due to some clause in the home purchase contract or the contract with the home owners' association. There are also sometimes services you are legally required to get, such as regular inspection of heating furnaces (though I don't think this translates to automatic contracts). But in any case you would not be liable for services rendered before you entered into the contract, which sounds like it's the case here. |
Money Saved on finance charges | Avoiding a cost (interest) isn't quite the same as income. There is no entry, nothing for you to consider for this avoided interest. What you do have is an expense that's no longer there, and you can decide to use that money elsewhere each month. |
What will be the long term impact of the newly defined minimum exchange rate target from francs to euro? | The total size of the eurozone economy is $13 trillion, whereas Switzerland'd GDP is about $0.5 trillion, so the eurozone is about 26 times larger. As such, I would not expect this move to have a large effect on the eurozone economy. On the margins, this may decrease somewhat eurozone exports to Switzerland and increase imports from Switzerland, so this would be a slight negative for eurozone growth. Switzerland accounts for 5.2% of the EU's imports, and these imports will now be slightly cheaper, which puts some deflationary pressure on the EU, particularly in the Swiss-specialized industries of chemicals, medicinal products, machinery, instruments and time pieces. But overall, 5.2% is a rather small proportion. Bottom line, most common eurozone countries' people should probably not fret too much about this announcement. What it means for Switzerland and Swiss citizens, however, is a totally different (and much more interesting) question. |
Should I take contributions out of my Roth IRA to live off of? | That's up to you, but I wouldn't play around with my retirement money if I was in your situation. Your earning potential during your retirement years will likely be at its nadir. Do you really want to risk being forced to be a Wal-Mart greeter when you are 80? Also, considering your earning potential now is probably at or near the peak, your opportunity cost for each hour of your life is much higher now than it will be later. So ultimately you'd be working a little harder now or a lot harder later for less money. |
Should we invest some of our savings to protect against inflation? | If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.) Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each). I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund. To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six. You could place that six month emergency fund in ING Direct as littleadv suggested. That's where we have our emergency funds and long term savings. This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use). You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it. Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing. Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education. The money grows tax free and is only taxed when used for non-education expenses. You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast. |
Why don't banks give access to all your transaction activity? | To add technical detail to other answers, your (and some commenters') estimates of storing that data is woefully (many orders of magnitude) off. Let's take your 10MB of transaction data per user. You're only estimating text records like in Quicken. Now add on the volume of storing everye check's image. That's 100K (if not 500Kb depending on resolution of the scan) per check. If you have 100 checks per year (not unrealistic, if you pay all utility/morgage bills by check, as well as purchases), you now have 10Mb/year to 50MB/year. Now you're asking for 10 years of this, so you have 100-500MB per customer. NOT 10MB-70MB as you initially assumed. Let's take a mid-range figure, 300 MB. You were estimating using consumer grate cheap-o storage (which Facebook can afford for their data, as they don't store transaction data). Now let's up that to enterprise server hard drives. Your storage costs just rose 2x-5x. Now, typically you'd have RAID. So 2x more. Most large financial institutions have multiple data centers. You typically store all data's copies in those data centers for DR purposes. Your multiplier added another 2x-4x Most production data servers have multiple copies (Write DB server + one or more read-only copies). Multiply by 2x-4x With some rare exceptions, most banks don't just have one central database server. Each major app / business line would have its own DB, so you multiply that by 2x-20x depending on the bank, especially if it's arrived at its size by merging with other banks and has dozens of inherited legacy systems. multiple backups. Regulatory backup requirements means you don't just back up your data once a year. You do it daily, till the data is purged from DB. Meaning, you don't store ONE copy of your transaction in backup. You stored, say, 10*365 copies, assuming 10 year retention) So, at the low end, your cost estimates are 30*2*2*2*2*2 = 900 times off (3 orders of magnitude) just for live database storage, and 3500 times off for backup costs. At the high end, they could be 50*5*2*4*4*20=16,000 times off (4-5 orders of magnitude) At this range, no, it isn't worth it for the bank to keep your transactions available in DB and online any longer than bare-bones absolutely critically necessary. |
Why is property investment good if properties de-valuate over time? | I just read this: Housing and inflation Adjusted for inflation the price of a house has increased a miniscule amount. A better investment would be an ETF that buys REIT stocks. You would be investing in real estate but can cash in and walk away at any time. Here is a list of mREITs: Stockchart of REITs |
