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The board of directors in companies | Boards of Directors are required for corporations by nearly all jurisdictions. Some jurisdictions have almost self-defeating requirements however, such as in tax havens. Boards of Directors are compensated by the company for which they sit. Historically, they have set their own compensation almost always with tight qualitative legal bounds, but in the US, that has now changed, so investors now set Director compensation. Directors are typically not given wages or salary for work but compensation for expenses. For larger companies, this is semantics since compensation averages around one quarter of a million of USD. Regulations almost always proscribe agencies such as other corporations from sitting on boards and individuals convicted of serious crimes as well. Some jurisdictions will even restrict directories to other qualities such as solvency. While directors are elected by shareholders, their obligations are normally to the company, and each jurisdiction has its own set of rules for this. Almost always, directors are forbidden from selling access to their votes. Directors are almost always elected by holders of voting stock after a well-publicized announcement and extended time period. Investors are almost never restricted from sitting on a board so long as they meet the requirements described above. |
How do you report S-corporation Shareholder loans / capital contributions? | As the owner of the S-corp, it is far easier for you to move money in/out of the company as contributions and distributions rather than making loans to the company. Loans require interest payments, 1099-INT forms, and have tax consequences, whereas the distributions don't need to be reported because you pay taxes on net profits regardless of whether the money was distributed. If you were paid interest, disregard this answer. I don't know if or how you could re-categorize the loan once there's a 1099-INT involved. If no interest was ever paid, you just need to account for it properly: If the company didn't pay you any interest and never issued you a 1099-INT form (i.e. you wrote a check to the company, no promissory note, no tax forms, no payments, no interest, etc.) then you can categorize that money as a capital contribution. You can likewise take that money back out of the company as a capital distribution and neither of these events are taxable nor do they need to be reported to the IRS. In Quickbooks, create the following Equity accounts -- one for each shareholder making capital contributions and distributions: When putting money into the company, deposit into your corporate bank account and use the Capital Contribution equity account. When taking money out of the company, write yourself a check and use the Distributions account. At the end of every tax year, you can close out your Contributions and Distributions to Retained Earnings by making a general journal entry. For example, debit retained earnings and credit distributions on Dec 31 every year to zero-out the distributions account. For contributions, do the reverse and credit retained earnings. There are other ways of recording these transactions -- for example I think some people just use a Member Capital equity account instead of separate accounts for contributions and distributions -- and QB might warn you about posting journal entries to the special Retained Earnings account at the end of the year. In any case, this is how my CPA set up my books and it's been working well enough for many years. Still, never a bad idea to get a second opinion from your CPA. Be sure to pay yourself a reasonable salary, you can't get out of payroll taxes and just distribute profits -- that's a big red flag that can trigger an audit. If you're simply distributing back the money you already put into the company, that should be fine. |
When shorting a stock, do you pay current market price or the best (lowest) available ask price? | In terms of pricing the asset, this functions in exactly the same way as a regular sell, so bids will have to be hit to fill the trade. When shorting an equity, currency is not borrowed; the equity is, so the value of per share liability is equal to it's last traded price or the ask if the equity is illiquid. Thus when opening a short position, the asks offer nothing to the process except competition for your order getting filled. Part of managing the trade is the interest rate risk. If the asks are as illiquid as detailed in the question, it may be difficult even to locate the shares for borrowing. As a general rule, only illiquid equities or those in free fall may be temporarily unable for shorting. Interactive Brokers posts their securities financing availabilities and could be used as a proxy guide for your broker. |
What is the smartest thing to do in case of a stock market crash | I would also be getting out of the stock market if I noticed prices starting to fall and a crash possibly on the way. There are some good and quite simple techniques I would use to time the markets over the medium to long term. I have described some of them in the answer to this question of mine: What are some simple techniques used for Timing the Stock Market over the long term? You could use similar techniques in your investing. And in regards to back-testing DCA to Timing The Markets, I have done that too in my answer to the following question: Investing in low cost index fund — does the timing matter? Timing the Markets wins hand down. In regards to back-testing and the concerns Kent Anderson has brought up, when I back-test a trading strategy, if that strategy is successful, I then forward test it over a year or two to confirm the results. As with back-testing you can sometimes curve fit your criteria too much. By forward testing you are confirming that the strategy is robust over different market conditions. One strategy you can take when the market does start to fall is short selling, as mentioned by some already. I am now short selling using CFDs over the short to medium term as one of my more aggressive strategies. I have a longer term strategy where I do not short, but tighten my stop losses when the market starts to tank. Sometimes my positions will keep going up even though the market as a whole is heading down, and I can make an extra 5% to 10% on these positions before I get taken out. The rare position even continues going up during the whole downturn and when the market starts to recover. So I let the market decide when I get out and when I stay in, I leave my emotions out of it. The best thing you can do is have a written trading plan with all your criteria for getting into the market, your criteria for getting out of the market and your position sizing and risk management incorporated in the plan. |
What are the implications of lending money to my sole member S-corp? | You can make a capital contribution, not a loan. It's not a taxable event, no interest, and you can take a distribution later when the business has the money to pay you back. So yes, transfer the money. If you use software like Quickbooks, make use of unique accounts for tracking the contribution |
Making a big purchase over $2500. I have the money to cover it. Should I get a loan or just place it on credit? | I would not be concerned about the impact to your credit rating. You already have an excellent credit score, and the temporary change to your utilization will have minimal impact to your score. If you really need to make this $2500 purchase and you have the money in the bank to pay for it, I would not recommend borrowing this money. Only put it on the credit card if you plan on paying it off in full without paying interest. Let me ask you this: Why do you want to keep this $2500 in the bank? It certainly isn't earning you anything significant. My guess is that you'd like to keep it there for an emergency. Well, is this $2500 purchase an emergency? If it is necessary, then spend the money. If not, then save up the money until you have enough to make the purchase. It doesn't make sense to keep money for an emergency in the bank, but then when one comes up, to leave the money in the bank and pay interest on your emergency purchase. If you make this emergency purchase and another emergency comes up, you can always (if necessary) borrow the money at that time. It doesn't make sense to borrow money before you need it. That having been said, I would encourage you to build up your emergency fund so that you have enough money in there to handle things like this without completely depleting your savings account. 3 to 6 months of expenses is the general recommendation for your emergency fund. Then if something unplanned comes up, you'll have the money in the bank without having to borrow and pay interest. |
What can I replace Microsoft Money with, now that MS has abandoned it? | hledger is a free software, cross-platform double-entry accounting tool I've been working on for a while. It has command-line and web-based interfaces to your local data, and some other interesting features. There's also ledger (http://wiki.github.com/jwiegley/ledger/) which is command-line only. These are.. different, but worth a look for some folks. |
Is selling put options an advisable strategy for a retiree to generate stable income? | As you move toward retirement, your portfolio is supposed to move toward low risk, stable investments, more bonds, less stocks, etc. Your question implies that you want to increase your income, most likely because your income is not satisfying your desires. First, any idea that you have that risks your savings, just eliminate it. You are not able to replace those savings. The time for those kind of plays has passed. However, you can improve your situation. Do random odd jobs. Find a part time job that you're willing to do for 10 hours a week or something. Keep this money separate from your retirement savings. Research the stock trades you would like to make and use that 'extra' money to play in the market. Set a rule that you do not touch your nest egg for trading. You may find that being retired gives you the time to do the #1 thing that helps investors make good investments -- research. Then when you make your first million doing this, write a book. If you call it Retire - And Then Get Rich, I expect royalties and a dedication. |
Bid price… sudden Drop | An option gives you the option rather than the obligation to buy (or sell) the underlying so you don't have to exercise you can just let the option expire (so long it doesn't have an automatic expiry). After expiration the option is worthless if it is out of the money but other than that has no hangover. Option prices normally drop as the time value of the option decays. An option has two values associated with it; time value and exercise value. Far out of the money (when the price of the underlying is far from the strike price on the losing side) options only have time value whereas deep in the money options (as yours seems to be) has some time value as well as the intrinsic value of the right to buy (sell) at a low (high) price and then sell (buy) the underlying. The time value of the option comes from the possibility that the price of the underlying will move (further) in your favour and make you more money at expiry. As expiry closes it is less likely that there will be a favourable mood so this value declines which can cause prices to move sharply after a period of little to no revaluing. Up to now what I have said applies to both OTC and traded options but exchange traded options have another level of complexity in their trading; because there are fewer traders in the options market the size of trade at which you can move the market is much lower. On the equities markets you may need to trade millions of shares to have be substantial enough to significantly move a price, on the options markets it could be thousands or even hundreds. If these are European style options (which sounds likely) and a single trading entity was holding a large number of the exchange traded options and now thinks that the price will move significantly against them before expiry their sell trade will move the market lower in spite of the options being in the money. Their trade is based on their supposition that by the time they can exercise the option the price will be below the strike and they will lose money. They have cashed out at a price that suited them and limited what they will lose if they are right about the underlying. If I am not correct in my excise style assumption (European) I may need more details on the trade as it seems like you should just exercise now and take the profit if it is that far into the money. |
Why buy insurance? | (Disclosure - I am a real estate agent, involved with houses to buy/sell, but much activity in rentals) I got a call from a man and his wife looking for an apartment. He introduced itself, described what they were looking for, and then suggested I google his name. He said I'd find that a few weeks back, his house burned to the ground and he had no insurance. He didn't have enough savings to rebuild, and besides needing an apartment, had a building lot to sell. Insurance against theft may not be at the top of your list. Don't keep any cash, and keep your possessions to a minimum. But a house needs insurance for a bank to give you a mortgage. Once paid off, you have no legal obligation, but are playing a dangerous game. You are right, it's an odds game. If the cost of insurance is .5% the house value and the chance of it burning down is 1 in 300 (I made this up) you are simply betting it won't be yours that burns down. Given that for most people, a paid off house is their largest asset, more value that all other savings combined, it's a risk most would prefer not to take. Life insurance is a different matter. A person with no dependents has no need for insurance. For those who are married (or have a loved one), or for parents, insurance is intended to help survivors bridge the gap for that lost income. The 10-20 times income value for insurance is just a recommendation, whose need fades away as one approaches independence. I don't believe in insurance as an investment vehicle, so this answer is talking strictly term. |
