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Did I get screwed in taxes on a mutual fund dividend payment?
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How is that possible?? The mutual fund doesn't pay taxes and passes along the tax bill to shareholders via distributions would be the short answer. Your basis likely changed as now you have bought more shares. But I gained absolutely nothing from my dividend, so how is it taxable? The fund has either realized capital gains, dividends, interest or some other form of income that it has to pass along to shareholders as the fund doesn't pay taxes itself. Did I get screwed the first year because I bought into the fund too late in the year? Perhaps if you don't notice that your cost basis has changed here so that you'll have lower taxes when you sell your shares. Is anyone familiar with what causes this kind of situation of receiving a "taxable dividend" that doesn't actually increase the account balance? Yes, I am rather familiar with this. The point to understand is that the fund doesn't pay taxes itself but passes this along. The shareholders that hold funds in tax-advantaged accounts like 401ks and IRAs still get the distribution but are shielded from paying taxes on those gains at that point at time. Is it because I bought too late in the year? No, it is because you didn't know the fund would have a distribution of that size that year. Some funds can have negative returns yet still have a capital gains distribution if the fund experiences enough redemptions that the fund had to sell appreciated shares in a security. This is part of the risk in having stock funds in taxable accounts. Or is it because the fund had a negative return that year? No, it is because you don't understand how mutual funds and taxes work along with what distribution schedule the fund had. Do I wait until after the distribution date this year to buy? I'd likely consider it for taxable accounts yes. However, if you are buying in a tax-advantaged account then there isn't that same issue.
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Double-entry accounting: how to keep track of mortgage installments as expenses?
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If your mortgage is an interest only one then the full amount of the payment you make should be to an expense account perhaps called mortgage interest. If the mortgage is a repayment mortgage you need to split the amount of the payment between such an expense account called mortgage interest and between a liability account which is the amount of the loan. In practice I have not found it very easy to do all this as the actual amounts vary depending on number of days in the month and then there are occasional charges etc made by the mortgage company so some approximations seem to be needed unless one is to spend hours trying to get it exactly correct...... Steve
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How to represent “out of pocket” purchases in general ledger journal entry?
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Journal entry into Books of company: 100 dr. expense a/c 1 200 dr. expense a/c 2 300 dr. expanse a/c 3 // cr. your name 600 Each expense actually could be a total if you don´t want to itemise, to save time if you totaled them on a paper. The paper is essentually an invoice. And the recipts are the primary documents. Entry into Your journal: dr. Company name // cr. cash or bank You want the company to settle at any time the balce is totaled for your name in the company books and the company name in your books. They should be equal and the payment reverses it. Or, just partially pay. Company journal: dr. your name // cr. cash or bank your journal: dr. cash or bank // cr. company name Look up "personal accounts" for the reasoning. Here is some thing on personal accounts. https://books.google.com/books?id=LhPMCgAAQBAJ&pg=PT4&dq=%22personal+account%22+double+entry&hl=es-419&sa=X&redir_esc=y#v=onepage&q=%22personal%20account%22%20double%20entry&f=false
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Will a credit card issuer cancel an account if it never incurs interest?
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Remember, the card company gets a percentage at the time of purchase, as well as any interest you let them collect from you. Yes, they're still making a profit on our accounts, and they can always hope that at some point we'll run up a high enough bill to be willing to pay some interest. They may kill completely inactive cards, since they need a bit of income to pay for processing the account. But if you're actively using it, they aren't very likely to tell you to go away (though they may change which plan(s) they offer you).
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Oversimplify it for me: the correct order of investing
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It isn't always clear cut that you should pay off a debt at all, particularly a mortgage. In simple terms, if you are making a better return than what the bank is charging you, and the investment meets your risk criteria, then you should not pay back the debt. In the UK for example, mortgage rates are currently quite low. Around 2.5 - 3% is typical at the moment. On the other hand, you might reasonably expect a long run average return of around 9 - 11% on property (3 - 5% rental yield, and the rest on capital gains). To make the decision properly you need take into account the following:
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Meanings of “price of the derivative”
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@Tim - in this case, a futures contract isn't like an options contract. It's simply a method of entering into an agreement for delivery at a future date. While the speculators appear to have taken over, there are practical examples of use of the futures market. I am a gold miner and I see that my cost is $1200/oz given my quality of ore. I see the price of gold at $1600 and instead of worrying that if it goes too low, I run at a loss, I take advantage and sell contracts to match my production for the next year (or as long as the contracts go, I forget how far out gold futures are). Of course I give up the higher price if gold goes higher, but this scenarion isn't speculation, it's a business decision. The bread maker, on the other hand, might buy wheat futures to guarantee his prices for the next year.
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Do I make money in the stock market from other people losing money?
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Just because your slice of pie gets bigger doesn't necessarily mean someone else's becomes smaller. In a lot of cases it's the entire pie that gets bigger. Why is the pie bigger? More investors (savers turn investors; foreign investments, etc.), more money printed (QE anyone?), Market sentiment changes (stock is priced by perceptions) And it can certainly get smaller.
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What happens if stock purchased on margin plummets below what I have in the brokerage?
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Different brokerages have different house rules for margin requirements and margin calls. You will likely get a margin call giving you a small amount of time to deposit the required funds to bring your account balance up to the required margin requirements. In reality, a stock that falls from $50 to $4 in a short period will probably become unmarginable. In short, yes, you will owe the broker for the loss.
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Tax On Unsold Mined Bitcoin
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Based on my research, the answer is both. You would pay taxes on the bitcoin you mine as income, and then capital gains tax when you sell them for a profit (or capital loss if you lose value on the sale). You can write off a portion of your electricity bill and hardware purchased for the use of mining as a business expense, but it's recommended that you consult a tax professional for determining the proper amount that is eligible for a deduction. From Forbes: New Bitcoin are being issued by the system roughly every 10 minutes by a process called mining. In mining, computers running the Bitcoin software around the world attempt to solve math problems and the first computer to come up with the solution adds the most recent transactions to the ledger of all Bitcoin transactions, plus receives the new bitcoins created by the system, called the block reward. If you are a miner and win the block reward, you must record the fair market value of Bitcoin that day and mark that as an addition to your personal or business income. Also note the date and timestamp at which your coins were mined. Later, when you dispose of those Bitcoin, you will subtract the date of acquisition from the date of disposal, and you will be taxed a long-term capital gains rate on any Bitcoin you held for more than a year, and a short-term capital gains rate on any Bitcoin you held for a year or less. (The timestamp isn’t absolutely necessary, but is helpful to validate the order of multiple acquisitions or disposals within a day.) The amount you pay in taxes on a long-term capital gain will depend on your income-tax bracket, while short-term capital gains are taxed the same as ordinary income. From bitcoin.tax: Another clarification in the IRS's March notice was how mining should be treated. Mining is income, on the day of receipt of any coins and at the fair value of those coins. This means that if you mined any Bitcoins or alt-coins either solo, as part of a pool, or through a cloud provider, you need to report any coins you received as income. Where it is less clear, is what that dollar value might be, since the fair value is not always as easy to determine. Bitcoins, Litecoins, Dogecoins, are all examples of where there is a direct USD market and so you can easily find out their value of any given day. However, a newly created alt-coin that was mined in its early days has no direct market and so how do you determine its value? Or for any alt-coin, e.g. ABC coin, that has no direct USD market but does have a BTC market. Does it have a value? Do you have to make a conversion from ABC to BTC to USD? Since there is no clarification yet from the IRS on this issue you should discuss how to proceed with your own tax professional. BitcoinTaxes has taken a prudent approach and calculates value where a fiat or BTC market exists, converting an alt-coin to BTC to USD as necessary. And from Bitcoin magazine: The IRS also stated mined bitcoins are treated as immediate income at the market value of those mined coins on their date of mining. “Most don’t know they can write off any losses they have,” said Libra founder Jake Benson. “The IRS allows you to offset income by up to $3,000 per year on capital losses. If you have losses and you aren’t writing them off, then it’s like throwing money away. Nobody likes doing taxes, but if you can owe less or increase your return, then doing your Bitcoin taxes often results in a benefit. In fact, the majority of our users are filing a capital loss, which means they’ve actually saved money by using our tool.” Benson also gives insight for miners. “Mining is considered income, so know the price of Bitcoin at the time you mined it,” he said. “If you make money on Bitcoin trading, the IRS requires that you report gains with line level detail.” The appropriate form for that is 8949, a sub-form of schedule D. Gains and losses, as outlined above, are treated like every other capital asset.
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Should I pay off investment property mortgage
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I would not recommend using your own money to pay off something that is not a strong asset. Use the savings where it will have the maximum return. Why not put (some of) the savings into another investment mortgage? Thanks to the leverage your return would be much higher than 5.5%, plus you would have more income.
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Are credit histories/scores international?
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It's not just that credit history is local; it's that it's a private business run for profit. The "big three" credit bureaus in the US are Experian, Equifax and Transunion. They collect information on debt usage and abuse from various companies in the US, and charge a fee to provide that information (and their judgement of you) to companies interested in offering you further credit. But there's nothing stopping a company from collecting international credit histories, or specialized credit histories either (for instance, there's a company called ChexSystems which focuses on retail purchase financing (mostly auto) and checking account abuse, while ignoring other types of lending). That being said, I don't know of any companies which currently collect international credit histories. Perhaps in Europe, with more nations in close geographic proximity, there would be, but not in North America.
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Is selling put options an advisable strategy for a retiree to generate stable income?
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No. In good years, the income seems free. In a down year, particularly a bad one, the investor will be subject to large losses that will prove the strategy a bad one. On the other hand, one often hears of the strategy of selling puts on stock you would like to own. If the stock rises, you keep the premium, if it drops, you own it at a bit of a discount from that starting point.
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Shared groceries expenses between roommates to be divided as per specific consumption ratio and attendance
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The solution to this problem is somewhat like grading on a curve. Use the consumption ratio multiplied by the attendance (which is also a ratio, out of 100 days) to calculate how much each person owes. This will leave you short. Then add together all of the shares in a category, determine the % increase required to get to the actual cost of that category, and increase all the shares by that %.
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Do market shares exhaust?
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Everyone has a price. If nobody is selling shares, then increase the price you will buy them for. And then wait. Somebody will have some hospital bills to pay for eventually. I buy illiquid investments all the time, and thats typically what happens. Great companies do not have liquidity problems.
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Is there a term for total money owed to you?
