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Is Mint allowed to share user data with other Intuit entities? | I wound up asking Mint over email so I'll share the answer I received: Thank you for contacting Mint.com. From my understand you want to know if Mint can transfer data to other Intuit products and vice versa. Let me address your concern based from what I can see on my tools. Upon confirming, while Mint and other Intuit products are under the same company, Mint.com is not yet integrated to other Intuit products. We’d like to thank you though for giving the idea to us. With this, we would know which future enhancements will our customers appreciate. We have forwarded your request/suggestion to our Product and Development team for their review. At this time though, we can't make any guarantee that your request/suggestion will get implemented as we must balance customer demand with resources and business objectives. Oops... |
What is the process of getting your first share? | Here's a different take: Look through the lists of companies that offer shareholder perks. Here's one from Hargreaves Lansdown. See if you can find one that you already spend money with with a low required shareholding where the perks would actually be usable. Note that in your case, being curious about the whole thing and based in London, you don't have to rule out the AGM-based perks, unlike me. My reason for this is simple: with 3 out of 4 of the companies we bought shares in directly (all for the perks), we've made several times the dividend in savings on money we would have spent anyway (either with the company in which we bought shares or a direct competitor). This means that you can actually make back the purchase price plus dealing fee quite quickly (probably in 2/4 in our case), and you still have the shares. We've found that pub/restaurant/hotel brands work well if you use them or their equivalents anyway. Caveats: It's more enjoyable than holding a handful of shares in a company you don't care about, and if you want to read the annual reports you can relate this to your own experience, which might interest you given your obvious curiosity. |
How to properly report income without 1099-MISC | You are right that even if you do not receive a 1099-MISC, you still need to report all income to the IRS. Report the $40 on Schedule C or Schedule C-EZ. Since your net profit was less than $400, you do not need to file Schedule SE. From the IRS web site: 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. |
Should I wait to save up 20% downpayment on a 500k condo? | The simple answer is yes - put 20% (or more) down. In the past I have paid PMI and used a combination first and second mortgage to get around it. I recommend avoiding both of those situations. I am much more comfortable now with just a regular mortgage payment. The more equity you have in your home the more options you will have in the future. |
What effect would currency devaluation have on my investments? | My question boiled down: Do stock mutual funds behave more like treasury bonds or commodities? When I think about it, it seems that they should respond the devaluation like a commodity. I own a quantity of company shares (not tied to a currency), and let's assume that the company only holds immune assets. Does the real value of my stock ownership go down? Why? On December 20, 1994, newly inaugurated President Ernesto Zedillo announced the Mexican central bank's devaluation of the peso between 13% and 15%. Devaluing the peso after previous promises not to do so led investors to be skeptical of policymakers and fearful of additional devaluations. Investors flocked to foreign investments and placed even higher risk premia on domestic assets. This increase in risk premia placed additional upward market pressure on Mexican interest rates as well as downward market pressure on the Mexican peso. Foreign investors anticipating further currency devaluations began rapidly withdrawing capital from Mexican investments and selling off shares of stock as the Mexican Stock Exchange plummeted. To discourage such capital flight, particularly from debt instruments, the Mexican central bank raised interest rates, but higher borrowing costs ultimately hindered economic growth prospects. The question is how would they pull this off if it's a floatable currency. For instance, the US government devalued the US Dollar against gold in the 30s, moving one ounce of gold from $20 to $35. The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury, after which it was stored in United States Bullion Depository at Fort Knox and other locations. The act also changed the nominal price of gold from $20.67 per troy ounce to $35. But now, the US Dollar is not backed by anything, so how do they devalue it now (outside of intentionally inflating it)? The Hong Kong Dollar, since it is fixed to the US Dollar, could be devalued relative to the Dollar, going from 7.75 to 9.75 or something similar, so it depends on the currency. As for the final part, "does the real value of my stock ownership go down" the answer is yes if the stock ownership is in the currency devalued, though it may rise over the longer term if investors think that the value of the company will rise relative to devaluation and if they trust the market (remember a devaluation can scare investors, even if a company has value). Sorry that there's too much "it depends" in the answer; there are many variables at stake for this. The best answer is to say, "Look at history and what happened" and you might see a pattern emerge; what I see is a lot of uncertainty in past devaluations that cause panics. |
401k compound interest vs other compound interest | A 401K (pre-tax or Roth) account or an IRA (Deductible or Roth) account is a retirement account. Which means you delay paying taxes now on your deposits, or you avoid paying taxes on your earnings later. But a retirement account doesn't perform any different than any other account year-to-year. Being a retirement account doesn't dictate a type of investment. You can invest in a certificate of deposit that is guaranteed to make x% this year; or you can invest in stocks, bonds, mutual funds that infest in stocks or bonds. Those stocks and bonds can be growth focused, or income focused; they can be from large companies or small companies; US companies or international companies. Or whatever mix you want. The graph in your question shows that if you invest early in your adulthood, and keep investing, and you make the average return you should make more money than starting later. But a couple of notes: So to your exact questions: An S&P 500 investment should perform exactly the same this year if it is in a 401K, IRA, or taxable account With a few exceptions: Yes any investment can lose money. The last 6 months have been volatile and the last month and a half especially so. A retirement account isn't any different. An investment in mutual fund X in a retirement account is just as depressed a one in the same fund but from a taxable account. |
Taxation of shares | If you sell your shares for more than their value at the time you received them (i.e. you make a profit) then you will be liable for capital gains tax - but only if the profit exceeds your annual allowance (£11,100, in tax year 2015-16). This is unrelated to how you came by the shares in the first place. (Note that there are certain exemptions to this, which includes some employer share schemes.) |
When will the U.K. convert to the Euro as an official currency? | Not anytime soon, I suspect, but not necessarily for financial reasons. I found this interesting, including the link to the five tests, but I think that this topic is only partially judged through financial eyes, there's a lot of political issues around this with national identity/immigration issues already in the spot light as well as political aspirations. If there will be a call in the near future to join the Euro, how would that reflect on the financial industry in the UK from a PR perspective? and on the political leadership and how it managed the financial crisis? I believe that it is in the interest of all the people in the high positions to show the country getting back on track rather than making ground shaking moves. But what do I know....:-) |
How can I legally and efficiently help my girlfriend build equity by helping with a mortgage? | A 30-yr mortgage IS a committment. So, you are willing to commit to a place, but not your long-term girlfriend??? Either you don't do this "cheap" scheme idea, or you set up as a business arrangement, or you get married. This is quite a laissez-faire statement you make... "Maybe we will eventually get married, maybe we will eventually break up, who knows." Anything or anyone that is a "who knows" is not what you make a 30-yr committment on. I mean, unless you just want to risk throwing your money away. Now, man up, hire the lawyer to do official paperwork or else get a legal certificate of civil union or marriage or whatever you want to call it. If you try to do your cockamamie scheme "on the cheap" now, it will most surely cost you dearly in the future! Mixing money (particulary huge sums of 200,000 $!) when there is no legal obligation like marriage or a business contract, is a fool's errand! Now, grow up and do it the right way if you want to help her - and yourself too. |
That “write your own mortgage” thing; how to learn about it | If an entity or individual has full rights to the land and land improvements, they can hold, transfer, delegate, or dispose of them on their terms. The only exception may be eminent domain. If the sovereignty meets the public necessity or public purpose tests they can assume or change the rights to your property in exchange for compensation. As others have said writing your own mortgage falls under the category of seller financing. A seller can write a mortgage with the help of a loan servicing company. Some loan service companies report to credit agencies, to help with buyer refinancing at a later point. Other forms of seller financing: Leasing Land contracts mineral contracts and more... Additionally, the seller can finance the minority of the property, called a junior mortgage. For example, the Bank finances 79% of the value, the seller finances 11%, and the buyer's 10% down payment covers the rest. If the buyer defaults, the superior mortgage (bank's) has collection priority. More commonly, the seller can option for a wrap-around mortgage or an 'all-inclusive mortgage'. The seller holds or refinances the existing mortgage and provides a junior mortgage in exchange for a secured promissory note and an all-inclusive trust deed. If the buyer defaults, the seller has foreclosure rights. It is not uncommon for entities or people to use financing strategies other than the traditional mortgage if they are unable to exclude the gain on sale. Check out section 1031 exchanges. In almost all cases I would tell people not to make decisions based on tax consequences alone, if your financial objective/goal for seller financing sounds like a 1031 exchange, take exception and carefully consider the tax consequences. |
The life cycle of money | Echoing JohnF, and assuming you mean the physical, rather than abstract meaning of money? The abstract concept obviously isn't replaced (unless the currency is discredited, or like the creation of the Euro which saw local currencies abandoned). The actual bits of paper are regularly collected, shredded (into itty-bitty-bits) and destroyed. Coinage tends to last a lot longer, but it also collected and melted down eventually. Depends on the country, though. No doubt, many people who took a gap year to go travelling in points diverse came across countries where the money is a sort of brown-grey smudge you hold with care in thick wadges. The more modern economies replace paper money on a dedicated cycle (around three years according to Wikipedia, anyway). |