What is a good rental yield? | Historically that 'divide by 1000' rule of thumb is what many people in Australia have thought of as normal, and yes, it's about a 5.2% gross yield. Net of expenses, perhaps 3-4%, without allowing for interest. If you're comparing this to shares, I think the right comparison is to the dividend yield, not to the overall PE. A dividend yield of about 3-5% is also about typical: if you look at the Vanguard Index Australian Shares Fund as a proxy for the ASX the yield last year was about 4%. Obviously a 4% return is not very competitive with a term deposit. But with both shares and housing you can hope for some capital growth in addition to the income yield. If you get 4% rental yield plus 5% growth it is more attractive. Is it "good" to buy at what people have historically thought was "normal"? Perhaps you are better off looking around, or sitting out, until you find a much better price than normal. "Is 5% actually historically normal?" deserves a longer answer. |
How does selling rights issues work in practice? | Do you simply get call options you can sell on an options exchange? No, you don't get call options that you can sell on an options exchange. Rather, you get rights that you can (generally) sell on the stock exchange. The right issue is in essence a call option – in that it behaves like one, but it is not considered a standardized option contract. is there a special exchange where such rights issues are traded? No. It will normally be done on the stock exchange. |
Risk of buying stock | When you buy shares, you are literally buying a share of the company. You become a part-owner of it. Companies are not required to pay dividends in any given year. It's up to them to decide each year how much to pay out. The value of the shares goes up and down depending on how much the markets consider the company is worth. If the company is successful, the price of the shares goes up. If it's unsuccessful, the price goes down. You have no control over that. If the company fails completely and goes bankrupt, then the shares are worthless. Dilution is where the company decides to sell more shares. If they are being sold at market value, then you haven't really lost anything. But if they are sold below cost (perhaps as an incentive to certain staff), then the value of the company per share is now less. So your shares may be worth a bit less than they were. You would get to vote at the AGM on such schemes. But unless you own a significant proportion of the shares in the company, your vote will probably make no difference. In practice, you can't protect yourself. Buying shares is a gamble. All you can do is decide what to gamble on. |
Does a stock's price represent current liquidation of all shares? | What if everyone decided to sell all the shares at a given moment, let's say when the stock is trading at $40? I imagine supply would outweigh demand and the stock would fall. Yes this is the case. Every large "Sell" order results in price going down and every large "Buy" order results in price going up. Hence typically when large orders are being executed, they are first negotiated outside for a price and then sold at the exchange. I am not talking about Ownership change event. If a company wants a change in ownership, the buyer would be ready to pay a premium over the market price to get controlling stake. |
When does Ontario's HST come into effect? | In general you must charge HST on and after July 1, 2010. However, in the case of delivered sales, you must charge HST if the transfer of goods will happen on or after July 1,2010. Example: A person comes into my hypothetical store on June 29, 2010 and buys a couch. They opt to have it delivered by my truck on July 2, 2010. I should charge HST on this purchase, not GST/PST. References: |
How and why does the exchange rate of a currency change almost everyday? | The basic idea is that money's worth is dependent on what it can be used to buy. The principal driver of monetary exchange (using one type of currency to "buy" another) is that usually, transactions for goods or services in a particular country must be made using that country's official currency. So, if the U.S. has something very valuable (let's say iPhones) that people in other countries want to buy, they have to buy dollars and then use those dollars to buy the consumer electronics from sellers in the U.S. Each country has a "basket" of things they produce that another country will want, and a "shopping list" of things of value they want from that other country. The net difference in value between the basket and shopping list determines the relative demand for one currency over another; the dollar might gain value relative to the Euro (and thus a Euro will buy fewer dollars) because Europeans want iPhones more than Americans want BMWs, or conversely the Euro can gain strength against the dollar because Americans want BMWs more than Europeans want iPhones. The fact that iPhones are actually made in China kind of plays into it, kind of not; Apple pays the Chinese in Yuan to make them, then receives dollars from international buyers and ships the iPhones to them, making both the Yuan and the dollar more valuable than the Euro or other currencies. The total amount of a currency in circulation can also affect relative prices. Right now the American Fed is pumping billions of dollars a day into the U.S. economy. This means there's a lot of dollars floating around, so they're easy to get and thus demand for them decreases. It's more complex than that (for instance, the dollar is also used as the international standard for trade in oil; you want oil, you pay for it in dollars, increasing demand for dollars even when the United States doesn't actually put any oil on the market to sell), but basically think of different currencies as having value in and of themselves, and that value is affected by how much the market wants that currency. |
Why do people sell when demand pushes share price up? | You are assuming the price increase will continue. The people selling are assuming that the price increase will not continue. Ultimately that's what a share transaction is: one person would rather have the cash at a particular price / time, and one person would rather have the share. |
Would it ever be a bad idea to convert a traditional IRA to a Roth IRA with the following assumptions? | Even if you're paying a lot of taxes now, you're talking marginal dollars when you look at current contribution, and average tax rate when making withdrawals. IE, if you currently pay 28% on your last dollar (and assuming your contribution is entirely in your marginal rate), then you're paying 28% on all of the Roth contributions, but probably paying a lower average tax rate, due to the lower tax rates on the first many dollars. Look at the overall average tax rate of your expected retirement income - if you're expecting to pull out $100k a year, you're probably paying less than 20% in average taxes, because the first third or so is taxed at a very low rate (0 or 15%), assuming things don't change in our tax code. Comparing that to your 28% and you have a net gain of 8% by paying the taxes later - nothing to shake a stick at. At minimum, have enough in your traditional IRA to max out the zero tax bucket (at least $12k). Realistically you probably should have enough to max out the 15% bucket, as you presumably are well above that bucket now. Any Roth savings will be more than eliminated by this difference: 28% tax now, 15% tax later? Yes please. A diversified combination is usually best for those expecting to have a lot of retirement savings - enough in Traditional to get at least $35k or so a year out, say, and then enough in Roth to keep your comfortable lifestyle after that. The one caveat here is in the case when you max out your contribution levels, you may gain by using money that is not in your IRA to pay the taxes on the conversion. Talk to your tax professional or accountant to verify this will be helpful in your particular instance. |
How high should I set my KickStarter funding goal in order to have $35,000 left over? | You are wildly over-estimating your taxes. First, remember that your business expenses reduce your gross income. Second, remember that taxes are progressive, so your flat 35% only applies if you're already making a high salary that pushed you into the higher brackets of US and CA. I think the deeper problems are: 1) you are expecting a super early start-up (with no finished product) to pay you the same as a steady job, including health insurance, and 2) you are expecting Kickstarter to independently fund the venture. The best source of funding is yourself. If you believe in this venture and in your game design abilities, then pay for most of the costs out of your own savings. Cut your expenses to the extent you can. You may want to wander over to startups.SE to get more perspective and ideas on your business plan. |
What evidence is there that rising interest rates causes Canadian condo prices to go down? | Yes, it's unreasonable to think the prices will drop 10-20% in that time frame. Housing prices are not an equation that can can be solved to "home prices are X% overvalued." You have 3 answers so far, Quanty's "prices are inversely proportional to rates," Rob's "there's no strong correlation between interest rates and house prices," and MB's, "rising interest rates create downward pressure on housing prices." Any research into price history had better take every other variable into account. Articles that look at rates vs price don't always address a key item, income. Say we agree that the data show your city to be 10% too high. But if sellers like their high price and have some 'dig my heels in' power, prices won't drop. The seller simply stays put, and the supply/demand curves result not in a lower price, but in less supply. And the effect is to change the demographic of that area, i.e. attracting higher income earners. Rob linked to an article with a nice set of charts. One chart showing the US30 yr fixed rate and 'Real House Prices'. What results is a chart that can refute the relationship between rates and prices. But that would ignore an historical point that's too important to forget. The tumble that started in Jan '06 had nothing to do with the 30 year rate. It was the result of a series of insane financial products including 'interest only option ARMs' which permitted buyers to get approved for a purchase based on a payment that wasn't fixed, and would change to a fully amortizing mortgage at a higher rate that was unaffordable. A product that was a financial time bomb. Canada Banks offered no such product, and when the US market got pneumonia, Canada experienced a mild cold. With respect to any answers that offer US centric data to prove any hypothesis, I don't feel such comparisons are appropriate. Correlations, and the data used to prove them are an interesting thing. I can suggest that you take the US 30 year rate, along with our median income, or rather 25% of monthly median income. Calculate the mortgage that results. This translates nicely to the home a median family can afford. And I claim that long term this is the equilibrium price of that median home. But supply/demand has another factor, 'stickyness' or the more technical term, 'inelasticity of demand.' This means that for example, a 10% increase in the price of cigarettes does not cause a 10% drop in consumption. Each and every good has its own elasticity, and in the case of housing, a rise in cost would certainly impact the marginal buyers, but others will simply adjust their budgets. Not all buyers were planning to hit the bank's limit on what they could afford, so the rise doesn't change their mind, just their budget. Last - I know that Canada does not have a 30 year mortgage, most common is a 5 year rate with 30 year amortization. (correction/clarification, anyone?) The effect of this is less volatility in the market, since I believe your rates are not poised for the 2.5% to 4% jump implied by another response. Small increases can be absorbed. In a beautiful coincidence, the Federal Reserve Board sent me a link to The Interest Rate Elasticity of Mortgage Demand: Evidence From Bunching at the Conforming Loan Limit. It's a bit long but a worthwhile look at how the correlation isn't as instant as some might think. |
What prevents investors from buying high yield stocks and selling them as soon as their dividend is paid out? | Although the market discussion by other answers is correct, the tax structure of many developed nations (I am familiar with Canada in particular) offers a preferred tax rate for dividend income compared to taxable gains. Consequently, if your portfolio is large enough to make transaction fees a very small percentage rate, this is a viable investment strategy. However, as the preferred tax rate for dividends typically will catch up to that for capital gains at some cut-off point, there is a natural limit on how much income can be favourably obtained in this way. If you believe your portfolio might be large enough to benefit from this investment strategy, talk to a qualified investment advisor, broker, or tax consultant for the specifics for your tax jurisdiction. |
Should I stockpile nickels? | The collectible value of coins will probably increase with the underlying metal value. I'd collect coins for that reason and because I enjoy collecting them. I wouldn't recommend buying bags of rolled nickels or anything though. |
Why do card processing companies discourage “cash advance” activities | I thought this was because credit card companies charge the retailer a fee to accept credit card payments. If you spend $100, the retailer pays $1 (or whatever percentage they have negotiated) to the credit card provider. Handing over $100 cash and paying $1 fee to Visa means a loss to the retailer. The same transaction on $100 worth of product means the loss is accepted out of the profit margin which the retailer accepts to attract custom. |