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Is there a word for that $20k owed? Trade Receivables, Accounts Receivables, or just Receivables Is there a different word for that $30k "hypothetical" total? Current Assets (Includes Inventory and other short term assets)
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Main source of the shares/stocks data on the web
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The main source is a direct feed from the stock market itself. The faster the feed, the more expensive. 15-minute delay is essentially free... and for those of us who do long-term investment is more than adequate. If you want data sooner, sign up with a brokerage that provides that service as part of what you're paying them for... and remember that every bit you spend on services is that much more profit you have to make just to break even, so there's a real tradeoff.
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Automatic transaction on credit card to stay active
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credit cards are almost never closed for inactivity. i have had dozens of cards innactive for years on end, and only one was ever closed on me for inactivity. i would bet a single 1$ transaction per calendar year would keep all your cards open. as such, you could forget automating the process and just spend 20 minutes a year making manual 1$ payments (e.g. to your isp, utility company, google play, etc.). alternatively, many charities will let you set up an automatic monthly donation for any amount (e.g. 1$ to wikipedia). or perhaps you could treat yourself to an mp3 once a month (arguably a charitable donation in the age of file sharing). side note: i use both of these strategies to get the 12 debit card transactions per month required by my kasasa checking account.
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Why do people buy insurance even if they have the means to overcome the loss?
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There are a couple of reasons that a person might choose to use insurance even if they could handle the financial loss if something went wrong. They know their risk better than the insurance company. While it might seem odd at first glance that an individual can be better at assessing risk than a large company with thousands of actuaries. There are limits to the amount of knowledge that an insurance company can have or use to price their insurance products. For instance if you were a very aggressive driver but didn't have any recent tickets or accidents because you were in college and didn't have a car on a regular basis, but now you have a job and drive 30 miles to work every day. You know your risk is relatively high but the insurance company sees you as relatively low risk and aren't able to price that extra risk into your premium. Just because a person can survive financial after losing something like a car or a house doesn't mean it isn't desirable to pay a small price to mitigate that risk. If you are using your savings to pay for an emergency then that money needs to be semi liquid in case you need it limiting your investment options. Where as if you purchase insurance you pay a small amount of money to be able to invest the rest of your money. Liquidity is a big deal particularly if you are a small business and investing into your business where your money can make your more money but you may or may not be able to access that money very easily.
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Do I need to write the date on the back of a received check when depositing it?
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You do not need to write anything on the second line. There are a variety of helpful things that you can add, e.g.: For Deposit Only. This tells the bank to deposit the check into your account and ignore other signatures. Your account number. Especially useful when added to "For Deposit Only". A countersignature. This tells the bank to pay the check to someone other than you. Countersigned checks used to be much more common than they are now. Someone who didn't have a bank account might ask someone who did to cash a check for them. See also: Four ways to endorse a check which gives the correct format for endorsing a check in these ways.
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What are some good ways to control costs for groceries?
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Keep a notebook. (or spreadsheet, etc. whatever works) Start to track what things cost as few can really commit this all to memory. You'll start to find the regular sale prices and the timing of them at your supermarkets. I can't even tell you the regular price of chicken breasts, I just know the sale is $1.79-1.99/lb, and I buy enough to freeze to never pay full price. The non-perishables are easy as you don't have to worry about spoilage. Soap you catch on sale+coupon for less than half price is worth buying to the limit, and putting in a closet. Ex Dove soap (as the husband, I'm not about to make an issue of a brand preference. This product is good for the mrs skin in winter) - reg price $1.49. CVS had a whacky deal that offered a rebate on Dove purchase of $20, and in the end, I paid $10 for 40 bars of soap. 2 yrs worth, but 1/6 the price. This type of strategy can raise your spending in the first month or two, but then you find you have the high runners "in stock" and as you use products from the pantry or freezer, your spending drops quite a bit. If this concept seems overwhelming, start with the top X items you buy. As stated, the one a year purchases save you far less than the things you buy weekly/monthly.
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Opportunity to buy Illinois bonds that can never default?
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If Illinois cannot go bankruptcy This is missing a few, very important words, "...under current law." The United States changed the law so as to allow Puerto Rico to go into a form of bankruptcy. So you cannot rely on a lack of legal support for bankruptcy to protect any bond investments you might make in Illinois. It is entirely possible for the federal government to add a law enabling a state to discharge its debts through a bankruptcy process. That's why the bonds have been downgraded. They are still fine now, but that could change at any time. I don't want to dive too deep into the politics on this stack, but I could quite easily see a bargain between US President Donald Trump and Democrats in Congress where he agreed to special privileges for pension debts owed to former employees in exchange for full discharge of all other debts. That would lead to a complete loss of value for the bonds that you are considering. There still seem to be other options now, but they seem to be getting closer and closer to that.
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Which practice to keep finances after getting married: joint, or separate?
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Echoing Justkt, different approaches will work for different couples. It also depends on your background, life experience, age, maturity.... Irrespective of the structure, any agreement must be based on a thorough understanding of the mechanism by which responsibility and accountability is apportioned. As in any financial relationship, when money is plentiful and covers all ends, then conflict hardly ever arises. Problems only turn up when money vanishes. Business contracts are written with a view to such conflicts and agreements within a marriage must be equatable and based on a shared understanding. So, don't worry too much about the structure. Think about thinkgs like the following: In other words, given that income between spouses is likely to be unbalanced, how do you manage this within a caring relationship so that neither feels like a charity case, a social worker, or dependent? There will not be one clear answer except that open and honest discussion on an ongoing bases can only serve to strengthen your relationship.
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How is the Dow divisor calculated?
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Have you actually read the Wikipedia article? To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. Early on, the initial divisor was composed of the original number of component companies; which made the DJIA at first, a simple arithmetic average. The present divisor, after many adjustments, is less than one (meaning the index is larger than the sum of the prices of the components). That is: DJIA = sum(p) / d where p are the prices of the component stocks and d is the Dow Divisor. Events such as stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow Divisor is updated so that the quotations right before and after the event coincide: DJIA = sum(p_old) / d_old = sum(p_new) / d_new The Dow Divisor was 0.14602128057775 on December 24, 2015.[40] Presently, every $1 change in price in a particular stock within the average, equates to a 6.848 (or 1 ÷ 0.14602128057775) point movement. Knowing the old prices, new prices (e.g. following a split), and old divisor, you can easily compute the new divisor... Edit: Also, the detailed methodology is published by SP Indices (PDF). Edit #2: For simplicity's sake, assume the DJIA is an index that contains 4 stocks, with a price of $100.00 each. One of the stocks splits 2:1, meaning the new price/share is $50.00. Plugging the numbers into the above equation, we can determine the new Dow Divisor: 400 / 4 = 350 / d => d = 3.5
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Why do car rental companies prefer/require credit over debit cards?
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A few reasons make sense: They have a defined process for rentals, risk assessment, and customer credit. Especially for a large corporation, making changes to that process is not trivial, adds risk/uncertainty, and will be costly. Such changes for a relatively small customer base might not makes sense. Many rental companies DO allow you to rent with a debit card. Why do some businesses take cash only? With a debit card, there is no third party guarantee. With a credit card, the cash is coming from a well-established third party who will pay (assuming no disputes) and has a well-established history of paying. Even if the merchant holds your account, it is still your cash under the control of you and your bank until the deposit clears the merchants bank. It is not surprising they view that as more risk and potentially not worth hassling with debit.
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What is meant by a market that is technically strong
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A technically strong stock or market is simply a stock or market which is up-trending and has been up-trending for a while. Just as a fundamentally strong stock is one with good fundamentals (a stock that is healthy and making higher profits year after year and continually improving), a technically strong stock has a healthy uptrend that continues to go up and up. Apple was technically strong until it hit $700 (its price stayed above the 200 day MA for a long period until after it hit $700, then broke down through the 200 day MA shortly after - the uptrend was over). I will usually buy stocks which are both fundamentally and technically strong, as a technically strong stock will generally stay technically strong longer if it also has strong and good fundamentals.
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Are precious metals/collectibles a viable emergency fund?
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People normally hold precious metals as a protection against the whole system going down: massive inflation, lawlessness, etc. If our whole government and financial system broke completely and we returned to a barter economy, then holding silver would likely turn out to be a good thing. However, precious metals are not very good hedges against individual calamity, like losing your job. They are costly and inconvenient to sell and the price of these metals fluctuates wildly, so you could end up wanting to sell just when the metal isn't worth much. I'd say having some precious metal isn't unreasonable, but it should not make up a major portion of one's total net worth. If you want protection against normal problems, especially as a person of limited means, start with an emergency savings account and paying down debt. That way fixed costs will be less likely to turn an unfortunate turn of events into a personal catastrophe.
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Can you recommend some good websites/brokers for buying/selling stocks in India?
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API wise there's just one at the retail level: Interactive Brokers (India). Brokerage is high though - 3.5 bps for F&O and 5 bps for cash. I've used Sharekhan (good, can get to 2 bps brokerage, trading client software, no API). Also used multiple other brokerages, and am advising a new one, Zerodha http://www.zerodha.com. API wise the brokers don't provide it easily to retail, though I've worked with direct access APIs at an institutional level.
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Why would anyone want to pay off their debts in a way other than “highest interest” first?
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I recently paid off a line of credit on an investment property that I own. I had some surplus cash and decided to pay off the line of credit rather than to make a principal payment on the primary mortgage with a higher interest rate. The interest rate on the line of credit was tiny and the balance was also pretty low. My reasoning was that by paying off the line of credit I would be done with that account and would have one less bill to pay each month, one less risk of something going wrong and a late payment hurting my credit, one less statement to reconcile each month, and one less bookkeeping core to manage. I could have grown my net worth by few couple of dollars each month had I kept the line of credit and made a principal payment on the primary loan. I judged that it wasn't worth the hassle and risks.
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Why do people build a stock portfolio if one could get a higher return from bank interest than dividend per annum?
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Large companies whose shares I was looking at had dividends of the order of ~1-2%, such as 0.65%, or 1.2% or some such. My savings account provides me with an annual return of 4% as interest. Firstly inflation, interest increases the numeric value of your bank balance but inflation reduces what that means in real terms. From a quick google it looks like inflation in india is currently arround 6% so your savings account is losing 2% in real terms. On the other hand you would expect a stable company to maintain a similar value in real terms. So the dividend can be seen as real terms income. Secondly investors generally hope that their companies will not merely be stable but grow in value over time. Whether that hope is rational is another question. Why not just invest in options instead for higher potential profits? It's possible to make a lot of money this way. It's also possible to lose a lot of money this way. If your knowlage of money is so poor you don't even understand why people buy stocks there is no way you should be going near the more complicated financial products.
