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In the US, does getting a loan with a cosigner, help your credit rating? | It all comes down to how the loan itself is structured and reported - the exact details of how they run the loan paperwork, and how/if they report the activity on the loan to one of the credit bureaus (and which one they report to). It can go generally one of three ways: A) The loan company reports the status to a credit reporting agency on behalf of both the initiating borrower and the cosigner. In this scenario, both individuals get a new account on their credit report. Initially this will generally drop related credit scores somewhat (it's a "hard pull", new account with zero history, and increased debt), but over time this can have a positive effect on both people's credit rating. This is the typical scenario one might logically expect to be the norm, and it effects both parties credit just as if they were a sole signor for the loan. And as always, if the loan is not paid properly it will negatively effect both people's credit, and the owner of the loan can choose to come after either or both parties in whatever order they want. B) The loan company just runs the loan with one person, and only reports to a credit agency on one of you (probably the co-signor), leaving the other as just a backup. If you aren't paying close attention they may even arrange it where the initial party wanting to take the loan isn't even on most of the paperwork. This let the person trying to run the loan get something accepted that might not have been otherwise, or save some time, or was just an error. In this case it will have no effect on Person A's credit. We've had a number of question like this, and this isn't really a rare occurrence. Never assume people selling you things are necessarily accurate or honest - always verify. C) The loan company just doesn't report the loan at all to a credit agency, or does so incorrectly. They are under no obligation to report to credit agencies, it's strictly up to them. If you don't pay then they can report it as something "in collections". This isn't the typical way of doing business for most places, but some businesses still operate this way, including some places that advertise how doing business with them (paying them grossly inflated interest rates) will "help build your credit". Most advertising fraud goes unpunished. Note: Under all of the above scenarios, the loan can only effect the credit rating attached to the bureau it is reported to. If the loan is reported to Equifax, it will not help you with a TransUnion or Experian rating at all. Some loans report to multiple credit bureaus, but many don't bother, and credit bureaus don't automatically copy each other. It's important to remember that there isn't so much a thing as a singular "consumer credit rating", as there are "consumer credit ratings" - 3 of them, for most purposes, and they can vary widely depending on your reported histories. Also, if it is only a short-term loan of 3-6 months then it is unlikely to have a powerful impact on anyone's credit rating. Credit scores are formulas calibrated to care about long-term behavior, where 3 years of perfect credit history is still considered a short period of time and you will be deemed to have a significant risk of default without more data. So don't expect to qualify for a prime-rate mortgage because of a car loan that was paid off in a few months; it might be enough to give you a score if you don't have one, but don't expect much more. As always, please remember that taking out a loan just to improve credit is almost always a terrible idea. Unless you have a very specific reason with a carefully researched and well-vetted plan that means that it's very important you build credit in this specific way, you should generally focus on establishing credit in ways that don't actually cost you any money at all. Look for no fee credit cards that you pay in full each month, even if you have to start with credit-building secured card plans, and switch to cash-value no-fee rewards cards for a 1-3% if you operate your financial life in a way that this doesn't end up manipulating your purchasing decisions to cost you money. Words to the wise: "Don't let the credit score tail wag the personal financial dog!" |
Investment strategy for retired couple | The safest investment in the United States is Treasures. The Federal Reserve just increased the short term rate for the first time in about seven years. But the banks are under no obligation to increase the rate they pay. So you (or rather they) can loan money directly to the United States Government by buying Bills, Notes, or Bonds. To do this you set up an account with Treasury Direct. You print off a form (available at the website) and take the filled out form to the bank. At the bank their identity and citizenship will be verified and the bank will complete the form. The form is then mailed into Treasury Direct. There are at least two investments you can make at Treasury Direct that guarantee a rate of return better than the inflation rate. They are I-series bonds and Treasury Inflation Protected Securities (TIPS). Personally, I prefer the I-series bonds to TIPS. Here is a link to the Treasury Direct website for information on I-series bonds. this link takes you to information on TIPS. Edit: To the best of my understanding, the Federal Reserve has no ability to set the rate for notes and bonds. It is my understanding that they can only directly control the overnight rate. Which is the rate the banks get for parking their money with the Fed overnight. I believe that the rates for longer term instruments are set by the market and are not mandated by the Fed (or anyone else in government). It is only by indirect influence that the Fed tries to change long term rates. |
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | There is no interest outstanding, per se. There is only principal outstanding. Initially, principal outstanding is simply your initial loan amount. The first two sections discuss the math needed - just some arithmetic. The interest that you owe is typically calculated on a monthly basis. The interested owed formula is simply (p*I)/12, where p is the principal outstanding, I is your annual interest, and you're dividing by 12 to turn annual to monthly. With a monthly payment, take out interest owed. What you have left gets applied into lowering your principal outstanding. If your actual monthly payment is less than the interest owed, then you have negative amortization where your principal outstanding goes up instead of down. Regardless of how the monthly payment comes about (eg prepay, underpay, no payment), you just apply these two calculations above and you're set. The sections below will discuss these cases in differing payments in detail. For a standard 30 year fixed rate loan, the monthly payment is calculated to pay-off the entire loan in 30 years. If you pay exactly this amount every month, your loan will be paid off, including the principal, in 30 years. The breakdown of the initial payment will be almost all interest, as you have noticed. Of course, there is a little bit of principal in that payment or your principal outstanding would not decrease and you would never pay off the loan. If you pay any amount less than the monthly payment, you extend the duration of your loan to longer than 30 years. How much less than the monthly payment will determine how much longer you extend your loan. If it's a little less, you may extend your loan to 40 years. It's possible to extend the loan to any duration you like by paying less. Mathematically, this makes sense, but legally, the loan department will say you're in breach of your contract. Let's pay a little less and see what happens. If you pay exactly the interest owed = (p*I)/12, you would have an infinite duration loan where your principal outstanding would always be the same as your initial principal or the initial amount of your loan. If you pay less than the interest owed, you will actually owe more every month. In other words, your principal outstanding will increase every month!!! This is called negative amortization. Of course, this includes the case where you make zero payment. You will owe more money every month. Of course, for most loans, you cannot pay less than the required monthly payments. If you do, you are in default of the loan terms. If you pay more than the required monthly payment, you shorten the duration of your loan. Your principal outstanding will be less by the amount that you overpaid the required monthly payment by. For example, if your required monthly payment is $200 and you paid $300, $100 will go into reducing your principal outstanding (in addition to the bit in the $200 used to pay down your principal outstanding). Of course, if you hit the lottery and overpay by the entire principal outstanding amount, then you will have paid off the entire loan in one shot! When you get to non-standard contracts, a loan can be structured to have any kind of required monthly payments. They don't have to be fixed. For example, there are Balloon Loans where you have small monthly payments in the beginning and large monthly payments in the last year. Is the math any different? Not really - you still apply the one important formula, interest owed = (p*I)/12, on a monthly basis. Then you break down the amount you paid for the month into the interest owed you just calculated and principal. You apply that principal amount to lowering your principal outstanding for the next month. Supposing that what you have posted is accurate, the most likely scenario is that you have a structured 5 year car loan where your monthly payments are smaller than the required fixed monthly payment for a 5 year loan, so even after 2 years, you owe as much or more than you did in the beginning! That means you have some large balloon payments towards the end of your loan. All of this is just part of the contract and has nothing to do with your prepay. Maybe I'm incorrect in my thinking, but I have a question about prepaying a loan. When you take out a mortgage on a home or a car loan, it is my understanding that for the first years of payment you are paying mostly interest. Correct. So, let's take a mortgage loan that allows prepayment without penalty. If I have a 30 year mortgage and I have paid it for 15 years, by the 16th year almost all the interest on the 30 year loan has been paid to the bank and I'm only paying primarily principle for the remainder of the loan. Incorrect. It seems counter-intuitive, but even in year 16, about 53% of your monthly payment still goes to interest!!! It is hard to see this unless you try to do the calculations yourself in a spreadsheet. If suddenly I come into a large sum of money and decide I want to pay off the mortgage in the 16th year, but the bank has already received all the interest computed for 30 years, shouldn't the bank recompute the interest for 16 years and then recalculate what's actually owed in effect on a 16 year loan not a 30 year loan? It is my understanding that the bank doesn't do this. What they do is just tell you the balance owed under the 30 year agreement and that's your payoff amount. Your last sentence is correct. The payoff amount is simply the principal outstanding plus any interest from (p*I)/12 that you owe. In your example of trying to payoff the rest of your 30 year loan in year 16, you will owe around 68% of your original loan amount. That seems unfair. Shouldn't the loan be recalculated as a 16 year loan, which it actually has become? In fact, you do have the equivalent of a 15 year loan (30-15=15) at about 68% of your initial loan amount. If you refinanced, that's exactly what you would see. In other words, for a 30y loan at 5% for $10,000, you have monthly payments of $53.68, which is exactly the same as a 15y loan at 5% for $6,788.39 (your principal outstanding after 15 years of payments), which would also have monthly payments of $53.68. A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. I didn't prepay it because of this. That is the wrong reason for not prepaying. I suspect you have misunderstood the terms of the loan - look at the Variable Monthly Payments section above for a discussion. The best thing to do with all loans is to read the terms carefully and do the calculations yourself in a spreadsheet. If you are able to get the cashflows spelled out in the contract, then you have understood the loan. |
Paying myself a distribution caused a negative Owner's Equity account balance? Is this normal? | It's not abnormal for a company that is as young as yours seems to be. It seems (based on what little I know), that you have debts, or accounts payable that were formerly covered by the $200 cash, but now aren't, because you paid it to yourself. For now, you're "entitled" to pay yourself a draw or a salary. But if you continue to do so without earning money to cover it, your company will fail. |
How should one structure a portfolio given the possibility that a Total Stock Market Index might decline and not recover for a long time? | Common financial advice is just that - it is common and general in nature and not specific for your financial needs, your goals and your risk tolerance. Regarding the possibility of a US market not going anywhere over a long period of time, well it is not a possibility, it has happened. See chart below: It took 13 years for the S&P 500 to break through 1550, a level first reached in March 2000, tested in October 2007 (just before the GFC) and finally broken through in March 2013. If you had bought in early 2000 you would still be behind when you take inflation into account. If you took the strategy of dollar cost averaging and bought the same dollar value (say $10,000) of the index every six months (beginning of each January and each July) starting from the start of 2000 and bought your last portion in January 2013, you would have a return of about 35% over 13.5 years (or an average of 2.6% per year). Now lets look at the same chart below, but this time add some trend lines. If we instead bought whenever the price crossed above the downtrend-line and sold whenever the price crossed below the uptrend-line (with the first purchase at the start of January 2000), we would have a return of 93% over the 13.5 years (or an average of 6.9% per year). Another more aggressive option (but manageable if you incorporate a risk management strategy) is to buy long when the price crosses the downtrend-line and sell your existing long position and sell short when the price drops below the uptrend-line. That is profiting both up-trending and down-trending markets. Again we start our buying at the start of January 2000. By shorting the index when the market is in a down-trend you could increase the above returns of 93% by another 54%, for a total return of 147% over 13.5 years (or an average of 10.9% per year). To conclude, using a simple long term strategy to time the markets may result in considerably higher returns than dollar cost averaging over the medium to long term, and I know which strategy would help me sleep better at night. |