How does one value Facebook stock as a potential investment? | To know if a stock is undervalued is not something that can be easily assessed (else, everybody would know which stock is undervalued and everybody will buy it until it reaches its "true" value). But there are methods to assess the value of a company, I think that the 3 most known methods are: If the assets of the company were to be sold right now and that all its debts were to be paid back right now, how much will be left? This remaining amount would be the fundamental value of your company. That method could work well on real estate company whose value is more or less the buildings that they own minus of much they borrowed to acquire them. It's not really usefull in the case of Facebook, as most of its business is immaterial. I know the value of several companies of the same sector, so if I want to assess the value of another company of this sector I just have to compare it to the others. For example, you find out that simiral internet companies are being traded at a price that is 15 times their projected dividends (its called a Price Earning Ratio). Then, if you see that Facebook, all else being equal, is trading at 10 times its projected dividends, you could say that buying it would be at a discount. A company is worth as much as the cash flow that it will give me in the future If you think that facebook will give some dividends for a certain period of time, then you compute their present value (this means finding how much you should put in a bank account today to have the same amount in the future, this can be done by dividing the amount by some interest rates). So, if you think that holding a share of a Facebook for a long period of time would give you (at present value) 100 and that the share of the Facebook is being traded at 70, then buy it. There is another well known method, a more quantitative one, this is the Capital Asset Pricing Model. I won't go into the details of this one, but its about looking at how a company should be priced relatively to a benchmark of other companies. Also there are a lot's of factor that could affect the price of a company and make it strays away from its fundamental value: crisis, interest rates, regulation, price of oil, bad management, ..... And even by applying the previous methods, the fundemantal value itself will remain speculative and you can never be sure of it. And saying that you are buying at a discount will remain an opinion. After that, to price companies, you are likely to understand financial analysis, corporate finance and a bit of macroeconomy. |
what is the best way of investment which gives returns forever? | What is the best way that I can invest money so that I can always get returns? Would it be to set up an FD in a bank, to buy land, to buy a rental house, to buy a field, or maybe to purchase gold? Forever is a long time. Of the options you listed, the only one guaranteed to generate returns is a bank account. The returns may well be very small, but (absent an economy-wide financial failure) you will get the stated return. Land doesn't always retain its value, nor do rental houses or fields. Gold clearly fluctuates. But you would be better served to think about goals and how you can attain them. What do you want to do with the "returns"? If you are trying to set yourself up for purchasing a home, paying for college, or retirement, then the small returns on a bank account may be insufficient. And in that case you might be better served by worrying more about the size of the returns you need than the certainty of them. There may be many "better investments" if you more clearly define what you expect to achieve by your investment. |
How can one identify institutional accumulation of a particular stock using price and volume data? | You can have a pretty good guess by looking at price pattern and order flow (size of the trades) a) price should be traded in a range b) relatively large size orders, speed. |
Are there any statistics that support the need for Title Insurance? | There seems to be no such information available. What is available is that number of claims are high and the Title Insurance companies have gone bankrupt as per the wikipedia article In 2003, according to ALTA, the industry paid out about $662 million in claims, about 4.3% percent of the $15.7 billion taken in as premiums. By comparison, the boiler insurance industry, which like title insurance requires an emphasis on inspections and risk analysis, pays 25% of its premiums in claims. However, no reference to the relationship between when claims are made and when policies are issued is found. As of 2008, the top three remaining title insurers all lost money, while LandAmerica went bankrupt and sold its title business to Fidelity http://en.wikipedia.org/wiki/Title_insurance#Industry_profitability The amount of premium received and claim made can be got from some of the companies balance sheet. For Fidelity its at http://www.investor.fnf.com/releasedetail.cfm?CompID=FNT&ReleaseID=363350 The article in here mentions the claims ratio as 5%. Refer http://www.federaltitle.com/blog/title-insuance-qaa |
If an option's price is 100% made up of its intrinsic value, is there a way to guarantee a non-loss while having a chance at a profit? | Yes, one such strategy is dividend arbitrage using stock and in the money options. You have to find out which option is the most mispriced before the ex-dividend date. |
Can individual investors buy precious metals at the spot price? | There are various exchanges around the world that handle spot precious metal trading; for the most part these are also the primary spot foreign exchange markets, like EBS, Thomson Reuters, Currenex (website seems to be down), etc. You can trade on these markets through brokers just like you can trade on stock markets. However, the vast majority of traders on these exchanges do not intend to hold any bullion ownership at the end of the day; they want to buy as much as they sell each day. A minority of traders do intend to hold metal positions for longer periods, but I doubt any of them intend to actually go collect bullion from the exchange. I don't think it's even possible. Really the only way to get bullion is to pay a service fee to a dealer like you mentioned. But on an exchange like the ones above you have to pay three different fees: So in the end you can't even get the spot price on the exchanges where the spot prices are determined. You might even come out ahead by going to a dealer. You should try to find a reputable dealer, and go in knowing the latest trade prices. An honest dealer will have a website showing you the current trade prices, so you know that they expect you to know the prices when you come in. For example, here's a well-known dealer in Chicago that happily shows you the spot prices from KITCO so you can decide whether their service fee is worth it or not. |
Is there any instance where less leverage will get you a better return on a rental property? | Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost of doing business (higher interest fees) and a higher risk of total failure, for a larger number of rents and thus higher potential earnings. As with any investment advice, whenever someone tells you "Do X and you are guaranteed to make more money", unless you are a printer of money that is not entirely true. In this case, taking more leverage exposes you to more risk, while giving you more potential gain. That risk is not only on the selling front; in fact, for most small property owners, the risk is primarily that you will have periods of time of higher expense or lower income. These can come in several ways: If you weather these and similar problems, then you will stand to make more money using higher leverage, assuming you make more money from each property than your additional interest costs. As long as you're making any money on your properties this is likely (as interest rates are very low right now), but making any money at all (above and beyond the sale value) may be challenging early on. These sorts of risks are magnified for your first few years, until you've built up a significant reserve to keep your business afloat in downturns. And of course, any money in a reserve is money you're not leveraging for new property acquisition - the very same trade-off. And while you may be able to sell one or more properties if you did end up in a temporarily bad situation, you also may run into 2008 again and be unable to do so. |
Shorting versus selling to hedge risk | The word 'hedge' emerges from early agriculture when farmers would ask the market for a minimum buy price for each crop they planted. They used this method to stop loss against any major losses. Investors today use this strategy when they are unsure of what the market will do. A perfect hedge reduces your risk to nothing (except for the cost of the hedge). |
How is a probability cone read? | A number of ways exist to calculate the chances of a particular outcome. Options, for example, use current price, cost of money, and volatility among other factors to price the chance of an underlying asset reaching a certain price in a certain timeframe. A graphical forecast simply puts these calculations into a visual format. That said, it appears the image you offer shows the prediction as it existed in the past along with how the stock has done since. A disclaimer - The odds of a fair die being rolled to a given number are 1 in 6. It's a fact. With stocks, on the other hand, models try to simulate real life and many factors can't be accounted for. |
Is it bad etiquette to use a credit or debit card to pay for single figure amounts at the POS | Etiquette doesn't really come into the picture here. The business offers a service and I choose to accept it. Personally, I use my debit card as much as possible. For every transaction, I record it in my checkbook. Then, when I do reconciling, I know exactly how much I paid for various categories of stuff. Good for budgeting. Most often my purchases are over $10 but when they aren't, I have no qualms about using the card. |
Is it possible for me to keep my credit card APR at 0% permanently? | No. The intro rate is a gambit by the bank - they accept losing money in the short term but expect to gain money in the long term when your intro is over and you (hopefully) start paying interest. There's not much in it for them if you never get around to paying interest. Same can be said for people who close the card after their intro period, but that's different - the bank is correctly expecting that most people won't bother. |
Why would I buy a bond with a negative yield? | Perhaps something else comes with the bond so it is a convertible security. Buffett's Negative-Interest Issues Sell Well from 2002 would be an example from more than a decade ago: Warren E. Buffett's new negative-interest bonds sold rapidly yesterday, even after the size of the offering was increased to $400 million from $250 million, with a possible offering of another $100 million to cover overallotments. The new Berkshire Hathaway securities, which were underwritten by Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman and chief executive, pay 3 percent annual interest. But they are coupled with five-year warrants to buy Berkshire stock at $89,585, a 15 percent premium to Berkshire's stock price Tuesday of $77,900. To maintain the warrant, an investor is required to pay 3.75 percent each year. That provides a net negative rate of 0.75 percent. |
What is the best way to short the San Francisco real estate market? | You could short home builders who do a lot of their business in Northern California. (Not just San Francisco, Silicon Valley, or even the Bay Area.) Home prices in Sacramento and the northern San Joaquin Valley are correlated with Bay Area home prices. Many of these builders went broke during the last bust, so you might have trouble finding a publicly traded home builder that is concentrated in just one market. |
Is selling only shares you bought with margin on a margin/unsettled cash purchase free ride? | I'm not 100% sure, but I don't think it would be considered a free ride. The idea of a free ride is that you are engaging in a transaction when you do not actually have the money available to cover it, since the broker is technically giving you a 3 day loan whenever you purchase your stock (3 day rule to settle.) However, if you are using a margin account, and you have enough credit available, then you are not actually using unsettled assets, but rather an additional line of credit which was granted to you. You would just need to make sure that your total transactions are less than your purchasing power. That's my take on it anyway. I hope that helps, and hopefully someone can confirm or reject what I have said. |