What purchases, not counting real estate, will help me increase my cash flow? | Mutual funds can be relatively low risk and a good starting point. Really it depends on you. What are your goals? This is a pretty open ended question. These can all be low risk and provide some return. Note "Less Knowledge" is never a good qualifier for an investment. Your money is your business and you are entitled to know what your business is up to. |
Is Cost of Living overstated? | I do not believe there is a strong correlation between CPI (Consumer Price Index) and housing value appreciation. Take, for example, New York City which has the highest CPI in the US. A great deal of the CPI number is skewed by Manhattan. One can live in Brooklyn or Queens and avoid some of NYC's high CPI. I would say that housing appreciation occurs because of the human activity in the area. That same human activity is what drives the CPI. There are other contributing factors, like limits on economies of scale. You simply cannot set down a Super Walmart in much of NYC, so goods are distributed over a larger number of stores. (Sure, NYC is a port city, but the goods are distributed within the city by trucks.) The San Francisco Bay Area is another high CPI area in the US. Here, as well, it is the location that draws people. While NYC is mostly about economic activity, the SF Bay Area is a mix of the draw of a great location and the economic activity that occurs due to the large number of people living there. I know of a house in Oakland that sold for approximately $350k, in 2004/05. It was located not too far from the "Killing Fields," as they were known locally. It was not the worst neighborhood in Oakland, but it was not very far from it. This was for a shabby, single-story unit which I believe had 5 (maybe 6) rooms. That is a lot of money for a house that required a lot of attention and was in a bad neighborhood. I have no idea how the housing market is after the housing bubble, but the higher value areas had the most room to fall and many of them fell hard. Ultimately, it is supply and demand that determines the CPI and housing values. This supply and demand is determined by the human activity in the area and some practical considerations regarding the area. A final note: If we are talking about a primary residence, it should not necessarily be looked at as an investment. First and foremost, it is a necessity. Second, if you need to hire people for the maintenance and/or upgrades, that will eat into your gains. Contractors are not cheap, especially where they are in high demand. Finally, the tax incentive is actually not that great. Sure, you take what you can get, but its impact is relatively marginal. |
Where can I invest my retirement savings money, where it is safer than stocks? | This is a very open ended question with no concrete answer as it depends on your personal situation. However, for starters I would suggest picking up a copy of The Investment Answer. It's a very light read, less than 100 pages, but it has some amazingly simple yet very concrete advice on investing and answers a lot of common questions (like yours). |
Are Index Funds really as good as “experts” claim? | I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some obvious touch-points: Most people don't have anywhere near the volume of money required for even a $5 commission outweigh the large index fund expense ratios. There are logistical issues that are massively reduced by holding a fund when it comes to winding down your investment(s) as you get near retirement age. Index funds are not touted as categorically "the best" investment, they are being touted as the best place for the average person to invest. There is still a management component to an index like the S&P500. The index doesn't simply buy a share of Apple and watch it over time. The S&P 500 isn't simply a single share of each of the 500 larges US companies it's market cap weighted with frequent rebalancing and constituent changes. VOO makes a lot of trades every day to track the S&P index, "passive index investing" is almost an oxymoron. The most obvious part of this is that if index funds were "the best" way to invest money Berkshire Hathaway would be 100% invested in VOO. The argument for "passive index investing" is simplified for public consumption. The reality is that over time large actively managed funds have under-performed the large index funds net of fees. In part, the thrust of the advice is that the average person is, or should be, more concerned with their own endeavors than they are managing their savings. Investment professionals generally want to avoid "How come I my money only returned 4% when the market index returned 7%? If you track the index, you won't do worse than the index; this helps people sleep better at night. In my opinion the dirty little secret of index funds is that they are able to charge so much less because they spend $0 making investment decisions and $0 on researching the quality of the securities they hold. They simply track an index; XYZ company is 0.07% of the index, then the fund carries 0.07% of XYZ even if the manager thinks something shady is going on there. The argument for a majority of your funds residing in Mutual Funds/ETFs is simple, When you're of retirement age do you really want to make decisions like should I sell a share of Amazon or a share of Exxon? Wouldn't you rather just sell 2 units of SRQ Index fund and completely maintain your investment diversification and not pay commission? For this simplicity you give up three basis points? It seems pretty reasonable to me. |