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Risk to Reward Ratio Calculation
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If you plan to take profit at $1.00 then your profit will be $40. Then, if you set your stop at $0.88 then your loss if you get stopped will be $20. So your Reward : Risk = 2:1. Note, that this does not take into account brokerage in and out and any slippage from the price gapping past your stop loss.
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Why I cannot buy at ask price?
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The price is moving higher so by the time you enter your order and press buy, a new buyer has already come in at that time and taken out the lowest ask price. So you end up chasing the market as the prices keep moving higher. The solution: if you really want to be sure that you buy it and don't want to keep chasing the market higher and higher, you should put in a market order instead of a limit order. With a market order you may pay a few cents higher than the last traded price but you will be sure to have your order filled. If you keep placing limit orders you may miss out altogether, especially if the price keeps moving higher and higher. In a fast moving market a market order is always best if your aim is to be certain to buy the stock.
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Advice on preserving wealth in a volatile economic/political country
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You might find some of the answers here helpful; the question is different, but has some similar concerns, such as a changing economic environment. What approach should I take to best protect my wealth against currency devaluation & poor growth prospects. I want to avoid selling off any more of my local index funds in a panic as I want to hold long term. Does my portfolio balance make sense? Good question; I can't even get US banks to answer questions like this, such as "What happens if they try to nationalize all bank accounts like in the Soviet Union?" Response: it'll never happen. The question was what if! I think that your portfolio carries a lot of risk, but also offsets what you're worried about. Outside of government confiscation of foreign accounts (if your foreign investments are held through a local brokerage), you should be good. What to do about government confiscation? Even the US government (in 1933) confiscated physical gold (and they made it illegal to own) - so even physical resources can be confiscated during hard times. Quite a large portion of my foreign investments have been bought at an expensive time when our currency is already around historic lows, which does concern me in the event that it strengthens in future. What strategy should I take in the future if/when my local currency starts the strengthen...do I hold my foreign investments through it and just trust in cost averaging long term, or try sell them off to avoid the devaluation? Are these foreign investments a hedge? If so, then you shouldn't worry if your currency does strengthen; they serve the purpose of hedging the local environment. If these investments are not a hedge, then timing will matter and you'll want to sell and buy your currency before it does strengthen. The risk on this latter point is that your timing will be wrong.
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Buying a more expensive house as a tax shelter (larger interest deduction)?
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Depending on the state you live in paying interest on a mortgage opens up other tax deduction options: Real estate taxes, Car tax, donations. See schedule A http://www.irs.gov/pub/irs-pdf/f1040sa.pdf The shocking bottom line is that it never works to your advantage in the short term. Owning your house: But there are big risks, ask anybody stuck with a house they can't sell. But it doesn't scale. You spend 10K more to save 2.5K in taxes. Buy because you want to, not to reduce taxes.
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Why would you ever turn down a raise in salary?
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I probably wouldn't turn down a raise, but there are some circumstances in which you might hesitate. Having a disproportionately high salary for your type of role or the value you are providing to the company makes you an attractive layoff target in an economic downturn. I've heard anecdotally of lots of corporate lawyers getting laid off because they were getting raises every year, and ended up with such ridiculous salaries that when the economy went south, the company basically asked "why are we paying these people so much?" Same thing happens in lots of places - Circuit City lays off the experienced, highly-paid salespeople and brings in cheap-o high school students (that didn't work out well for them, but they did it anyway). Still, even knowing that, I'd accept the pay raise. You're making more money the whole time you're employed, and prior salary is the biggest predictor of the salary you can negotiate at a new position.
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How does a high share price benefit a company when it is raising funds?
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Share price is based on demand. Assuming the same amount of shares are made available for trade then stocks with a higher demand will have a higher price. So say a company has 1000 shares in total and that company needs to raise $100. They decide to sell 100 shares for $1 to raise their $100. If there is demand for 100 shares for at least $1 then they achieve their goal. But if the market decides the shares in this company are only worth 50 cents then the company only raises $50. So where do they get the other $50 they needed? Well one option is to sell another 100 shares. The dilution comes about because in the first scenario the company retains ownership of 900 or 90% of the equity. In the second scenario it retains ownership of only 800 shares or 80% of the equity. The benefit to the company and shareholders of a higher price is basically just math. Any multiple of shares times a higher price means there is more value to owning those shares. Therefore they can sell fewer shares to raise the same amount. A lot of starts up offer employees shares as part of their remuneration package because cash flow is typically tight when starting a new business. So if you're trying to attract the best and brightest it's easier to offer them shares if they are worth more than those of company with a similar opportunity down the road. Share price can also act as something of a credit score. In that a higher share price "may" reflect a more credit worthy company and therefore "may" make it easier for that company to obtain credit. All else being equal, it also makes it more expensive for a competitor to take over a company the higher the share price. So it can offer some defensive and offensive advantages. All ceteris paribus of course.
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Should you always max out contributions to your 401k?
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My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more.
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Correct way to amend tax return as a result of not correctly reporting gains on sale of private stock based on Installment method?
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After much research, the answer is "a": recompute the tax return using the installment sales method because (1) the escrow payment was subject to "substantial restrictions" by virtue of the escrow being structured to pay buyer's indemnification claims and (2) the taxpayer did not correctly elect out of the installment method by reporting the entire gain including the escrow payments on the return in the year of the transaction.
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How to understand expenses matter relative to investment type for mutual funds?
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The net return reported to you (as a percentage) by a mutual fund is the gross return minus the expense ratio. So, if the gross return is X% and the expense ratio is Y%, your account will show a return of (X-Y)%. Be aware that X could be negative too. So, with Y = 1, If X = 10 (as you might get from a stock fund if you believe historical averages will continue), then the net return is 9% and you have lost (Y/X) times 100% = 10% of the gross return. If X = 8 (as you might get from a bond fund if you believe historical averages will continue), then the net return is 7% and you have lost (Y/X) times 100% = 12.5% of the gross return. and so on and so forth. The numbers used are merely examples of the returns that have been obtained historically, though it is worth emphasizing that 10% is an average return, averaged over many decades, from investments in stocks, and to believe that one will get a 10% return year after year is to mislead oneself very badly. I think the point of the illustrations is that expense ratios are important, and should matter a lot to you, but that their impact is proportionately somewhat less if the gross return is high, but very significant if the gross return is low, as in money-market funds. In fact, some money market funds which found that X < Y have even foregone charging the expense ratio fee so as to maintain a fixed $1 per share price. Personally, I would need a lot of persuading to invest in even a stock fund with 1% expense ratio.
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Is it smart to only invest in mid- and small-cap stock equity funds in my 401(k)?
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Your initial premise (mid-cap and small-cap company stocks have outperformed the market) is partially correct - they have, over many 40 yr periods, provided higher returns than large caps (or bond funds). The important thing to consider here is that risk adjusted, the returns from a diversified portfolio are far more robust - with proper asset allocation you and expect high returns and reduce your risk simultaneously. Imagine this scenario - you decide to stick to small / mid caps for 10 - 15 yrs and move into a more diversified portfolio then. Had you made that decision during a sustained period of poor small cap performance (late 80s or the 40's) you would have lost a boatload of return, as those were periods were small / mids underperformed the market as a whole, and large caps in particular. As an example, from 1946 to 1958 large caps outperformed small every single year. If 2016 were to be the first year of a similar trend, you've done yourself a major disservice. Since the dot com crash small /mids have outperformed for sure, pretty much every year - but that doesn't mean that they will continue to do so. The reason asset allocation exists is precisely this - over a 40 yr period, no single asset class outperforms a diversified portfolio. If you attempt to time the market, even if you do so with a multi-decade time horizon in mind, there a good chance that you will do more poorly.
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Track uninvoiced (pre-invoiced?) expected income in Quicken
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You are right on track with your idea of setting up a separate account for invoiced income. Create a new account with the type other asset and call it "Receivables" (or something similar). Every time you invoice a client, enter a credit to this account with the amount of the invoice. Once the client pays and you deposit a check, enter a transfer from the "Receivables" account to the bank account. EDIT I overlooked that you wish to account for not-yet-invoiced income. I think that's a bad idea. It will become confusing and will give you the false sense that your financial condition is better than it really is. There are plenty of stories about businesses that have stellar sales, but fail because of lack of cash flow (the business' bills become due before it gets paid by its own customers).
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How can I stop wasting food?
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Buy products that can be stored for a long time or require thorough thermal processing. For example, you can buy frozen chicken meat in two pounds packs - it can be stored in a freezer for half a year, then you roast it and after it cools down you can put it into a fridge and it will last for up to ten days. Just about anything that you've roasted or boiled for several dozens minutes can be stored in a fridge for at least five days - its taste will get slightly worse over time, but it still preserves nutrition value and is safe to eat.
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How can I determine how much my car insurance will cost me?
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The best way to determine how much it will cost you is to call the insurance companies to get a quote from them for all the vehicles that you are planning on purchasing. They will have a set amount depending on the year/make/model of the car combined with all your personal details like where you live, age, sex, occupation. There are many online sites where you an get quotes as well, though talking with a rep may be the better option since you have a lot of questions. If you are still living with your parents, you may be able to get a cheaper rate with that company as you might qualify for a multi-vehicle discount or combined property/vehicle insurance with them. You might also be able to get a better rate since you were probably insured as a secondary driver with that company for several years. The cost of your auto insurance will depend also on what type of premium you choose. For instance, it will be cheaper if you opt to only purchase 3rd party liability insurance (which only covers the cost of repairing the 3rd party's vehicle - ie the person you hit). You may also get discounts for having certain (optional) safety equipment/options - like snow tires. You will need to have your insurance purchased and sorted out before you are able to drive your car out of the dealership. For a male with ~10 years driving experience and a clean record. You could probably find something good for about $120 a month. Of course, this depends on the many factors listed above.
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Reason for “qualified” buyer requirements to exercise stock options/rights spun off from parent company?