How often do stocks become worthless? | Randomly selected stocks would probably become worthless at a similar rate of all businesses going out of business do. I'm not sure why you'd randomly select a stock though. Stocks in the S&P500 (or other similar index), or large-cap stocks probably become worthless at a much lower rate. |
Should market based health insurance premiums be factored into 6 months emergency fund savings? | Yes factor into your fund the cost of health insurance. You basically have three options when facing a loss of income for 3-6 months: Pre-ACA the COBRA one was the default option many planned for because there was no need to change doctors. Of course many people were shocked how expensive it was compared to just looking at the employees share of the monthly premium. For planning you can do some research into the cost of one of the ACA approved plans in your state. Keeping in mind that the lack of income might qualify you for a subsidy. As to the coverage level, that would depend on your situation and the perceived gap. I have known many people who didn't have to pick COBRA until after the new job started so they knew exactly what they needed to cover and what their bills were during the gap. |
Best starting options to invest for retirement without a 401k | Being from the UK, I'd not heard of a Roth IRA, but it sounds very similar to our own ISA (Individual Savings Account). Having just looked it up, I couldn't believe the annual limit was so low: $5500! Still, you have to work within your jurisdiction's legal framework (or agitate for change?). I would definitely agree with Ben Miller's answer: you need different savings buckets for the different savings objectives you'll have throughout the different periods of your life. I, for instance, am now a parent of two young children. I am fortunate to be able to provide for them on multiple levels: I hope that's of some help. |
What kind of symbol can be shorted? | Some platforms/brokers have HTB indication for a stock symbol, meaning Hard To Borrow. That usually means you can't sell it short at the moment. |
Strategy to pay off car loan before selling the car | As far as ease of sale transaction goes you'll want to pay off the loan and have the title in your name and in your hand at the time of sale. Selling a car private party is difficult enough, the last thing you want is some administrivia clouding your deal. How you go about paying the remaining balance on the car is really up to you. If you can make that happen on a CC without paying an additional fee, that sounds like a good option. |
What are the downsides that prevent more people from working in high-income countries, and then retiring in low-income (and cost of living) ones? | I'm currently working as an expat, and my grandparents used to work overseas but retired to Canada so you could say my family has done things completely the opposite of what you suggest. However there are a number of very good reasons that my grandparents have done things the way we have, and I think it's worth sharing the rationale there. Low-cost moving to high-cost is a no-brainer: it's not easy to do, but many people are trying nonetheless. However, even they will be likely to stay in the high-cost countries, mostly because of health care, also safety is a factor, but social factors also matter. Firstly, I think two key factors that have been overlooked are language and health care-- most low-cost countries speak different languages than high-cost countries. This isn't a problem if you're young, but it becomes prohibitive if you are older. Even if you can manage, it's inconvenient in most countries. You can't just walk down the street and do whatever you like. You either have to keep a translator handy, or restrict your activities to places where you can communicate in your native language. Your favorite sports channels (rugby, american football etc.) might not be available, because nobody there cares. Your favorite news channel, or food (even in grocery stores) might not be so readily available. All these reasons made living abroad undesirable for my grandparents, but the big deal for them was healthcare. Outside of the US, every single developed economy has socialized healthcare to a large extent. When you're young it doesn't really matter, but when you are older, it's a constant concern! There are two aspects to healthcare-- firstly, if you are a citizen in a developed country there are significant financial benefits (In the US there is also medicare/medicaid but I don't know how those work so I'm not going to talk about that) to staying in-country when you retire, even if the health care would be more expensive- it's the government that's paying! Secondly, health care in low-cost countries tends to either be cheap and poor quality (and by poor quality I mean really, really scary!) or expensive and almost as good as a developed country. Again, high-quality hospitals in low-cost countries may still save you money, but the nurses may not speak good English and the doctors may not have a great bed-side manner. In many low-cost countries, nobody calls the police because they know the cops don't care, or will never solve the problem (i.e. they will arrive hours or days after it's too late), or the cops may even be 'in on it'. So basically you try to protect yourself from the inevitable robbery,swindle,extortion,hold-up,you-name-it but sooner or later something bad will happen. With security guards and being younger, it's less of an issue, but when you're elderly, especially if you look foreign and rich, it's definitely more dangerous. Many of my friends from low-income countries try to emigrate for this reason (and/or in combination with the political climate, which is largely corrupt and full of problems). So, if you're old, why risk it? Stay somewhere safe. |
What is the formula for determining estimated stock price when I only have an earning per share number? | Stock price = Earning per share * P/E Ratio. Most of the time you will see in a listing the Stock price and the P/E ration. The calculation of the EPS is left as an exercise for the student Investor. |
Planning to invest in stock, age 16 | First of all, since you're 16 - you will not invest in anything. You cannot, you're a minor. You cannot enter contracts, and as such - you cannot transact in property. Your bank accounts are all UGMA accounts. I.e.: your guardian (or someone else who's the trustee on the account) will be the one transacting, not you. You can ask them to do trades, but they don't have to. They must make decisions in your best interest, which trades may not necessarily be. If however they decide to make trades, or earn interest, or make any other decision that results in gains - these are your gains, and you will be taxed on them. The way taxes work is that you're taxed on income. You're free to do with it whatever you want, but you're taxed on it. So if you realized gains by selling stocks, and reinvested them - you had income (the gains) which you did with whatever you felt like (reinvested). The taxman doesn't care what you did with the gains, the taxman cares that you had them. For losses it is a bit more complicated, and while you can deduct losses - there are limitations on how much you can deduct, and some losses cannot be deducted at all when realized (like wash sale losses or passive activity losses). When you have stock transactions, you will probably need to file a tax return reporting the transactions and your gains/losses on them. You may end up not paying any tax at all, but since the broker is reporting the transactions - you should too, if only to avoid IRS asking why you didn't. This, again, should be done by your guardian, since you personally cannot legally sign documents. You asked if your gains can affect your parents' taxes. Not exactly - your parents' taxes can affect you. This is called "Kiddie Tax" (unofficially of course). You may want read about it and take it into account when discussing your investments with your guardian/parents. If kiddie tax provisions apply to you - your parents should probably discuss it with their tax adviser. |
US Stock Market - volume based real-time alert | TdAmeritrade offers this service for free using 3rd party company markit. From markit's site, below is their guarantee. http://www.markit.com/product/markit-on-demand Markit On Demand delivers an average of two million alerts per day through various technology platforms and via multiple channels, including email, instant messages, wireless, RSS and Facebook. Investors can subscribe to their alerts of choice, and Markit On Demand guarantees that they will receive an alert within five minutes of the event trigger for all price and volume alerts |
Will progressively investing with moderate-to-high risk help secure a future? | There are a few flaws in your reasoning: I know my portfolio will always keep going up, No, it won't. You'll have periods of losses. You are starting your investing in a bull market. Do NOT be fooled into believing that your successes now will continue indefinitely. The more risky your portfolio, the bigger the losses. The upside of a risky portfolio is that the gains generally outweigh the losses, but there will be periods of losses. I honestly don't believe that it's possible for me to end up losing in the long term, regardless of risk. I think you vastly underestimate the risk of your strategy and/or the consequences of that risk. There's nothing wrong with investing in risky assets, since over time you'll get higher-than-average returns, but unless you diversify you are exposing yourself to catastrophic losses as well. |
Is ScholarShare a legitimate entity for a 529 plan in California? | To mhoran's point, yes, the company, TIAA-CREF is valid. I'd focus on the expenses - Their S&P fund (Index US Large Cap Equity Portfolio) shows a .11% total fee. You might choose this one, or others, but this number looks great to me. We are in an investment world where fees are still often over 1%, and we are conditioned to think anything less is a good fee. For me, the goal is less than .25% in your retirement fund, college savings, etc. |
why is the money withdrawn from traditional IRA taxed at the ordinary income tax rate? | You are missing something very significant. The money in a traditional IRA (specifically, a deductible traditional IRA; there is not really any reason to keep a nondeductible traditional IRA anymore) is pre-tax. That means when you pay tax on it when you take it out, you are paying tax on it for the first time. If you take ordinary money to invest it in stocks, and then pay capital gains tax on it when you take it out, that is post-tax money to begin with -- meaning that you have already paid (income) tax on it once. Then you have to pay tax again on the time-value growth of that money (i.e. that growth is earned from money that is already taxed). That means you are effectively paying tax twice on part of that money. If that doesn't make sense to you, and you think that interest, capital gains, etc. is the first time you're paying tax on the money because it's growth, then you have a very simplistic view of money. There's something called time value of money, which means that a certain amount of money is equivalent to a greater amount of money in the future. If you invest $100 now and end up with $150 in the future, that $150 in the future is effectively the same money as the $100 now. Let's consider a few examples. Let's say you have $1000 of pre-tax income you want to invest and withdraw a certain period of time later in retirement. Let's say you have an investment that grows 100% over this period of time. And let's say that your tax rate now and in the future is 25% (and for simplicity, assume that all income is taxed at that rate instead of the tax bracket system). And capital gains tax is 15%. You see a few things: Traditional IRA and Roth IRA are equivalent if the tax rates are the same. This is because, in both cases, you pay tax one time on the money (the only difference between paying tax now and later is the tax rate). It doesn't matter that you're paying tax only on the principal for the Roth and on the principal plus earnings for Traditional, because the principal now is equivalent to the principal plus earnings in the future. And you also see that investing money outside fares worse than both of them. That is because you are paying tax on the money once plus some more. When you compare it against the Roth IRA, the disadvantage is obvious -- in both cases you pay income tax on the principal, but for Roth IRA you pay nothing on the earnings, whereas for the outside stock, you pay some tax on the earnings. What may be less obvious is it is equally disadvantageous compared to a Traditional IRA; Traditional and Roth IRA are equivalent in this comparison. 401(k)s and IRAs have a fundamental tax benefit compared to normal money investment, because they allow money to be taxed only one time. No matter how low the capital gains tax rate it, it is still worse because it is a tax on time-value growth from money that is already taxed. |