If a company's assets are worth more than its market cap, can one say the shares must be undervalued? | You haven't mentioned how much debt your example company has. Rarely does a company not carry any kind of debt (credit facilities, outstanding bonds or debentures, accounts payable, etc.) Might it owe, for instance, $1B in outstanding loans or bonds? Looking at debt too is critically important if you want to conduct the kind of analysis you're talking about. Consider that the fundamental accounting equation says: or, But in your example you're assuming the assets and equity ought to be equal, discounting the possibility of debt. Debt changes everything. You need to look at the value of the net assets of the company (i.e. subtracting the debt), not just the value of its assets alone. Shareholders are residual claimants on the assets of the company, i.e. after all debt claims have been satisfied. This means the government (taxes owed), the bank (loans to repay), and bondholders are due their payback before determining what is leftover for the shareholders. |
Does anyone know what Bank of NY Mellon's EB DLs are? | ACWI refers to a fund that tracks the MSCI All Country World Index, which is A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International, and is comprised of stocks from both developed and emerging markets. The ex-US in the name implies exactly what it sounds; this fund probably invests in stock markets (or stock market indexes) of the countries in the index, except the US. Brd Mkt refers to a Broad Market index, which, in the US, means that the fund attempts to track the performance of a wide swath of the US stock market (wider than just the S&P 500, for example). The Dow Jones U.S. Total Stock Market Index, the Wilshire 5000 index, the Russell 2000 index, the MSCI US Broad Market Index, and the CRSP US Total Market Index are all examples of such an index. This could also refer to a fund similar to the one above in that it tracks a broad swath of the several stock markets across the world. I spoke with BNY Mellon about the rest, and they told me this: EB - Employee Benefit (a bank collective fund for ERISA qualified assets) DL - Daily Liquid (provides for daily trading of fund shares) SL - Securities Lending (fund engages in the BNY Mellon securities lending program) Non-SL - Non-Securities Lending (fund does not engage in the BNY Mellon securities lending program) I'll add more detail. EB (Employee Benefit) refers to plans that fall under the Employee Retirement Income Security Act, which are a set a laws that govern employee pensions and retirement plans. This is simply BNY Mellon's designation for funds that are offered through 401(k)'s and other retirement vehicles. As I said before, DL refers to Daily Liquidity, which means that you can buy into and sell out of the fund on a daily basis. There may be fees for this in your plan, however. SL (Securities Lending) often refers to institutional funds that loan out their long positions to investment banks or brokers so that the clients of those banks/brokerages can sell the shares short. This SeekingAlpha article has a good explanation of how this procedure works in practice for ETF's, and the procedure is identical for mutual funds: An exchange-traded fund lends out shares of its holdings to another party and charges a rental fee. Running a securities-lending program is another way for an ETF provider to wring more return out of a fund's holdings. Revenue from these programs is used to offset a fund's expenses, which allows the provider to charge a lower expense ratio and/or tighten the performance gap between an ETF and its benchmark. |
How could USA defaulting on its public debt influence the stock/bond market? | The default scenario that we're talking about in the Summer of 2011 is a discretionary situation where the government refuses to borrow money over a certain level and thus becomes insolvent. That's an important distinction, because the US has the best credit in the world and still carries enormous borrowing power -- so much so that the massive increases in borrowing over the last decade of war and malaise have not affected the nation's ability to borrow additional money. From a personal finance point of view, my guess is that after the "drop dead date" disclosed by the Treasury, you'd have a period of chaos and increasing liquidity issues after government runs out of gimmicks like "borrowing" from various internal accounts and "selling" assets to government authorities. I don't think the markets believe that the Democrats and Republicans are really willing to destroy the country. If they are, the market doesn't like surprises. |
Buying a house, how much should my down payment be? | Mortgage qualification is typically done based on pretax income. To keep the math easy, let's assume $10K/month gross. A well written loan allows 28% or $2800 to be used for the mortgage and property tax. Property tax varies, but 1% is the average of the 2 states mentioned. This results in $7500/yr property or $625/mo tax leaving $2175/mo. Note here - OP stated $750K house. $2175 will finance $450K at 4%/30 years. $2175 will finance $300K at 3.5% /15years. Let me pause here. Facts are most important to make these decisions. Unless you're clear on gross income, which may be higher, the constraints above quickly come into play. Once the numbers are spelled out, you may find that you are qualified to only borrow $350K based on a 30 year note. Nathan's $2500 payment was correct, but for the mortgage only. Add property tax and you'd be at $3125. You'd need a gross $11,160/mo. to meet the 28% rule. The above discussion would render any further thoughts (of mine) moot. |
Is it adventageous to expedite my wedding before the new year for tax savings? | You are correct. If you get married by December 31, you will file as married for this year (Married Filing Jointly or Married Filing Separately) instead of Single. That could indeed save you some amount of taxes, if your situation is as you described. Some people do plan their date of marriage in such a way to optimize tax savings. Whether your marriage date should be set in such a way is your personal decision. |
ETF's for early retirement strategy | If your intention is to purchase ETFs on a regular basis (like $x per month), then ETFs may not make sense. You may have to pay a fixed transaction cost like you were buying a stock for each purchase. In a similar no load mutual fund, there are more likely to be no transaction costs (depending on how it is bought). The above paragraph is not very definitive, and is really dependent upon how you would purchase either ETFs or Mutual funds. For example if you have a Fidelity brokerage account, they may let you buy certain ETFs commission free. Okay then either ETFs make great sense. It would not make sense to buy ones that they charge $35 per transaction if you have regular transactions that are smallish. The last two questions seem to be asking if you should buy MF or buy stocks directly. For most people the later is a losing proposition. They do not have the time or ability to buy stocks directly, effectively. Even if they did they may not have the capital to make enough of a difference when one considers all the cost involved. However, if that kind of thing interests you, perhaps you should dabble. Start out small and look at the higher costs of doing so as part of the "cost of doing business". |
Is there any reason to buy shares before/after a split? | There has been a lot of research on the effects of stock splits. Some studies have concluded that: However note that (i) these are averages over large samples and does not say it will work on every split and (ii) most of the research is a bit dated and more recent papers have often struggled to find any significant performance impact after 1990, possibly because the effect has been well documented and the arbitrage no longer exists. This document summarises the existing research on the subject although it seems to miss some of the more recent papers. More practically, if you pay a commission per share, you will pay more commissions after the split than before. Bottom line: don't overthink it and focus on other criteria to decide when/whether to invest. |
Does Degiro charge per order or per transaction? | An order is not a transaction. It is a request to make a transaction. If the transaction never occurs (e.g. because you cancel the order), then no fees should be charged. will I get the stamp duty back (the 0.5% tax I paid on the shares purchase) when I sell the shares? I'm not a UK tax expert, but accorging to this page is seems like you only pay stamp tax when you buy shares, and don't get it back when you sell (but may be responsible for capital gains taxes). That makes sense, because there's always a buyer and a seller, so if you got the tax back when you sold, the tax would effectively be transferred from the buyer to the seller, and the government would never collect anything. |
How did this day trader lose so much? | The day trader in the article was engaging in short selling. Short selling is a technique used to profit when a stock goes down. The investor borrows shares of a stock from someone else and sells them. After the stock price goes down, the investor buys the shares back and returns them, pocketing the difference. As the day trader in the article found out, it is a dangerous practice, because there is no limit to the amount of money you can lose. The stock was trading at $2, and the day trader thought the stock was going to go down to $1. He borrowed and sold 8,400 shares at $2. He hoped to buy them back at $1 and earn $8,400 profit. Instead, the stock went up a lot, and he was forced to buy back the shares at $18.50 per share, or about $155,400. He had had $37,000 with E-Trade, which they took, and he is now over $100,000 in debt. |
Comparing IRA vs 401K's rate-of-return with dollar cost averaging | The number you are trying to calculate is called the Internal Rate of Return (IRR). Google Spreadsheets (and excel) both have an XIRR function that can do this for you fairly simply. Setup a spreadsheet with 1 column for dates, 1 column for investment. Mark your investments as negative numbers (payment to invest). All investments will be negative. Mark your last row with today's date and today's valuation (positive). All withdrawals will be positive, so you are pretending to withdrawal your entire account for the purpose of calculation. Do not record dividends or other interim returns unless you are actually withdrawing money. The XIRR function will calculate your internal rate of return with irregularly timed investments. Links: Article explaining XIRR function (sample spreadsheet in google docs to modify) |
Making your first million… is easy! (??) | It is difficult to become a millionaire in the short term (a few years) working at a 9-to-5 job, unless you get lucky (win the lottery, inheritance, gambling at a casino, etc). However, if you max out your employer's Retirement Plan (401k, 403b) for the next 30 years, and you average a 5% rate of return on your investment, you will reach millionaire status. Many people would consider this "easy" and "automatic". Of course, this assumes you are able to max our your retirement savings at the start of your career, and keep it going. The idea is that if you get in the habit of saving early in your career and live modestly, it becomes an automatic thing. Unfortunately, the value of $1 million after 30 years of inflation will be eroded somewhat. (Sorry.) If you don't want to wait 30 years, then you need to look at a different strategy. Work harder or take risks. Some options: |
401k compound interest vs other compound interest | 1a. It isn't. Compound interest is compound interest. It works no different within a 401(k). 1b. Yes. 401(k)'s are made up of the same underlying assets that you could invest in with a regular brokerage account. |
Who can truly afford luxury cars? | Keep in mind your household income is in the top 20%, which does not translate to wealth. Given a healthy income, and no debt, other then a small house payment, you probably have a decent amount of free cash flow. This could easily be used to buy a car on time… which a lot of people do. Congratulations on being different. Having said that, living as you do, you will likely be wealthier than your income suggests. If you invested the amount you saved on car payments for an average car you can become a muli-millionaire. Doing that alone can put you in the top 10% of the wealthiest in this nation. Keep in mind 76% of Americans live paycheck-to-paycheck, so there is a sizable portion of the population that make more than you do, yet one costly emergency can cause them to spiral into significant financial difficulty. News flash: Emergencies happen. If I am not being clear, you are living wisely! I would recommend reading The Millionaire Next Door and The Millionaire Mind. You will understand that not following the whims of advertisers is good for your bottom line and that it is good to be different from the general population. One of my favorite stories from the author is these yuppies hires the author to find them rich people to sell their products. The author gets the rich people by offering them cash, albeit a relatively small amount considering their wealth (about $200) and lunch. The yuppies complain that the guys don’t “look rich” as there are no fancy suits or Rolex watches. One of the rich guys likes the pitch so much in inquires on how he can buy the company. There are a lot of lessons in that short anecdote. |
Why would people sell a stock below the current price? | Why would people sell below the current price, and not within the range of the bid/ask? There are many scenarios where this is deliberate but all of them boil down to the fact that the top level's bid doesn't support the quantity you're trying to sell (or is otherwise bogus[1]). One scenario as an example: You're day-trading both sides but at the end of the day you accumulated a rather substantial long position in a stock. You don't want to (or aren't allowed to[2]) be exposed overnight, however. What do you do? You place an order that is highly likely to go through altogether. There's several ways to achieve that but a very simple one is to look at the minimum bid level for which the bid side is willing to take all of your shares, then place a limit order for the total quantity at that price. If your position doesn't fit into the top level bid that price will well be lower than the "current" bid. Footnotes: [1] Keyword: quote stuffing [2] Keyword: overnight margin (aka positional margin, as opposed to intraday margin), this is highly broker dependent, exchanges don't usually distinguish between intraday and overnight margins, instead they use the collective term maintenance margin |
Is there a difference between buying few shares of an expensive stock vs many shares of an inexpensive one? | Before the prevalence of electronic trading, trading stocks was very costly, dropping from ~15c in the late 1970s to less than a nickel per share today. Exchange fees for liquidity takers are ~0.3c per share, currently. When orders were negotiated exclusively by humans, stocks used to be quoted in fractions rather than decimal, such as $50 1/2 instead of something more precise like $50.02. That necessary ease of negotiation for humans to rapidly trade extended to trade size as well. Traders preferred to handle orders in "round lots", 100 shares, for ease of calculation of the total cost of the trade, so 100 shares at $50 1/2 would have a total cost of $5,050. The time for a human to calculate an "odd lot" of 72 shares at $50.02 would take much longer so would cost more per share, and these costs were passed on to the client. These issues have been negated by electronic trading and simply no longer exist except for obsolete brokerages. There are cost advantages for extremely large trades, well above 100 shares per trade. Brokerage fees today run the gamut: they can be as insignificant as what Interactive Brokers charges to as high as a full service broker that could charge hundreds of USD for a few thousand USD trade. With full service brokerages, the charges are frequently mystifying and quoted at the time a trade is requested. With discount brokerages, there is usually a fee per trade and a fee per share or contract. Interactive Brokers will charge a fee per share or option only and will even refund parts of the liquidity rebates exchanges provide, as close as possible to having a seat on an exchange. Even if a trader does not meet Interactive Brokers' minimum trading requirement, the monthly fee is so low that it is possible that a buy and hold investor could benefit from the de minimis trade fees. It should be noted that liquidity providing hidden orders are typically not rebated but are at least discounted. The core costs of all trades are the exchange fees which are per share or contract. Over the long run, costs charged by brokers will be in excess of charges by exchanges, and Interactive Brokers' fee schedule shows that it can be reduced to a simple markup over exchange fees. Exchanges sometimes have a fee schedule with lower charges for larger trades, but these are out of reach of the average individual. |