What's the best application, software or tool that can be used to track time? | A free solution that I've been using is Task Coach. It has tasks, subtasks, categories, and all the stuff you would expect from a time tracking program. It also counts each distinct period spent on a task as a separate "effort" that you can add comments, for example to remind you what that chunk of time was spent on. |
How to calculate how far a stock price can drop before a broker would issue a margin call? | With your numbers, look at it this way - You borrowed $50. When the stock is $100, you are at 50% margin. What's most important, is that there's margin interest charged, so the amount owed will increase regardless of the stock price. When calculating your return or loss, the interest has to be accounted for or your numbers will be wrong. For a small investor, margin rates can run high, and often, will offset much of your potential gain. What good is a $100 gain if you paid $125 in margin interest? |
What tax advantage should I keep an eye for if I am going to relocate? | Depends. If you can choose where to relocate to, then I second the "no income tax" states. But even of these chose wisely, some have no income taxes at all, others have taxes on some kinds of income. Some don't have neither individual nor corporate taxes, some tax businesses in some ways. Some compensate with higher property taxes, others compensate with higher sales taxes. On the other hand, you might prefer states with income taxes but no sales taxes. It can happen if your current income is going to be low, but you'll be spending your savings. If you don't have a choice (for example, your employer wants you to move closer to their office), then you're more limited. Still, you can use the tax break on moving expenses (read the fine print, there are certain employment requirements), and play with the state taxes (if you're moving to a state with less/no taxes - move earlier, if its the other way - move later). Check out for cities that have income taxes. In some states it cannot happen by law (for example, in California only the state is allowed to collect income taxes), in others it is very common (Ohio comes to mind). Many things to consider in New York. New York City has its own income tax (as well as Yonkers, as far as I remember these are the only ones in the State of New York). So if you want to save on taxes in NYS but live close to the city, consider White Plains etc. If you work in NYC its moot, you're going to pay city taxes anyway. That is also true if you live in NJ but work in the city, so tax-wise it may be more efficient not to live across state lines from your place of work. |
Effect of Quantitative Easing on Price of Bonds | The classic definition of inflation is "too much money chasing too few goods." Low rates and QE were intended to help revive a stalled economy, but unfortunately, demand has not risen, but rather, the velocity of money has dropped like a rock. At some point, we will see the economy recover and the excess money in the system will need to be removed to avoid the inflation you suggest may occur. Of course, as rates rise to a more normal level, the price of all debt will adjust. This question may not be on topic for this board, but if we avoid politics, and keep it close to PF, it might remain. |
Why Are Credit Card Rates Increasing / Credit Limits Falling? | Because people are going deeper into debt and filing for bankruptcy more often, there is more risk on behalf of the credit company. Therefore, they limit their risk by lower limits and increasing interest. For every person that goes bankrupt, there might be 10 that pay that new higher interest rate, thereby netting a profit even though they lost out completely on the one customer. The recent legislation limited how and under what circumstance rate are adjusted and raised, but not forbidden. As for the fact that these banks took tax money under the idea (we all thought) I see two points of view. We never should have had the credit we did, so they are correcting and you (like me and millions of others) are suffering for their prior mistakes. It is an honest attempt to correct the system for long term stability even if we suffer in the short term. We gave them tax money, they need to not screw us over. In response to the still frozen credit markets I would suggest penalty taxes to companies that do not lend. Penalties to companies that do not modify mortgages. The second you take government money is the last second a you are entitled to a profit of anything. Furthermore, we the people bought you and we the people get to decide your salary. The bottom line is there is truth in both statements. Things are totally screwed up right now because we ALL made mistakes in the past trying to get a bigger profit or own a bigger house. There are those among us who didn't make a mistake, and those among us who made nothing but mistakes. As a society, we have to pay the piper either way. The best thing you can do now is pay down your debts, live simply and spend your money wisely. |
What are the financial advantages of living in Switzerland? | As per Wikipedia of right now, here are unemployment figures for Switzerland and surrounding countries: Liechtenstein, unfortunately, does not have a large job market, given its total population of about 37,000 people. And note that the German figure of 4.5% is the lowest it has been for decades - I'd expect this number to go up and the Swiss one to stay constant. Bottom line: you will have an easier time finding a job in Switzerland. (Plus all the other good points the other answers raised: great mountains, great chocolate, low taxes, clean streets etc.) |
Are variable rate loans ever a good idea? | Fixed You are confirming the amount you are going t pay over the term of the loan. Variable: 3.79% over 82mo. The total difference over the life of the loan comes to around $1200 That is the wrong way to calculate the variable portion. The variable is primarily set with a margin over a certain benchmark i.e. Fed rate. Assuming the Fed rate doesn't change over or only goes lower the variable rate is the one to go. If it rises then your payment will increase. And the margin they take over the benchmark rate may increase, so the total amount you pay might increase too. I would assume a read through the T&Cs should clarify that for you. Is it ever a good idea to choose a variable rate loan? Only if you think we are in a low interest rate environment i.e. the economy is in doldrums and the Feds are trying to simulate the economy by decreasing the benchmark rates. And you are sure that the lender isn't going to increase his margins if the rate remains low for quite a substantial amount of time. And I might assume there will be penalties for paying off a loan quicker. |
How to motivate young people to save money | In the United States you can't, because the average millennial in the United States has no opportunity to save money. Either you get a college education, then you will be burdened with a student loan. The cost of college education skyrocketed in the past decades. It is now practically impossible to enter the workforce without a huge debt, unless you are one of the lucky few who has rich and generous parents. Or you skip college. But college is the only way in the United States to obtain a generally accepted qualification, so you won't get any job which pays enough to save any money. As soon as that student loan is paid off, you need to get another loan for you house which you pay off for several decades. As soon as the house debt is paid off, you will be old and develop some medical problems. The medical bills will come in and you will be in debt again. So when in their life are millennials supposed to save money? |
Can I buy only 4 shares of a company? | One of my university professors suggested doing this systematically to get access to shareholder meetings where there is typically a nice dinner involved. As long as the stock price + commission is less than the price of a nice restaurant it's actually not a bad idea. |
Where can I find historic performance data on Barclays Aggregate Canadian Bond Index? | I couldn't find historical data either, so I contacted Vanguard Canada and Barclays; Vanguard replied that This index was developed for Vanguard, and thus historical information is available as of the inception of the fund. Unfortunately, that means that the only existing data on historical returns are in the link in your question. Vanguard also sent me a link to the methodology Barclay's uses when constructing this index, which you might find interesting as well. I haven't heard from Barclays, but I presume the story is the same; even if they've been collecting data on Canadian bonds since before the inception of this index, they probably didn't aggregate it into an index before their contract with Vanguard (and if they did, it might be proprietary and not available free of charge). |
How do credit card banks detect fraudulent transactions without requiring a travel advisory? | One bank is more willing to risk losses and customer hassle in exchange for lower processing costs than the other bank is. It's strictly a business decision. Regarding how they detect suspicious transactions: Patten detection based on your past usage history. I've gotten calls asking me to confirm that I just placed a large order with a company I'd never bought from before, or in a country that I haven't previously visited, or... |
Capital Gains Tax with Multiple 'buy' Transactions per Stock (U.S.) | According to the following article the answer is "first-in, first-out": http://smallbusiness.chron.com/calculate-cost-basis-stock-multiple-purchases-21588.html According to the following article the last answer was just one option an investor can choose: https://www.usaa.com/inet/pages/advice-investing-costbasis?akredirect=true |
Steps to buying a home | At this stage, I would think about education. You can attend open houses, and often times real estate agents and bankers put on seminars for first time home buyers. Borrow books from the library and I would watch some HGTV. Many of the shows are entertaining and quite educational. Secondly you may want to get your finances in order. Make and stick to a budget. Start building a down payment and emergency fund. Pay down consumer debt/student loans. Picking up side work or overtime will help. You will look far more attractive to a lender if you go in with a large down payment and an emergency fund then someone with better credit scores and 100% financing. That is if the lender does manual underwriting. If not, then use a different lender. Once you get a budget figured out, how much of a down payment and emergency fund you need, and how much consumer debt to pay off, you can then predict when you will hit your goals. Then you will know when you are ready to buy. If it seems too far off, cut spending and work more if it is that important to you! You can make a prioritized list about what is most important features to you and your wife. I would wait on doing this until after you view some homes. Open houses are a great way to do this, but be careful not to get "house fever" and rush into a decision. You will get some encouragement to do so by the selling agents. After viewing some homes, and developing your list you can get an idea as of what the home will cost. This will further refine your budget, goals, and timeline. I think that is a lot of work to start. |
buying a stock while the price is going down, and buy it at a lower price | If you bought them, you can sell them. That does not preclude you from buying again later. You might get yourself into a situation where you need to account for a so-called "wash sale" on your taxes, but your broker should calculate that and report it on your 1099-B at the end of the year. There's nothing illegal about this though - It's just a required step in the accounting of capital gains for tax purposes. |
Do I even need credit cards? | Credit cards are great. You get free money for 30+ days and a bunch of additional benefits like insurance, extended warranties and reward programs. When vendors don't behave, you dispute the charge with the credit card and they deal with it on your behalf. Just get a fee-free American Express card and pay the balance off each month. There's nothing wrong with using cash either, but I would avoid debit cards like the plague. |
A merchant requests that checks be made out to “Cash”. Should I be suspicious? | To put a positive spin on the whole thing, maybe it's a small family shop, and having the check made out to "cash" means that your barber can hand it to someone else without the need to countersign. Or maybe his last name is "Cash" - there was a pretty famous singer who fit that description. Either way, it's not your place to nanny his finances. |
Why are Rausch Coleman houses so cheap? Is it because they don't have gas? | In northwest Arkansas, most of the houses this company offers do cost about 90 - 110 dollars per square foot. The exceptions use the Whitney plan, which has the following design features (and/or problems) which happen to save the builder a lot of money: One very nice feature is the U-shaped stairway in the center of the house. It is easy to find, and has an angled landing. It might be a bit narrow, though. Does the builder bother to put rebar in the brickwork? Arkansas is in earthquake country. What are the floors like? Is the first floor a slab concrete floor with vinyl flooring (and/or carpet on thin pad) immediately above the concrete? Is the second floor bouncy, due to using long-span joists of code-minimum size? Does the builder bother to make the rear windows look as nice as the front windows? As mentioned earlier, the builder only bothers to have one side window. Where to learn more: Fernando Pagés Ruiz is a Nebraska homebuilder who wrote a book on Building the Affordable House: Trade Secrets for High-Value, Low-Cost Construction (The Taunton Press, 2005). He has also written many articles in Fine Homebuilding, including "Building Affordable Houses". True North Consulting specializes in helping builders eliminate waste and "value-engineer" their designs. True North often works with Tim Garrison, the self-proclaimed "builder's engineer". |