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The fact that your shares are of a Canadian-listed corporation (as indicated in your comment reply) and that you are located in the United States (as indicated in your bio) is highly relevant to answering the question. The restriction for needing to be a "qualified institutional buyer" (QIB) arises from the parent company not having registered the spin-off company rights [options] or shares (yet?) for sale in the United States. Shares sold in the U.S. must either be registered with the SEC or qualify for some exemption. See SEC Fast Answers - Securities Act Rule 144. Quoting: Selling restricted or control securities in the marketplace can be a complicated process. This is because the sales are so close to the interests of the issuing company that the law might require them to be registered. Under Section 5 of the Securities Act of 1933, all offers and sales of securities must be registered with the SEC or qualify for some exemption from the registration requirements. [...] There are regulations to follow and costs involved in such registration. Perhaps the rights [options] themselves won't ever be registered (as they have a very limited lifetime), while the listed shares might be? You could contact investor relations at the parent company for more detail. (If I guessed the company correctly, there's detail in this press release. Search the text for "United States".)
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What is a good way to keep track of your credit card transactions, to reduce likelihood of fraud?
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There are some tools that might help you. For example, I have an "Expense It" application on my iPhone, where I can type in a purchase while still at the cashier, the idea is to track expenses on a trip, but the implementation will suit your needs perfectly. Keeping slips is a way to go too, but I personally don't like that because I'm a messy person and after a couple of days all the receipts are gone. If you can keep track of tons of slips - you can just do that.
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Why don't some places require a credit card receipt signature, and some do?
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This is basically done to reduce costs and overhead, with agreement of the credit card issuers. When the card is physically present and the charge is low, the burden of keeping the signed receipts and of additional delays at the cash register is not worth the potential risk of fraud. Depending on the location and the specific charge-back history of the business, the limit above which signature is required differs. In one supermarket in the area I live they require signatures only on charges above $50. In another, 10 miles away from the first one, they require signatures on charges above $25.
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American taxes if living outside the US and get paid by US company on a US bank account
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I agree with Joe, having the money deposited to the US bank account may land you in trouble. Technically, a US business paying a foreigner must withhold 30% of the payment, unless a tax treaty says otherwise. The US business should do that based on your W8-BEN/W8-ECI form that you should have given to the business before being paid. I'm guessing, that by paying to your US bank account, you (and your American counterpart) are trying to avoid this withholding. That may cause trouble for both of you. I would suggest you talking to a professional (EA/CPA licensed in the State where the business is located) and having the situation resolved ASAP. You may not be liable for the US taxes at all, but because of incorrectly reporting the income/expense - you and the US business may end up paying way more than the $0 you otherwise would have, in penalties.
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Is SIPC coverage on cash as strong as FDIC?
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For cash, SIPC insurance is similar to FDIC insurance. Your losses are not covered, but you're covered in case of fraud. Since your cash is supposed to be in a trust account and not commingled with brokerage's funds, in case of bankruptcy you would still have your cash unless there was fraud.
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Deciding between Employee Stock Option and Restricted Stock
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There's no best strategy. Options are just pieces of paper, and if the stock price goes below the strike price - they're worthless. Stocks are actual ownership share, whatever the price is - that's what they're worth. So unless you expect the company stock prices to sky-rocket soon, RSU will probably provide better value. You need to do some math and decide whether in your opinion the stock growth in the next few years justifies betting on ESOP. You didn't say what country you're from, but keep in mind that stock options and RSUs are taxed differently and that can affect your end result as well.
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Why is there so much interest on home loans?
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Interest rates are always given annually, to make them comparable. If you prefer to calculate the rate or the total interest for the complete time, like 10 years or 15 years or 30 years, it is simple math, and it tells you the total you will pay, but it is not helpful for picking the better or even the right offer for your situation. Compare it to your car's gas mileage- what sense does it make to provide the information that a car will use 5000 gallons of gas over its lifetime? Is that better than a car that uses 6000 gallons (but may live 2 years longer?)
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Strategies for putting away money for a child's future (college, etc.)?
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Saving for school is [fundamentally] no different than saving for any other major purchase: in addition to some of the great answers already provided, here are a couple other thoughts: Just to have the [simplified] numbers handy: If you can increase that to $2000/yr, after 18 years: One final thought - I would personally avoid the 529 plans because if your child decides to not go to school (eg goes in the Coast Guard, decides to be a farmer, enters the Peace Corps, etc), you're penalized on withdrawal, whereas with any other savings/investment methodology, you won't have those penalties.
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Exercise a put option when shorting is not possible
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You are the one lending yourself the shares to sell;you purchase the stock at market price and sell at the strike price of the option to the put seller when you exercise the option.
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What are the common moving averages used in a “Golden Cross” stock evaluation?
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The 'standard' in such moving average crossover systems is 50/200. The numbers are essentially arbitrary as long as the long term average is greater than the short term and there is some different between the averages in terms of the smoothing they provide (i.e. comparing a 74 day MA to a 75 day MA isn't what the system is intended for) There are plenty of software programs that will let you run through many possible values for the system over historical data. I concur with the other answers in that this system/indicator alone isn't very good. However, I disagree with their blanket brushing off of technical analysis. There are many successful traders out there. The moving average cross over system is perhaps the second most primitive example of technical strategies categorized as trend following systems (buying new recent highs and selling new recent lows being the most simple). This particular system isn't very powerful because of its poor use of simple moving averages. A simple moving average is intended to smooth out data, but smoothing comes at the cost of lagging from the present. A simple moving average essentially gives you an idealized smoothing of price action for the day at that is one half of their period ago. So your 200 day simple moving average shows you an idealized smoothing of price action 100 days ago. A lot can happen in 100 days and that is why this system is far from ideal.
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Does high frequency trading (HFT) punish long-term investment?
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No, at least not noticeably so. The majority of what HFT does is to take advantage of the fact that there is a spread between buy and sell orders on the exchange, and to instantly fill both orders, gaining relatively risk-free profit from some inherent inefficiencies in how the market prices stocks. The end result is that intraday trading of the non-HFT nature, as well as speculative short-term trading will be less profitable, since HFT will cause the buy/sell spread to be closer than it would otherwise be. Buying and holding will be (largely) unaffected since the spread that HFT takes advantage of is miniscule compared to the gains a stock will experience over time. For example, when you go to buy shares intending to hold them for a long time, the HFT might cost you say, 1 to 2 cents per share. When you go to sell the share, HFT might cost you the same again. But, if you held it for a long time, the share might have doubled or tripled in value over the time you held it, so the overall effect of that 2-4 cents per share lost from HFT is negligible. However, since the HFT is doing this millions of times per day, that 1 cent (or more commonly a fraction of a cent) adds up to HFTs making millions. Individually it doesn't affect anyone that much, but collectively it represents a huge loss of value, and whether this is acceptable or not is still a subject of much debate!
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Should I buy a house because Mortgage rates are low
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Reasons for no: In your first sentence you say something interesting: rates low - prices high. Actually those 2 are reversely correlated, imagine if rates would be 5% higher-very few people could buy at current prices so prices would drop. Also you need to keep in mind the rate of inflation that was much higher during some periods in the US history(for example over 10% in the 1980) so you can not make comparisons just based on the nominal interest rate. Putting all your eggs in one basket. If you think real estate is a good investment buy some REITs for 10k, do not spend 20% of your future income for 20 years. Maintenance - people who rent usually underestimate this or do not even count it when making rent vs mortgage comparisons. Reasons for yes: Lifestyle decision - you don't want to be kicked out of your house, you want to remodel... Speculation - I would recommend against this strongly, but housing prices go up and down, if they will go up you can make a lot of money. To answer one of questions directly: 1. My guess is that FED will try to keep rates well bellow 10% (even much lower, since government can not service debts if interest rates go much higher), but nobody can say if they will succeed.
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Hedging against Exchange Rate Risk
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How can I calculate my currency risk exposure? You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar. Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar. Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate. That would tell you how much risk you need to mitigate. how can I hedge against it? There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above. Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 . Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs.
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Is it legal if I'm managing my family's entire wealth?
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I am not going to discuss legality, because with family members you are able to give a lot of guidance and assistance without running into legal issues. The biggest problem is that when they transfer the funds to you and you invest the money, all the tax rates and tax limits are determined by your situation; plus you have more investments than you should have so you hit those limits and brackets quicker. For example: In the United states a person can put $5,500 or $6,500 into a IRA or Roth IRA each year. If you combine the funds for three with your funds then you are giving up three quarters of the amount that you can invest in that type of account. The decision regarding Roth or not depends on age and income level. But now their decision is related to what is best based on your situation. The ability to even deduct IRA deposits would be based on your situation. Of course for taxable accounts the tax rate is determined by your income, not theirs. If they want you to have the ability to make investment decisions for them, then power of attorney is the way to go. The money is deposited in their name, and all the rules and tax rates are determined by their situation. You make sure they have all the information they need to login and review the accounts, but you make the all the moves within and between accounts.
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Why will the bank only loan us 80% of the value of our fully paid for home?
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I am going to add just one more item to what are some very well thought out answers. The element of "Cash Out" If you are taking out 80% of the value of the home that you already own free and clear the bank considers this a "Cash Out" transaction - meaning you would effectively walk away from closing with a check for 80% of your home's value. So in a hypothetical situation you have a $200,000 home value - you would be handed a check for $160,000 with which you could do anything that you wanted. Granted, you are likely going to do something responsible with it and purchase another home - BUT (big BUT) the bank can't control what you do with it and that is the part they don't like - and therefore they treat these types of transactions with a higher degree of scrutiny. It is all about control - if the property you are downsizing to fits their rules for lending they may actually loan you a higher loan to value on that purchase than they would on your "cash out" refinance transaction on your current home. With the purchase loan the money you get goes immediately to the purchase of a new home. In the "cash out" transaction it goes to a check with which you could do anything you want . . . and then not pay the loan back . . . I know no one here would do that - but there are some folks that would . . . and this is one of the reasons "Cash Out" loans are not nearly as easy as they once were to get. http://www.justice.gov/usao/az/mortgagefraud.html
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First time investor and online brokerage accounts
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First, let me say that $1000 is not that much of amount to invest in stocks. You need to remember that each transaction (buy/sell) has fees, which vary between $4-$40 (depending on the broker, you mentioned Scottrade - they charge $7 per transaction for stocks and about twice as much for some mutual funds). Consider this: you invest $1000, you gain $100. You'll pay $15 in fees just to buy/sell, that's 1.5% expense ratio. If you invest in more than 1 stock - multiply your fees. To avoid that you can look into mutual funds. Different brokers offer different funds for free, and almost all of them carry many of the rest for a fee. When looking into funds, you can find their expense ratio and compare. Remember that a fund with 1% expense ratio diversifies and invests in many stocks, while for you 1.5% expense ratio is for investing in a single stock. Is it a good idea to invest only in US or diversify worldwide? You can invest in the US, but in funds that diversify worldwide or across industries. Generally it is a good idea to diversify. I am 28. Should I be a conservative investor or take some risks? Depends on how bad of a shape will you be if you lose all your principle. What online brokerage service is the best? I have heard a lot about Scotttrade but want to be sure before I start. It seems to be the least expensive and most user-friendly to me. "Best" is a problematic term. Scottrade is OK, E*Trade is OK, you can try Sharebuilder, Ameritrade, there are several "discount" online brokers and plenty of on-line reviews and comparisons amongst them. What is a margin account and how would it affect my investing? From what I understand it comes into play when an investor borrows money from the broker. Do I need to use it at all as I won't be investing on a big scale yet. You understand right. There are rules to use margin accounts, and with the amount you have I'd advise against them even if you get approved. Read through the brokers' FAQ's on their requirement. Should I keep adding money on a monthly basis to my brokerage account to give me more money to invest or keep it at a certain amount for an extended period of time? Sharebuilder has a mechanism to purchase monthly at discounted prices. But be careful, they give you discounted prices to buy, but not to sell. You may end up with a lot of positions, and the discounts you've gotten to buy will cause you spend much more on selling. Generally, averaging (investing monthly) is a good way to save and mitigate some risks, but the risks are still there. This is good only for long term savings. How should my breakdown my investments in terms of bonds vs stocks? Depends on your vulnerability and risk thresholds.