What does net selling or buying of a stock mean? | I'm not sure the term actually has a clear meaning. We can think of "what does this mean" in two ways: its broad semantic/metaphorical meaning, and its mechanical "what actual variables in the market represent this quantity". Net buying/selling have a clear meaning in the former sense by analogy to the basic concept of supply and demand in equilibrium markets. It's not as clear what their meaning should be in the latter sense. Roughly, as the top comment notes, you could say that a price decrease is because of net selling at the previous price level, while a price rise is driven by net buying at the previous price level. But in terms of actual market mechanics, the only way prices move is by matching of a buyer and a seller, so every market transaction inherently represents an instantaneous balance across the bid/ask spread. So then we could think about the notion of orders. Actual transactions only occur in balance, but there is a whole book of standing orders at various prices. So maybe we could use some measure of the volume at various price levels in each of the bid/ask books to decide some notion of net buying/selling. But again, actual transactions occur only when matched across the spread. If a significant order volume is added on one side or the other, but at a price far away from the bid/offer - far enough that an actual trade at that price is unlikely to occur - should that be included in the notion of net buying/selling? Presumably there is some price distance from the bid/offer where the orders don't matter for net buying/selling. I'm sure you'd find a lot of buyers for BRK.A at $1, but that's completely irrelevant to the notion of net buying/selling in BRK.A. Maybe the closest thing I can think of in terms of actual market mechanics is the comparative total volumes during the period that would still have been executed if forced to execute at the end of period price. Assuming that traders' valuations are fixed through the period in question, and trading occurs on the basis of fundamentals (which I know isn't a good assumption in practice, but the impact of price history upon future price is too complex for this analysis), we have two cases. If price falls, we can assume all buyers who executed above the last price in the period would have happily bought at the last price (saving money), while all sellers who executed below the last price in the period would also be happy to sell for more. The former will be larger than the latter. If the price rises, the reverse is true. |
Exercise an out of the money option | It is possible to exercise an out of the money option contract. Reasons to do this: You want a large stake of voting shares at any price without moving the market and could not get enough options contracts at a near the money strike price, so you decided to go out of the money. Then exercised all the contracts and suddenly you have a large influential position in the stock and nobody saw it coming. This may be favorable if the paper loss is less than the loss of time value that would have been incurred if you chose contracts near the money at further expiration dates, in search of liquidity. Some convoluted tax reason. |
Determining current value for real estate for inheritance purposes | My question is... how is this new value determined? Does it go off of the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to appraise the value of the property and include that assessment of the properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate |
Where to find the 5 or 10 year returns for a mutual fund? | Yahoo's primary business isn't providing mutual fund performance data. They aim to be convenient, but often leave something to be desired in terms of completeness. Try Morningstar instead. Their mission is investment research. Here's a link to Morningstar's data for the fund you specified. If you scroll down, you'll see: |
Superannuation: When low risk options have higher return, what to do? | The long term view you are referring to would be over 30 to 40 years (i.e. your working life). Yes in general you should be going for higher growth options when you are young. As you approach retirement you may change to a more balanced or capital guaranteed option. As the higher growth options will have a larger proportion of funds invested into higher growth assets like shares and property, they will be affected by market movements in these asset classes. So when there is a market crash like with the GFC in 2007/2008 and share prices drop by 40% to 50%, then this will have an effect on your superannuation returns for that year. I would say that if your fund was invested mainly in the Australian stock market over the last 7 years your returns would still be lower than what they were in mid-2007, due to the stock market falls in late 2007 and early 2008. This would mean that for the 7 year time frame your returns would be lower than a balanced or capital guaranteed fund where a majority of funds are invested in bonds and other fixed interest products. However, I would say that for the 5 and possibly the 10 year time frames the returns of the high growth options should have outperformed the balanced and capital guaranteed options. See examples below: First State Super AMP Super Both of these examples show that over a 5 year period or less the more aggressive or high growth options performed better than the more conservative options, and over the 7 year period for First State Super the high growth option performed similar to the more conservative option. Maybe you have been looking at funds with higher fees so in good times when the fund performs well the returns are reduced by excessive fees and when the fund performs badly in not so good time the performance is even worse as the fees are still excessive. Maybe look at industry type funds or retail funds that charge much smaller fees. Also, if a fund has relatively low returns during a period when the market is booming, maybe this is not a good fund to choose. Conversely, it the fund doesn't perform too badly when the market has just crashed, may be it is worth further investigating. You should always try to compare the performance to the market in general and other similar funds. Remember, super should be looked at over a 30 to 40 year time frame, and it is a good idea to get interested in how your fund is performing from an early age, instead of worrying about it only a few years before retirement. |