1.4 million cash. What do I do? | First--congratulations! I certainly wish I could create something worth buying for $1.4 million. In addition to what @duffbeer703 recommended, consider putting some of the money in Treasury Inflation-Protected Securities (TIPS). I second the advice on staying away from annuities as well. @littleadv is right about certified financial planners. A good one will put those funds in a mix of investments that minimize your potential tax exposure. They will also look at whether you're properly insured. Research what is FDIC-insured (and what isn't) here. Since you're still making a six-figure income in your salaried job, be sure not to neglect things like contributing to your 401(k)--especially if it's a matching one. At your salary level, I think you're still eligible to contribute to a Roth IRA (taxable income goes in, so withdrawals are tax-free). A good adviser will know which options are best. |
Should I cash out my Roth IRA to pay my mother's property tax debt, to avoid foreclosure on her home? | First, I'm really sorry to hear about your mother. My wife was recently diagnosed with Stage 4 cancer, so I know that there is a possibility that your mind is in "survival" mode, trying to preserve as much as you can in the way of things that you can effect (that's how I've been feeling recently). Having a loved one with cancer is really tough because there is absolutely, positively nothing tangible that you can do to change the fact that they have cancer. You will have to ask yourself some questions: How important is it that your mom can stay in her house? Moving could add some unneeded stress. How may years have you been contributing to your 401k? If you have 30 years left, you could have enough time to recover some of your losses from reducing the amount of money you have given up for your mom. Will your mom be able to pay you back for paying the taxes over time, or would this be a 'gift'? Have her doctors told her that she "... has N months left..."? What is the next step after you are able to pay her taxes and save the house? Someone close to me recently told me that "There is no point in trying to save for someone for the future, if you can't sustain them until they get to that future. What will happen to your mom if she loses her house? Will it make it easier or harder for her to recover if she can stay? To paraphrase someone famous, "you can't take a loan out for your retirement, but you could take a loan out for this event." At any rate, good luck. My thoughts are with you and your mother. |
Tax for Basket with Coupon containing two different VAT rates | The vendor needs to do this using apportionment, according to the VAT rules for mixed supplies: If you make mixed supplies and the individual supplies are not liable to VAT at the same rate then you need to work out the tax value of each supply in order to calculate how much tax is due. If the tax value is based on the total price you charge (see paragraph 7.3) you do this by splitting that price between the supplies. This is called an apportionment ... There is no special method of apportionment ... However, your calculations must be fair and you must be able to justify them. It is usually best to use one of the methods shown in section 32. The section 32 referred to really relates to apportioning use between business and non-business purposes, but it implies that splitting up the total price in proportion to the original prices would probably be fair. So in your example the vendor might split the £5 discount equally between the spoon and the carrycot as they had the same gross cost, and pay VAT as if each had cost £7.50 gross. The vendor could also do it in proportion to their net (pre-VAT) prices and thus apportion a bit more of the discount to the carrycot than the spoon, but as this would lead to them paying slightly more tax overall they probably wouldn't choose to. However, none of this is likely to be too relevant to a consumer, since in the UK prices must be presented as the gross (VAT-inclusive) amounts and so the discounts will also apply to those amounts. It will of course affect how much of the purchase price the vendor ends up paying on to the government and thus might indirectly affect what discounts the vendor is willing to offer. |
What debts are both partners liable for in a 'community property' state? | (Yes, I know this is a seven year old question.) Does this only apply to debts that were taken on during marriage Yes or to all debts of both partners? No. The important thing to remember is that it's both debts and assets acquired during the marriage which are shared. This comes from the reality that men in the olden times were the ones in business, accumulating wealth, etc while the woman "made the home". The working assumption was that the woman who made the home was an equal partner with the man, since he benefited from a good home, and she benefited from his income. The fact that pre-marriage debts and assets were not community property also protected the woman, because she was able to then take back her dowry and use that to support herself. (N.B. - I live in a CP state.) |
How do you declare revenues from YouTube earnings in the USA if you are a minor? | If you receive a 1099-MISC from YouTube, that tells you what they stated to the IRS and leads into most tax preparation software guided interviews or wizards as a topic for you to enter. Whether or not you have a 1099-MISC, this discussion from the IRS is pertinent to your question. You could probably elect to report the income as a royalty on your copyrighted work of art on Schedule E, but see this note: "In most cases you report royalties in Part I of Schedule E (Form 1040). However, if you ... are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040)." Whether reporting on Schedule E or C is more correct or better for your specific circumstances is beyond the advice you should take from strangers on the internet based on a general question - however, know that there are potentially several paths for you. Note that this is revenue from a business, so if you paid for equipment or services that are 100% dedicated to your YouTubing (PC, webcam, upgraded broadband, video editing software, vehicle miles to a shoot, props, etc.) then these are a combination of depreciable capital investments and expenses you can report against the income, reducing the taxes you may owe. If the equipment/services are used for business and personal use, there are further guidelines from the IRS as to estimating the split. These apply whether you report on Sch. E, Sch. C, or Sch C-EZ. Quote: "Self-Employment Income It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income. All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040. Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income. Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer. Fees received for babysitting, housecleaning and lawn cutting are all examples of taxable income, even if each client paid less than $600 for the year. Someone who repairs computers in his or her spare time needs to report all monies earned as self-employment income even if no one person paid more than $600 for repairs." |
Why do only motor insurers employ “No Claims Discounts”? | Some people are better drivers than others. A collision can happen to anybody, even good drivers. The collision might not be your fault at all; it might be entirely the fault of the other party. However, the best drivers do a better job of avoiding collisions in situations where the other drivers on the road are doing the wrong things. The "no claims discount" is a way to identify and reward those good drivers, as they have a lower likelihood of claims in the future. |
Buying a house, Bank or rent to own? | It depends on the deal: and you didn't give any details. That said, there are some things that stand out regardless, and some more specific answers to your questions. First, Mortgage rates (at the bank) are absurdly low right now. Like 4%-5%; less than 4% for excellent credit. You say your credit is ok, so unless your landlord is willing to do a deal where they get no benefit (beyond the price of the house), the bank is the way to go. If you don't have much for a down payment, go with an FHA loan, where you need only 3.5% down. Second, there is another option in between bank mortgage and rent-to-own. And that is that where your landlord "carries the note". Basically, there is a mortgage, and it works like a bank mortgage, but instead of the bank owning the mortgage, your landlord does. Now, in terms of them carrying all of it, this isn't really helpful. Who wants to make 3-4% interest? But, there is an interesting opportunity here. With your ok credit, you can probably get pretty close to 4% interest at the bank IF the loan is for 80% LTV (loan to value; that is, 20% equity). At 80% LTV you also won't have PMI, so between the two that loan will be very cheap. Then, your accommodating landlord can "carry" the rest at, say, 6-7% interest, junior to the bank mortgage (meaning if you default, the bank gets first dibs on the value of the house). Under that scenario, your over all interest payment is very reasonable, and you wouldn't have to put any money down. Now for your other questions: If we rent to own are we building equity? Not usually. Like the other posters said, rent-to-own is whatever both parties agree on. But objectively, most rent-to-own agreements, whether for a TV or a house, are set up to screw the buyer. Sorry to be blunt, and I'm not saying your landlord would do that, this is just generally how it is with rent to own. You don't own it till you make the last payment, and if you miss a payment they repo the property. There is no recourse because, hey, it was a rental agreement! Of course the agreements vary, and people who offer rent to own aren't necessarily bad people, but it's like one of those payday loan places: They provide a valid service but no one with other options uses them. If we rent to own, can we escape if we have to (read: can't pay anymore). Usually, sure! Think about what you're saying: "Here's the house back, and all that money I paid you? Keep it!" It's a great deal if you're on the selling side. How does rent to own affect (or not) our credit? It all depends on how it's structured. But really, it comes down to are they going to do reporting to the credit bureaus? In a rent-to-own agreement between individuals, the answer is no. (individuals can't report to a credit bureau. it's kind of a big deal to be set up to be able to do that) |
Is it wise to switch investment strategy frequently? | My super fund and I would say many other funds give you one free switch of strategies per year. Some suggest you should change from high growth option to a more balance option once you are say about 10 to 15 years from retirement, and then change to a more capital guaranteed option a few years from retirement. This is a more passive approach and has benefits as well as disadvantages. The benefit is that there is not much work involved, you just change your investment option based on your life stage, 2 to 3 times during your lifetime. This allows you to take more risk when you are young to aim for higher returns, take a balanced approach with moderate risk and returns during the middle part of your working life, and take less risk with lower returns (above inflation) during the latter part of your working life. A possible disadvantage of this strategy is you may be in the higher risk/ higher growth option during a market correction and then change to a more balanced option just when the market starts to pick up again. So your funds will be hit with large losses whilst the market is in retreat and just when things look to be getting better you change to a more balanced portfolio and miss out on the big gains. A second more active approach would be to track the market and change investment option as the market changes. One approach which shouldn't take much time is to track the index such as the ASX200 (if you investment option is mainly invested in the Australian stock market) with a 200 day Simple Moving Average (SMA). The concept is that if the index crosses above the 200 day SMA the market is bullish and if it crosses below it is bearish. See the chart below: This strategy will work well when the market is trending up or down but not very well when the market is going sideways, as you will be changing from aggressive to balanced and back too often. Possibly a more appropriate option would be a combination of the two. Use the first passive approach to change investment option from aggressive to balanced to capital guaranteed with your life stages, however use the second active approach to time the change. For example, if you were say in your late 40s now and were looking to change from aggressive to balanced in the near future, you could wait until the ASX200 crosses below the 200 day SMA before making the change. This way you could capture the majority of the uptrend (which could go on for years) before changing from the high growth/aggressive option to the balanced option. If you where after more control over your superannuation assets another option open to you is to start a SMSF, however I would recommend having at least $300K to $400K in assets before starting a SMSF, or else the annual costs would be too high as a percentage of your total super assets. |
401K - shift from agressive investment to Money Market | If you look at history, it shows that the more people predict corrections the less was the chance they came. That doesn't prove it stays so, though. 2017 is not any different than other years in the future: Independent of this, with less than ten years remaining until you need to draw from your money, it is a good idea to move away from high risk (and high gain); you will not have enough time to recover if it goes awry. There are different approaches, but you should slowly and continuously migrate your capital to less risky investments. Pick some good days and move 10% or 20% each time to low-risk, so that towards the end of the remaining time 90 or 100% are low or zero risk investments. Many investment banks and retirement funds offer dedicated funds for that, they are called 'Retirement 2020' or 'Retirement 2030'; they do exactly this 'slow and continuous moving over' for you; just pick the right one. |