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How To Report Cryptocurrency Earnings?
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As cryptocurrencies are rather new compared to most assets, there hasn't been a lot of specific guidance for a lot of situation, but in 2014 the IRS announced that it published guidance in Notice 2014-21. I'm not aware of further guidance that has been published beyond that, though it wouldn't surprise me if treatments changed over time. In that notice, the answer to the first question describes the general treatment: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. Your specific questions (about what constitutes a "business", and when you're considered to be "selling" the cryptoproperty) are likely to be considered on a case by case basis by the IRS. As the amounts involved here are so small (relatively speaking), my recommendation would be to read through what the IRS has published carefully, make reasonable assumptions about what scenarios that are described are closest to what you're doing, and document doing so clearly as part of your tax preparations. And when in doubt, erring on the side of whichever option incurs more tax is unlikely to be objected to by them. Of course, I'm not a lawyer or tax advisor, I'm a stranger on the Internet, so for "real" advice you should contact somebody qualified. I doubt you'd be faulted too much for not doing so given the amounts involved. You could also attempt contacting a local IRS office or calling them with your specific questions, and they may be able to provide more specific guidance tailored to you, though doing so may not save you from an auditor deciding something differently if they were to examine your return later. There are also phone numbers to contact specific people listed at the end of Notice 2014-21; you could try calling them as well.
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When should I open a “Line of credit” at my bank?
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With the information you have given, I would say never. Remember the banker is a salesman, and the line of credit is the product. If you don't need to borrow the money for something specific, then you don't need the line of credit in the first place. Even if you did need something I would tell you to save up and pay cash for it. On the tax advantage: There is none, in the US you can deduct your mortgage interest on your taxes but it's not a tax credit it's a tax deductions. Let me explain further: You spend $10,000 on mortgage interest, and you're in the 25% tax bracket. You send the bank $10,000 in return you get at tax savings of $2500. You are still in the hole $7500 You would have been better off not taking out the loan in the first place. On the Emergency Fund: You should have 3 - 6 months of expenses in cash, like a money market account. This money isn't for investing, it's like insurance, and you don't make money on insurance. The last thing you want to do is have to go into debt right in the middle of an emergency. Say you lost your job, the last thing you would want to do is borrow money, right at the time you have no income to pay it back. The bank is under no obligation to maintain you credit limit and can without notice reduce it, they can in most cases call the loan balance due in full with little or no notice as well. Both of those are likely scenarios if the bank were to become aware of the fact that you were unemployed.
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Is there a good forum where I can discuss individual US stocks?
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I would recommend looking at The Motley Fool.
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Steps to buying a home
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At this stage, I would think about education. You can attend open houses, and often times real estate agents and bankers put on seminars for first time home buyers. Borrow books from the library and I would watch some HGTV. Many of the shows are entertaining and quite educational. Secondly you may want to get your finances in order. Make and stick to a budget. Start building a down payment and emergency fund. Pay down consumer debt/student loans. Picking up side work or overtime will help. You will look far more attractive to a lender if you go in with a large down payment and an emergency fund then someone with better credit scores and 100% financing. That is if the lender does manual underwriting. If not, then use a different lender. Once you get a budget figured out, how much of a down payment and emergency fund you need, and how much consumer debt to pay off, you can then predict when you will hit your goals. Then you will know when you are ready to buy. If it seems too far off, cut spending and work more if it is that important to you! You can make a prioritized list about what is most important features to you and your wife. I would wait on doing this until after you view some homes. Open houses are a great way to do this, but be careful not to get "house fever" and rush into a decision. You will get some encouragement to do so by the selling agents. After viewing some homes, and developing your list you can get an idea as of what the home will cost. This will further refine your budget, goals, and timeline. I think that is a lot of work to start.
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How do you determine “excess cash” for Enterprise Value calculations from a balance sheet?
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Excess Cash = Cash & Equivalents + Long-Term Investments - Current Liabilities The problem this calculation of excess cash is that "long-term investments" can be illiquid things like real estate. Another flaw is that it gives no credit for Current Assets, like receivables, which can be used to offset Current Liabilities. The first thing I'd do is "net out" Current Assets and Current Liabilities, then add Cash back in. Excess Cash = Current Assets - Current Liabilities + Cash & Equivalents. It would be nice if GAAP would require Long-Term Investments to be broken out as a) liquid long-term investments (stocks, bonds) b) illiquid long-term investments (real estate, private equity, etc)
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How to help a financially self destructive person?
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Back in the day, they had a highly effective solution for this type of crap, but it is frowned upon in modern society. The second-best solution would be to get your lawyer to put together a case that she is unfit to be around the children and that visitation rights should be revoked. Unfortunately, this will most likely not solve her problems, and she will probably become far worse as she feels more alone, alienated, miserable, and embarrassed.
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Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't
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That ain't nothing. It's really easy to get "whipped up" into a sense of entitlement, and forget to be grateful for what you do have. If this house doesn't exist, what would his costs of housing be elsewhere? Realistically. Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better? What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors? It's entirely possible he has a sweet deal here, and just doesn't make enough money. If your credit rating is poor, your housing options really suck. Banks won't lend you money for a house unless you have a huge ton of upfront cash. Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism. In this day and age, there are lots of ways to make money with a property you own. In fact, I believe very firmly in Robert Allen's doctrine: Never sell. That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke. Keep the property forever, keep it working for you. If he doesn't know how, learn. To "get bootstrapped" he can put it up on AirBnB or other services. Or do "housemate shares". When your house is not show-condition, just be very honest and relatable about the condition. Don't oversell it, tell them exactly what they're going to get. People like honesty in the social sharing economy. And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB? Can he carve out an "in-law unit" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright. This is what the new sharing economy is all about. Of course, sister might show up with her hand out, wanting half the revenue since it's half her house. Tell her hell no, this pays the mortgage and you don't! She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it! And if she wants to go to court, get a judge to tell her that. Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him. "Owning it on paper" doesn't mean you own it. There's a mortgage on it, which means you don't own all of it. The amount you own is the value of the house minus the mortgage owed. This is called your equity. Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements, MINUS the cost of cosmetically making the house presentable. But when you actually sell, there's also the 6% Realtors' commission and other closing costs. This is where the mortgage is more than the house is worth. This is a dangerous situation. If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale. If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell. And that is leverage he has over her. I imagine a "Winter's bone" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died. That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale. The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt.
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Does wash sale apply if I buy stock on 2 two different dates and sell it later
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Wash sale applies. If you purchase shares within 30 days of that Feb 3 sell date, the wash sale kicks in, preventing the loss on that sale, and deferring it into the new shares.
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Can a US bank prevent you from making early payments to the principal on a home mortgage?
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Some lenders want to discourage the borrower from making these additional payments because they want to sell this as a service. They might set this up for you, or they have a contract with a 3rd party to set it up. These services generally charge you to initiate the process, and may have a recurring fee. They take 1/2 a payment every 2 weeks. Then forward the money on the first of the month to the lender. Once a year they will send in the 13th monthly payment. This gives them control of up to a months payment per account. There is no law that says they have to accept early payments. So check the documents to make sure it is allowed for that mortgage. Then send in a test payment directing that the excess funds go to pay down principal. Verify online that the extra funds were credited correctly. Even it works once the borrower will have to keep checking to make sure it is handled correctly each month.
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Tenant wants to pay rent with EFT
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How can someone use the account number to withdraw money without my consent? They can use your account number to game your banks phone support and try to phish their way into your account. Banks have gotten very good at combating this, but theoretically with just the address he lives in, your name, and a bad bank phone rep, he could get into your business. The account number would just be one more piece of information to lead with. I have 1 savings and 3 checking accounts with the same bank. Would they be able to gain access to the other accounts? Dependent on how incompetent the bad bank rep I referenced above is, sure. But the odds are incredibly low, and if anything were to happen, the bank would be falling over itself to fix it and make reparations so that you don't sue for a whole crap ton more. Is there a more secure and still free option that I have overlooked? Opening up yet another checking account solely for accounts receivable and transfer to accounts payable would keep your financial records more transparent. Also, banks are doing "money transfer by email" now, so I don't know how great that is for business transactions, but in that instance you're just giving out an email linked to a money receiving account instead of an actual account number. Paypal is also a pretty good EFT middleman, but their business practices have become shady in the past 5 years.
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Sleazy Bait and Switch Marketing — Is this legal?