What are the advantages of a Swiss bank account? | This doesn't answer your question, but as an aside, it's important to understand that your second and third bullet points are completely incorrect; while it used to be true that Swiss bank accounts often came with "guarantees" of neutrality and privacy, in recent years even the Swiss banks have been caving to political pressure from many sides (especially US/Obama), with regards to the most extreme cases of criminals. That is to say, if you're a terrorist or a child molester or in possession of Nazi warcrime assets, Swiss banks won't provide the protection you're interested in. You might say "But I'm not a terrorist or a pervert or profiteering of war crimes!" but if you're trying so hard to hide your personal assets, it's worth wondering how much longer until Swiss banks make further concessions to start providing information on PEOPLE_DOING_WHAT_YOU_ARE_DOING. Not to discourage you, this is just food for thought. The "bulletproof" protection these accounts used to provide has been compromised. I work with online advertising companies, and a number of people I know in the industry get sued on a regular basis for copyright or trademark infringement or spamming; most of these people still trust Swiss bank accounts, because it's still the best protection available for their assets, and because Swiss banks haven't given up details on someone for spamming... yet. |
Buying shares in employer's company during IPO | Rather than take anyone's word for it (including and especially mine) you need to do think very carefully about your company; you know it far better than almost anyone else. Do you feel that the company values its employees? If it values you and your immediate colleagues then its likely that it not only values its other employees but also its customers which is a sign that it will do well. Does the company have a good relationship with its customers? Since you are a software engineer using a web stack I assume that it is either a web consultancy or has an e-commerce side to it so you will have some exposure to what the customers complain about, either in terms of bugs or UX difficulties. You probably even get bug reports that tell you what customer pain points are. Are customers' concerns valid, serious and damaging? If they are then you should think twice about taking up the offer, if not then you may well be fine. Also bear in mind how much profit is made on each item of product and how many you can possibly sell - you need to be able to sell items that have been produced. Those factors indicate how the future of the company looks currently, next you need to think about why the IPO is needed. IPOs and other share offerings are generally done to raise capital for the firm so is your company raising money to invest for the future or to cover losses and cashflow shortfalls? Are you being paid on time and without issues? Do you get all of the equipment and hiring positions that you want or is money always a limiting factor? As an insider you have a better chance to analyse these things than outsiders as they effect your day-to-day work. Remember that anything in the prospectus is just marketing spiel; expecting a 4.5 - 5.3% div yield is not the same as actually paying it or guaranteeing it. Do you think that they could afford to pay it? The company is trying to sell these shares for the maximum price they can get, don't fall for the hyped up sales pitch. If you feel that all of these factors are positive then you should buy as much as you can, hopefully far more than the minimum, as it seems like the company is a strong, growing concern. If you have any concerns from thinking about these factors then you probably shouldn't buy any (unless you are getting a discount but that's a different set of considerations) as your money would be better utilized elsewhere. |
Should Emergency Funds be Used for Infrequent, but Likely, Expenses? | This is probably a very opinion-based Q&A. But anyway: My solution to such questions is to have multiple layers of emergency funds. I have one amount in a bank account that I do not like to tap, but can (and do) when I need money. This is most close to your infrequent but not completely surprising moments of cash need. I have a second layer in the form of stocks. As I understand that selling stocks should not be done when you need money, but when the stock price is good, this provides a fairly high barrier to selling it on a whim. Before I do so, especially if the stock price isn't at a local max, it would have to be an emergency. My third layer is even more fixed investment which I can't access with online brokerage. The physical aspect makes sure that it has to be a real, serious emergency before I turn that into cash. If you have such a layered approach, the question is not black and white anymore, and easier to answer. |
If I invest in securities denominated in a foreign currency, should I hedge my currency risk? | Like most other investment decisions - it depends. Specifically in this case it depends upon your view of the FX (Foreign Exchange) market over the next few years, and how sensitive you are to losses. As you correctly note, a hedge has a cost, so it detracts from your overall return. But given that you need to repatriate the investment eventually to US Dollars, you need to be aware of the fluctuations of the dollar versus other currencies. If you believe that over your time horizon, the US dollar will be worth the same as now or less, then you should not buy the hedge. If the dollar is the same - the choice is/was obvious. If you believe the US dollar will be weaker in the future, that means that when you repatriate back to US dollars, you will purchase more dollars with your foreign currency. If on the other hand, you believe the US Dollar will get stronger, then you should certainly lock in some kind of hedge. That way, when your foreign currency would have effectively bought fewer US, you will have made money on the hedge to make up the difference. If you choose not to hedge now, you can likely hedge that exposure at any time in the future, separate from the initial investment purchase buy buying/selling the appropriate FX instrument. Good Luck |
Diversification reduces risk, but does this base on the assumption that expected return of each asset is always in proportion to its risk? | if I have a asset A with expected return of 100% and risk(measured by standard deviation) 1%, and asset B with expected return of 1% and risk 100%, would it be rational to put asset B into the portfolio ? No, because Modern Portfolio Theory would say that if there is another asset (B2) with the same (or higher) return but less risk (which you already have in asset A), you should invest in that. If those are the only two assets you can choose from, you would invest completely in Asset A. The point of diversification is that, so long as two assets aren't perfectly positively correlated (meaning that if one moves up the other always moves up), then losses in one asset will sometimes be offset by gains in another, reducing the overall risk. |
High expense ratio funds - are they worth it? | In almost every circumstance high expense ratios are a bad idea. I would say every circumstance, but I don't want backlash from anyone. There are many other investment companies out there that offer mutual funds for FAR less than 1.5% ratio. I couldn't even imagine paying a 1% expense ratio for a mutual fund. Vanguard offers mutual funds that are significantly lower, on average, than the industry. Certainly MUCH lower than 1.5%, but then again I'm not sure what mutual funds you have, stock, bonds, etc. Here is a list of all Vanguard's mutual funds. I honestly like the company a lot, many people haven't heard of them because they don't spend nearly as much money on advertisements or a flashy website - but they have extremely low expense ratios. You can buy into many of their mutual funds with a 0.10%-0.20% expense ratio. Some are higher, but certainly not even close to 1.5%. I don't believe any of them are even half of that. Also, if you were referring to ETF's when you mentioned Index Fund (assuming that since you have ETFs in your tag), then 0.20% for ETF's is steep, check out some identical ETFs on Vanguard. I am not a Vanguard employee soliciting their service to you. I'm just trying to pass on good information to another investor. I believe you can buy vanguard funds through other investment companies, like Fidelity, for a good price, but I prefer to go through them. |
Can I buy stock of a company that just IPO | Yes, you could buy a stock on the day of its IPO. I'm a college student, and I wonder if I can buy stock from a company right after it finishes its IPO? Yes, you can. However, unless you are friends or family of an employee, chances are you'll be paying a higher price than you think as there is generally a fair bit of hype on most IPOs that allows some people to "flip them" which means someone is buying at a higher price. If I am not allowed to buy its stocks immediately after they go on sell, how long do I have to wait? Generally I'd wait until the hype dies down as if you look at most historical IPOs the stock could be bought cheaper later but that's just my perspective. And also who are allowed to buy the stocks at the first minute they are on sell? Anyone but keep in mind that while an IPO may be priced at $x, the initial trades may be a few times that value and the stock may come down over time. Facebook could be an example to consider of a company that had an IPO at one price and then came down for a little while on its chart over the past couple of years. |
What emergencies could justify a highly liquid emergency fund? | Weather events and aging infrastructure. Cash will buy gasoline, food and water when there is no power or telephone connectivity to process ATMs and credit cards. |
What can a CPA do that an EA cannot, and vice versa? | Enrolled Agents typically specialize only in tax matters. Their status allows them to represent clients before the IRS (which a CPA can also do) See the IRS site regarding Enrolled Agents Their focus is much narrower than a CPA and you would only hire them for advice or representation with tax related matters. (e.g. you'd not hire an enrolled agent to do an external audit) A CPA is a much broader certification, covering accounting in general, of which taxes are only a portion. A CPA may or may not specialize in tax matters, so if you have a tax related issue, especially an audit, review or appeal, you may want to query a prospective CPA as to their experience with tax matters and representing clients, appeals, etc. You would likely be better off with an EA than a CPA who eschews tax work and specializes in other things such as financial auditsOn the other hand if you have need of advice that is more generalized to accounting, audits, etc then you'd want to talk with a CPA as opposed to an EA |
What's a Letter of Credit? Are funds held in my bank for the amount in question? | Ok so this is the best information I could get! It is a guarantee from a financial institution that payment will be made for items or services once certain requirements are met. Let me know if this helps! I'll try to get more info in the meantime. |
Are solar cell panels and wind mills worth the money? | Solar water heaters are definitely questionable in the Northeast -- the season when you most need them is also the season when they are least effective. Solar electric isn't a huge moneymaker, but with rebates on installation and carbon-reduction credits (SRECs) -- and a group purchase discount if you can get one, either at a town level or through organizations like One Block Off The Grid -- it can definitely turn a profit. Early estimate was that my setup would pay its initial costs back in 4 years, and the panels are generally considered to be good for a decade before the cells have degraded enough that the panels should be replaced. I haven't had a negative electric bill yet, but I've gotten close, and my setup is a relatively small one (eight panels facing SSE on a 45-degree roof). Admittedly I've also been working to reduce electricity use; I don't think I have an incandescent bulb left in the house. |
What is a formula for calculating equity accumulated while repaying car loan? | Here is a simple way to analyze the situation. Go to your bank or credit union website and use their loan calculator with their current real interest rates and down payment requirements. Enter the rate, and number of years. Enter different values for the loan amount to get the monthly payment to the level you want ($400). Today for my credit union, the max loan would be about $9,500. Keep in mind there may be taxes, registration fees, and down payment on top of this. Jump ahead two years. The loan is paid off, the car is owned free and clear. You will be able to sell it and get some money in your pocket. If you go for a longer term loan to keep the payments under your goal the issue is that in two years you might be upside down on the loan. The car may be worth less than the remaining balance on the loan. Your equity would be negative. |
Do Options take Dividend into account? | No can't make quick bucks. It depends very much on what the strike price was. Dividends which are below 10% of the market value of the underlying stock, would be deemed to be ordinary dividends and no adjustment in the Strike Price would be made for ordinary dividends. For extra-ordinary dividends, above 10% of the market value of the underlying security, the Strike Price would be adjusted. Refer more at NSE India Edit: The Nifty consists of 50 stocks. The largest one has weight of around 8%. So 10% on this will only translate to .8% on index. |
What could cause a stock to trade below book value? | Discrepancies between what the book value is reported as and what they'd fetch if sold on the open market. Legal disputes in court. |
Do banks give us interest even for the money that we only had briefly in our account? | It depends on your bank's terms (which may in turn be influenced by laws and regulations), but most banks calculate interest on a per-day basis, so if you leave the money in the account for more than a day, it will generate interest. However, it will most likely be so little that you could make more money doing any kind of paid work in the time it took you to write this question... |