Should I use a bank or a credit union for my savings account? | In practical terms, these days, a credit union IS a small "savings and loan" bank -- the kind of bank that used to exist before bankers started making money on everything but writing loans. They aren't always going to offer higher interest and/or cheaper loans than the bank-banks, but they're almost always going to be more pleasant to deal with since they consider the depositors and borrowers their stockholders, not just customers. There are minor legal differences (different insurance fund, for example), and you aren't necessarily eligible to open an account at a randomly-chosen credit union (depending on how they've defined the community they're serving), but they will rarely affect you as an account holder. The main downside of credit unions is that, like other small local banks, they will only have a few branches, usually within a limited geographic area. However, I've been using a credit union 200 miles away (and across two state lines on that route, one if I take a large detour) for decades now, and I've found that between bank-by-mail, bank-by-internet, ATM machines, and the "branch exchange" program (which lets you use branches of participating credit unions as if they were branches of your own) I really haven't felt a need to get to the branch. I did find that, due to network limitations of $50K/CU/day, drawing $200,000 worth of bank checks on a single day (when I purchased the house) required running around to four separate branch-exchange credit unions. But that's a weird situation where I was having trouble beating the actual numbers out of the real estate agents until a few days before the sale. And they may have relaxed those limitations since... though if I had to do it again, I'd consider taking a scenic drive to hit an actual branch of my own credit union. If you have the opportunity to join a credit union, I recommend doing so. Even if you don't wind up using it for your "main" accounts, they're likely to be people you want to talk to when you're shopping for a loan. |
How can I get the most value from my employer's ESPP? | A 15% discount does not necessarily mean it is a good investment. The stock price can go down at any point. 15% discount might mean you are getting a little better deal than the average cat. |
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | One way to think of the typical fixed rate mortgage, is that you can calculate the balance at the end of the month. Add a month's interest (rate times balance, then divide by 12) then subtract your payment. The principal is now a bit less, and there's a snowball effect that continues to drop the principal more each month. Even though some might object to my use of the word "compounding," a prepayment has that effect. e.g. you have a 5% mortgage, and pay $100 extra principal. If you did nothing else, 5% compounded over 28 years is about 4X. So, if you did this early on, it would reduce the last payment by about $400. Obviously, there are calculators and spreadsheets that can give the exact numbers. I don't know the rules for car loans, but one would actually expect them to work similarly, and no, you are not crazy to expect that. Just the opposite. |
Exotic Car Flipping as a Strategic Investment? (US-CAN) | You can greatly reduce the risk if you can line up a buyer prior to purchasing the car. That kind of thing is common in business, one example is drop shipping. Also there are sales companies that specialize in these kinds of things bringing manufacturers of goods together with customers. The sales companies never take delivery of the product, just a commission on the sales. From this the manufacturers are served as they have gained a customer for their goods. The buying company is served as they can make a "better" end product. The two parties may have not been brought together had it not been for the sales company so on some level both are happy to pay for the service. Can you find market inequalities and profit from them? Sure. I missed a great opportunity recently. I purchased a name brand shirt from a discount store for $20. Those shirts typically sell on ebay for $80. I should have cleaned out that store's inventory, and I bet someone else did as by the time I went back they were gone. That kind of thing was almost risk-less because if the shirts did not sell, I could simply return them for the full purchase price. That and I can afford to buy a few hundred dollars worth of shirts. Can you afford to float 45K CDN? What if it takes a year to sell the car? What if the economy goes sour and you are left "holding the bag"? Why are not car dealers doing exactly what you propose? Here in the US this type of thing is called "horse trading" and is very common. I've both lost and made money on these kind of deals. I would never put a significant amount of my net worth at risk. |
Will anything happen to me if the AMT is not re-established before 2011? | According to pages 6 & 7 of the instructions for form 1040 in 2009 AMT was only temporarily patched for the year. Congress can't politically afford to drastically cut AMT exemptions by 30 to 40%, and may even retroactively change it, if it isn't passed by the end of the year (despite the constitution forbidding ex post facto laws) : What’s New for 2009 ... Alternative minimum tax (AMT) exemption amount increased. The AMT exemption amount has increased to $46,700 ($70,950 if married filing jointly or a qualifying widow(er); $35,475 if married filing separately)... What’s New for 2010 ... Alternative minimum tax (AMT) exemption amount. The AMT exemption amount is scheduled to decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately). So, if you are married, and several regular tax deductions push your income below the AMT exemption amount of $45,000, it's quite possible you would be required to pay AMT, even if you didn't last year. There is a work sheet for AMT in the instructions for line 43, but the IRS also provides an AMT calculator. According to page 146 (E-8) of the instructions for form 1040 AMT is paid as: the smallest amount you are allowed to report as your taxable income (Form 1040, line 43). It is also the smallest amount you are allowed to report as your alternative minimum taxable income (AMTI) on Form 6251, line 29. If the [AMT calculation] is larger than your taxable income would otherwise be, enter the amount from column (c) on Form 1040, line 43 [or ...] Form 6251, line 29. As always, congress finds ways to further complicate things by making a few credits and losses deductible against the absolute minimum you're expected to pay taxes on, making the AMT a misnomer. |
Finding out actual items bought via credit card issuer and not the store receipt? | As a merchant I can tell you that the only thing the bank gets from me. Is the total amount and a category for my business. No detail, not ever. |
Info about managment compansation schemes in publicly traded companies | Converting the comment from @MD-Tech into answer How or where could I find info about publicly traded companies about how stock owner friendly their compensation schemes are for their board and officers? This should be available in the annual report, probably in a directors' remunerations section for most companies |
What risks are there acting as a broker between PayPal and electronic bank transfers? | This is definitely a scam. My husband was inquiring with a "company" that was offering him to be. Representative for them. He got the same job details but the company was called Ceneo. I did due diligence and found that the real Ceneo has no problems receiving money directly from buyers around the world. The fake company mirrored their website, posted jobs on the net,hoping to "employ" unsuspecting people in the U.S. This is their reply to my husband when he asked the job details. DO NOT GET SCAMMED and held accountable for money laundering. |
Are Certificates of Deposit worth it compared to investing in the stock market? | A CD is guaranteed to pay its return on maturation. So if you need a certain amount of money at a specific time in the future, the CD is a more reliable way of getting it. The stock market might give you more money or less. More is obviously OK. Less is not if you're planning to pay basic expenses with it, e.g. food, rent, etc. Most retirement portfolios will have a mix of investments. Some securities (stocks and bonds), some guaranteed returns (CDs, treasuries), and some cash equivalents (money market, savings, and checking accounts). Cash equivalents are good for short term expenses and an emergency fund. Guaranteed returns are good for medium term expenses. Securities are good for the long term. Once retired, the general system is to maintain enough cash equivalents for the next few months of expenses and emergencies. Then schedule CDs for the next few years so that you have a predictable amount. Finally, keep the bulk of your wealth in securities. As you get older, your potential emergencies increase and your need for savings decreases, so the mix shifts more and more to the cash equivalents and guaranteed returns and away from securities. CDs have limited use prior to retirement (and the couple years right before retirement), mainly saving up for a large purchase like a house, car, or major appliance. Even there if you have the option of delaying the purchase, that might allow you to use securities instead. Perhaps some of your emergency fund in a short term CD that you keep rolling over. Note that the problem isn't so much that securities will fall. It's that they'll fall right when you need the money. So rather than sell 1% of your securities to meet your needs, you have to sell 2%. That's a dead weight loss of 1% that you have to deduct from your returns. That roughly matches the drop from the height of 2007 to the trough of 2009 of the S&P 500. And it was 2012 before it recovered. If in 2007, you had put the 1% of your portfolio in a two-year CD, you'd be ahead even at zero interest in 2009. |
Loan to son - how to get it back | I think you've made a perfectly valid suggestion, and, if your son is struggling somewhat financially now, one that may be very welcome. If you agree to forgive the debt at this time in lieu of a similar amount forgone in future inheritance, it will eliminate the never ending interest-only payments, free up $200+ a month for you son on a tight budget, and improve your own credit score once you pay off the credit line. It's also, in my opinion, a good idea to be open about this in advance with your other children heirs so that everyone will understand what is expected during the eventual probate. My paternal grandfather was the recipient of a great deal of financial largess from his wealthy mother during her life, and it was fully understood by him, her, and his siblings, that in exchange he would not share in her estate when she passed. He didn't, there were no problems, and he and his siblings stayed close for the rest of their lives. |
Is it legal if I'm managing my family's entire wealth? | This is the biggest blunder I see in money handling. "Oh I'm a good person and everyone knows my intentions are good. And they're really happy with me right now, so it'll stay that way forever, right? So I can just do anything and they'll trust me." And then in hindsight 10 years later, the person realizes "wow, I was really stubborn and selfish to just assume that. No wonder it blew up." Anyway, to that end, your requirement that all the money be in one account and "this will simplify taxes" is horsepuckey. No one will believe a legitimate financial advisor needs that, but it's exactly what a swindler would do. And that's the problem. If anything goes wrong, their trust in you will be forgotten, some will say you intended to scam all along, and the structure will be the first thing to convict you. Money makes everyone mistrusting. Ironically, the concept is called a "trust", and there's a wide body of law and practice for Person X responsibly handling the money of Person Y. The classic example is Person Y is a corporation (say, a charity) and Person X is on the Board of Directors. It's the same basic thing. The doctrine is: |