Can you explain why these items are considered negatives on my credit report? | 1. Your oldest active credit agreement is not very old This is fairly straight forward. If you've not been exposed to borrowing for a reasonable length of time, people won't want to lend you money. They have no reason to have any confidence in your ability to repay them. As other said, it's pretty much a case of proving yourself by being good with credit over a period of time. 2. You have no active credit card accounts Credit reference agencies have to consider a variety of factors for a variety of purposes. Notably, they will be used for credit cards, unsecured loans, mortgages, and secured loans such as vehicle finance applications. These all have varying types of customer, and some will be inherently more risky than others. For instance, someone with a mortgage on a home is far more likely to make payments because they would be homeless without, however someone with a finance agreement on a car is relatively less likely to make those payments because all they stand to lose is their car. Consider that the most fruitful information the lender will get is a score and some breakdown of how it's generated, it's a very general understanding of your history. For that reason, having a wide variety of credit is very important. A good variety of credit to have would be one secured loan (e.g car finance) to get started, as well as at least one revolving unsecured credit account (e.g a credit card), and later on in your "credit life" an unsecured fixed term loan (e.g a loan for something which has nothing secured against it). I say the above reluctantly, because that's how I increased my credit score from 450 to 999 - first step was the car finance where in 3 months or so I changed from 450 to around 600, with a credit card I was approaching 900, and once I had an unsecured loan for 8 months I hit 999 - now I have all of the above plus a competitive mortgage and remain at 999. Whether each is mandatory to maintain 999 is debatable but based on personal experience, it seems reasonable. |
Why do people invest in mutual fund rather than directly buying shares? | Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your investments to reduce the risk, even though that may reduce the possible gain. A mutual fund is diversification-in-a-can. It requires little to no active maintenance. Yes, you pay a management fee, but you aren't paying per-transaction fees every time you adjust your holdings, and the management costs can be quite reasonable if you pick the right funds; minimal in the case of computer-managed (index) funds. If you actively enjoy playing with stocks and bonds and are willing/able to accept your failures and less-than-great choices as part of the game, and if you can convince yourself that you will do better this way, go for it. For those of us who just want to deposit out money, watch it grow, and maybe rebalance once a year if that, index funds are a perfectly good choice. I spend at least 8 hours a day working for my money; the rest of the time, I want my money to work for me. Risk and reward tend to be proportional to each other; when they aren't, market prices tend to move to correct that. You need to decide how much risk you're comfortable with, and how much time and effort and money you're willing to spend managing that risk. Personally, I am perfectly happy with the better-than-market-rate-of-return I'm getting, and I don't have any conviction that I could do better if I was more involved. Your milage will vary. If folks didn't disagree, there wouldn't be a market. |
Starting an investment portfolio with Rs 5,000/- | Given that you are starting with a relatively small amount, you want a decent interest rate, and you want flexibility, I would consider fixed deposit laddering strategy. Let's say you have ₹15,000 to start with. Split this in to three components: Purchase all of the above at the same time. 30 days later, you will have the first FD mature. If you need this money, you use it. If you don't need it, purchase another 90-day fixed deposit. If you keep going this way, you will have a deposit mature every 30 days and can choose to use it or renew the fixed deposit. This strategy has some disadvantages to consider: As for interest rates, the length of the fixed deposit in positively related to the interest rate. If you want higher interest rates, elect for longer fixed deposit cycles.For instance, when you become more confident about your financial situation, replace the 30, 60, 90 day cycle with a 6, 12, 18 month cycle The cost of maintaining the short term deposit renewals and new purchases. If your bank does not allow such transactions through on line banking, you might spend more time than you like at a bank or on the phone with the bank You want a monthly dividend but this might not be the case with fixed deposits. It depends on your bank but I believe most Indian banks pay interest every three months |
Options for dummies. Can you explain how puts & calls work, simply? | I'm normally a fan of trying to put all the relevant info in an answer when possible, but this one's tough to do in one page. Here's the best way, by far to learn the basics: The OIC (Options Industry Council) has a great, free website to teach investors at all levels about options. You can set up a learning path that will remember which lessons you've done, etc. And they're really, truly not trying to sell you anything; their purpose is to promote the understanding and use of options. |
Tax implications of restricted stock units | My friend Harry Sit wrote an excellent article No Tax Advantage In RSU. The punchline is this. The day the RSUs vested, it's pretty much you got $XXX in taxable income and then bought the stock at the price at that moment. The clock for long term gain starts the same as if I bought the stock that day. Historical side note - In the insane days of the Dotcom bubble, people found they got RSUs vested and worth, say, $1M. Crash. The shares are worth $100K. The $1M was ordinary income, the basis was $1M and the $900K loss could offset cap gains, not ordinary income above $3000/yr. Let me be clear - the tax bill was $250K+ but the poor taxpayer had $100K in stock to sell to pay that bill. Ooops. This is the origin of the 'sell the day it vests' advice. The shares you own will be long term for capital gain a year after vesting. After the year, be sure to sell those particular shares and you're all set. No different than anyone selling the LT shares of stock when owning multiple lots. But. Don't let the tax tail wag the investing dog. If you feel it's time to sell, you can easily lose the tax savings while watching the stock fall waiting for the clock to tick to one year. |
Option Theta: What conditions are needed for Theta > P/N, where P = option price, and N = days to expiration? | So, if an out-of-the-money option (all time value) has a price P (say $3.00), and there are N days... The extrinsic value isn't solely determined by time value as your quote suggests. It's also based on volatility and demand. Here is a quote from http://www.tradingmarkets.com/options/trading-lessons/the-mystery-of-option-extrinsic-value-767484.html distinguishing between extrinsic time value and extrinsic non-time value: The time value of an option is entirely predictable. Time value premium declines at an accelerating rate, with most time decay occurring in the last one to two months before expiration. This occurs on a predictable curve. Intrinsic value is also predictable and easily followed. It is worth one point for every point the option is in the money. For example, a call with a strike of 30 has three points of intrinsic value when the current value of the underlying stock is $33 per share; and a 40 put has two points of intrinsic value when the underlying stock is worth $38. The third type of premium, extrinsic value, increases or decreases when the underlying stock changes and when the distance between current value of stock and strike of the option get closer together. As a symptom of volatility, extrinsic value may be greater for highly volatile underlying stock, and lower for less volatile stocks. Extrinsic value is the only classification of option premium that is unpredictable. The SPYs you point out probably had a volatility component affecting value. This portion is a factor of expectations or uncertainty. So an event expected to conclude prior to expiration, but of unknown outcome can cause theta to be higher than p/n. For example, a drug company is being sued and the outcome of a trial will determine whether that company pays out millions or not. The extrinsic will be higher than p/n prior to the outcome of the trial then drops after. Of course, the most common situation where this happens is earnings. After the announcement, it's not unusual to see a dramatic drop in the extrinsic portion of options. This is why sometimes a new option trader gets angry when buying calls prior to earnings. When 'surprise' good earnings are announced as hoped, the rise is stock price is largely offset by a fall in extrinsic value giving call holders little or no gain! As for the reverse situation where theta is lower than p/n would expect? Well you can actually have negative theta meaning the extrinsic portion rises over time. (this statement is a little confusing because theta is usually described as negative, but since you describe it as a positive number, negative here means the opposite of what you'd expect). This is a quote from "Option Volatility & Pricing". Keep in mind that they use 'positive' theta to mean the time value increases up over time: Is it ever possible for an option to have a positive theta such that if nothing changes the option will be worth more tomorrow than it is today? When futures options are subject to stock-type settlement, as they currently are in the United States, the carrying cost on a deeply in-the-money option, either a call or a put, can, under some circumstances, be greater than the volatility component. If this happens, and the option is European (no early exercise permitted), it will have a theoretical value less than parity (less than intrinsic value). As expiration approaches, the value of the option will slowly rise to parity. Hence, the option will have a positive theta. Sheldon Natenberg. Option Volatility & Pricing: Advanced Trading Strategies and Techniques (Kindle Locations 1521-1525). Kindle Edition. |
Why would a central bank or country not want their currency to appreciate against other currencies? | It would essentially make goods from other countries more cheaper than goods from US. And it would make imports from these countries to China more expensive. The below illustration is just with 2 major currencies and is more illustrative to show the effect. It does not actually mean the goods from these countries would be cheaper. 1 GBP = 1.60 USD 1 EUR = 1.40 USD 1 CNY = 0.15 USD Lets say the above are the rates for GBP, EUR, CNY. The cost of a particular goods (assume Pencils) in international market is 2 USD. This means for the cost of manufacturing this should be less than GBP 1.25 in UK, less than 1.43 in Euro Countires, less than 13.33 CNY in China. Only then export would make sense. If the real cost of manufacturing is say 1.4 GBP in UK, 1.5 EUR in Euro countires, clearly they cannot compete and would loose. Now lets say the USD has appreciated by 20% against other currencies. The CNY is at same rate. 1 GBP = 1.28 USD 1 EUR = 1.12 USD 1 CNY = 0.15 USD Now at this rate the cost of manufacturing should be less than GBP 1.56 GBP, less than 1.78 EUR in Euro Countires. In effect this is more than the cost of manufacturing. So in effect the goods from other countires have become cheaper/compatative and goods from China have become expensive. Similarly the imports from these countires to China would be more expensive. |
401K - shift from agressive investment to Money Market | I can understand your fears, and there is nothing wrong with taking action to protect yourself from them. How much income do you need in retirement? For arguments sake, lets say you need to pull 36K per year from your 401K or 3K per month. Lets also assume that you current contribute (with any match) 1,000 per month. Please adjust to your actual numbers accordingly. One option would be to pull out 48K right now and put it in a money market. With your contributions, I would then put half into the money market and half into more aggressive investments. In 10 years, you would have about 110K in your money market account. You could live off of that for three years. If the market does crash, this should give you plenty of time to recover. Taking this option opens you to another risk, which is being beat up by inflation or lack of growth on a nice pile of cash. My time frame is not that different then yours (I am about 12 years away), but am still all in stocks. Having 48K and more with not opportunity for growth frightens me more than any temporary stock market crash. Having said that I think it would be a horrible mistake to get completely out of stocks. Many of those destroyed in 2008 also missed 2012 through 2014 which were awesome years. So do some. Set aside a year or three of income in something nice and safe. Maybe one year of income in money market, one in bonds and preferred stocks, and one in blue chips. |
Are the “debt reduction” company useful? | They are a complete waste of money, see my answer here for more details. |