How to interpret these explanatory graphs (about option strategies)? | The blue line is illustrating the net profit or loss the investor will realise according to how the price of the underlying asset settles at expiry. The x-axis represents the underlying asset price. The y-axis represents the profit or loss. In the first case, the investor has a "naked put write" position, having sold a put option. The strike price of the put is marked as "A" on the x-axis. The maximum profit possible is equal to the total premium received when the option contract was sold. This is represented by that portion of the blue line that is horizontal and extending from the point above that point marked "A" on the x-axis. This corresponds to the case that the price of the underlying asset settles at or above the strike price on the day of expiry. If the underlying asset settles at a price less than the strike price on the day of expiry, then the option with be "in the money". Therefore the net settlement value will move from a profit to a loss, depending on how far in the money the option is upon expiry. This is represented by the diagonal line moving from above the "A" point on the x-axis and moving from a profit to a loss on the y-axis. The diagonal line crosses the x-axis at the point where the underlying asset price is equal to "A" minus the original premium rate at which the option was written - i.e., net profit = zero. In the second case, the investor has sold a put option with a strike price of "B" and purchase a put option with a strike price "A", where A is less than B. Here, the reasoning is similar to the first example, however since a put option has been purchase this will limit the potential losses should the underlying asset move down strongly in value. The horizontal line above the x-axis marks the maximum profit while the horizontal line below the x-axis marks the maximum loss. Note that the horizontal line above the x-axis is closer to the x-axis that is the horizontal line below the x-axis. This is because the maximum profit is equal to the premium received for selling the put option minus the premium payed for buying the put option at a lower strike price. Losses are limited since any loss in excess of the strike price "A" plus the premium payed for the put purchased at a strike price of "A" is covered by the profit made on the purchased put option at a strike price of "A". |
Best personal finance strategy to control my balance | My bank will let me download credit card transactions directly into a personal finance program, and by assigning categories to stores I can get at least a rough overview of that sidd of things, and then adjust categories/splits when needed. Ditto checks. Most of my spending is covered by those. Doesn't help with cash transactions, though; if I want to capture those accurately I need to save receipts. There are ocr products which claim to help capture those; haven't tried them. Currently, since my spending is fairly stable, I'm mostly leaving those as unknown; that wouldn't work for you. |
Student loan payments and opportunity costs | Ponder this. Suppose that a reputable company or government were to come out and say hey, we are going to issue some 10 year bonds at 6.4%. Anyone interested in buying some? Assume that the company or government is financially solid and there is zero chance that they will go bankrupt. Think those bonds would sell? Would you be interested in buying such a bond? Well, I would wager that these bonds would sell like hotcakes, despite the fact that the long term stock market return beats it by a half percent. Heck, vanguard's junk bond fund is hot right now. It only yields 4.9% and those are junk bonds, not rock solid companies (see vanguard high yield corporate bond fund) Every time you make an extra principal payment on your student loan, you are effectively purchasing a investment with a rock solid, guaranteed 6.4% return for 10 years (or whatever time you have left on the loan if make no extra payments). On top of that, paying off a loan early builds your credit reputation, improves your monthly cash flow once the loan is paid, may increase your purchasing power for a house or car, and if nothing else, it frees you from being a slave to that debt payment every month. Edit Improved wording based on Ross's comment |
JCI headache part 2: How to calculate cost basis / tax consequences of JCI -> ADNT spinoff? | Your 1099-B report for ADNT on the fractional shares of cash should answer this question for you. The one I am looking at shows ADNT .8 shares were sold for $36.16 which would equal a sale price of $45.20 per share, and a cost basis of $37.27 for the .8 shares or $46.59 per share. |
If I were to get into a life situation where I would not be able to make regular payments, do lenders typically provide options other than default? | For insight on what will happen, I suggest looking at the situation from the lender's perspective: If your setbacks are temporary, and you are likely to get back on your feet again, they will protect their investment by making accommodations, and probably charging you extra fees along the way. If your financial hardship seems irredeemable, they probably try to squeeze you for as much as possible, and then eventually take your house, protecting their investment as best they can. If they are going to foreclose, they may be reluctant to do it quickly, as foreclosure is expensive, takes man power, and looks bad on their books. So it may get pushed off for a Quarter, or a fiscal year. But if you are asking if they'll help you out from the goodness of their heart, well, a bank has no heart, and creditors are interested in ROI. They'll take the easiest path to profit, or failing that, the path to minimum financial losses. The personal consequences to you are not their concern. Once you realize this, it may change your thinking about your own situation. If you think you have a path to financial recovery, then you need to make that clear to them, in writing, with details. Make a business case that working with you is in their own best interests. If you cannot make such a case, recognize that they'll likely squeeze you for as much as possible in penalties, fees, interest payments, etc, before eventually foreclosing on you anyway. Don't play that game. If your home is a lost cause financially, plan how to get out from it with the smallest losses possible. Don't pay more than you need to, and don't throw good money after bad. |