How to mitigate the risk of Euro Stoxx 50 ETF? | You could go with either of: Choosing this you'd pretty much have minimized your risk by using the whole world asa market. |
HELOC vs. Parental Student Loans vs. Second Mortgage? | First of all, I'm happy that the medical treatments were successful. I can't even imagine what you were going through. However, you are now faced with a not-so-uncommon reality that many households face. Here's some other options you might not have thought of: I would avoid adding more debt if at all possible. I would first focus on the the cost side. With a good income you can also squeeze every last dollar out of your budget to send them to school. I agree with your dislike of parent loans for the same reasons, plus they don't encourage cost savings and there's no asset to "give back" if school doesn't work out (roughly half of all students that start college don't graduate) I would also avoid borrowing more than 80% of your home's value to avoid PMI or higher loan rates. You also say that you can pay off the HELOC in 5 years - why can you do that but not cash flow the college? Also note that a second mortgage may be worse that a HELOC - the fees will be higher, and you still won't be able to borrow more that what the house is worth. |
Why sometimes payable date is BEFORE the ex-dividend date? | Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July. |
Can a company have a credit rating better than that of the country where it is located? | BlackJack's answer is technically correct: government credit ratings are independent of corporate credit ratings. The rating should reflect the borrower's ability to repay its obligations. One reason the book you read may have stated that corporate credit ratings cannot be better than the government's credit rating is that the government, unlike the corporation, can steal (or in government parlance "tax") from anywhere or anyone. So if a government finds itself in financial difficulty it could simply take the cash from corporations or people with high credit ratings by a variety of methods: implement windfall profit taxes, take over industries, take peoples gold, tax pension savings, or simply take peoples pensions or retirement savings. This increases the risk of doing business in a country with an over-extended government. Over extended governments do not die gracefully. They only die when there is nothing left to steal. |
Why do UK banks require monthly “pay in” into current account? | Banks are not your friends, they are not performing services for you because they like you. They are a business, and they make money by borrowing money from you at low interest and loaning it out at higher interest. They are trying to persuade you to deposit more money (however briefly) in their bank so they can loan out more money. They are probably also counting on the fact that most folks won't go to the trouble of setting up accounts at multiple banks with the interlocking automatic transfers, in order to meet the required deposit threshold. That lets them save on the interest payments to consumers that are individually tiny, but significant in the aggregate. |
I can't understand candlestick shadows | Each candlestick in a candlestick chart represents the open, close, high and low for a period of time. If you are looking at a daily chart it represents the open price, close price, high price and low price for that day. If you are looking at an hourly chart, then a single candlestick represents the open, close, high and low prices for an hour. If looking at a weekly chart, then a single candlestick will represent the opening price on Monday morning, the closing price on Friday afternoon, and the highest and lowest price for that week. The diagram below represents the two main types of candle sticks. When the price closes higher than they open for the period of the candlestick it is called a bullish candle and the main body is usually represented in green. When the price closes lower than they open for the period of the candlestick it is called a bearish candle and the main body is usually represented in red. In a bullish candle with a large real body and small shadows or wicks, where prices open near the low of the period and close near the top of the period, it represents a very bullish period (especially if volume is high). An example of this situation could be when good news is released to the market and most market participants want to buy the shares driving prices higher during the period. An example of a bullish candle with a small real body and a large upper shadow or wick could be when market participants start buying early during the period, then some negative news comes out or prices reach a major resistance level, then prices drop from their highs but still close higher than the open. The large upper shadow represents some indecision in prices moving higher. In a bearish candle with a large real body and small shadows or wicks, where prices open near the high of the period and close near the low of the period, it represents a very bearish period (especially if volume is high). An example of this situation could be when bad news is released to the market and most market participants want to sell the shares driving prices lower during the period. An example of a bearish candle with a small real body and a large lower shadow or wick could be when market participants start selling early during the period, then some positive news comes out or prices reach a major support level, then prices move up from their lows but still close lower than the open. The large lower shadow represents some indecision in prices moving lower. These are just some examples of what can be derived from looking at candlestick charts. There are plenty more and too much to include in this answer. Another type of candle is the Doji, represented in the diagram below. The Doji Candle represents indecision in the market. Prices open then move up to the high of the period then start falling past the open before reversing again and closing either at the open or very close to the open. The market participants can't decide whether the price should move up or down, so prices end up closing very close to where they opened. A doji Candle close to a market high or low could represent a turning point in the short term trend and could mean that over the next period or two prices could reverse and go in the opposite direction. There are many more definitions for candlestick charts, and I would recommend an introductory book on candlestick charting, like one from the "Dummies" series. The main things to keep in mind as a beginner it that a strong bullish candle with small shadows and large real body could represent further price movement upwards, a strong bearish candle with small shadows and large real body could represent further movement downwards, and any candle with large shadows could represent indecision and a reversal from the direction of the large shadow. |
Options revisited: Gold fever | Your plan already answers your own question in the best possible way: If you want to be able to make the most possible profit from a large downward move in a stock (in this case, a stock that tracks gold), with a limited, defined risk if there is an upward move, the optimal strategy is to buy a put option. There are a few Exchange Traded Funds (ETFs) that track the price of gold. think of them as stocks that behave like gold, essentially. Two good examples that have options are GLD and IAU. (When you talk about gold, you'll hear a lot about futures. Forget them, for now. They do the same essential thing for your purposes, but introduce more complexity than you need.) The way to profit from a downward move without protection against an upward move is by shorting the stock. Shorting stock is like the opposite of buying it. You make the amount of money the stock goes down by, or lose the amount it goes up by. But, since stocks can go up by an infinite amount, your possible loss is unlimited. If you want to profit on a large downward move without an unlimited loss if you're wrong and it goes up, you need something that makes money as the stock drops, but can only lose so much if it goes up. (If you want to be guaranteed to lose nothing, your best investment option is buying US Treasuries, and you're technically still exposed to the risk that US defaults on its debt, although if you're a US resident, you'll likely have bigger problems than your portfolio in that situation.) Buying a put option has the exact asymmetrical exposure you want. You pay a limited premium to buy it, and at expiration you essentially make the full amount that the stock has declined below the strike price, less what you paid for the option. That last part is important - because you pay a premium for the option, if it's down just a little, you might still lose some or all of what you paid for it, which is what you give up in exchange for it limiting your maximum loss. But wait, you might say. When I buy an option, I can lose all of my money, cant I? Yes, you can. Here's the key to understanding the way options limit risk as compared to the corresponding way to get "normal" exposure through getting long, or in your case, short, the stock: If you use the number of options that represent the number of shares you would have bought, you will have much, much less total money at risk. If you spend the same "bag 'o cash" on options as you would have spent on stock, you will have exposure to way more shares, and have the same amount of money at risk as if you bought the stock, but will be much more likely to lose it. The first way limits the total money at risk for a similar level of exposure; the second way gets you exposure to a much larger amount of the stock for the same money, increasing your risk. So the best answer to your described need is already in the question: Buy a put. I'd probably look at GLD to buy it on, simply because it's generally a little more liquid than IAU. And if you're new to options, consider the following: "Paper trade" first. Either just keep track of fake buys and sells on a spreadsheet, or use one of the many online services where you can track investments - they don't know or care if they're real or not. Check out www.888options.com. They are an excellent learning resource that isn't trying to sell you anything - their only reason to exist is to promote options education. If you do put on a trade, don't forget that the most frustrating pitfall with buying options is this: You can be basically right, and still lose some or all of what you invest. This happens two ways, so think about them both before you trade: If the stock goes in the direction you think, but not enough to make back your premium, you can still lose. So you need to make sure you know how far down the stock has to be to make back your premium. At expiration, it's simple: You need it to be below the strike price by more than what you paid for the option. With options, timing is everything. If the stock goes down a ton, or even to zero - free gold! - but only after your option expires, you were essentially right, but lose all your money. So, while you don't want to buy an option that's longer than you need, since the premium is higher, if you're not sure if an expiration is long enough out, it isn't - you need the next one. EDIT to address update: (I'm not sure "not long enough" was the problem here, but...) If the question is just how to ensure there is a limited, defined amount you can lose (even if you want the possible loss to be much less than you can potentially make, the put strategy described already does that - if the stock you use is at $100, and you buy a put with a 100 strike for $5, you can make up to $95. (This occurs if the stock goes to zero, meaning you could buy it for nothing, and sell it for $100, netting $95 after the $5 you paid). But you can only lose $5. So the put strategy covers you. If the goal is to have no real risk of loss, there's no way to have any real gain above what's sometimes called the "risk-free-rate". For simplicity's sake, think of that as what you'd get from US treasuries, as mentioned above. If the goal is to make money whether the stock (or gold) goes either up or down, that's possible, but note that you still have (a fairly high) risk of loss, which occurs if it fails to move either up or down by enough. That strategy, in its most common form, is called a straddle, which basically means you buy a call and a put with the same strike price. Using the same $100 example, you could buy the 100-strike calls for $5, and the 100-strike puts for $5. Now you've spent $10 total, and you make money if the stock is up or down by more than $10 at expiration (over 110, or under 90). But if it's between 90 and 100, you lose money, as one of your options will be worthless, and the other is worth less than the $10 total you paid for them both. |
Purpose of having good credit when you are well-off? | Because even if you won the lottery, without at least some credit history you will have trouble renting cars and hotel rooms. I learned about the importance, and limitations of credit history when, in the 90's, I switched from using credit cards to doing everything with a debit card and checks purely for convenience. Eventually, my unused credit cards were not renewed. At that point in my life I had saved a lot and had high liquidity. I even bought new autos every 5 years with cash. Then, last decade, I found it increasingly hard to rent cars and sometimes even a hotel rooms with a debit card even though I would say they could precharge whatever they thought necessary to cover any expenses I might run. I started investigating why and found out that hotels and car rentals saw having a credit card as a proxy for low risk that you would damage the car or hotel room and not pay. So then I researched credit cards, credit reports, and how they worked. They have nothing about any savings, investments, or bank accounts you have. I had no idea this was the case. And, since I hadn't had cards or bought anything on credit in over 10 years there were no records in my credit files. Old, closed accounts had fallen off after 10 years. So, I opened a couple of secured credit cards with the highest security deposit allowed. They unsecured after a year or so. Then, I added several rewards cards. I use them instead of a debit card and always pay in full and they provide some cash back so I save money compared to just using a debit card. After 4 years my credit score has gone to 800+ even though I have never carried any debt and use the cards as if they were debit cards. I was very foolish to have stopped using credit cards 20 years ago but just had no idea of the importance of an established credit history. And note that establishing a great credit history does not require that you borrow money or take out loans for anything. just get credit cards and pay them in full each month. |