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But.. what I really want to know.... is it illegal, particularly the clause REQUIRING a trade in to qualify for the advertised price? The price is always net of all the parts of the deal. As an example they gave the price if you have $4000 trade in. If you have no trade in, or a trade in worth less than 4K, your final price for the new car will be more. Of course how do you know that the trade in value they are giving you is fair. It could be worth 6K but they are only giving you a credit of 4K. If you are going to trade in a vehicle while buying another vehicle the trade in should be a separate transaction. I always get a price quote for selling the old car before visiting the new car dealer. I do that to have a price point that I can judge while the pressure is on at the dealership.. Buying a car is a complex deal. The price, interest rate, length of loan, and the value of the trade in are all moving parts. It is even more complex if a lease is involved. They want to adjust the parts to be the highest profit that you are willing to agree to, while you think that you are getting a good deal. This is the fine print: All advertised amounts include all Hyundai incentives/rebates, dealer discounts and $2500 additional down from your trade in value. +0% APR for 72 months on select models subject to credit approval through HMF. *No payments or 90 days subject to credit approval. Value will be added to end of loan balance. 15MY Sonata - Price excludes tax, title, license, doc, and dealer fees. MSRP $22085- $2036 Dealer Discount - $500 HMA Lease Cash - $500 HMA Value Owner Coupon - $1000 HMA Retail Bonus Cash - $500 HMA Military Rebate - $500 HMA Competitive Owner Coupon - $400 HMA College Grad Rebate - $500 HMA Boost Program - $4000 Trade Allowance = Net Price $12149. On approved credit. Certain qualifications apply to each rebate. See dealer for details. Payment is 36 month lease with $0 due at signing. No security deposit required. All payment and prices include HMA College Grad Rebate, HMA Military Rebate, HMA Competitive Owner Coupon and HMA Valued Owner Coupon. Must be active military or spouse of same to qualify for HMA Military Rebate. Must graduate college in the next 6 months or within the last 2 years to qualify for HMA College Grad rebate. Must own currently registered Hyundai to qualify for HMA Valued Owner Coupon. Must own qualifying competitive vehicle to qualify for HMA Competitive Owner Coupon.
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What does it mean “sell on ask” , “sell on bid” in stocks?
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Bid and ask prices are the reigning highest buy price and lowest sell price in the market which doesn't mean one must only buy/sell at thise prices. That said one can buy/sell at whatever price they so wish although doing it at any other price than the bid/ask is usually harder as other market participants will gravitate to the reigning bid/ask price. So in theory you can buy at ask and sell at bid, whether or not your order will be filled is another matter altogether.
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Retirement & asset allocation of $30K for 30 year old single guy
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I would definitely recommend putting some of this in an IRA. You can't put all $30K in an IRA immediately though, as the contribution limit is $5500/year for 2014, but until April 15 you can still contribute $5500 for 2013 as well. At your income level I would absolutely recommend a Roth IRA, as your income will very likely be higher in retirement, given that your income will almost certainly rise after you get your Ph.D. Your suggested asset allocation (70% stocks, 30% bonds) sounds appropriate; if anything you might want to go even higher on stocks assuming you won't mind seeing the value drop significantly. If you don't want to put a lot of energy into investment choices, I suggest a target retirement date fund. As far as I am aware, Vanguard offers the lowest expenses for these types of funds, e.g. this 2050 fund.
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Why is the price of my investment only updated once per day?
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There is no fundamental, good reason, I think; "that's just how it's done" (which is what all the other answers seem to be saying, w/o coming out and admitting it). Just guessing, but I'll bet most of the reason is historical: Before up-to-the-moment quotes were readily available, that was a bit tedious to calculate/update the fund's value, so enacted-laws let it be done just once per day. (@NL7 quotes the security act of 1940, which certainly has been updated, but also still might contain the results of crufty rationales, like this.) There are genuinely different issues between funds and stocks, though: One share of a fund is fundamentally different from one share of stock: There is a finite supply of Company-X-stock, and people are trading that piece of ownership around, and barter to find an mutually-agreeable-price. But when you buy into a mutual-fund, the mutual-fund "suddenly has more shares" -- it takes your money and uses it to buy shares of the underlying stocks (in a ratio equal to its current holdings). As a consequence: the mutual fund's price isn't determined by two people bartering and agreeing on a price (like stock); there is exactly one sane way to price a mutual fund, and that's the weighted total of its underlying stock. If you wanted to sell your ownership-of-Mutual-Fund-Z to a friend at 2:34pm, there wouldn't be any bartering, you'd just calculate the value based on the stated-value of the underlying stock at that exact moment. So: there's no inherent reason you can't instantaneously price a mutual fund. BUT people don't really buy/sell funds to each other -- they go to the fund-manager and essentially make a deposit-or-withdraw. The fund-manager is only required by law to do it once a day (and perhaps even forbidden from doing it more often?), so that's all they do. [Disclaimer: I know very little about markets and finance. But I recognize answers that are 'just because'.]
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Will I be paid dividends if I own shares?
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gnasher729, was able to see my problem here. It was a silly oversight. It's not 50p a share, its 0.5p a share. @Bezzzo: The dividend is not 50p per share, it is 0.50p per share - half a penny per share. Thanks!
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Which is better when working as a contractor, 1099 or incorporating?
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It makes no difference for tax purposes. If you are 1099, you will pay the same amount of taxes as if you formed a corporation and then paid yourself (essentially you are doing this as a 1099 contractor, just not formally). Legally, I don't know the answer. I would assume you have some legal protections by forming an LLC but practically I think this won't make any difference if you get sued.
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Can I withdraw from my Roth IRA retirement account to fund a startup?
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Chris's answer is a great start. Keep in mind that when you withdraw from a Roth IRA, you "shrink" the size of the IRA (i.e. if the start up flourishes, you can't put the $10k you withdrew back, as you're limited to ~$5k in contributions per year). You may want to consider funding your startup with a credit card (ideally a balance transfer of $10k at 0% interest). If you need to, you can always pay your card off with your Roth balance, but if the startup takes off, your IRA is unharmed. (On a side note, I wouldn't feel comfortable quitting my job to do a startup with only $10k in savings, but to each his own!)
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Which Novo Nordisk ticker is most tax efficient in a UK SIPP?
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What I ended up doing was finding where each ticker of Novo was registered (what exchange), then individually looking up the foreign taxation rules of the containing country. Luckily, most companies only have a few tickers so this wasn't too hard in the end.
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Options for the intelligent but inexperienced
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Some thoughts on your questions in order, Duration: You might want to look at the longest-dated option (often a "LEAP"), for a couple reasons. One is that transaction costs (spread plus commission, especially spread) are killer on options, so a longer option means fewer transactions, since you don't have to keep rolling the option. Two is that any fundamentals-based views on stocks might tend to require 3-5 years to (relatively) reliably work out, so if you're a fundamental investor, a 3-6 month option isn't great. Over 3-6 months, momentum, short-term news, short squeezes, etc. can often dominate fundamentals in determining the price. One exception is if you just want to hedge a short-term event, such as a pending announcement on drug approval or something, and then you would buy the shortest option that still expires after the event; but options are usually super-expensive when they span an event like this. Strike: Strike price on a long option can be thought of as a tradeoff between the max loss and minimizing "insurance costs." That is, if you buy a deeply in-the-money put or call, the time value will be minimal and thus you aren't paying so much for "insurance," but you may have 1/3 or 1/2 of the value of the underlying tied up in the option and subject to loss. If you buy a put or call "at the money," then you might have only say 10% of the value of the underlying tied up in the option and subject to loss, but almost the whole 10% may be time value (insurance cost), so you are losing 10% if the underlying stock price stays flat. I think of the deep in-the-money options as similar to buying stocks on margin (but the "implied" interest costs may be less than consumer margin borrowing rates, and for long options you can't get a margin call). The at-the-money options are more like buying insurance, and it's expensive. The commissions and spreads add significant cost, on top of the natural time value cost of the option. The annual costs would generally exceed the long-run average return on a diversified stock fund, which is daunting. Undervalued/overvalued options, pt. 1: First thing is to be sure the options prices on a given underlying make sense at all; there are things that "should" hold, for example a synthetic long or short should match up to an actual long or short. These kinds of rules can break, for example on LinkedIn (LNKD) after its IPO, when shorting was not permitted, the synthetic long was quite a bit cheaper than a real long. Usually though this happens because the arbitrage is not practical. For example on LNKD, the shares to short weren't really available, so people doing synthetic shorts with options were driving up the price of the synthetic short and down the price of the synthetic long. If you did actually want to be long the stock, then the synthetic long was a great deal. However, a riskless arbitrage (buy synthetic long, short the stock) was not possible, and that's why the prices were messed up. Another basic relationship that should hold is put-call parity: http://en.wikipedia.org/wiki/Put%E2%80%93call_parity Undervalued/overvalued options, pt. 2: Assuming the relationship to the underlying is sane (synthetic positions equivalent to actual positions) then the valuation of the option could focus on volatility. That is, the time value of the option implies the stock will move a certain amount. If the time value is high and you think the stock won't move much, you might short the option, while if the time value is low and you think the stock will move a lot, you might buy the option. You can get implied volatility from your broker perhaps, or Morningstar.com for example has a bunch of data on option prices and the implied components of the price model. I don't know how useful this really is though. The spreads on options are so wide that making money on predicting volatility better than the market is pretty darn hard. That is, the spread probably exceeds the amount of the mispricing. The price of the underlying is more important to the value of an option than the assumed volatility. How many contracts: Each contract is 100 shares, so you just match that up. If you want to hedge 100 shares, buy one contract. To get the notional value of the underlying multiply by 100. So say you buy a call for $30, and the stock is trading at $100, then you have a call on 100 shares which are currently priced at $10,000 and the option will cost $30*100=3,000. You are leveraged about 3 to 1. (This points to an issue with options for individual investors, which is that one contract is a pretty large notional value relative to most portfolios.)
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Can another tax loss be used to offset capital gains taxes? How does it work?
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Capital gains and losses offset each other first, then your net gain is taxed at the applicable rate. If you have a net loss, you can offset your other income by up to $3,000. In your example, you have no net-gain or loss, so no tax implications from your activity.
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Can I lose more on Forex than I deposit?
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It's the same as with equities. If you're just buying foreign currencies to hold, you can't lose more than you invest. But if you're buying derivatives (e.g. forward contracts or spread bets), or borrowing to buy on margin, you can certainly lose more than you invest.
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Should I really pay off my entire credit card balance each month or should I maintain some balance?
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Always pay on time, and stop listening to whoever is telling you not to -- they are clueless. Credit cards are revolving accounts with a grace period. The balance owed is due on the statement date, and you have a grace period of 20-40 days to pay. Paying bills on time is the single most important thing that you can do to have a good credit score. Always pay on time.
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Do I make money in the stock market from other people losing money?