Resources on Buying Rental Properties | I would also suggest finding the training resource within your state for real estate agent license exam prep... When I was getting started, I took the "101" level course and it was worth the few hundred bucks for the overview I gleaned. |
What is buying pressure? | Buying pressure means there are more interested buyers than there are ready sellers putting upward pressure on prices. That might include institutional buyers who are slowly executing buy orders because they still want the best prices possible without clearing out the market. Buying pressure doesn't have to be related to volume at all. If everyone who owns shares think they are going to be worth far more than recent market prices, they will not offer them for sale. That means there is more demand to buy than there is a supply of shares to be bought. That condition can exist regardless of trading volume. |
Why do I get a much better price for options with a limit order than the ask price? | There are usually so many different options around for the same stock that some are rarely traded. Especially if the price has moved since the option was issued, nobody might be interested in that particular option at that price anymore. So the asking price might be something that someone asked for ages ago and that is much higher than anyone would reasonably pay today. With a bid of $20 and an ask of $30, nobody is trading, but the value of that option is somewhere between $20 and $30. If the value is below $25, someone will notice your $25 bid and sell. |
Pay off car or use money for down payment | Absolutely do not pay off the car if you aren't planning to keep it. The amount of equity that you have from a trade in vehicle will always be a variable when negotiating a new car purchase. By applying cash (a hard asset) to increase your equity, you are trading a fixed amount for an unknown, variable amount. You are also moving from a position of more certainty for a position of less certainty. You gain nothing by paying off the car, whereas the dealer can negotiate away a larger piece of the equity in the vehicle. |
Can you beat the market by investing in double long ETFs? [duplicate] | Here is a simple example of how daily leverage fails, when applied over periods longer than a day. It is specifically adjusted to be more extreme than the actual market so you can see the effects more readily. You buy a daily leveraged fund and the index is at 1000. Suddenly the market goes crazy, and goes up to 2000 - a 100% gain! Because you have a 2x ETF, you will find your return to be somewhere near 200% (if the ETF did its job). Then tomorrow it goes back to normal and falls back down to 1000. This is a fall of 50%. If your ETF did its job, you should find your loss is somewhere near twice that: 100%. You have wiped out all your money. Forever. You lose. :) The stock market does not, in practice, make jumps that huge in a single day. But it does go up and down, not just up, and if you're doing a daily leveraged ETF, your money will be gradually eroded. It doesn't matter whether it's 2x leveraged or 8x leveraged or inverse (-1x) or anything else. Do the math, get some historical data, run some simulations. You're right that it is possible to beat the market using a 2x ETF, in the short run. But the longer you hold the stock, the more ups and downs you experience along the way, and the more opportunity your money has to decay. If you really want to double your exposure to the market over the intermediate term, borrow the money yourself. This is why they invented the margin account: Your broker will essentially give you a loan using your existing portfolio as collateral. You can then invest the borrowed money, increasing your exposure even more. Alternatively, if you have existing assets like, say, a house, you can take out a mortgage on it and invest the proceeds. (This isn't necessarily a good idea, but it's not really worse than a margin account; investing with borrowed money is investing with borrowed money, and you might get a better interest rate. Actually, a lot of rich people who could pay off their mortgages don't, and invest the money instead, and keep the tax deduction for mortgage interest. But I digress.) Remember that assets shrink; liabilities (loans) never shrink. If you really want to double your return over the long term, invest twice as much money. |
Should I use my non-tax advantaged investment account to pay off debt? | Paying off debts will reduce your monthly obligation to creditors (less risk) and also remove the possibility of foreclosure / repossession / lawsuit if you ever lost access to income (less risk). Risk is an important part of the equation that can get overlooked. It sounds like pulling that money out of the market will reduce your yearly tax bill as well. |