Why does the stock market index get affected when a terrorist attack takes place? | While JB King says some useful things, I think there is another fundamental reason why stock markets go down after disasters, either natural or man-made. There is a real impact on the markets - in the case of something like 9/11 due to closed airport, higher security costs, closer inspections on trade goods, tighter restrictions on visas, real payments for the rebuilding of destroyed buildings and insurance payouts for killed people, and eventually the cost of a war. But almost as important is the uncertainty and risk. Nobody knew what was going to happen in the days and weeks after an attack like that. Is there going to be another one a week later, or every week for the next year? Will air travel become essentially impractical? Will international trade be severely restricted? All those would have a huge, massive effect on the economy. You may argue that those things are very unlikely, even after something like 9/11. But even a small increase in the likelihood of a catastrophic economic crash is enough to start people selling. There is another thing that drives the market down. Even if most people are sure that there won't be a catastrophic economic crash, they know that other people think there might be and so will sell. That will drive the market down. If they know the market is going down, then sensible traders will start to sell, even if they think there is zero risk of a crash. This makes the effect worse. Eventually prices will drop so far that the people who don't think there is a crash will start to buy, so they can make a profit on the recovery. But that usually doesn't happen until there has been a substantial drop. |
Is buying a home a good idea? | IF the price of the property (1) increases A LOT, you will just break even, on the huge expenses of home owning. IF the price of the property (2) increases A HUGE AMOUNT, you will make lots of money, due to the leverage. IF the price of the property (3) stays even, you will LOSE a tremendous amount of money. It's much like owning a car - constant expenses. That's all there is to it. It's well worth bearing in mind that property prices for your area / your property need to be constantly increasing for you to merely break even. Note that over long periods of time prices tend to go up (most anywhere - but not everywhere). Many people basically base their thinking on that. It will be OK "in the long run". Which is fair enough. I believe one huge factor is that it is enforced saving. That is the number one advantage for most. Note too that in most/all jurisdictions, there are tremendous tax advantages, even if it turns out to be situation (1) (i.e. a waste of time, you only break-even). Note finally that there are, indeed, tremendous social/financial advantages to having the equity: it gets incredibly easy to get other loans (for business or the like) once you own a house; this is undeniably an advantage (perhaps press your husband on that one). |
Taxes for citizen of EU country #1 living in EU country #2 and working from home for non-EU country #3? | There are just too many variables here... Will you legally be considered a permanent resident from the moment you move? Will you work from home as a contractor or as an employee? Those are not questions you can answer yourself, they really depend on your circumstances and how the tax authorities will look at them. I strongly encourage you to speak to an advisor. Very generally spoken, at your place of residence you pay taxes for your worldwide income, at the place of your work base (which is not clear if this really would be Turkey) you pay taxes on the income generated there. If it's one and the same country, it's simple. If not, then theoretically you pay twice. However, most countries have double taxation treaties to avoid just that. This usually works so that the taxes paid abroad (in Turkey) would be deducted from your tax debt at your place of residence. But you might want to read the treaty to be sure how this would be in your specific case (all treaties are publicly available), and you should really consider speaking to a professional. |
With respect to insider trading, what is considered “material information”? | Material Information means that any information that can reasonable affect the share price of the company [upward or downward] as looked by the investors. The idea is to provide a level playing field to all investors. Hence it forces people having material information not to trade when they have this information that is not yet disclosed. Yes it happens all the time and laws are quite stringent. There is monitoring of share activity by regulators ... hence most of the times the companies come out with their own guidelines and top & senior management is prohibited from trading in their own company’s shares for pretty much round the year except few windows the company decides is safe. Now it may not be possible to monitor every small material info, but any large spike of stocks after certain announcements is investigated by regulators to verify any undue gains. For ex a person who never trades suddenly buys large qty of shares and it goes up and he sells again ... etc |
Is it wise to switch investment strategy frequently? | A guy who does a sports talk show here in the US can be pretty smart about some things. His advice: If you are wondering if something is a good idea, say it out loud. In his book he cites the fact that people thought, at one time, it would be a good idea to allow smoking on airline flights. Keep in mind you are using liquid oxygen, news paper, and are 10,000+ feet up in the air. Say it like that and you hit yourself in the forehead. Read the title of your question in a day or two, and you can answer it yourself with a resounding NO. |
Rules for SEP contributions in an LLC? | From Schwab - What are the eligibility requirements for a business to establish a SEP-IRA? Almost any type of business is eligible to establish a SEP-IRA, from self-employed individuals to multi-person corporations (including sole proprietors, partnerships, S and C corporations, and limited liability companies [LLCs]), tax-exempt organizations, and government agencies. What are the contribution limits? You may contribute up to 25% of compensation (20% if you’re self-employed3) or $49,000 for 2011 and $50,000 for 2012, whichever is less. If we set the PC aside, you and the son have an LLC renting office space, this addresses the ability of the LLC to offer the retirement account. |
Free service for automatic email stock alert when target price is met? | Hey guys, I found this website, it seems to do it for free, and they have many options. If let me know if you find something better than this. http://members.zignals.com/main/ |
Didn't apply for credit card but got an application denied letter? | It's marketing or SCAM tentative. Please check with extreme attention before clicking any link present in the communication. |
How do annual risks translate into long-term risks? | The short answer is the annualised volatility over twenty years should be pretty much the same as the annualised volatility over five years. For independent, identically distributed returns the volatility scales proportionally. So for any number of monthly returns T, setting the annualization factor m = 12 annualises the volatility. It should be the same for all time scales. However, note the discussion here: https://quant.stackexchange.com/a/7496/7178 Scaling volatility [like this] only is mathematically correct when the underlying price model is driven by Geometric Brownian motion which implies that prices are log normally distributed and returns are normally distributed. Particularly the comment: "its a well known fact that volatility is overestimated when scaled over long periods of time without a change of model to estimate such "long-term" volatility." Now, a demonstration. I have modelled 12,000 monthly returns with mean = 3% and standard deviation = 2, so the annualised volatility should be Sqrt(12) * 2 = 6.9282. Calculating annualised volatility for return sequences of various lengths (3, 6, 12, 60 months etc.) reveals an inaccuracy for shorter sequences. The five-year sequence average got closest to the theoretically expected figure (6.9282), and, as the commenter noted "volatility is [slightly] overestimated when scaled over long periods of time". Annualised volatility for varying return sequence lengths Edit re. comment Reinvesting returns does not affect the volatility much. For instance, comparing some data I have handy, the Dow Jones Industrial Average Capital Returns (CR) versus Net Returns (NR). The return differences are somewhat smoothed, 0.1% each month, 0.25% every third month. More erratic dividend reinvestment would increase the volatility. |
On a debt collection agency's letter, what does “balance” refer to? | Without more info to go on (such as a screenshot of the relevant portion of the statement or what country you're in), I will run with the answer that "balance" is the amount the collection agency is attempting to collect from you, including any and all fees the agency may have added. One important idea to keep in mind is that depending on how old the debt is, the amount involved, and the importance to the agency to collect it, you may be able to negotiate a settlement for less than the full amount. This isn't always possible, but sometimes you get lucky, and it doesn't hurt to try. Collection agencies work in several ways. Some will actually buy the outstanding debt from the original creditor for some percentage of the debt's face value and then take their chances on whether they collect anything at all, while others work on behalf of the creditor and earn some percentage of what they manage to recover. In the latter case, your chance of negotiating a reduced amount is better, because the agency is being evaluated by the creditor on how quickly and efficiently they collect debts. An agency that is slower or less effective than another is less likely to continue earning the creditor's business. I hope this helps. Good luck! |
Does the bid/ask concept exist in dealer markets? | Why would there not be a bid and ask? Dealers make their money in the spread between what they buy it from one entity for and what they sell it to another entity for. This doesn't mean they have to do it auction-style, but they'll still have a different buy price from a sell price, hence "bid" and "ask". |
Want to buy expensive product online. Credit line on credit cards not big enough. How do “Preferred Account” programs work? | First and foremost - make sure where you are purchasing the product is a reputable organization. Secondly (coming from a biased computer geek) - be aware that Apple is a content trap. Now on to my answer to your question... How do "Preferred Account" programs work? They're "Preferred" because they tend to bring in more money to the lender. It may say No payments for 6 months but the fine print may have you being charged interest during those 6 months, meaning your new shiny computer will be costing more than the sticker price. The good side is that you don't have to send in any actual payments for 6 months, but be aware that you'll probably be paying more than advertised. What are the different ways I can do it? Your listed options 1 & 2 are both good ways to pay for your new computer. Yes, option 1 will charge you sales tax, but are you sure paying online excludes sales tax? Some states mandate it. Option 2 is a viable option too - probably your best option. 1st - there is possibly no sales tax with purchases made online, although there may be a delivery charge. 2nd - you're not committing to an additional monthly bill, you are essentially paying with cash, just directly from your bank account. No interest charge! 3rd - that little Visa logo is your friend. Purchases made through Visa & MasterCard (whether it's a credit or debit card) normally have an auto-extended warranty feature (you may want to verify with Visa before taking my word on it). Typically they double any manufacture's warranty. Lastly - you can always set up a PayPal account and link it to your bank account. Assuming the site you plan on purchasing the computer from accepts PayPal. |
Can you buy gift cards at grocery store to receive a higher reward rate? | I actually just did that with my Chase Freedom card. They rotate categories every 3 months, and from April-June it was 5% back at grocery stores. So I bought a ton of gas cards and got my 5% back. Next I figured out I would be clever and buy a ton of store gift cards (grocery gift cards) right at the end of the quarter, then use those in the future to purchase gas cards. Well, I just tried that a couple days ago and discovered the store refuses to sell a gift card if you're paying with a gift card! So now I'm stuck with $1,000 in grocery cards until I use them in actual grocery purchases haha One of the things about this grocery store is they partner with a gas station on their rewards program. They offer 10 cents off a gallon with every $100 spent in store, and they double it to 20 cents off a gallon if you buy $100 in gift cards. Then on the back of the receipt is a coupon for 10 cents off per gallon -- which they double on Tuesdays. Unfortunately I think I'm one of the only people that takes this much advantage of the program :-/ Side note: I actually just changed the billing cycle of my Chase Freedom card to end on the 24th of the month. That way I can charge a bunch of rewards in the final 6-7 days of the quarter. And if I have a $0 balance on the 24th, my bill isn't due for 7 weeks -- interest free! And Chase Freedom has never cared if you purchase gift cards with their quarterly rewards program. I also gave them a courtesy email giving the specific store and $$$ amount that was going to be charged, and of course they still called me with a 'fraud alert'... |
give free budgeting advice | The counsel of a friend doesn't come with a legal or professional liability. The key to doing this sort of thing successfully is to respect boundaries. You are providing advice and discussion, not taking over your friend's life. |
Is my mortgage more likely to be sold if I pre-pay principal? | In a process called collateralization, your mortgage is combined with others to form a security that other can invest in. When done right, this process provides liquidity, more money to be lent for more loans. When done wrong, bad things happen. My mortgage happens to be held by the issuing bank. Yours was sold into such a pool of mortgages. One effect of this is the reselling of the servicing of the loan. I've had other mortgages that were sold every year, but I never paid ahead. With this bank, I'm on my fifth refinance, but the bank keeps the loan in house no matter what. I don't know if there's any correlation, it depends on the originating bank, in my opinion. |
Good book-keeping software? | Best Linux software is PostBooks. It is full double entry, but there is definitely a learning curve. For platform-agnostic, my favorite is Xero, which is web-based. It is full double entry balance sheet, the bank reconciliation is a pleasure to use, and they are coming out with a US version this summer. Easy to use and does everything I need. |