incorrect printed information on check stock | Even where national law might allow such a practice, the law in an individual province or state (either for issuing or receiving bank) might not; or if that does then the receiving bank may have its own regulations or compliance practice which may not permit them to accept an altered cheque. In any case, printed numbers are usually machine-readable, and a corrected cheque would not be. The question needs a specific answer which addresses the specific circumstances involved (which are not stated, at the time of writing this), but for the general question “Should I alter a printed cheque?” the answer must be no. Cheque numbers are used for identification of the cheque. In many cases, there is no verification of uniqueness and it would be perfectly acceptable simply to use cheques with duplicate numbers: a cheque is merely an order to the bank to make a payment. But you would not be able to identify a particular payment on your statement, and neither would the issuing bank if you wanted one stopped. Where the number is verified as unique, then clearing the payment may be refused or at best delayed in order to be queried. Making an obvious amendment to a cheque’s details is likely to raise a red flag. The receiving bank would not be able to tell if you did it, or the payee; they would not know why. They may suspect that it was done in order to render the cheque unidentifiable [even though the opposite is in fact the case] and refuse to accept it. They may refuse to accept it because it could not be read automatically. Any refusal would sour your relationship with your payees. Presumably your printing house (or your bank, if they printed them) has made the error: raise it with them and have them reprint the batch. Ask your bank what to do with the incorrect cheques: they may want them returned to the bank, or they may be happy for you to keep (and even use) them. If the latter, I suggest you shred them. |
How do I know when I am financially stable/ready to move out on my own? | I’m going to suggest something your parents may be reluctant to say: “Grow up and get out.” A man living in a van down by the river, making minimum wage, with $0 in savings has achieved something you have still failed to achieve: adulthood. This, I believe, is more important than a man’s income or net worth. So please join us adults Bryan. I think you’ll enjoy it. Yes, your savings may take a hit but you will gain the respect that comes with being an adult. I think it is worth it. |
When's the best time to sell the stock of a company that is being acquired/sold? | What's your basis? If you have just made a 50% gain, maybe you should cash out a portion and hold the rest. Don't be greedy, but don't pass up an opportunity either. |
Why do some people go through contortions to avoid paying taxes, yet spend money on expensive financial advice, high-interest loans, etc? | One is a choice the other is not. While they are both liabilities on the balance sheet, in the real world they are quite different. We do not feel as much ownership over our money that goes to interest payments as we do over our tax payments. Taxes pay for our government and the services it provides. Interest, on the other hand, is what we pay in order to have a bank loan us money. Similar to paying for a good or service obtained from some other business, we do not feel we have a say in what the bank does with that money. If we disapprove of a business' practices, we stop doing business with them; assuming there are other choices. We can not practically avoid dealing with our government. We certainly feel that we should have a say in what is done with our tax money. I doubt there is anyone in the world that completely approves of their government's spending. It is very easy to feel marginalized with regard to our tax payments. For example, some people feel resentment because their taxes fund the welfare rolls. All that said, I believe there is little overlap between the two groups. It seems to me that you are referring to those with large amounts of high interest (e.g. credit card) debt. I doubt that a large percentage of them are scouring the tax laws, looking for deductions and loopholes. If they had that mindset, they would also be working hard to get out of the hole they are in. In summary, we choose to pay a financial adviser, to take out a loan or to obtain a credit card. We do not choose to pay taxes. Since taxes are supposed to pay for our government and things which should benefit everyone, we want a say in what is done with it. This is also the case because it is forced on us. ("Fine son, I'll lend you some money, but I don't want you buying cigarettes with it.") Since our say is limited and we likely will not approve of everything our government does, we want to exert what control we do have: reduce our payments as best we can. |
How does one value Facebook stock as a potential investment? | You could try this experiment: pay for an Ad/banner on Facebook for 1 month. The Ad/banner should link to your ecommerce site. Then see if the Ad/banner does or does not convert into ecommerce orders ("converting" means that people coming to your eccomerce site from Facebook after having clicked on your Ad/banner really buy something on your site). If it does convert, you will go on paying for Ads/banners and other people will do the same for their sites, so FB might make cash in next years. But if it does NOT convert you and everybody else will soon discover and stop paying for Ads/banners, thus it will be hard for Facebook to make money with Advertising, thus Facebook might be just a big bubble (unless they find other ways of making money). I did the experiment I suggested above and the conversion rate was an absoulte ZERO!!! (Instead Google Adwords converted well for the same site). So IMHO I would stay away from FB. But remember that stock market is emotional (at least on short periods of time), so it might be that even if FB wil never become a cash cow, for the 1st few months people (expecially small investors tempeted by the brand) might go crazy for the stocks and buy buy buy, making the price go up up up. EDIT in reply to some comments below arguing that my answer was boiled down to one single experiment: General Motors said Tuesday that it will stop paid advertising on Facebook...the social media paid ads simply weren't delivering the hoped-for buyers... (CNN May/15/2012) A donkey can not fly either when it's me (with a single experiment) trying to make it fly or the entire GM workforce. |
Which is better when working as a contractor, 1099 or incorporating? | If you start an LLC with you as the sole member it will be considered a disregarded entity. This basically means that you have the protection of being a company, but all your revenues will go on your personal tax return and be taxed at whatever rate your personal rate calculates to based on your situation. Now here is the good stuff. If you file Form 2553 you can change your sole member LLC to file as an S Corp. Once you have done this it changes the game on how you can pay out what your company makes. You will need to employ yourself and give a "reasonable" salary. This will be reported to the IRS and you will file your normal tax returns and they will be taxed based on your situation. Now as the sole member you can then pay yourself "distribution to share holders" from your account and this money is not subject to normal fica and social security tax (check with your tax guy) and MAKE SURE to document correctly. The other thing is that on that same form you can elect to have a different fiscal year than the standard calendar IRS tax year. This means that you could then take part of profits in one tax year and part in another so that you don't bump yourself into another tax bracket. Example: You cut a deal and the company makes 100,000 in profit that you want to take as a distribution. If you wrote yourself a check for all of it then it could put you into another tax bracket. If your fiscal year were to end say on sept 30 and you cut the deal before that date then you could write say 50,000 this year and then on jan 1 write the other check. |
Why buy insurance? | The fundamental flaw here is conflating net worth with utility, at least failing to recognize that there's a nonlinear relationship between the two. In the extreme example imagine taking a bet that will either make you twice as rich or completely broke. Your expected return is zero, but it would be pretty dumb to take it since being flat broke could ruin your life while being twice as rich may only improve it marginally. In more realistic cases most of your income is tied up in fixed costs, which magnifies relatively small perturbations to your net worth. Losing something essential (like your house or car), even if it's only 20% of your net worth, renders you effectively broke until you scrape together enough cash to get another one. That situation robs you of much more utility than you'd gain from a 20% increase in net worth. In either case, avoiding the risk is completely rational as long as you believe in nonlinear utility as a function of net worth, it's not just an issue of humans being "risk averse". |
Does it make any sense to directly contribute to reducing the US national debt? | No, it makes no sense. The US national debt is different from other debt on TWO KEY WAYS : 1.) The national debt is not money we owe to our government IT IS MONEY WE OWE TO OURSELVES. 2.) If the GNP of our country can grow at a rate equal to or greater than the national debt interest, then the figure of national debt has no bearing on anything. So a more philanthropic endeavor would be to help grow the economy. |
Is there legal reason for restricting someone under 59-1/2 from an in-service rollover from a 401K to an IRA? | Yes, this is restricted by law. In plain language, you can find it on the IRS website (under the heading "When Can a Retirement Plan Distribute Benefits?"): 401(k), profit-sharing, and stock bonus plans Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach age 59½; or •suffer a hardship. Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you: •terminate employment (by death, disability, retirement or other severance from employment); •reach the age specified in the plan (any age); or •suffer a hardship or experience another event specified in the plan. Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. Source: https://www.irs.gov/retirement-plans/plan-participant-employee/when-can-a-retirement-plan-distribute-benefits If you want to actually see it in the law, check out 26 USC 401(k)(2)(B)(i), which lists the circumstances under which a distribution can be made. You can get the full text, for example, here: https://www.law.cornell.edu/uscode/text/26/401 I'm not sure what to say about the practice of the company that you mentioned in your question. Maybe the law was different then? |
Why does shorting a call option have potential for unlimited loss? | You are likely making an assumption that the "Short call" part of the article you refer to isn't making: that you own the underlying stock in the first place. Rather, selling short a call has two primary cases with considerably different risk profiles. When you short-sell (or "write") a call option on a stock, your position can either be: covered, which means you already own the underlying stock and will simply need to deliver it if you are assigned, or else uncovered (or naked), which means you do not own the underlying stock. Writing a covered call can be a relatively conservative trade, while writing a naked call (if your broker were to permit such) can be extremely risky. Consider: With an uncovered position, should you be assigned you will be required to buy the underlying at the prevailing price. This is a very real cost — certainly not an opportunity cost. Look a little further in the article you linked, to the Option strategies section, and you will see the covered call mentioned there. That's the kind of trade you describe in your example. |
What would a stock be worth if dividends did not exist? [duplicate] | As a thought experiment I suppose we can ask where dividends came from and what would be different if they never existed. The VOC or Dutch East India Companywas the first to IPO, sell shares and also have a dividend. There had been trade entrepot before the VOC, the bulk cog (type of sea-going ship) trade in the Hanseatic League, but the VOC innovation was to pool capital to build giant spice freighters - more expensive than a merchant partnership could likely finance (and stand to lose at sea) on their own but more efficient than the cogs and focused on a trade good with more value. The Dutch Republic became rich by this capital formed to pursue high value trade. Without dividends this wouldn't have been an innovation in seventeenth century Europe and enterprises would be only as large as say the contemporary merchant family networks of Venice could finance. So there could be large partnerships, family businesses and debt financed ventures but no corporations as such. |
Taking partial capital loss purely for tax purposes | Note that the rules around wash sales vary depending on where you live. For the U.S., the wash sale rules say that you cannot buy a substantially identical stock or security within 30 days (before or after) your sale. So, you could sell your stock today to lock in the capital losses. However, you would then have to wait at least 30 days before purchasing it back. If you bought it back within 30 days, you would disqualify the capital loss event. The risk, of course, is that the stock's price goes up substantially while you are waiting for the wash sale period. It's up to you to determine if the risk outweighs the benefit of locking in your capital losses. Note that this applies regardless of whether you sell SOME or ALL of the stock. Or indeed, if we are talking about securities other than stocks. |
Need a loan to buy property in India. What are my options? | There are P2P lending sites like prosper.com and lendingclub.com (both have 35K limit) where you can take out a personal loan. Don't expect the rate to be nowhere close to a secured loan like a mortgage or a car loan. |