When do I pay taxes if I'm self employed? | I strongly recommend that you talk to an accountant right away because you could save some money by making a tax payment by January 15, 2014. You will receive Forms 1099-MISC from the various entities with whom you are doing business as a contractor detailing how much money they paid you. A copy will go to the IRS also. You file a Schedule C with your Form 1040 in which you detail how much you received on the 1099-MISC forms as well as any other income that your contracting business received (e.g. amounts less than $600 for which a 1099-MISc does not need to be issued, or tips, say, if you are a taxi-driver running your own cab), and you can deduct various expenses that you incurred in generating this income, including tools, books, (or gasoline!) etc that you bought for doing the job. You will need to file a Schedule SE that will compute how much you owe in Social Security and Medicare taxes on the net income on Schedule C. You will pay at twice the rate that employees pay because you get to pay not only the employee's share but also the employer's share. At least, you will not have to pay income tax on the employer's share. Your net income on Schedule C will transfer onto Form 1040 where you will compute how much income tax you owe, and then add on the Social Security tax etc to compute a final amount of tax to be paid. You will have to pay a penalty for not making tax payments every quarter during 2013, plus interest on the tax paid late. Send the IRS a check for the total. If you talk to an accountant right away, he/she will likely be able to come up with a rough estimate of what you might owe, and sending in that amount by January 15 will save some money. The accountant can also help you set up for the 2014 tax year during which you could make quarterly payments of estimated tax for 2014 and avoid the penalties and interest referred to above. |
FHA Reduction Notices From Third-Party Companies - Scam? Or Something To Consider? | This is obviously a spam mail. Your mortgage is a public record, and mortgage brokers and insurance agents were, are and will be soliciting your business, as long as they feel they have a chance of getting it. Nothing that that particular company offers is unique to them, nothing they can offer you cannot be done by anyone else. It is my personal belief that we should not do business with spammers, and that is why I suggest you to remember the company name and never deal with them. However, it is up to you if you want to follow that advice or not. What they're offering is called refinance. Any bank, credit union or mortgage broker does that. The rates are more or less the same everywhere, but the closing fees and application fees is where the small brokers are making their money. Big banks get their money from also servicing the loans, so they're more flexible on fees. All of them can do "streamline" refinance if your mortgage is eligible. None if it isn't. Note that the ones who service your current mortgage might not be the ones who own it, thus "renegotiating the rate" is most likely not an option (FHA backed loans are sold to Fannie and Freddie, the original lenders continue servicing them - but don't own them). Refinancing - is a more likely option, and in this case the lender will not care about your rate on the old mortgage. |
Are COBRA premiums deductible when self-employed? | http://www.ehow.com/about_4625753_cobra-as-selfemployed-health-insurance.html This link makes it clear... it has to be itemized, and is subject to the > than 7.5% AGI rule. |
Can I sell my ESPP in a different order than I acquired it, to avoid paying too much tax on profits? | That's up to you. If you instruct your broker to sell shares purchased in specific lots, they can do that -- but doing so requires that you and/or they track specific fractional lots forever afterwards so you know what is still there to be sold. FIFO simplifies the bookkeeping. And I am not convinced selecting specific lots makes much difference; the government gets its share of your profits sooner or later. |
Does it make any sense to directly contribute to reducing the US national debt? | No. Unless you are ten Bill Gates rolled into one man, you can not possibly hope to make a dent in the 14 trillion debt. Even if you were and paid off whole debt in one payment, budget deficits would restore it to old glory in a short time. If you have some extra money, I'd advise to either choose a charity and donate to somebody who needs your help directly or if you are so inclined, support a campaign of a financially conservative politician (only if you are sure he is a financial conservative and doesn't just tell this to get elected - I have no idea how you could do it :). |
Forex vs day trading for beginner investor | This image is an advertisement from this week's Barron's. The broker would want to put himself in the best light, correct? This shows you that of their current accounts, 53.5% are not profitable. And these guys have the best track record of the list. Also keep in mind that their client base isn't random. The winners tend to stay, so even if it were 50/50, the 50% of losers might represent many times that number of people who came to the table, lost their money and left. |
Why diversify stocks/investments? | Diversifying is the first advice given to beginner in order to avoid big loss. For example in 2014 the company Theranos was really appealing before it fail in 2016. So a beginner could have invest ALL his money and lose it. But if he has deverified he wouldn't lost everything. As an investor goes from beginner to experience some still Diversify and other concentrate. Mostly it depends how much confident you are about an investement. If you have 20 years of experience, now everything about the company and you are sure there will be profit you can concentrate. If you are not 100% sure there will be a profit, it is better to Diversify. Diversifying can also be profitating when you loose money: because you will pay tax when you earn money, if you diversify you can choose to loose money in some stock (usually in december) and in this way cut your taxes. |
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