Best Time to buy a stock in a day | You want to buy when the stock market is at an all-time low for that day. Unfortunately, you don't know the lowest time until the end of the day, and then you, uh can't buy the stock... Now the stock market is not random, but for your case, we can say that effectively, it is. So, when should you buy the stock to hopefully get the lowest price for the day? You should wait for 37% of the day, and then buy when it is lower than it has been for all of that day. Here is a quick example (with fake data): We have 18 points, and 37% of 18 is close to 7. So we discard the first 7 points - and just remember the lowest of those 7. We bear in mind that the lowest for the first 37% was 5. Now we wait until we find a stock which is lower than 5, and we buy at that point: This system is optimal for buying the stock at the lowest price for the day. Why? We want to find the best position to stop automatically ignoring. Why 37%? We know the answer to P(Being in position n) - it's 1/N as there are N toilets, and we can select just 1. Now, what is the chance we select them, given we're in position n? The chance of selecting any of the toilets from 0 to K is 0 - remember we're never going to buy then. So let's move on to the toilets from K+1 and onwards. If K+1 is better than all before it, we have this: But, K+1 might not be the best price from all past and future prices. Maybe K+2 is better. Let's look at K+2 For K+2 we have K/K+1, for K+3 we have K/K+2... So we have: This is a close approximation of the area under 1/x - especially as x → ∞ So 0 + 0 + ... + (K/N) x (1/K + 1/K+1 + 1/K+2 ... + 1/N-1) ≈ (K/N) x ln(N/K) and so P(K) ≈ (K/N) x ln(N/K) Now to simplify, say that x = K/N We can graph this, and find the maximum point so we know the maximum P(K) - or we can use calculus. Here's the graph: Here's the calculus: To apply this back to your situation with the stocks, if your stock updates every 30 seconds, and is open between 09:30 and 16:00, we have 6.5 hours = 390 minutes = 780 refreshes. You should keep track of the lowest price for the first 289 refreshes, and then buy your stock on the next best price. Because x = K/N, the chance of you choosing the best price is 37%. However, the chance of you choosing better than the average stock is above 50% for the day. Remember, this method just tries to mean you don't loose money within the day - if you want to try to minimise losses within the whole trading period, you should scale this up, so you wait 37% of the trading period (e.g. 37% of 3 months) and then select. The maths is taken from Numberphile - Mathematical Way to Choose a Toilet. Finally, one way to lose money a little slower and do some good is with Kiva.org - giving loans to people is developing countries. It's like a bank account with a -1% interest - which is only 1% lower than a lot of banks, and you do some good. I have no affiliation with them. |
Job Offer - Explain Stock Options [US] | An option is a financial instrument instrument that gives you the right, but not the obligation, to do some transaction in the future at a given price. An employee stock option is a kind of "call option" -- it gives you the right, but not the obligation, to buy the stock at a certain price (the "exercise price", usually set as the price of the stock when the option was granted). The idea is that you would "exercise" the option (buy the stock at the given price as provided by the option), if the value of the stock is higher than the exercise price, and not if it is lower. The option is gifted to you. But that does not mean you get any stock. If and when you choose to exercise the option, you would buy the stock with your own money. At what time you can exercise the option (and how many shares you can exercise at a given time) will be specified in the agreement. Usually, you can only exercise a particular share after it has "vested" (according to some vesting schedule), and you lose the ability to exercise after you no longer work for the company (plus perhaps a grace period), or after the option expires. |
After consulting HR Block, are you actually obligated to file your taxes with them, if they've found ways to save you money? | The obligation is contractual, so you need to read the contract to answer your question. However, since you paid for the service provided, I see no way they can force you buy any other service from them. They cannot file your tax returns without your explicit consent (on a form dedicated to that, dated and having the numbers matching the return filed - not something you can sign before the actual return is ready). Worst case they can claim you owe them more money, but since you paid for the services provided, I can't see how they can have that stand in court as well. Bottom line - even if the contract has such an obligation, I cannot see how it can be enforced. As to the mistake they noted... I wouldn't rely on H&R Block advice in any matter. Very likely, the person you were talking to was not even licensed to provide tax advice. You're lucky if the person has passed CRTP exams (in California they're legally required), but I seriously doubt their clerks are EAs or CPAs (the only designations other than a lawyer legally allowed to provide tax advice). Tax preparers (CRTPs included) are only allowed to provide advice pertaining to the preparation of the tax return they're currently engaged to prepare. Claiming income is sourced or not sourced in NY is borderline, IMHO. If they got it wrong (and to me it sounds as they did) you can sue them for damages. If your situation is tricky and it is too late to get an appointment with a proper adviser - file an extension (form 4868) and deal with it after the April busy season. |
How can all these countries owe so much money? Why & where did they borrow it from? | Here is an overview of who owns US Debt from Wikipedia, it indicates that approximately 1/3rd of US debt is held by foreigners (mainly the central banks of other countries), approximately 1/2 of US Debt is held by the federal reserve, and the rest is owned by various America organizations (mutual funds, pension funds, etc). The money is loaned via bonds, treasury bills, etc. When you put money in your pension fund, you very likely buying US debt. The US Treasury department all has a comprehensive page about how public debt works in the United States here: an overview of public debt from the treasury. I wasn't able to find a similar breakdown for other countries, but Wikipedia has a comprehensive list of how much debt is owed by other countries: a list of countries by public debt. |
How did this day trader lose so much? | Learn something new every day... I found this interesting and thought I'd throw my 2c in. Good description (I hope) from Short Selling: What is Short Selling First, let's describe what short selling means when you purchase shares of stock. In purchasing stocks, you buy a piece of ownership in the company. You buy/sell stock to gain/sell ownership of a company. When an investor goes long on an investment, it means that he or she has bought a stock believing its price will rise in the future. Conversely, when an investor goes short, he or she is anticipating a decrease in share price. Short selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered. Still with us? Here's the skinny: when you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later, you must "close" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money. So what happened? The Plan The Reality Lesson I never understood what "Shorting a stock" meant until today. Seems a bit risky for my blood, but I would assume this is an extreme example of what can go wrong. This guy literally chose the wrong time to short a stock that was, in all visible aspects, on the decline. How often does a Large Company or Individual buy stock on the decline... and send that stock soaring? How often does a stock go up 100% in 24 hours? 600%? Another example is recently when Oprah bought 10% of Weight Watchers and caused the stock to soar %105 in 24 hours. You would have rued the day you shorted that stock - on that particular day - if you believed enough to "gamble" on it going down in price. |
Trading when you work for a market participant | There is normally a policy at the organisation that would restrict trades or allow trades under certain conditions. This would be in accordance with the current regulations as well as Institutions own ethical standards. Typical I have seen is that Technology roles are to extent not considered sensitive, ie the employees in this job function normally do not access sensitive data [unless your role is analyst or production support]. An employee in exempt roles are allowed to trade in securities directly with other broker or invest in broad based Mutual Funds or engage a portfolio management services from a reputed organisation. It is irrelevant that your company only deals with amounts > 1 Million, infact if you were to know what stock the one million is going into, you may buy it slightly earlier and when the company places the large order, the stock typically moves upwards slightly, enough for you to make some good money. That is Not allowed. But its best you get hold of a document that would layout the do' and don't in your organisation. All such organisation are mandated to have a written policy in this regard. |
What is the best way to stay risk neutral when buying a house with a mortgage? | You can hedge your house price from losing value if you believe that the housing market is correlated with major stock indices. Speak with a commodities broker because they will be able to help you buy puts on stock indices which if correlated with housing prices will offer somewhat of a hedge. Example. House prices drop 30% because of weak economy, stocks will generally drop around that same amount 30%. If you have enough exposure to in the puts compared to your house value you will be protected. You can also buy calls in 30 year bonds for interest rate lock if you are not on a fixed interest rate. Many investors like warren buffet and carl icahn have been protecting them selves from a potential market downward turn. Speak to a local commodity broker to get some detailed advice, not etrade or any discount brokers they won't be able to help you specialize your trades. look for a full time commodity broker house. |
$65000/year or $2500 every two weeks: If I claim 3 exemptions instead of zero, how much would my take home pay be? | Take a look at IRS Publication 15. This is your employer's "bible" for withholding the correct amount of taxes from your paycheck. Most payroll systems use what this publication defines as the "Percentage Method", because it requires less data to be entered into the system in order to correctly compute the amount of withholding. The computation method is as follows: Taxes are computed "piecewise"; dollar amounts up to A are taxed at X%, and then dollar amounts between A and B are taxed at Y%, so total tax for B dollars is A*X + (B-A)*Y. Here is the table of rates for income earned in 2012 on a daily basis by a person filing as Single: To use this table, multiply all the dollar amounts by the number of business days in the pay period (so don't count more than 5 days per week even if you work 6 or 7). Find the range in which your pay subject to withholding falls, subtract the "more than" amount from the range, multiply the remainder by the "W/H Pct" for that line, and add that amount to the "W/H Base" amount (which is the cumulative amount of all lower tax brackets). This is the amount that will be withheld from your paycheck if you file Single or Married Filing Separately in the 2012 TY. If you file Married Filing Jointly, the amounts defining the tax brackets are slightly different (there's a pretty substantial "marriage advantage" right now; withholding for a married person in average wage-earning range is half or less than a person filing Single.). In your particular example of $2500 biweekly (10 business days/pp), with no allowances and no pre-tax deductions: So, with zero allowances, your employer should be taking $451.70 out of your paycheck for federal withholding. Now, that doesn't include PA state taxes of 3.07% (on $2500 that's $76.75), plus other state and federal taxes like SS (4.2% on your gross income up to 106k), Medicare/Medicaid (1.45% on your entire gross income), and SUTA (.8% on the first $8000). But, you also don't get a refund on those when you fill out the 1040 (except if you claim deductions against state income tax, and in an exceptional case which requires you to have two jobs in one year, thus doubling up on SS and SUTA taxes beyond their wage bases). If you claim 3 allowances on your federal taxes, all other things being equal, your taxable wages are reduced by $438.45, leaving you with taxable income of $2061.55. Still in the 25% bracket, but the wages subject to that level are only $619.55, for taxes in the 25% bracket of $154.89, plus the withholding base of $187.20 equals total federal w/h of $342.09 per paycheck, a savings of about $110pp. Those allowances do not count towards other federal taxes, and I do not know if PA state taxes figure these in. It seems odd that you would owe that much in taxes with your withholding effectively maxed out, unless you have some other form of income that you're reporting such as investment gains, child support/alimony, etc. With nobody claiming you as a dependent and no dependents of your own, filing Single, and zero allowances on your W-4 resulting in the tax withholding above, a quick run of the 1040EZ form shows that the feds should owe YOU $1738.20. The absolute worst-case scenario of you being claimed as a dependent by someone else should still get you a refund of $800 if you had your employer withhold the max. The numbers should only have gotten better if you're married or have kids or other dependents, or have significant itemized deductions such as a home mortgage (on which the interest and any property taxes are deductible). If you itemize, remember that state income tax, if any, is also deductible. I would consult a tax professional and have him double-check all your numbers. Unless there's something significant you haven't told us, you should not have owed the gov't at the end of the year. |
Why does ExxonMobil's balance sheet show more liabilities than assets? | I believe you are missing knowledge of how to conduct a ratio analysis. Understanding liquidity ratios, specifically the quick or acid-test ratio will be of interest and help your understanding. http://www.investopedia.com/terms/a/acidtest.asp Help with conducting a ratio analysis. http://www.demonstratingvalue.org/resources/financial-ratio-analysis Finally, after working through the definitions, this website will be of use. https://www.stock-analysis-on.net/NYSE/Company/Exxon-Mobil-Corp/Ratios/Liquidity |
Can I use my long position stocks as margin for my short sold stocks? | 200% margin for a short sale is outrageous. You should only need to put up 150% margin, of which 50% is your money, and the 100% is the proceeds. With $100 of your money, you should be able to buy $100 of GOOG and short $100 of PNQI. |
Can a credit card company raise my rates for making a large payment? | No. That's pretty unlikely. Card issuers typically base your rate on your credit score. Paying down debt reduces your percent of available credit used, and improves your score until you are in the 1-20% range. That's optimum. To this issuer, you are one of a million customers, there's no emotion in this, just numbers to them. For what it's worth, if a card issuer raises your rate, you are permitted to "not accept" the rate, stop using the card for new charges, and pay at the current rate. Of course this doesn't apply to zero interest deals, only to increases to your regular rate. |
Is there such a thing as a deposit-only bank account? | Do you write checks? You are giving your bank account and routing number to anybody you have ever given a check to. Your employer is paying taxes on your behalf, so they need your social security number so they can pay your social security taxes. Account and routing numbers are how deposits are made. If you are concerned, create a free checking account, collect the direct deposit and each payday go to the bank and withdraw your money to put it where you like. Nothing is deposit only because you will want your money back. Finally, you would be shocked at how little it takes to make a draft on your account in the US. Certainly not your SSN, Address, or even your name. |