How can one get their FICO/credit scores for free? (really free) | I visited annualcreditreport.com to get my annual credit report. It is only the report, not the score or FICO score. This is the only outlet I know of that allows you to get your report for free, without a bunch of strings attached or crap to sign up for and cancel later. It was very easy. I was wary of putting in my private information, but how else can they possibly pull you up? Read the instructions carefully. You go to each bureau to fetch your report, and they dutifully give you a free report, but they push hard to try and sell you a score or a report service. It is easy to avoid these if you read carefully. Once you get a report, you have print it out or you can't see it again for another year. Each bureau has a different site, with different rules, and different identity checks to get in. Again, read the instructions and it isn't hard. Instead of printing, I just saved the page as HTML. You get one html file and a folder with all the images and other stuff. This suits me but you might like to print. After you get each report, you have to click a link to back to the annualcreditreport.com site. From there you go to the next bureau. Regarding a score. Everybody does it differently. Free Issac does FICO, but anybody who pulls your credit can generate a score however they like, so getting a score isn't anywhere near as important as making sure your report is accurate. You can use credit.com to simulate a score from one of the bureaus (I can't easily see which one at the moment). It is as easy as annualcreditreport.com and I have no issue getting a simulated score and report card. |
What is the difference between a bond and a debenture? | Investopedia has definitions for both: Debenture: A type of debt instrument that is not secured by physical asset or collateral. Bond: A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Wikipedia's entry for debenture says: In some countries [debenture] is used interchangeably with bond, loan stock or note. Seems to me that there's not much difference. |
Why do banks insist on allowing transactions without sufficient funds? | The laws about this changed in 2010 with the new Overdraft Protection Law HR 1261. § 140B. (c) Consumer consent opt-In.—A depository institution may charge overdraft coverage fees with respect to the use of an automatic teller machine or point of sale transaction only if the consumer has consented in writing, in electronic form, or in such other form as is permitted under regulations of the Bureau. Now when you sign up for a bank account you have to opt in to overdraft coverage (the bank transfers funds from other accounts to cover overdrafts), or overdraft protection (the bank simply bounces NSF checks). I'm pretty sure you could always set this option on your account, but banks were defaulting everyone's account that didn't think to ask such that overdrafts got paid and incurred fees. The law now prohibits them from using that as the default option. |
Paying off a loan with a loan to get a better interest rate | Your current loan is for a new car. Your refinanced loan would probably be for a used car. They have different underwriting standards and used car loan rates are usually higher because of the higher risks associated with the loans. (People with better credit will tend to buy new cars.) This doesn't mean that you can't come out ahead after refinancing but you'll probably have to do a bit of searching. I think you should take a step back though. 5% isn't that much money and five years is a long time. Nobody can predict the future but my experience tells me that the **** is going to hit the fan at least once over any five year period, and it's going to be a really big dump at least once over any ten year period. Do you have savings to cover it or would you have to take a credit card advance at a much higher interest rate? Are you even sure that's an option - a lot of people who planned to use their credit card advances as emergency savings found their credit limits slashed before they could act. I understand the desire to reduce what you pay in interest but BTDT and now I don't hesitate to give savings priority when I have some excess cash. There's no one size fits all answer but should have at least one or two months of income saved up before you start considering anything like loan prepayments. |
Buy home and leverage roommates, or split rent? | ...instead of all of us draining our money into a landlord... Instead, you are suggesting that still everyone (except you) will drain their money into a landlord, just that now the landlord is you. I guess what that really means is that you will need to have landlord tenant agreements between you and your roommates. When things break or need replacing you'll have to foot the bill and as your tenants, your "roomies" might not be too forgiving when things need fixing. When the fridge breaks down, you'll have to buy a new one immediately. Yard work is your sole responsibility, unless you offer discounted rent or other perks. What about service bills: energy, water, sewage, internet, television, etc? |
A guy scammed me, but he gave me a bank account number & routing number. Can I use that to take out what he owes me? | You're potentially in very deep water here. You don't know who this person is that you're dealing with. Before you'd even met him, he just gave you his banking info, seemingly without a second thought. You have no idea what the sources of his money are, so what happens if the money is stolen or otherwise illegal? If it is determined that you used any of that money, you'll be on the hook to return it, at the very least. Who knows what the legal ramifications are either? So it sounds like you began spending his money before you had any kind of written agreement in place? Doesn't that seem odd to you to have someone just so trusting as to not even ask for that? Was the source of the email about the $2500 from PayPal, or from him or his advisor? PayPal always sends you a notice directly when funds are received into your account, and even if they were going to put a temporary hold on them for whatever reason (sometimes they do that), it would still show up in your account. I would HIGHLY (can I be more emphatic?) advise you not to go anywhere NEAR his bank account until or unless you can absolutely verify who he is, where his money comes from, and what the situation is. If you start dipping into his account, whether you think you're somehow entitled to the money or not, he could cry foul and have you arrested for theft. This is a very odd situation, and for someone who says he's normally cautious and skeptical, you sure let your guard down here when you started spending his money without making any serious effort to confirm his bona fides. Just because he passes himself off as smart and the "doctor type" doesn't mean squat. The very best scammers can do that (ever see the movie "Catch Me If You Can", based on a true story?), so you have no basis for knowing he's anything at all. I am thoroughly confused as to why you'd just willfully start using his money without knowing anything about him. That's deeply disconcerting, because you've opened yourself up to a world of potential criminal and civil liability if this situation goes south. If this guy was giving you money as an investment in your business and you instead used some of that money for your own personal expenses then you could land in very serious trouble for co-mingling of funds. Even if he told you it was okay, it doesn't sound like there's anything in writing, so he could just as easily deny giving you permission to use the money that way and have you charged with embezzlement. You need to step back, take a deep breath, stop using his money, and contact a lawyer for advice. Every attorney will give you a free consultation, and you need to protect yourself here. Be careful, my friend. If this makes you suspicious then you need to listen to that voice in your head and find a way to get out of this situation. |
Shorting Obvious Pump and Dump Penny Stocks | Assuming you have no non-public material information, it should be perfectly legal. I suspect it's not a great idea for the reasons that Joe outlined, but it should be legal. |
Health insurance lapsed due to employer fraud. How to get medications while in transition? | Your doctor may also have free samples available. You could call, explain your situtation and ask to see if they have any free samples. |
Freelancing Tax implication | If you have income in the US, you will owe US income tax on it, unless there is a treaty with your country that says otherwise. |
How can I transfer and consolidate my 401k's and other options? | Every plan administrator has their own procedures for rollovers. In any case, you would start by browsing their website or calling them seeking information on rollover. You will need to arrange it with both your current and prior administrators. Usually the administrator will send the money directly to your current plan provider, keeping you out of the chain and minimizing any risks of tax complications. It may happen, though, that they have to send the check to you. In that case you will have a limited amount of time to provide it to your current plan. |
Is there a mathematical formula to determine a stock's price at a given time? | The fallacy in your question is in this statement: "The formulas must exist, because prices can be followed real time." What you see are snapshots of the current status of the stock, what was the last price a stock was traded at, what is the volume, is the price going up or down. People who buy and hold their stock look at the status every few days or even every few months. Day traders look at the status every second of the trading day. The math/formula comes in when people try to predict where the stock is going based on the squiggles in the line. These squiggles move based on how other people react to the squiggles. The big movements occur when big pieces of news make large movements in the price. Company X announces the release of the key product will be delayed by a year; the founder is stepping down; the government just doubled the order for a new weapon system; the insiders are selling all the shares they can. There are no formulas to determine the correct price, only formulas that try to predict where the price may go. |
Am I understanding buying options on stock correctly | Here is a quick and dirty explanation of options. In a nutshell, you pay a certain amount to buy a contract that gives you the right, but not the obligation, to buy or sell a stock at a predetermined price at some date in the future. They come in a few flavors: I'll give you $100 if you let me buy 10,000 shares of XYZ for $10 more per share than it is trading at today any time before August 10th. I'll give you $100 if you promise to buy 10,000 shares of XYZ from me for $10 less per share than it is trading at today if I ask before August 10th. There are also two main types based on the expiration behavior: There are lots of strategies that employ options, too many to go into. Two key uses are.. Leverage: Buying Call options can give you a much higher return on your investment than just investing in the actual stock. However, with much higher risk of losing all of your investment instead of just some of it when the stock drops. Hedging: If you already own the underlying stock, put options can be used to buy down risk of serious drops in a holding. |
Can I open a Solo 401(k) if I am an independent contractor but also work part-time as an employee? | A Solo 401k plan requires self-employment income; you cannot put wages into it. |
US Bank placing a hold on funds from my paycheck deposit: Why does that make sense? | It is possible that they only do the hold on the first deposit from a given source. It is probably worth asking if they intend to do the hold on every paycheck or just the first one. |
Investment in mutual fund in India for long term goals | On reading couple of articles & some research over internet, I got to know about diversified investment where one should invest 70% in equity related & rest 30% in debt related funds Yes that is about right. Although the recommendation keeps varying a bit. However your first investment should not aim for diversification. Putting small amounts in multiple mutual funds may create paper work and tracking issues. My suggestion would be to start with an Index EFT or Large cap. Then move to balanced funds and mid caps etc. On this site we don't advise on specific funds. You can refer to moneycontrol.com or economictimes or quite a few other personal finance advisory sites to understand the top funds in the segments and decide on funds accordingly. PS: Rather than buying paper, buy it electronic, better you can now buy it as Demat. If you already have an Demat account it would be best to buy through it. |
Question about car loan payment | You can earn significantly more than 0.99% in the stock market. I'd pay the $450/month and invest the rest in a (relatively conservative) stock market fund, making monthly withdrawals for the car note. |
Do options always expire on third Friday of every month | Prior to 2005, the only SPY options that existed were the monthly ones that expire on the third Friday of every month. But in 2005, the Chicago Board Options Exchange introduced SPY weekly options that expire every Friday (except that there is no weekly option that expires on the same day as a monthly option). These weekly options only exist for 8 days - they start trading on a Thursday and expire 8 days later on Friday. The SPY options that expire on Friday October 31 are weekly options, and they started trading on Thursday October 23. Sources: Investopedia |
How to compute for losses in an upside down trade-in of a financed car? | Numbers: Estimate you still owe around 37000 (48500 - 4750, 5% interest, 618 per month payment). Initial price, down payment, payments made - none of these mean anything. Ask your lender, "What is the payoff of the current loan?" Next, sell or trade the current vehicle. Compare to the amount owed. Any shortfall has to be repaid, out of pocket, or in some cases added to the price of the new car and included in the principal of the new loan. You cannot calculate how much you still owe the way you have, because it totally ignores interest. Advice on practicality: Don't do this. You will be upside down even worse on the new car from the instant you drive off the lot. Sell the current vehicle, find a way to pay the difference - one that doesn't involve financing. Cut your losses on the upside down vehicle. Then purchase a new vehicle. I'm in the "Pay cash for gently used" school, YMMV. Another option is to go to your bank. Refinance your car now to get a lower interest rate. Pay as much of the principal as you can. Keep that car until it is paid off. Then you will not be upside down. If you're asking how to use the estimator on the webpage. Put the payoff in the downpayment as a negative and the trade in value in the trade in spot. Expect the payment to go up significantly. Another opinion that might be practical advice. Nothing we say here will convince your financially responsible spouse that this is a good idea. |