Does the sale of personal items need to be declared as income on my income taxes? | Books would be considered Personal-Use Property according to Canada's income tax laws. The most detailed IT I was able to find is IT-332R, which says: GAINS AND LOSSES 3. A gain on the disposition of personal-use property is normally a capital gain within the meaning of paragraph 39(1)(a). Where the property is a principal residence, the gain > is computed under paragraph 40(2)(b) or (c). 4. Under subparagraph 40(2)(g)(iii), a loss on a disposition of personal-use property, other than listed personal property, is deemed to be nil. [...] This part of the bulletin indicates that a gain might be considered a capital gain - not income. However, you don't get to book a loss as a capital loss. This is the first hint that your book sale - which is actually an exempt capital loss - shouldn't go on your tax return unless it's one of the "listed" items: LISTED PERSONAL PROPERTY 7. Listed personal property is defined in paragraph 54(e) to mean personal-use property that is all or any portion of, or any interest in or right to, any (a) print, etching, drawing, painting, sculpture, or other similar work of art, (b) jewellery, (c) rare folio, rare manuscript, or rare book, (d) stamp, or (e) coin. So unless you're selling rare books, the disposition (sale) of them is essentially exempt as income, regardless of whether you sold it at a profit or at a loss. If it is rare, then you might be able to consider it a capital loss, which doesn't help you much unless you had other capital gains, but you can carry over capital losses to future years. There's also a newer IT related to hobbies and "collecting" items, IT-334R2. This one says: 11. In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit. Where such an expectation does not exist (as is the case with most hobbies), neither amounts received nor expenses incurred are included in the income computation for tax purposes and any excess of expenses over receipts is a personal or living expense, the deduction of which is denied by paragraph 18(1)(h). On the other hand, if the hobby or pastime results in receipts of revenue in excess of expenses, that fact is a strong indication that the hobby is a venture with an expectation of profit; if so, the net income may be taxable as income from a business. The current version of IT-504, Visual Artists and Writers, discusses the concept of "a reasonable expectation of profit" in greater detail. Where a hobby consists of collecting personal-use property or listed personal property, dispositions should be accounted for as described in the current version of IT-332, Personal-Use Property. (emphasis mine) In other words, if it's not the type of thing where you'd make a tax deduction when you bought it in the first place, then you clearly don't need to report it as income when you sell it. Just to be absolutely clear here: The fact that you are selling them at a loss is not actually what's important here. What's important is that, if the books aren't collectibles, then you would have had no expectation of profit. If you did have that expectation then you could have made a tax deduction when you first purchased them. So in this case, it is probably not necessary for you to report the income; however, for the benefit of other readers, in some cases you might need to report it under "other income" or book it as a capital gain/loss, depending on what those personal items are and whether or not you made a net profit. |
Learning investment--books to read? Fundamental/Value/Motley Fool | You are smart to read books to better inform yourself of the investment process. I recommend reading some of the passive investment classics before focusing on active investment books: If you still feel like you can generate after-tax / after-expenses alpha (returns in excess of the market returns), take a shot at some active investing. If you actively invest, I recommend the Core & Satellite approach: invest most of your money in a well diversified basket of stocks via index funds and actively manage a small portion of your account. Carefully track the expenses and returns of the active portion of your account and see if you are one of the lucky few that can generate excess returns. To truly understand a text like The Intelligent Investor, you need to understand finance and accounting. For example, the price to earnings ratio is the equity value of an enterprise (total shares outstanding times price per share) divided by the earnings of the business. At a high level, earnings are just revenue, less COGS, less operating expenses, less taxes and interest. Earnings depend on a company's revenue recognition, inventory accounting methods (FIFO, LIFO), purchase price allocations from acquisitions, etc. If you don't have a business degree / business background, I don't think books are going to provide you with the requisite knowledge (unless you have the discipline to read textbooks). I learned these concepts by completing the Chartered Financial Analyst program. |
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. |
On what dates do the U.S. and Canada release their respective federal budgets? | In the US there is no set date. If all goes well there are multiple dates of importance. If it doesn't go well the budget process also may include continuing resolutions, shutdowns, and sequestrations. |
Good habits pertaining to personal finance for someone just getting started? | nan |
How does Yahoo finance adjust stock data for splits and dividends? | For stock splits, let's say stock XYZ closed at 100 on February 5. Then on February 6, it undergoes a 2-for-1 split and closes the day at 51. In Yahoo's historical prices for XYZ, you will see that it closed at 51 on Feb 6, but all of the closing prices for the previous days will be divided by 2. So for Feb 5, it will say the closing price was 50 instead of 100. For dividends, let's say stock ABC closed at 200 on December 18. Then on December 19, the stock increases in price by $2 but it pays out a $1 dividend. In Yahoo's historical prices for XYZ, you will see that it closed at 200 on Dec 18 and 201 on Dec 19. Yahoo adjusts the closing price for Dec 19 to factor in the dividend. |
Covered call when stock position is at a loss | If your shares get called on stock at a price below what you paid for the stock, your gain or loss depends on what premium you got for the options you sold. "can I deliver shares at that assigned strike using margin or additional capital if I have it? Can the broker just take care of it and let me collect the time premium? " You don't need margin or any cash because you already hold the shares. A covered call means your cash requirements are 'covered'. So they'll just buy your shares at the strike price of $50. And you still get to keep the premium (which you should have gotten when you sold the covered call). You only need cash or margin when you've sold an uncovered call or put. |
Do corporate stock splits negate share repurchase programs? | No, I think you are misunderstanding the Math. Stock splits are a way to control relatively where the price per share can be for a company as companies can split or reverse split shares which would be similar to taking dimes and giving 2 nickels for each dime, each is 10 cents but the number of coins has varied. This doesn't create any additional value since it is still 10 cents whether it is 1 dime or 2 nickels. Share repurchase programs though are done to prevent dilution as executives and those with incentive-stock options may get shares in the company that increase the number of outstanding shares that would be something to note. |
Which field should I use for getting the income yield of this bond ETF? | What you want is the distribution yield, which is 2.65. You can see the yield on FT as well, which is listed as 2.64. The difference between the 2 values is likely to be due to different dates of updates. http://funds.ft.com/uk/Tearsheet/Summary?s=CORP:LSE:USD |
What steps should be taken, if any, when you find out your home's market value is underwater, i.e. worth less than the mortgage owed? | Do you still enjoy living in your home? Can you afford the mortgage payments? Is there a reason for you to move, such as a relocation for work, or your third kid is on the way and your current house is already crowded with two? Those questions are more important than "Is my home worth more than what I owe on it". Ultimately, it's your home. You probably chose it for more than just its price, and those qualities should still make it valuable to you in some way beyond the monetary value which goes up and down with the market. You have a few options: |
As a Brit, how do I invest in US ETFs | Vanguard has just recently started listing its funds in London but it doesn't look like the High Dividend Yield ETF is available yet. You'll need to either get a broker who can trade on the U.S. markets (there might be tax and exchange rate complications), or wait until Vanguard lists this stock on the London exchange. |
Stock trading after a crash | There are two things going on here, neither of which favors this approach. First, as @JohnFx noted, you should be wary of the sunk-cost fallacy, or throwing good money after bad. You already lost the money you lost, and there's no point in trying to "win it back" as opposed to just investing the money you still have as wisely as possible, forgetting your former fortune. Furthermore, the specific strategy you suggest is not a good one. The problem is that you're assuming that, whenever the stock hits $2, it will eventually rebound to $3. While that may often happen, it's far from guaranteed. More specifically, assuming the efficient market hypothesis applies (which it almost certainly does), there are theorems that say you can't increase your expected earning with a strategy like the one you propose: the apparent stability of the steady stream of income is offset by the chance that you lose out if the stock does something you didn't anticipate. |
How to send money across borders physically and inexpensively, but not via cash? | Traveller's cheques. That's exactly what they were intended for. Their usage has dropped a lot since everyone can use ATMs in foreign countries, but they still exist. |
Digital envelope system: a modern take | While Googling answers for a similar personal dilemma I found Mvelopes. I already have a budget but was looking for a digital way for my husband and I to track our purchases so we know when we've "used the envelope". It's a free app. |
Are buyouts always for higher than the market value of a stock? | Buyouts are usually for more than the ORIGINAL value of a stock. That's because the price "premium" represents an incentive for holders to "tender" their shares to the would-be buyer. Sometimes in these situations, the stock price rises above the proposed buyout price, in anticipation of a higher takeover bid from a SECOND party (that may or may not materialize). To answer the other part of the question, does a bidder have a chance of taking over a dying company for less than the market price? That is a strategy sometimes referred to as a "take under," and it has not been a notably successful strategy. That's because it goes against "human nature" (of the seller). "Where there is life, there is hope." They would seldom accept a lower price for "sure" survival, when the market is telling them that they are worth a higher price. Very few people realize that the market may disappear tomorrow. Think of all the homeowners who won't cut their price, but insist on bids that meet recent "comps." And if the company is really dying, the prospective buyer may be best served by waiting until it does, and then pick up the individual pieces at auction. |