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The answer is partly and sometimes, but you cannot know when or how. Most clearly, you do not take somebody else's money if you buy shares in a start-up company. You are putting your money at risk in exchange for a share in the rewards. Later, if the company thrives, you can sell your shares for whatever somebody else will pay for your current share in the thriving company's earnings. Or, you lose your money, when the company fails. (Much of it has then ended up in the company's employees' pockets, much of the rest with the government as taxes that the company paid). If the stockmarket did not exist, people would be far less willing to put their money into a new company, because selling shares would be far harder. This in turn would mean that fewer new things were tried out, and less progress would be made. Communists insist that central state planning would make better decisions than random people linked by a market. I suggest that the historical record proves otherwise. Historically, limited liability companies came first, then dividing them up into larger numbers of "bearer" shares, and finally creating markets where such shares were traded. On the other hand if you trade in the short or medium term, you are betting that your opinion that XYZ shares are undervalued against other investors who think otherwise. But there again, you may be buying from a person who has some other reason for selling. Maybe he just needs some cash for a new car or his child's marriage, and will buy back into XYZ once he has earned some more money. You can't tell who you are buying from, and the seller can only tell if his decision to sell was good with the benefit of a good few years of hindsight. I bought shares hand over fist immediately after the Brexit vote. I was putting my money where my vote went, and I've now made a decent profit. I don't feel that I harmed the people who sold out in expectation of the UK economy cratering. They got the peace of mind of cash (which they might then reinvest in Euro stocks or gold or whatever). Time will tell whether my selling out of these purchases more recently was a good decision (short term, not my best, but a profit is a profit ...) I never trade using borrowed money and I'm not sure whether city institutions should be allowed to do so (or more reasonably, to what extent this should be allowed). In a certain size and shortness of holding time, they cease to contribute to an orderly market and become a destabilizing force. This showed up in the financial crisis when certain banks were "too big to fail" and had to be bailed out at the taxpayer's expense. "Heads we win, tails you lose", rather than trading with us small guys as equals! Likewise it's hard to see any justification for high-frequency trading, where stocks are held for mere milliseconds, and the speed of light between the trader's and the market's computers is significant.
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Are there common stock price trends related to employee option plans?
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Whenever a large number of shares to be sold hit the market at the same time the expectation is that the price for each share will drop. The employees in a normal market would be expected to sell some of their shares at the first opportunity. Because during the dot com boom some companies employees were able to become millionaires, every employee at a tech IPO hopes to be richly rewarded. If the long term prospects of the stock price are viewed by the employees as a continuous path up, then the percentage of shares that will hit the market is low. They do want some instant cash, but want the bulk of the shares to capture future growth. The more dismal the long term price lookout is, the greater the percentage of shares that will hit the market. The general consensus is that as each of the Lock Ups expires a significant percentage of shares will be sold, and the price will suffer a short term drop.
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How can people have such high credit card debts?
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I had $70K in credit card at one point. Limited income, starting a business - it's the only credit available. (yes, all paid off now).
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Rollover 401k into Roth IRA?
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There is some advantage to putting your house downpayment in the Roth to get tax-free growth. However this advantage is offset by the risk of the investment losing value in the short period before you take advantage of it. You might go this route if the timeline is greater than 5 years and you use a conservative investment vehicle.
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Why are credit cards preferred in the US?
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For me, it is mostly for the fraud protection. If I have a debit card and someone makes a fraudulent charge the money is removed from my bank account. From my understanding, I can then file a fraud complaint with the bank to recover my money. However, for some period of time, the money is missing from my bank account. I've heard conflicting stories of money being returned quickly while the complaint is undergoing investigation as well as money being tied up for several days/weeks. It may depend on the bank. With a credit card, it is the banks money that is tied up.
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Options for dummies. Can you explain how puts & calls work, simply?
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In addition to all these great answers, check out the Wikipedia entry on options. The most important thing to note from their definition is that an option is a derivative (and nothing about any derivative is simple). Because it is a derivative, increases or decreases in the price of the underlying stock won't automatically result in the same amount of change in the value of the option.
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Efficient International money transfer
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Typical wire transfers are not with 4-5%; but it all depends on the bank that does the transfer. You can chose to send ('wire') the money in source currency or in US $; the former, the target bank in the US does the conversion (so pick one that adds no or little spread); the latter, the sending bank does the conversion (so ask about their fees/spreads). I have multiple times transferred money across the ocean (though not from Japan), and never paid more than 0.3% + ~40 $ flat. It should be possible to get te same range. Note that if you look around for current offers, you might be easily able to even make some money on it - some US banks are eager for new money, and offer 200+$ bonus if you open an account and bring (significant =15k$+) new money to them.
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Historical data files for NYSE/NASDAQ daily open/close price data?
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Another possibly more flexible option is Yahoo finance here is an example for the dow.. http://finance.yahoo.com/q/hp?s=%5EDJI&a=9&b=1&c=1928&d=3&e=10&f=2012&g=d&z=66&y=0 Some of the individual stocks you can dl directly to a spreadsheet (not sure why this isn't offer for indexs but copy and paste should work). http://finance.yahoo.com/q/hp?s=ACTC.OB+Historical+Prices
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Should I have a higher credit limit on my credit card?
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I'm not sure that OP was asking if he/she personally should have more available credit, so I will answer the other interpretation: should that particular card have a higher limit? The answer is "no." The range varies vastly by issuer. Starting limits vary widely from issuer to issuer even with identical credit histories. Some issuers never automatically increase the limit, some periodically conduct account reviews to determine if an increase is warranted. Some like to see higher spending habits each month. Personally, my cards range from $500 to $25000, and the high and low extremes are the same age. You can search for tips on how often to request increases for your particular card, or what kind of spending habits the issuer prefers. An important note: You do not need to carry a balance to make the issuer happy. You never need to pay a cent in credit card interest.
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Is issuer's bank allowed to charge fee when cashing check?
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Some banks charge their own customers if they make use of a teller. That is what you are doing. You are going to a bank where you are not a customer and requesting a transaction that requires a teller. If you cash the check by going though your bank, the issuer's bank only handles it as a non-teller transaction.
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How are shares used, and what are they, physically?
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Shares used to be paper documents, but these days they are more commonly held electronically instead, although this partly depends on what country you're in. But it doesn't make any significant practical difference. Regardless of their physical form, a share simply signifies that you own a certain proportion of a company, and are thus entitled to receive any dividends that may be paid to the shareholders. To sell your shares, you need a broker -- there are scores of online ones who will sell them for a modest fee. Your tax forms are entirely dependent on the jurisdiction(s) that tax you, and since you've not told us where you are, no one can answer that.
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Is it bad practice to invest in stocks that fluctuate by single points throughout the day?
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Yes. There are several downsides to this strategy: You aren't taking into account commissions. If you pay $5 each time you buy or sell a stock, you may greatly reduce or even eliminate any possible gains you would make from trading such small amounts. This next point sounds obvious, but remember that you pay a commission on every trade regardless of profit, so every trade you make that you make at a loss also costs you commissions. Even if you make trades that are profitable more often than not, if you make quite a few trades with small amounts like this, your commissions may eat away all of your profits. Commissions represent a fixed cost, so their effect on your gains decreases proportionally with the amount of money you place at risk in each trade. Since you're in the US, you're required to follow the SEC rules on pattern day trading. From that link, "FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of the customer’s total trades in the margin account for that same five business day period." If you trip this rule, you'll be required to maintain $25,000 in a margin brokerage account. If you can't maintain the balance, your account will be locked. Don't forget about capital gains taxes. Since you're holding these securities for less than a year, your gains will be taxed at your ordinary income tax rates. You can deduct your capital losses too (assuming you don't repurchase the same security within 30 days, because in that case, the wash sale rule prevents you from deducting the loss), but it's important to think about gains and losses in real terms, not nominal terms. The story is different if you make these trades in a tax-sheltered account like an IRA, but the other problems still apply. You're implicitly assuming that the stock's prices are skewed in the positive direction. Remember that you have limit orders placed at the upper and lower bounds of the range, so if the stock price decreases before it increases, your limit order at the lower bound will be triggered and you'll trade at a loss. If you're hoping to make a profit through buying low and selling high, you want a stock that hits its upper bound before hitting the lower bound the majority of the time. Unless you have data analysis (not just your intuition or a pattern you've talked yourself into from looking at a chart) to back this up, you're essentially gambling that more often than not, the stock price will increase before it decreases. It's dangerous to use any strategy that you haven't backtested extensively. Find several months or years of historical data, either intra-day or daily data, depending on the time frame you're using to trade, and simulate your strategy exactly. This helps you determine the potential profitability of your strategy, and it also forces you to decide on a plan for precisely when you want to invest. Do you invest as soon as the stock trades in a range (which algorithms can determine far better than intuition)? It also helps you figure out how to manage your risk and how much loss you're willing to accept. For risk management, using limit orders is a start, but see my point above about positively skewed prices. Limit orders aren't enough. In general, if an active investment strategy seems like a "no-brainer" or too good to be true, it's probably not viable. In general, as a retail investor, it's foolish to assume that no one else has thought of your simple active strategy to make easy money. I can promise you that someone has thought of it. Trading firms have quantitative researchers that are paid to think of and implement trading strategies all the time. If it's viable at any scale, they'll probably already have utilized it and arbitraged away the potential for small traders to make significant gains. Trust me, you're not the first person who thought of using limit orders to make "easy money" off volatile stocks. The fact that you're asking here and doing research before implementing this strategy, however, means that you're on the right track. It's always wise to research a strategy extensively before deploying it in the wild. To answer the question in your title, since it could be interpreted a little differently than the body of the question: No, there's nothing wrong with investing in volatile stocks, indexes, etc. I certainly do, and I'm sure many others on this site do as well. It's not the investing that gets you into trouble and costs you a lot of money; it's the rapid buying and selling and attempting to time the market that proves costly, which is what you're doing when you implicitly bet that the distribution of the stock's prices is positively skewed. To address the commission fee problem, assuming a fee of $8 per trade ... and a minimum of $100 profit per sale Commissions aren't your only problem, and counting on $100 profit per sale is a significant assumption. Look at point #4 above. Through your use of limit orders, you're making the implicit assumption that, more often than not, the price will trigger your upper limit order before your lower limit order. Here's a simple example; let's assume you have limit orders placed at +2 and -2 of your purchase price, and that triggering the limit order at +2 earns you $100 profit, while triggering the limit order at -2 incurs a loss of $100. Assume your commission is $5 on each trade. If your upper limit order is triggered, you earn a profit of 100 - 10 = 90, then set up the same set of limit orders again. If your lower limit order is triggered this time, you incur a loss of 100 + 10 = 110, so your net gain is 90 - 110 = -20. This is a perfect example of why, when taking into account transaction costs, even strategies that at first glance seem profitable mathematically can actually fail. If you set up the same situation again and incur a loss again (100 + 10 = 110), you're now down -20 - 110 = -130. To make a profit, you need to make two profitable trades, without incurring further losses. This is why point #4 is so important. Whenever you trade, it's critical to completely understand the risk you're taking and the bet you're actually making, not just the bet you think you're making. Also, according to my "algorithm" a sale only takes place once the stock rises by 1 or 2 points; otherwise the stock is held until it does. Does this mean you've removed the lower limit order? If yes, then you expose yourself to downside risk. What if the stock has traded within a range, then suddenly starts declining because of bad earnings reports or systemic risks (to name a few)? If you haven't removed the lower limit order, then point #4 still stands. However, I never specified that the trades have to be done within the same day. Let the investor open up 5 brokerage accounts at 5 different firms (for safeguarding against being labeled a "Pattern Day Trader"). Each account may only hold 1 security at any time, for the span of 1 business week. How do you control how long the security is held? You're using limit orders, which will be triggered when the stock price hits a certain level, regardless of when that happens. Maybe that will happen within a week, or maybe it will happen within the same day. Once again, the bet you're actually making is different from the bet you think you're making. Can you provide some algorithms or methods that do work for generating some extra cash on the side, aside from purchasing S&P 500 type index funds and waiting? When I purchase index funds, it's not to generate extra liquid cash on the side. I don't invest nearly enough to be able to purchase an index fund and earn substantial dividends. I don't want to get into any specific strategies because I'm not in the business of making investment recommendations, and I don't want to start. Furthermore, I don't think explicit investment recommendations are welcome here (unless it's describing why something is a bad idea), and I agree with that policy. I will make a couple of points, however. Understand your goals. Are you investing for retirement or a shorter horizon, e.g. some side income? You seem to know this already, but I include it for future readers. If a strategy seems too good to be true, it probably is. Educate yourself before designing a strategy. Research fundamental analysis, different types of orders (e.g., so you fully understand that you don't have control over when limit orders are executed), different sectors of the market if that's where your interests lie, etc. Personally, I find some sectors fascinating, so researching them thoroughly allows me to make informed investment decisions as well as learn about something that interests me. Understand your limits. How much money are you willing to risk and possibly lose? Do you have a risk management strategy in place to prevent unexpected losses? What are the costs of the risk management itself? Backtest, backtest, backtest. Ideally your backtesting and simulating should be identical to actual market conditions and incorporate all transaction costs and a wide range of historical data. Get other opinions. Evaluate those opinions with the same critical eye as I and others have evaluated your proposed strategy.