Is stock trading based more on luck than poker playing? | I'd say that it cannot be meaningfully calculated or measured because the two are just too different in every way. Poker Stock trading I guess the last point (that someone relying on luck is exploitable in poker but not in stock trading) could be interpreted as stock trading being based more on luck, while the second and third points indicated that poker has more true randomness and is thus based more on luck. Something both have in common is that people who have been losing money are often tempted to take stupid risks which lose them everything. |
3-year horizon before trading up to next home: put windfall in savings, or pay off mortgage? | You may have to both save your windfall in a savings account and use it to pay down your mortgage. Almost every mortgage has some sort of pay-down option that allows you to pay off a percentage of the original principal without penalty. Any amounts above that will be penalized, most likely by the amount of interest the lending institution would have collected. Ask your lender what the penalties are and what penalty-free pay-down options you have. Knowing that and how much you will receive each quarter by selling the company stock will tell you how much of your money you need to put against your house and your savings account. |
Are limit orders safe? | Limit orders are generally safer than market orders. Market orders take whatever most-favorable price is being offered. This can be especially dangerous in highly volatile stocks which have a significant spread between the bid and ask. That being said, you want to be very careful that you enter the price you intend into a limit order. It is better to be a bit slower at entering your orders than it is to make a terrible mistake like the one you mention in your question. |
Should I fund retirement with a static asset allocation or an age based glide path? | So I did some queries on Google Scholar, and the term of art academics seem to use is target date fund. I notice divided opinions among academics on the matter. W. Pfau gave a nice set of citations of papers with which he disagrees, so I'll start with them. In 1969, Paul Sameulson published the paper Lifetime Portfolio Selection By Dynamic Stochaistic Programming, which found that there's no mathematical foundation for an age based risk tolerance. There seems to be a fundamental quibble relating to present value of future wages; if they are stable and uncorrelated with the market, one analysis suggests the optimal lifecycle investment should start at roughly 300 percent of your portfolio in stocks (via crazy borrowing). Other people point out that if your wages are correlated with stock returns, allocations to stock as low as 20 percent might be optimal. So theory isn't helping much. Perhaps with the advent of computers we can find some kind of empirical data. Robert Shiller authored a study on lifecycle funds when they were proposed for personal Social Security accounts. Lifecycle strategies fare poorly in his historical simulation: Moreover, with these life cycle portfolios, relatively little is contributed when the allocation to stocks is high, since earnings are relatively low in the younger years. Workers contribute only a little to stocks, and do not enjoy a strong effect of compounding, since the proceeds of the early investments are taken out of the stock market as time goes on. Basu and Drew follow up on that assertion with a set of lifecycle strategies and their contrarian counterparts: whereas a the lifecycle plan starts high stock exposure and trails off near retirement, the contrarian ones will invest in bonds and cash early in life and move to stocks after a few years. They show that contrarian strategies have higher average returns, even at the low 25th percentile of returns. It's only at the bottom 5 or 10 percent where this is reversed. One problem with these empirical studies is isolating the effect of the glide path from rebalancing. It could be that a simple fixed allocation works plenty fine, and that selling winners and doubling down on losers is the fundamental driver of returns. Schleef and Eisinger compare lifecycle strategy with a number of fixed asset allocation schemes in Monte Carlo simulations and conclude that a 70% equity, 30% long term corp bonds does as well as all of the lifecycle funds. Finally, the earlier W Pfau paper offers a Monte Carlo simulation similar to Schleef and Eisinger, and runs final portfolio values through a utility function designed to calculate diminishing returns to more money. This seems like a good point, as the risk of your portfolio isn't all or nothing, but your first dollar is more valuable than your millionth. Pfau finds that for some risk-aversion coefficients, lifecycles offer greater utility than portfolios with fixed allocations. And Pfau does note that applying their strategies to the historical record makes a strong recommendation for 100 percent stocks in all but 5 years from 1940-2011. So maybe the best retirement allocation is good old low cost S&P index funds! |
Explanations on credit cards in Canada | Is my understanding okay ? If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. Which is where the credit card company can add fees so you pay more and they make more money. Don't forget that in the credit case, you are borrowing money rather than using your own. Another thing that bothers me is that the credit card apparently has a rather low credit limit. If I wanted to buy something that costs $2500 but only have a credit limit of $1500, can I make a preemptive wire from my check account to the VISA account to avoid facing the limit ? If so, what is the point for the customer of having two accounts (and two cards for that matter...) ? If you were the credit card company, do you believe people should be given large limits first? There are prepaid credit cards where you could put a dollar amount on and it would reject if the balance gets low enough. Iridium Prepaid MasterCard would be an example here that I received one last year as I was involved in the floods in my area and needed access to government assistance which was given this way. Part of the point of building up a credit history is that this is part of how one can get the credit limits increased on cards so that one can have a higher limit after demonstrating that they will pay it back and otherwise the system could be abused. There may be a risk that if you prepay onto a credit card and then want to take back the money that there may be fees involved in the transaction. Generally, with credit cards the company makes money on the fees involved for transactions which may come from merchants or yourself as a cash advance on a credit card will be charged interest right away while if you buy merchandise in a store there may not be the interest charged right away. |
Bringing money to UK for investment purposes | Transfers of money to the UK for any purpose are not generally taxed, so you can just transfer it here and invest. Once the money is here, you'll be taxed on the business activity like anyone else - the company will have to pay corporation tax, and depending on your own residency you might have to pay income tax on any distributions from the company. |
Best buying price on stock marketing based on market depth detail (CSE atrad tool) | When I first started working in finance I was given a rule of thumb to decide which price you will get in the market: "You will always get the worst price for your deal, so when buying you get the higher ask price and when selling you get the lower bid price." I like to think of it in terms of the market as a participant who always buys at the lowest price they can (i.e. buys from you) and sells at the highest price they can. If that weren't true there would be an arbitrage opportunity and free money never exists for long. |
Historical Stock Prices of delisted company [duplicate] | You need a source of delisted historical data. Such data is typically only available from paid sources. According to my records, Lawson Software Inc listed on the NASDAQ on 7 Dec 2001 and delisted on 6 Jul 2011. Its final traded price was $11.23. It was taken over by Infor who bid $11.25 per share. Source: Symbol LWSN-201107 within Premium Data US delisted stocks historical data set available from http://www.premiumdata.net/products/premiumdata/ushistorical.php Disclosure: I am a co-owner of Norgate / Premium Data. |
Online stock screener to find stocks that are negatively correlated to another stock/index? | Finviz can be screened by beta which is an index of correlation. Finviz covers all major North American exchanges and some others. |
Do the tax consequences make it worth it for me to hold ESPP stock? | I think people in general tend to unnecessarily over-complicate this issue. Here's what I think you should do in any situation like this: First and foremost, put all tax considerations aside and decide whether it makes sense to sell the stock now or hold on to it for the long term based on its merits as an investment. Tax considerations have absolutely nothing to do with whether the stock is a good investment. If you consider all non-tax factors and decide to hold on to it for the long term, then you can use the tax considerations as a very minor input to how long you should hold it - in other words, don't set your time horizon to 17.5 months if waiting another 2 weeks gives you better tax treatment. You're going to pay taxes on your gains no matter what. The only difference is whether you pay capital gains tax or income tax. Granted, the income tax rate is higher, but wouldn't it suck if you pay a LOT less tax only because you have a LOT less value in your stock? So to answer your question - I would say, absolutely not, tax consequences do not make it worthwhile to hold on to your ESPP shares. If you decide to hold on to your ESPP for other reasons (and they better be good ones to put that much free profit at risk), only then should you look at the tax consequences to help fine-tune your strategy. |
Should I pay off my credit card online immediately or wait for the bill? | If you carried a balance from the last month, then pay the card off as soon as possible. Otherwise I agree with @mbhunter that you should wait until close to time for the bill to become due. Then always pay the credit card off in full and you will borrowing Chase's money interest free for up to 30 days. |
If I have no exemptions or deductions, just a simple paycheck, do I HAVE to file taxes? | While you are required to do so as others have said, it's actually in your interest to do so. In a recent article at GlobeInvestor, Tim Cestnick discusses the benefits of filing tax returns for teens. This situation may or may not apply to you but the message is the same. The main benefits are (1) create RRSP contribution room and (2) be eligible for GST/HST credits and other possible one-shot credits (think oil royalty surplus cheques in Alberta). Excerpt: You see, when Lincoln was 14, he filed a tax return and reported $2,000 of income that year. He paid no tax thanks to the basic personal tax credit, but he created $360 of RRSP contribution room that year. Beginning in 2003, Lincoln started working part-time in his father's business. His father agreed to pay him $6,000 each summer to work in the business, to help save money for university. Lincoln didn't pay any tax on the money he earned in those summers because his basic personal tax credit was always higher than his earnings. In addition, Lincoln added to his RRSP contribution room simply by filing a tax return each year. |
How do 401k handle rate of return | Your employer sends the money that you choose to contribute, plus employer match if any, to the administrator of the 401k plan who invests the money as you have directed, choosing between the alternatives offered by the administrator. Typically, the alternatives are several different mutual funds with different investment styles, e.g. a S&P 500 index fund, a bond fund, a money-market fund, etc. Now, a statement such as "I see my 401k is up 10%" is meaningless unless you tell us how you are making the comparison. For example, if you have just started employment and $200 goes into your 401k each month and is invested in a money-market fund (these are paying close to 0% interest these days), then your 11th contribution increases your 401k from $2000 to $2200 and your 401k is "up 10%". More generally, suppose for simplicity that all the 401k investment is in just one (stock) mutual fund and that you own 100 shares of the fund as of right now. Suppose also that your next contribution will not occur for three weeks when you get your next paycheck, at which time additional shares of the mutual fund will be purchased Now, the value of the mutual fund shares (often referred to as net asset value or NAV) fluctuates as stock prices rise and fall, and so the 401k balance = number of shares times NAV changes in accordance with these fluctuations. So, if the NAV increases by 10% in the next two weeks, your 401k balance will have increased by 10%. But you still own only 100 shares of the mutual fund. You cannot use the 10% increase in value to buy more shares in the mutual fund because there is no money to pay for the additional shares you wish to purchase. Notice that there is no point selling some of the shares (at the 10% higher NAV) to get cash because you will be purchasing shares at the higher NAV too. You could, of course, sell shares of the stock mutual fund at the higher NAV and buy shares of some other fund available to you in the 401k plan. One advantage of doing this inside the 401k plan is that you don't have to pay taxes (now) on the 10% gain that you have made on the sale. Outside tax-deferred plans such as 401k and IRA plans, such gains would be taxable in the year of the sale. But note that selling the shares of the stock fund and buying something else indicates that you believe that the NAV of your stock mutual fund is unlikely to increase any further in the near future. A third possibility for your 401k being up by 10% is that the mutual fund paid a dividend or made a capital gains distribution in the two week period that we are discussing. The NAV falls when such events occur, but if you have chosen to reinvest the dividends and capital gains, then the number of shares that you own goes up. With the same example as before, the NAV goes up 10% in two weeks at which time a capital gains distribution occurs, and so the NAV falls back to where it was before. So, before the capital gains distribution, you owned 100 shares at $10 NAV which went up to $11 NAV (10% increase in NAV) for a net increase in 401k balance from $1000 to $1100. The mutual fund distributes capital gains in the amount of $1 per share sending the NAV back to $10, but you take the $100 distribution and plow it back into the mutual fund, purchasing 10 shares at the new $10 NAV. So now you own 110 shares at $10 NAV (no net change in price in two weeks) but your 401k balance is $1100, same as it was before the capital gains distribution and you are up 10%. Or, you could have chosen to invest the distributions into, say, a bond fund available in your 401k plan and still be up 10%, with no change in your stock fund holding, but a new investment of $100 in a bond fund. So, being up 10% can mean different things and does not necessarily mean that the "return" can be used to buy more shares. |