Why do stocks gap up after a buyout is announced? | The price gaps up because the offer is for a price above the current price. Therefore people want to buy now before the price jumps to the offer level. Of course it does depend on the tone of the announcement, which party is making the announcement, and are they announcing an offer or a deal. If the price is $10, and the offer is for $12; then the price may quickly jump. The early buyers will make the most quick money. They hope that the deal is done quickly, or if not the final price ends up higher. There are risks. The company could reject the offer. The due diligence could expose a problem. The regulators could reject the deal based on anti-trust issues. The deal could take many months to complete. Or the final deal could be for shares in the new company. The risks are one reason people sell after the deal/offer is announced. In other cases the seller finally is seeing a profit, or a smaller loss and wants out while they can. |
The Benefits/Disadvantages of using a credit card | One of the more subtle disadvantages to large credit card purposes purchases (besides what the other answer mentions), is that it makes you less prepared for emergencies. If you carry a large balance on your credit card with the idea that your income can easily handle the payments to beat the no-interest period, you never know when you'll have an unexpected emergency and you'll end up having to pay less, miss the deadline and end up paying huge interest. Even if you are fastidious about saving and budgeting, what if your family comes under a large financial burden (just as one possible example)? |
How does a brokerage firm work? | Brokerages offer you the convenience of buying and selling financial products. They are usually not exchanges themselves, but they can be. Typically there is an exchange and the broker sends orders to that exchange. The main benefit that brokers offer is a simpler commission structure. Not all brokers have their own liquidity, but brokers can have their own allotment of shares of a stock, for example, that they will sell you when you make an order, so that you get what you want faster. Regarding accounts at the exchanges to track actual ownership and transfer of assets, it is not safe to assume thats how that works. There are a lot of shortcomings in how the actual exchange works, since the settlement time is 1 - 3 business days, depending on the product (so upwards of 5 to 6 actual days). In a fast market, the asset can change hands many many times making the accounting completely incorrect for extended time periods. Better to not worry about that part, but if you'd like to read more about how that is regulated look up "Failure To Deliver" regulations on short selling to get a better understanding of market microstructure. It is a very antiquated system. |
What return are you getting on your money from paying down a mortgage on a rental property? | There are a few ways to look at this question. Assumptions. Per the original post's assumptions, this answer: In other words, if the owner paid the mortgage on its original schedule, the deal could boil down to a $ 40,000 up-front payment, in exchange for $ 200,000 of equity after 30 years. Or the deal could boil down to a $ 40,000 up-front payment, in exchange for a $ 810.70 monthly payment starting in 30 years. While the owner is paying down the mortgage, the return on equity is the principal payment divided by the equity. The principal payment is the net rent minus non-financing costs and interest, so it is actually a profit. The initial return on equity is 6.321 % APR, or 6.507 % APY. This is calculated by dividing the $ 210.70 monthly principal payment by the initial $ 40,000 equity, and converting from monthly return to annual return. After 30 years, the return on equity is 4.864 % APR, or 4.974 % APY. This is calculated by dividing the $ 810.70 monthly cash flow (which is no longer reduced by mortgage payments) by the $ 200,000 equity after 30 years, and converting from monthly return to annual return. The cap rate is the same as the return on equity in the absence of debt. In this example, 4.864 % APR, or 4.974 % APY. The return on equity declines from 6.507 % APY initially to 4.974 % APY after 30 years. This is because the cap rate exceeds the note rate (4.974 % APY vs. 4.594 % APY), and the leverage decreases from 5x to 1x. The weighted average compound annual growth rate of the equity during the 30 years is 5.511 % APY. Per the original poster's answer, this is computed by taking the 30th root of the 5-fold increase in equity. Because the owner made no extra principal payments (besides those already discussed), the relevant amounts are the initial $ 40,000 owner payment and the final $ 200,000 owner equity. 5.511 % APY corresponds to a 5.377 % APR. The internal rate of return if the owner never sells can be computed by treating the deal as a $ 40,000 up-front payment, in exchange for an $ 810.70 monthly payment starting in 30 years. The internal rate of return (IRR) is not a very useful number, because it assumes that you can somehow reinvest the eventual dividends at the same rate. In this example, the IRR is 5.172 % APR, or 5.296 % APY. In this example, the IRR is calculated by (iteratively) finding an interest rate for which (initial investment) * (1 + IRR) ^ (number periods before dividends start) = (periodic dividend) / (IRR - growth rate of dividend). For example: $ 40,000 * (1.004309687)^360 = $ 810.70 / (0.004309687 - 0) = $ 188,111 I then converted the 0.431 % monthly IRR to an annual IRR. The deal can be thought of as a return on equity, plus a return on paying down the mortgage. When computing the return from paying down the mortgage, the initial equity is irrelevant. It does not matter whether you start with a $ 160,000 mortgage on a $ 160,000 property, a $ 160,000 mortgage on a $ 200,000 property, or a $ 160,000 mortgage on a $ 1,000,000 property. All that matters is the note rate on the mortgage, which is the applicable compound interest rate. The return on paying down the mortgage equals the note rate of the mortgage. For a 4.5% note rate, this works out to a 4.594% annual percentage yield (APY). You can confirm this by looking at your amortization schedule. Suppose you have a $ 160,000 mortgage with a fixed 4.5% APR note rate for 360 months. Your monthly payment is $ 810.70. In the first month, $ 600 goes toward interest, and $ 210.70 reduces the principal. In other words, the $ 210.70 principal payment eliminated the need for a $ 810.70 payment 30 years later. Notice that: . $ 210.70 * (1 + 0.045 / 12)^360 = $ 210.70 * (1.00375)^360 = $ 210.70 * 3.8477 = $ 810.71 which is within rounding error of $ 810.70. The interest rate is 3/8 % per month, which is an APR of 4.5%, and an APY of 4.594 %. |
Why is the stock market price for a share always higher than the earnings per share? | When you buy a stock, you're really paying for a STREAM of earnings, from now till whenever. The job of an investor is to figure out how large that stream will be in the future. But if the stock price were the same as "earnings" (for one year), it would mean that you would get all future earnings for "free." That's not likely to happen unless 1) the company is in liquidation," meaning "no future" and 2) it earned ALL of the money it ever earned in the past year, meaning "no past." If there are likely to be any earnings in the future, you will have to pay for those future earnings, over and above what was earned in the most recent year. |
Buying Fixed Deposit in India from Europe | You could go further and do a carry trade by borrowing EUR at 2% and depositing INR at 10%. All the notes above apply, and see the link there. |
What does it mean for a normal citizen like me when my country's dollar value goes down? | This may make Australian exports cheaper, which can be a good thing. However it is at the expense of making imports more expensive. Look to Japan, which is devaluing their currency, and is a large importer of energy: I wont say its bad or unnecessary to hold money in other currencies. However, keep in mind that all AUD-denominated assets will, or at least should, rise as the currency falls. If just AUD/USD falls this may not apply, but if AUD is weakened all around it should hold true. Again, look to Japan, where the Nikkei is closely correlated with the strength of the yen: Another possibility is to buy gold which should rise in AUD terms but other forces are at work with gold price so some would not agree with this. |
On what dates do the U.S. and Canada release their respective federal budgets? | To the best of my knowledge, there's no firm date requirement. The fiscal year for the US Federal Government starts on October 01, but if my memory serves me right, last time a budget was approved before the fiscal year started was during the Clinton administration. |
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. |
How do I resolve Free Fillable Tax Form error F1040-524-01? | Buried on the IRS web site is the "Fillable Forms Error Search Tool". Rather than including an explanation of errors in the rejection email itself, you're expected to copy and paste the error email into this form, which gives more details about what's wrong. (Don't blame me; I didn't design it.) If I copy your error message in, here's the response I get: There is an error with the “primary taxpayer’s Date of Birth” in Step 2 Section 4. The date of birth that was entered does not match IRS records. Make sure you enter the correct birth date, in the correct format, in the correct space. Scroll down, and enter the current date (“Today’s date”). Today’s date is the day you intend to e-file the return again. Also, if you are making an electronic payment you must re-date that section. E-File your return. You say that you've already checked your birthday, so I don't know as this is particularly helpful. If you're confident that it's correct and in the right place, I think your next step needs to be contacting the IRS directly. They have a link at the bottom of the error lookup response on how to contact them specifically about their solution not working, or you could try contacting your local IRS office or giving them a call. |
Organizing finances and assigning a number to each record type | Mint.com does a pretty good job at this, for a free service, but it's mostly for personal finance. It looks at all of your transactions and tries to categorize them, and also allows you to create your own categories and filters. For example, when I started using it, it imported the last three months of my transactions and detected all of my 'coffee house' transactions. This is how I learned that I was spending about $90 a month going to Starbucks, rather than the $30 I had estimated. I know it's not a 'system' like an accounting outfit might use, but most accounting offices I've worked with have had their own home-brewed system. |
Are online mortgage lenders as good as local brick-and-mortar ones? | I had a pretty good experience with Lending Tree, although they are a mortgage broker, not a lender themselves. |
Getting financial advice: Accountant vs. Investment Adviser vs. Internet/self-taught? | An accountant should be able to advise on the tax consequences of different classes of investments/assets/debts (e.g. RRSP, TFSA, mortgage). But I would not ask an accountant which specific securities to hold in these vehicles, or what asset allocation (in terms of geography, capitalization, or class (equity vs fixed income vs derivatives vs structured notes etc). An investment advisor would be better suited to matching your investments to your risk tolerance. |