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How to minimise the risk of a reduction in purchase power in case of Brexit for money held in a bank account?
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If you are really worried your best bet is to move all your cash from Sterling into a foreign currency that you think will be resilient should Brexit occur. I would avoid the Euro! You could look at the US Dollar perhaps, make sure you are aware of the charges for moving the money over and back again, as you will at some stage probably want to get back into Sterling once it settles down, if it does indeed fall. Based on my experience on the stock markets (I am not a currency trader) I would expect the pound to fall fairly sharply on a vote for Brexit and the Euro to do the same. Both would probably rebound quite quickly too as even if there is a Brexit vote it doesn't mean the UK Government will honour the outcome or take the steps quickly. ** I AM NOT A FINANCIAL ADVISOR AND HAVE NO QUALIFICATIONS AS SUCH **
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Would investing equally in all 30 companies which comprise the DJIA net the same performance as the DJIA?
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MD-Tech's answer is correct. Let me only point out that there are easier ways to invest in the DJIA index without having to buy individual stocks. You can buy a mutual fund or ETF that will track the index and your return will be almost identical to the performance of the underlying index. It's "almost" identical because the fund will take a small management fee, you will have to pay annual taxes on capital gains (if you hold the investment in a taxable account), and because the fund has to actually invest in the underlying stocks, there will be small differences due to rounding and timing of the fund's trades. You also ask: Assuming that I calculated those numbers correctly, is this gain approximately better, equal to, or worse than an average investment for that timespan? While people argue about the numbers, index funds tend to do better than average (depends on what you call "average", of course). They do better than most actively managed funds, too. And since they have low management fees, index funds are often considered to be an important part of a long-term investment portfolio because they require very little activity on your part other than buying and holding.
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Why can't the government simply payoff everyone's mortgage to resolve the housing crisis?
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I think Energy and Mike point out the some serious issues but the prospects for the futures also need to be considered. If the banks no longer have those loans then they need to rebuild their income base that is wiped out by the payoff of their loans. They would be incentivised to make a large number of loans so that they could quickly reestablish their base so they can maintain profitability. This is likely to lead to more poor lending practices that lead to this location in the first place. The high earning heavily leveraged would benefit far more from this than the poor. A function of income is that as it increases the ability to leverage increases in a non lineal fashion. So single person making 250k a year(the benchmark set by the current administration) with a 2 million dollar mortgage(probably underwater currently) on a home would benefit much more than a family of 4 making 50k a year with a 100k mortgage. Assuming that government does pay off all mortages now people can sell of their now fully paid homes for less than their value, as its basically free money, leverage that money to move into a better home, so home values actually crash, in some areas as people sell them off cheap, people try to gamble on cheap houses(like we just saw), etc. It takes a market that is on the verge of recovery and stabilization and shakes it up. How long before it stabilizes again would be a matter of debate but I would not expect to see it in less than a decade. Business and the Economy thrives on stability and retreats from instability. So while this would appear to be an injection to the economy the chaos it creates would likely actually severely retard future economic growth.
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Why haven't there been personal finance apps or softwares that use regression modeling or A.I.?
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How would they make money from it? They sell you the software for $100 (US example; could as easily be 100 Euros or 10,000 Japanese Yen). You use it to make recommendations on your blog. Your blog becomes rich from advertising. They sold $100 worth of software. If they spent $1 million in labor developing it, they're way behind. Another problem is that the software would stop working and need adjusted periodically. This is easy to do on a server but annoying on a PC. And who pays for the adjustments? Put both those things together, and it's a lot easier to do on a server. Another advantage is that a server can get a better data feed as well. Pay a premium for the detailed information rather than relying on public sources. And people are used to renting server access where they expect to buy software once. Another issue is that they are unlikely to beat the market this way. Yes, AIs have done so. But that's the latest AI, constantly adjusted. This is going to be a previous generation AI. It's more likely to match the market. And we already have a way to match the market: an index fund. If someone had a brilliant AI, the best use would probably be to sell it to a fund manager. The fund manager could then use the AI to find opportunities for its existing investors. Note that a $10 billion fund with a 10% return that gives a .1% commission would be paying $1 million. And that has no marketing or packaging overhead. Think $10 billion is a lot? Fidelity has $2 trillion.
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23 and on my own, what should I be doing?
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You are doing Great! But you might want to read a couple of books and do some studying on budgeting and personal finance - education yourself now and you will avoid pain in the future. I learned a lot from reading Dave Ramsey's Total Money Makeover, and I have found some great advice from the simple budgeting guidelines on LearnVest. Budget in these three categories with these percentages, You may find that your "essentials" lower than 50%, because you are sharing room and utilities. You want to put as much into "financial" as you can for the first 1-2 years, to reduce (or eliminate) your student loan debt. Many folks will recommend you save six months (salary/expenses) for emergencies and unexpected situations. But understand that you are in debt now, and you have a unique opportunity to pay off your debt before your living expenses creep up (as they so often do). Since you are a contractor, put aside 2 months expenses (twice what I would normally advise), and then attack paying off your debts with passion. Since you have a mix of student loans, focus on paying them off by picking one at a time, paying the minimum against the others while you pay off the one you picked, then proceed to the next. Dave Ramsey advises a Debt Snowball, paying the smallest one first (psychological advantage, early wins), while others advise paying the highest interest off first. Since you have over $2400/month available to pay down debt, you could plan on reducing your student loan debt substantially in a year. But avoid accumulating other debt along the way. Save for larger purchases. Your bedroom purchase may have been premature, but you needed some basics. But check your contract. Since many 0% furniture loan deals retroactively charge interest if you don't pay them off in full - you might want to make regular payments, and pay the debt off a month early (avoid any 'gotcha's). You might want to open a retirement account - many folks recommend a Roth account for folks your age - it is after tax, but you don't pay tax when you withdraw money. Roth is better when you have lots of deductions (think mortgage, kids). But some retirement account would be great to get started. Open a credit union account (if you can), that will make getting a credit card or personal loan (installment) easier. You want to build a credit file, but you don't want credit card debt (seems contradictory), so opening 2 credit cards over the next year will help your credit. You want a good credit mix (student loans, revolving, installment, and mortgage - wait on that one).
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Contract job (hourly rate) as a 1099: How much would I be making after taxes?
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If it's just you working, I'd use a ballpark figure of 35% owed - it may be a little high or low, but it's a safe margin to keep set aside for paying your liabilities at the end of the year.
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Should I use a credit repair agency?
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Repairing your credit takes time. Companies that offer to do it for you (for money) generally succeed mostly at getting money from you. Nonprofit agencies will help you with advice and encouragement and will not want money from you. They may be able to help you apply for a consolidation loan, but to be honest that is rarely the best first step. Over time, you need to The last step may happen months or years after the first two.
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Allocation between 401K/retirement accounts and taxable investments, as a young adult?
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First off, great job on your finances so far. You are off on the right foot and have some sense of planning for the future. Also, it is a great question. First, I agree with @littleadv. Take advantage of your employer match. Do not drop your 401(k) contributions below that. Also, good job on putting your contributions into the Roth account. Second, I would ask: Are you out of debt? If not, put all your extra income towards paying off debt, and then you can work your plan. Third, time to do some math. What will your business look like? How much capital would you need to get started? Are there things you can do now on a part-time basis to start this business or prepare you to start the business? Come up with a figure, find some mutual funds that have a low beta, and back out how much money you need to save per month, so you have around that total. Then you have a figure. e.g. Assume you need $20,000, and you find a fund that has done 8% over the past 20 years. Then, you would need to save about $110/month to be ready to go in 10 years, or $273/month to go in about 5 years. (It's a time value of money calculation.) The house is really a long way off, but you could do the same kind of calculation. I feel that you think your income, and possibly locale, will change dramatically over the next few years. It might not be bad to double what you are saving for the business, and designate one half for the house.
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