How to make money from a downward European market? | Trying to make money on something going down is inherently more complicated, risky and speculative than making money on it going up. Selling short allows for unlimited losses. Put options expire and have to be rebought if you want to keep playing that game. If you are that confident that the European market will completely crash (I'm not, but then again, I tend to be fairly contrarian) I'd recommend just sitting it out in cash (possibly something other than the Euro) and waiting until it gets so ridiculously cheap due to panic selling that it defies all common sense. For example, when companies that aren't completely falling apart are selling for less than book value and/or less than five times prior peak earnings that's a good sign. Another indicator is when you hear absolutely nothing other than doom-and-gloom and people swearing they'll never buy another stock as long as they live. Then buy at these depressed prices and when all the panic sellers realize that the world didn't end, it will go back up. |
Huge return on investment, I feel like im doing the math wrong | Your math is correct. These kind of returns are possible in the capital markets. (By the way, Google Finance shows something completely different for $CANV than my trading console in ThinkorSwim, ToS shows a high of $201, but I believe there may have been some reverse splits that are not accurately reflected in either of these charts) The problems with this strategy are liquidity and timing. Let's talk about liquidity, because that is a greater factor here than the random psychological factors that would have affected you LONG LONG before your $1,000 allowance was worth a million dollars. If you bought $1000 worth of this stock at $.05 share, this would have been 20,000 shares. The week of October 11th, 2011, during the ENTIRE WEEK only 5,000 shares were traded. From this alone, you can see that it would have been impossible for you to even acquire 20,000 shares, for yourself at $.05 because there was nobody to sell them to you. We can't even look at the next week, because there WERE NO TRADES WHATSOEVER, so we have to skip all the way to November 11th, where indeed over 30,000 shares were traded. But this pushed the price all the way up to $2.00, again, there was no way you could have gotten 20,000 shares at $.05 So now, lets talk about liquidation of your shares. After several other highs and lows in the $20s and $30s, are you telling me that after holding this stock for 2 years you WOULDN'T have taken a $500,000 profit at $25.00 ? We are talking about someone that is investing with $1,000 here. I have my doubts that there was no time between October 2011 and January 2014 that you didn't think "hm this extra $100,000 would be really useful right now.. sell!" Lets say you actually held your $1,000 to $85.55 there were EXACTLY TWO DAYS where that was the top of the market, and in those two days the volume was ~24,000 shares one day and ~11,000 shares the next day. This is BARELY enough time for you to sell your shares, because you would have been the majority of the volume, most likely QUADRUPLING the sell side quotes. As soon as the market saw your sell order there would be a massive selloff of people trying to sell before you do, because they could barely get their shares filled (not enough buyers) let alone someone with five times the amount of shares that day. Yes, you could have made a lot of money. Doing that simplistic math does not tell you the whole story. |
Advice on preserving wealth in a volatile economic/political country | You might find some of the answers here helpful; the question is different, but has some similar concerns, such as a changing economic environment. What approach should I take to best protect my wealth against currency devaluation & poor growth prospects. I want to avoid selling off any more of my local index funds in a panic as I want to hold long term. Does my portfolio balance make sense? Good question; I can't even get US banks to answer questions like this, such as "What happens if they try to nationalize all bank accounts like in the Soviet Union?" Response: it'll never happen. The question was what if! I think that your portfolio carries a lot of risk, but also offsets what you're worried about. Outside of government confiscation of foreign accounts (if your foreign investments are held through a local brokerage), you should be good. What to do about government confiscation? Even the US government (in 1933) confiscated physical gold (and they made it illegal to own) - so even physical resources can be confiscated during hard times. Quite a large portion of my foreign investments have been bought at an expensive time when our currency is already around historic lows, which does concern me in the event that it strengthens in future. What strategy should I take in the future if/when my local currency starts the strengthen...do I hold my foreign investments through it and just trust in cost averaging long term, or try sell them off to avoid the devaluation? Are these foreign investments a hedge? If so, then you shouldn't worry if your currency does strengthen; they serve the purpose of hedging the local environment. If these investments are not a hedge, then timing will matter and you'll want to sell and buy your currency before it does strengthen. The risk on this latter point is that your timing will be wrong. |
Why Google Finance puts to two decimal places for the trading volumes? | Many brokerages offer automatic dividend reinvestment. It is very infrequent that these dividends are exactly a whole share. So, if you have signed up for automatic dividend reinvestment, many brokerages will reinvest your dividends and assign to you a fractional share. I can't speak for how these shares work with regards to voting, but I can say that the value of these fractional holdings does change with stock price as if one genuinely could hold a fraction of a share. |
Which set of earnings is used to work out the P/E of a stock | This is a note from my broker, CMC Markets, who use Morningstar: Morningstar calculate the P/E Ratio using a weighted average of the most recent earnings and the projected earnings for the next year. This may result in a different P/E Ratio to those based solely on past earnings as reported on some sites and other publications. They show the P/E as being 9.93. So obviously past earnings would usually be used but you would need to check with your source which numbers they are using. Also, as BHP's results just came out yesterday it may take a while for the most recent financial details to be updated. |
Is there a good tool to view a stock portfolio's value as a graph? | I have no idea if Wikivest can handle options, but I've been pretty satisfied with it as a portfolio visualization tool. It links automatically with many brokerage accounts, and has breakdowns by both portfolio and individual investment levels. |
Why would you elect to apply a refund to next year's tax bill? | The refund may offset your liability for the next year, especially if you are a Schedule "C" filer. By having your refund applied to the coming year's taxes you are building a 'protection' against a potentially high liability if you were planning to sell a building that was a commercial building and would have Capital Gains. Or you sold stock at a profit that would also put you in the Capital Gain area. You won a large sum in a lottery, the refund could cushion a bit of the tax. In short, if you think you will have a tax liability in the current year then on the tax return you are filing for the year that just past, it may be to your benefit to apply the refund. If you owe money from a prior year, the refund will not be sent to you so you will not be able to roll it forward. One specific example is you did qualify in the prior year for the ACA. If in the year you are currently in- before you file your taxes-- you realize that you will have to pay at the end of the current year, then assigning your refund will pay part or all of the liability. Keep in mind that the 'tax' imposed due to ACA is only collected from your refunds. If you keep having a liability to pay or have no refunds due to you, the liability is not collected from you. |
How can I save on closing costs when buying a home? | Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught? A home inspection costs hundreds of dollars. The average is $315. Inspections regularly catch things that cost tens of thousands of dollars to fix, e.g. a new roof or a cracked foundation. You also might find that a home inspection is required for your mortgage. do I need a realtor, or can I do their job myself? Unless you are a licensed realtor or you buy directly from a seller without a realtor, the fee (charged to the seller) will be the same regardless of whether you have a realtor. The seller's realtor will share the fee with your realtor if you have one. So you can do the work yourself (perhaps not as well), but you won't save money by doing so. If you have a lot of flexibility in when you purchase, you could look for especially cheap properties with motivated sellers. Arrange financing ahead of time (before you find a house), so you can close quickly. Some sellers will give you a discounted price to finish the sale quickly. Even small savings on the price of a house will outweigh most savings on closing costs. |
Strategies for paying off my Student loans | My advice is that if you've got the money now to pay off your student loans, do so. You've saved up all of that money in one year's time. If you pay it off now, you'll eliminate all of those monthly payments, you'll be done paying interest, and you should be able to save even more toward your business over the next year. Over the next year, you can get started on your business part time, while still working full time to pile up cash toward your business. Neither you nor your business will be paying interest on anything, and you'll start out in a very strong position. The interest on your student loans might be tax deductible, depending on your situation. However, this doesn't really matter a whole lot, in my opinion. You've got about $22k in debt, and the interest will cost you roughly $1k over the next year. Why pay $1k to the bank to gain maybe $250 in tax savings? Starting a business is stressful. There will be good times and bad. How long will it take you to pay off your debt at $250 a month? 5 or 6 years, probably. By eliminating the debt now, you'll be able to save up capital for your business even faster. And when you experience some slow times in your business, your monthly expenses will be less. |
Is it smart to only invest in mid- and small-cap stock equity funds in my 401(k)? | Can you easily stomach the risk of higher volatility that could come with smaller stocks? How certain are you that the funds wouldn't have any asset bloat that could cause them to become large-cap funds for holding to their winners? If having your 401(k) balance get chopped in half over a year doesn't give you any pause or hesitation, then you have greater risk tolerance than a lot of people but this is one of those things where living through it could be interesting. While I wouldn't be against the advice, I would consider caution on whether or not the next 40 years will be exactly like the averages of the past or not. In response to the comments: You didn't state the funds so I how I do know you meant index funds specifically? Look at "Fidelity Low-Priced Stock" for a fund that has bloated up in a sense. Could this happen with small-cap funds? Possibly but this is something to note. If you are just starting to invest now, it is easy to say, "I'll stay the course," and then when things get choppy you may not be as strong as you thought. This is just a warning as I'm not sure you get my meaning here. Imagine that some women may think when having a child, "I don't need any drugs," and then the pain comes and an epidural is demanded because of the different between the hypothetical and the real version. While you may think, "I'll just turn the cheek if you punch me," if I actually just did it out of the blue, how sure are you of not swearing at me for doing it? Really stop and think about this for a moment rather than give an answer that may or may not what you'd really do when the fecal matter hits the oscillator. Couldn't you just look at what stocks did the best in the last 10 years and just buy those companies? Think carefully about what strategy are you using and why or else you could get tossed around as more than a few things were supposed to be the "sure thing" that turned out to be incorrect like the Dream Team of Long-term Capital Management, the banks that were too big to fail, the Japanese taking over in the late 1980s, etc. There are more than a few times where things started looking one way and ended up quite differently though I wonder if you are aware of this performance chasing that some will do. |
Can a CEO short his own company? | mhoran_psprep has answered the question well about "shorting" e.g. making a profit if the stock price goes down. However a CEO can take out insurance (called hedging) against the stock price going down in relation to stocks they already own in some cases. But is must be disclosed in public filings etc. This may be done for example if most of the CEO’s money is in the stock of the company and they can’t sell for tax reasons. Normally it would only be done for part of the CEO’s holding. |
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