What is the difference between a stock and a bond? | In a sentence, stocks are a share of equity in the company, while bonds are a share of credit to the company. When you buy one share of stock, you own a (typically infinitesimal) percentage of the company. You are usually entitled to a share of the profits of that company, and/or to participate in the business decisions of that company. A particular type of stock may or may not pay dividends, which is the primary way companies share profits with their stockholders (the other way is simply by increasing the company's share value by being successful and thus desirable to investors). A stock also may or may not allow you to vote on company business; you may hear about companies buying 20% or 30% "interests" in other companies; they own that percentage of the company, and their vote on company matters is given that same weight in the total voting pool. Typically, a company offers two levels of stocks: "Common" stock usually has voting rights attached, and may pay dividends. "Preferred" stock usually gives up the voting rights, but pays a higher dividend percentage (maybe double or triple that of common stock) and may have payment guarantees (if a promised dividend is missed in one quarter and then paid in the next, the preferred stockholders get their dividend for the past and present quarters before the common shareholders see a penny). Governments and non-profits are typically prohibited from selling their equity; if a government sold stock it would basically be taxing everyone and then paying back stockholders, while non-profit organizations have no profits to pay out as dividends. Bonds, on the other hand, are a slice of the company's debt load. Think of bonds as kind of like a corporate credit card. When a company needs a lot of cash, it will sell bonds. A single bond may be worth $10, $100, or $1000, depending on the investor market being targeted. This is the amount the company will pay the bondholder at the end of the term of the bond. These bonds are bought by investors on the open market for less than their face value, and the company uses the cash it raises for whatever purpose it wants, before paying off the bondholders at term's end (usually by paying each bond at face value using money from a new package of bonds, in effect "rolling over" the debt to the next cycle, similar to you carrying a balance on your credit card). The difference between the cost and payoff is the "interest charge" on this slice of the loan, and can be expressed as a percentage of the purchase price over the remaining term of the bond, as its "yield" or "APY". For example, a bond worth $100 that was sold on Jan 1 for $85 and is due to be paid on Dec 31 of the same year has an APY of (15/85*100) = 17.65%. Typically, yields for highly-rated companies are more like 4-6%; a bond that would yield 17% is very risky and indicates a very low bond rating, so-called "junk status". |
Why don't institutions share stock recommendations like Wall Street analysts? | Institutions may be buying large quantities of the stock and would want the price to go up after they are done buying all that they have to buy. If the price jumps before they finish buying then they may not make as great a deal as they would otherwise. Consider buying tens of thousands of shares of a company and then how does one promote that? Also, what kind of PR system should those investment companies have to disclose whether or not they have holdings in these companies. This is just some of the stuff you may be missing here. The "Wall street analysts" are the investment banks that want the companies to do business through them and thus it is a win/win relationship as the bank gets some fees for all the transactions done for the company while the company gets another cheerleader to try to play up the stock. |
Do Options take Dividend into account? | No can't make quick bucks. It depends very much on what the strike price was. Dividends which are below 10% of the market value of the underlying stock, would be deemed to be ordinary dividends and no adjustment in the Strike Price would be made for ordinary dividends. For extra-ordinary dividends, above 10% of the market value of the underlying security, the Strike Price would be adjusted. Refer more at NSE India Edit: The Nifty consists of 50 stocks. The largest one has weight of around 8%. So 10% on this will only translate to .8% on index. |
Hypothetical: can taxes ever cause a net loss on otherwise-profitable stocks? | You have a sequence of questions here, so a sequence of answers: If you stopped at the point where you had multiple wins with a net profit of $72, then you would pay regular income tax on that $72. It's a short term capital gain, which does not get special tax treatment, and the fact that you made it on multiple transactions does not matter. When you enter your next transaction that takes the hypothetical loss the question gets more complicated. In either case, you are paying a percentage on net gains. If you took a two year view in the second case and you don't have anything to offset your loss in the second year, then I guess you could say that you paid more tax than you won in the total sequence of trades over the two years. Although you picked a sequence of trades where it does not appear to play, if you're going to pursue this type of strategy then you are likely at some point to run into a case where the "wash sale" rules apply, so you should be aware of that. You can find information on this elsewhere on this site and also, for example, here: http://www.marketwatch.com/story/understanding-the-wash-sale-rules-2015-03-02 Basically these rules require you to defer recording a loss under some circumstances where you have rapid wins and losses on "substantially identical" securities. EDIT A slight correction, you can take part of your losses in the second year even if you have no off-setting gain. From the IRS: If your capital losses exceed your capital gains, the amount of the excess loss that you can claim on line 13 of Form 1040 to lower your income is the lesser of $3,000, ($1,500 if you are married filing separately) |
College student interested in starting a stock portfolio, how much should I invest? | You should invest a trivial (<500$USD) amount of money in a stock portfolio. If you aren't able to make more on the market than the interest rates of your loans, you are losing money. This question has discussed this topic as well. |
Is there a limit on the dollar amount of a personal check? | Like the old American Express commercial: "no preset spending limit". It is really up to the bank(s) in question how big a cheque they are willing to honour. A larger amount would likely be held longer by a receiving institution to ensure that it cleared properly, but nothing written in law (in Canada, that I am aware of). |
Am I responsible for an annual fee on a credit card I never picked up? | Have you signed anything? If not - then tell them you don't know who they are and have not agreed to pay. If you did sign that piece of paper at the airport, then you have probably agreed to pay. Either way, it won't go away. As you've already discovered, ignoring things doesn't make them go away. You should make an effort, as hard as it may be, and call them. Notify them that you have never asked for this card, never activated it, and in fact never had it in your possession. You should stress out that it was issued without your authorization, which is probably illegal. And you wish the account to be closed and the charge reversed. Otherwise it will just grow and make your life miserable. |
Does Joel Greenblatt's “Magic Formula Investing” really beat the market? | In addition to other answers consider the following idea. That guy could have invented say one thousand formulas many years ago and been watching how they all perform then select the one that happened to be beat the market. |
Selling To Close | Absolutely. There is no requirement that an option be in-the-money for you to close out a position. Remember that there are alwayes two sides to a trade - a buyer and a seller. When you bought your option, it's entirely possible that someone else was closing out their long position by selling it to you. |
Need something more basic than a financial advisor or planner | You know how when people called in on the Car Talk radio show (Click and Clack, I miss those guys), and while the caller asked a question about his car, really he needed marital advice? And the hosts would pounce on the part about the disagreement with family member and provide an unexpected answer ("Yeah, the trick to a using a clutch is [...], but really, if you want to learn to drive a stick shift, get your dad out of the car!") So I'm pouncing on the part about the spouse. It sounds like you and your spouse don't always agree on saving and spending, and you want to find a way to agree on saving and spending. If you can find a coach or planner or counselor that you both like and both trust, then go for it. You're looking more for the right personality than a precise job description. Start with exploring what you do agree on: we agree we need to save money, we agree we need to have a spending plan and budget, etc. The right coach will help you get to more agreement -- the job title is less important. |
Can buying REIT's be compared to investing in Real Estate? | well yes but you should also begin to understand the sectoral component of real estate as a market too in that there can be commercial property; industrial property and retail property; each of which is capable of having slightly (tho usually similar of course) different returns, yields, and risks. Whereas you are saving to buy and enter into the residential property market which is different again and valuation principles are often out of kilter here because Buying a home although exposing your asset base to real estate risk isnt usually considered an investment as it is often made on emotional grounds not strict investment criteria. |
Canadian personal finance software with ability to export historical credit card transactions? | If you're willing to use OFX or QIF files, most Canadian banks can spit output more data than 90 days. The files are typically used to import into Quicken-like local programs, but can be easily parsed for your webapp, I imagine. |
Are large companies more profitable than small ones? | This isn't as rigorous as it should be, but may offer some useful insight into how big and small companies differ operationally. Putting Apple aside, larger companies tend to sell larger volumes of products (even if they're MRI devices, or turbines) relative to what smaller companies can sell (obviously, in absolute terms as well). They are also able to negotiate volume discounts as well as payment terms. This allows them to finance sales through their supply chain. However, their large direct competitors are able to do the same thing as well. Competitive forces then drive prices down. Smaller businesses, without these advantages of scale, tend to have to charge higher margins since they have to pay directly (and, if their clients are large businesses, finance the sale). Small businesses still have higher proportional costs of operation. Sadly, my reference here is a study I performed for the South African Revenue Service about ten years ago, and not available online. However, the time taken by a small business to manage admin, tax, HR is a greater proportion of revenue than for larger companies. If the small business is a start-up with big investment from venture finance, then they could subsidise their selling price, run at a loss and try and gain scale. Funnily enough, there is a fantastic article on this by Joel Spolsky (Ben and Jerry's vs. Amazon) For the average highly-competitive smaller company, the best choice is to chase design/quality/premium markets in order to justify the higher margins they have to charge. And that's what makes Apple interesting as a case study. They were a small company in the presence of giants (Intel, Microsoft, IBM). They were "forced" to concentrate on design and premium markets in order to justify their need for higher margins. It almost didn't work but then they broke through. Now they're in the unique position of having gained scale but are still small enough relative to other electronics manufacturers to continue charging that premium (by volume their sales are still relatively small but their margins make them a giant). This type of variation from market to market makes developing some sort of generalised solution very unlikely but the general requirement holds: that smaller companies must charge higher margins in order to create equivalent profits to larger companies which must gain scale through volume. |
Can I use my Roth IRA to start a business? | Read the Forbes article titled IRA Adventures. While it's not the detailed regulations you certainly need, the article gives some great detail and caution. You may be able to do what you wish, but it must be structured to adhere to specific rules to avoid self dealing. Those rules would be known by the custodians who would help you set up the right structure, it's well buried within IRS regs, I'm sure. Last, in general, using IRA funds to invest in the non-traditional assets adds that other layer of risk, that the investment will be deemed non-allowed and/or self-dealing. So, even if you have the best business idea going, be sure you get proper council on this. |
Why could rental costs for apartments/houses rise while buying prices can go up and down? | Average rent rates will typically rise and fall, and are market-dependent just like real estate. In the short term, a collapse in housing like the one we saw in 2008 can induce a spike in rental costs as people walk away or get foreclosed on, and move back into apartments. That then tends to self-adjust, as the people who had been in the apartments find a deal on a foreclosed house and move out. However, one thing I've seen to be near-constant in the apartment business is that a landlord will offer you a deal to get in, then increase the rent on you from year to year until you get fed up and move. This is a big reason I didn't have the same address for two years in a row until I bought my house. The landlord is basically betting that you won't want to deal with the hassle of moving, and so will pay the higher rent rate, even if, when you do the math, it makes more sense to move even to maintain the same rent rate. Eventually though, you do get fed up, look around, find the next good deal, and move, "resetting" your rent rate. I have never, not once in my life, seen or heard of any landlord offering a drop in rent as a "loyalty" move to keep you from going somewhere else. It's considered part of the game; retailers will price match, but most service providers (landlords, but also utility providers) expect a large amount of "churn" in their customer base as people shop around. It averages out. |
Working out if I should be registered as self-employed in the UK | As 'anonymous' already mentioned, I think the correct answer is to go see an accountant. That said, if you are already have to fill in a tax return anyway (ie, you're already a high rate taxpayer) then I don't see why it should be an issue if you just told HMRC of your additional profit via your tax return. I never was in the situation of being employed with a side business in the UK, only either/or, but my understanding is that registering as self employed is probably more suitable for someone who doesn't PAYE already. I might be wrong on this as I haven't lived in the UK for a couple of years but an accountant would know the answer. Of course in either case, make sure that you keep each an every scrap of paper to do with your side business. |
College student - I'm a 'dependent' and my parents won't apply for the Parent PLUS loan or cosign a private loan | I was in a similar (but not quite as bad situation) a couple years ago, and I had a stroke of luck that helped me, but your friend might be able to force a similar situation. My parents refused to take out the huge parent loan (understandably so), but my dad made enough money that I wasn't eligible for much aid. My stroke of luck came when they got divorced; I could refile my FAFSA with only one parent (using my mom with very little income), my aid shot through the roof and nearly covered my undergrad (this happened in California, I don't know if this works in other states). My advice for your friend would be to take the 6 units/part time job option, but do what she can to earn enough to pay her own rent/food/other bills. I think the requirement for filing as an independent is that you supply >50% of your own income. It won't kick in right away, but for next school year this would end up getting her a lot more money from the state/federal governments. For me it was enough to cover my school, food, rent, gas, car payment, and still have a little left over. (I don't know if this is still possible, and I know it doesn't work for graduate school, or if it applies to every state. It might be an option worth pursuing though) |
Question about dividends and giant companies [duplicate] | Dividends are a way of distributing profits from operating a business to the business owners. Why would you call it "wasting money" is beyond me. Decisions about dividend distribution are made by the company based on its net revenue and the needs of future capital. In some jurisdictions (the US, for example), the tax policy discourages companies from accumulating too much earnings without distributing dividends, unless they have a compelling reason to do so. Stock price is determined by the market. The price of a stock is neither expensive nor cheap on its own, you need to look at the underlying company and the share of it that the stock represents. In case of Google, according to some analysts, the price is actually quite cheap. The analyst consensus puts the target price for the next 12 months at $921 (vs. current $701). |
Do I have to explicitly apply for claim of tax rebate u/s 87A in India | If my salary slip says that I will be paying x INR tax this financial year. Then how much minimum investment I need to do to avoid any tax? This rebate is not directly linked to investments. If your total Gross is less than Rs 5 lacs, from the total tax computed, you can claim a rebate of upto Rs 5000. Does salary slip considers this rebate amount? This depends on the company policy. Companies may already factor in the rebate and deduct less tax. However it is important to claim this when you file the Returns, else it would show up as excess tax. There is no provision in the company form 16 to show this. Further if your taxable income becomes more than Rs 5 lacs, due to say other income, you will not be eligible for this rebate and have to pay tax. Do I have to explicitly specify this claim under 87A in my ITR? Yes you have to. If you company has already factored this while deducting tax you will not get any refunds. If the company has not factored this, you will have to claim refund. If above is true, and x is not calculated by considering this rebate amount, As indicated, this is not directly linked to investments. Will this increment of tax rebate from 2000INR to 5000INR will be applicable immediately This is applicable for financial year 2016-2017 for which you would be filing returns in 2017. Edit: If you say Gross salary is say Rs 6 lacs. If you invest 1.5 lacs in 80C. Your Net taxable income is Rs 4.5 lacs. The tax on 4.5 lacs Normal individual less than 60 years will be 10% of 2 lacs. i.e. Rs 20,000. You can then claim Rs 5000 as deduction under 87A and pay only Rs 15,000 [20000-15000]. If your Gross salary is say Rs 2.8 lacs. You don't do any investments, your Net taxable income is Rs 2.8 lacs. The tax would be Rs 3000. You can claim rebate under 87A and not pay any tax. |
What happens to an options contract during an all stock acquisition? | Depends on your contract, cash or shares delivered? If shares, then you get 5 BIG shares. Theres no longer any options. If you sell instantly, theoretically you will net the $10 difference + profit above strike. If cash, same thing just that you get cash $50 less strike. Applies to cash and stock deals Options are binary, never pro-rated. if converted, basically you end up with BIG shares. |
What's the least risky investment for people in Europe? | Putting the money in a bank savings account is a reasonably safe investment. Anything other than that will come with additional risk of various kinds. (That's right; not even a bank account is completely free of risk. Neither is withdrawing cash and storing it somewhere yourself.) And I don't know which country you are from, but you will certainly have access to your country's government bonds and the likes. You may also have access to mutual funds which invest in other countries' government bonds (bond or money-market funds). The question you need to ask yourself really is twofold. One, for how long do you intend to keep the money invested? (Shorter term investing should involve lower risk.) Two, what amount of risk (specifically, price volatility) are you willing to accept? The answers to those questions will determine which asset class(es) are appropriate in your particular case. Beyond that, you need to make a personal call: which asset class(es) do you believe are likely to do better or less bad than others? Low risk usually comes at the price of a lower return. Higher return usually involves taking more risk (specifically price volatility in the investment vehicle) but more risk does not necessarily guarantee a higher return - you may also lose a large fraction of or even the entire capital amount. In extreme cases (leveraged investments) you might even lose more than the capital amount. Gold may be a component of a well-diversified portfolio but I certainly would not recommend putting all of one's money in it. (The same goes for any asset class; a portfolio composed exclusively of stocks is no more well-diversified than a portfolio composed exclusively of precious metals, or government bonds.) For some specifics about investing in precious metals, you may want to see Pros & cons of investing in gold vs. platinum?. |
Can I make my savings keep in check with or beat inflation over a long time period via index funds? | For your base question, yes. (Barring some major collapse-of-civilization event, but in that case you're screwed anyway :-)) On the individual points: 1) Depends on whether you choose to invest in index-type funds (where profit is mainly expected from price appreciation), or more value-based investing. But either or a mix of the two (my own choice) should show returns above inflation, over the long term. 2) Yes, in the US anyway. You can invest a few hundred dollars at a time, and (with good companies like Vanguard & T. Rowe Price) there are no transaction fees, either for investing or for redeeming. 3) Long-term, it's crash-proof IF you have the self-discipline not to panic-sell at market lows. In my case, my total fund valuation dropped around 40% in '08. I didn't sell anything (and in fact tried to cut spending and invest more), and now I have nearly double what I had before the crash. Bottom line is that it has worked for me. After ~30 years of investing this way without being fanatic about it, I have enough that I could live moderately without working for the rest of my life. Not - and this is where I part company with MMM and most of the FIRE community - that I'd ever want to actually retire. But my modest financial independence gives me the freedom to work at things I like, rather than because I'm worrying about paying bills. |
Do I have to explain the source of *all* income on my taxes? | You can report it as illegal income and you don't have to elaborate any further. For instance, spirit the cash off to a state where pot is legal and set up a dispensary. That is not legal at the Federal level, so it is in fact "illegal income" vis-a-vis your Form 1040 and that's all you say. Make sure you look, walk, and quack like a fairly successful pot distributor. That will most likely be the end of their inquiry, since they're not terribly driven to investigate the income you do report. Having to give 33% of it to the IRS is generally strong motivation for folks to not report fake income. You're not claiming the money is from pot, you're allowing them to infer it. |
Which credit card is friendliest to merchants? | Please don't waste any more time feeling bad for merchants for the charges they incur. I don't know who supported the lobby for this rule, but issuers no longer can demand that merchants accept all transactions (even the unprofitable ones). I discussed this at length on my blog. Merchants accept credit cards for one reason, and one reason only: it brings them more business. More people will buy, and on average they'll buy more. They used to take the occasional hit for someone buying a pack of gum with a credit card, but they don't have to anymore. The new law restricts issuers from imposing minimum transactions that are less than $10. I use a rewards card wherever possible. I get a cheaper price. In most cases I don't care what the merchant has to pay. They've already factored it into their prices. But if you are concerned, then as fennec points out in his comment, cash is the way to go. |
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