Unmarried Couple Splitting up with Joint Ownership of Home | Despite the unmarried status, you need to see a lawyer. Essentially you have a business with this person owning a home as the asset, and a mortgage for which you are responsible for. A lawyer needs to examine any paperwork you have and with knowledge of your particular jurisdiction's laws can advise you on the proper course of action. You paint a really ugly picture of this guy. I bet you are correct that he is kind of a horrible person. "Tough love" time: You willingly entered into a long term contract with this person. Why would you do such a thing? Perhaps some self reflection and counseling is in order. This is probably more important than worrying about your credit. All that being said, it is good of you to want to break ties with this person. You can rebuild. All will be good if you concentrate on the right things. |
Pros/cons of borrowing money using a mortgage loan and investing it in a low-fee index fund? | Risk is the problem, as others have pointed out. Your fixed mortgage interest rate is for a set period of time only. Let's say your 3% might be good for five years, because that's typical of fixed-rate mortages in Canada. So, what happens in five years if your investment has dropped 50% due to a prolonged bear market, and interest rates have since moved up from 3% to 8%? Your investment would be underwater, and you wouldn't have enough to pay off the loan and exit the failed strategy. Rather, you might just be stuck with renewing the mortage at a rate that makes the strategy far less attractive, being more likely to lose money in the long run than to earn any. Leverage, or borrowing to invest, amplifies your risk considerably. If you invest your own money in the market, you might lose what you started with, but if you borrow to invest, you might lose much more than you started with. There's also one very specific issue with the example investment you've proposed: You would be borrowing Canadian dollars but investing in an index fund of U.S.-based companies that trade in U.S. dollars. Even if the index has positive returns in U.S. dollar terms, you might end up losing money if the Canadian dollar strengthens vs. the U.S. dollar. It has happened before, multiple times. So, while this strategy has worked wonderfully in the past, it has also failed disastrously in the past. Unless you have a crystal ball, you need to be aware of the various risks and weigh them vs. the potential rewards. There is no free lunch. |
What is this discrepency between Fidelity's and Google's stock price chart; large price spike? | This is from Google Finance right now. |
What is quotational loss in stock market? | In this instance "quotational" is a reference to a market price quote, not a mathematical function. Staunch "value investors" like Graham, Dodd, Munger, Buffett et al. believe there is a material difference between what security is "worth" and what the current market mood quotes as its price. You, the investor, perform your analysis then derive a value for a security. If there has been no material change to an aspect of the security you analyzed then there hasn't been a change in that security's value, even if there has been a decline in the price quoted by the market, that is a "quotational loss." |
One of my stocks dropped 40% in 2 days, how should I mentally approach this? | Hopefully, before you invested in this stock, you evaluated the company. You looked at the financial information about the company and where the company was headed, and evaluated whether the stock was undervalued or overvalued. Hopefully, you determined that the stock was undervalued at the time you bought it. The thing to do now is to reevaluate the stock. Do you think the stock is overvalued or undervalued right now? If you didn't own it, would you buy it today? Instead of looking at the past performance of the stock, you want to try to determine which direction the stock will go from today. If you wouldn't buy it today at it's current price, then you should sell. If you have no idea how to do this evaluation, neither do I. For me, with the investing knowledge I have right now, investing in an individual stock would be way too risky. If you don't know how to evaluate a stock and determine if it is a good buy or not, then you should stay away from individual stocks and instead invest in stock mutual funds, which lower the risk by diversifying over lots of stocks. |
Are there “buy and hold” passively managed funds? | They pretty much already have what you are looking for. They are called Unit Investment Trusts. The key behind these is (a) the trust starts out with a fixed pool of securities. It is completely unmanaged and there is no buying or selling of the securities, (b) they terminate after a fixed period of time, at which time all assets are distributed among the owners. According to Investment Company Institute, "securities in a UIT are professionally selected to meet a stated investment objective, such as growth, income, or capital appreciation." UITs sell a fixed number of units at one-time public offering. Securities in a UIT do not trade actively, rather, UITs use a strategy known as buy-and-hold. The UIT purchases a certain amount of securities and holds them until its termination date. Holdings rarely change throughout the life of the trust so unit holders know exactly what they're investing in, and the trust lists all securities in its prospectus. Unit trusts normally sell redeemable units - this obligates the trust to re-purchase investor's units at their net asset value at the investors request. |
Highstreet bank fund, custom ETF or Nutmeg? | It's a good question, I am amazed how few people ask this. To summarise: is it really worth paying substantial fees to arrange a generic investment though your high street bank? Almost certainly not. However, one caveat: You didn't mention what kind of fund(s) you want to invest in, or for how long. You also mention an “advice fee”. Are you actually getting financial advice – i.e. a personal recommendation relating to one or more specific investments, based on the investments' suitability for your circumstances – and are you content with the quality of that advice? If you are, it may be worth it. If they've advised you to choose this fund that has the potential to achieve your desired returns while matching the amount of risk you are willing to take, then the advice could be worth paying for. It entirely depends how much guidance you need. Or are you choosing your own fund anyway? It sounds to me like you have done some research on your own, you believe the building society adviser is “trying to sell” a fund and you aren't entirely convinced by their recommendation. If you are happy making your own investment decisions and are merely looking for a place to execute that trade, the deal you have described via your bank would almost certainly be poor value – and you're looking in the right places for an alternative. ~ ~ ~ On to the active-vs-passive fund debate: That AMC of 1.43% you mention would not be unreasonable for an actively managed fund that you strongly feel will outperform the market. However, you also mention ETFs (a passive type of fund) and believe that after charges they might offer at least as good net performance as many actively managed funds. Good point – although please note that many comparisons of this nature compare passives to all actively managed funds (the good and bad, including e.g. poorly managed life company funds). A better comparison would be to compare the fund managers you're considering vs. the benchmark – although obviously this is past performance and won't necessarily be repeated. At the crux of the matter is cost, of course. So if you're looking for low-cost funds, the cost of the platform is also significant. Therefore if you are comfortable going with a passive investment strategy, let's look at how much that might cost you on the platform you mentioned, Hargreaves Lansdown. Two of the most popular FTSE All-Share tracker funds among Hargreaves Lansdown clients are: (You'll notice they have slightly different performance btw. That's a funny thing with trackers. They all aim to track but have a slightly different way of trading to achieve it.) To hold either of these funds in a Hargreaves Lansdown account you'll also pay the 0.45% platform charge (this percentage tapers off for portolio values higher than £250,000 if you get that far). So in total to track the FTSE All Share with these funds through an HL account you would be paying: This gives you an indication of how much less you could pay to run a DIY portfolio based on passive funds. NB. Both the above are a 100% equities allocation with a large UK companies weighting, so won't suit a lower risk approach. You'll also end up invested indiscriminately in eg. mining, tobacco, oil companies, whoever's in the index – perhaps you'd prefer to be more selective. If you feel you need financial advice (with Nationwide) or portfolio management (with Nutmeg) you have to judge whether these services are worth the added charges. It sounds like you're not convinced! In which case, all the best with a low-cost passive funds strategy. |
Why is property investment good if properties de-valuate over time? | When you buy a property the house or the building goes down in value every year (it gets depreciated) similar to when you drive a new car out of the lot. However, it is the land that increases in value over time. As land becomes scarcer the value of land in that area will increase in value, as does land in sought after areas. If more people want to live in a particular suburb the land value will keep on increasing year after year. Sometimes established areas with houses built in the 1980s or even earlier can be worth much more than newly built areas. It comes down to the supply and demand of land and houses in a particular area. You might even get a situation where a run-down dilapidated house in a very sought after suburb sells for more than a brand new house in a less sought-after suburb nearby. Properties can be a very good investment and they can be a very poor investment. It can largely depend on the decisions you make in buying your investment property. The first thing you need to make a decision on is the location of the property. If you buy a property in a good area that is well sought after you can make good capital and rental returns over the long run. If you buy poorly in an area no one wants to live in then you might have problems renting it out or only be able to rent it out to bad tenants who cause damage, and you may not get any capital gains over many years. The second thing you need to decide on is when in the property cycle you buy the property. If you buy at the right time you can get higher rents and make some quick capital gains over a relatively short time. I can provide a personal example of this situation. I had bought a house (in Australia) in 2007 for $240,000 at a time when interests where at their highest (9%), no one was buying property and rents were on the increase (with low vacancy rates). Today, eight years after, we are getting $410 per week rent and the house next door (in worse condition than ours) has been put on the market asking for between $500,000 to $550,000 (most houses in the area had been selling during this year for over $500,000). So you can say that our house has more than doubled in 8 years. However, up to a few months ago houses were selling within 2 weeks of being listed. The house next door however, has been listed for over a month and has not had very much interest. So from this you can conclude that in 2007 we had bought near the bottom of the market, whilst now we are near the top of the market. What you also need to remember is that different areas of a country can have different cycles, so there is not just one property cycle but many property cycles in the same country. |
Is there ACH analogue in Asia? | ACH as offered in US is a very broad and versatile network used for a range of business case. There is no other network as versatile. In Europe UK has BACS as equivalent about 50-70% of what US-ACH offers. Most European countries also have ACH [Collectively Called ACH, have 90% of the layouts that are identical, called by different names domestically, different business capabilities and rules]. Most countries in Asia also have similar networks. For example in India there is ECS now replaced by NACH. In Singapore/Indonesia/Thailand/Malaysia they have Giro's. China has CNAPS and BEPS. So essentially every country has addressed the business need differently and bis.org has a decent over-view country wise on the clearing systems available. |
Why does a ETN that is supposed to track Crude Oil like UWTI show constant decline every year? And am I an idiot for investing in it? | After looking at both S&P GSCI Crude Oil Index Excess Return (INDEXSP:SPGSCLP) and CS VS 3x LC ETN NYSEARCA: UWTI they seem to track well (using Google Finance). I'm not seeing where your statement this ETN loses whether oil is gaining or not holds true. Both have posted a year-over-year loss. In the past year the Crude Oil index has fallen from a high of 494 on October 6, 2014 to a low of 213 as of today October 5th, 2015. So of course the UWTI will lose as well. Please also notice that that, as stated in the prospectus for UWTI: The ETNs are intended to be daily trading tools for sophisticated investors to manage daily trading risks. They are designed t o achieve their stated investment objectives on a daily basis, but their performance over different periods of time can differ significantly fr om their stated daily objectives. The ETNs are riskier than securities that have intermediate or long-term investment objectives, and may not be sui table for investors who plan to hold them for a period other than one day. You might want to look into investing in an ETF for long term investment goals and objectives. Oil ETF List |
Stocks: do Good Till Cancelled orders get executed during after hours? | You'd have to check the rules for your broker to make sure that the term is being used in its usual sense, but the typical answer to your question is "no." A GTC will execute during market hours. You would need to explicitly specify extended hours if you want to execute outside of market hours (which your broker may or may not support). |
Expecting to move in five years; how to lock mortgage rates? | You could consider turning your current place into a Rental Property. This is more easily done with a fixed rate loan, and you said you have an ARM. The way it would work: If you can charge enough rent to cover your current mortgage plus the interest-difference on your new mortgage, then the income from your rental property can effectively lower the interest rate on your new home. By keeping your current low rate, month-after-month, you'll pay the market rate on your new home, but you'll also receive rental income from your previous home to offset the increased cost. Granted, a lot of your value will be locked up in equity in your former home, and not be easily accessible (except through a HELOC or similar), but if you can afford it, it is a good possibility. |
(Almost) no credit unions in New York City, why? | There are 2 credit unions in the Metro NY area that are open to everyone: You might also want to check out aSmarterChoice.org to see if there are other credit union options based on where you live, work, worship & more. |
Is it possible to influence a company's actions by buying stock? | To quote Adam Smith, 'Everything is worth what its purchaser will pay for it'. In this case, that means, the value of a stock is equal to the price that someone will pay for it. If you buy shares in a company, the number of people who want shares in that company has just gone up by 1. If you buy shares in companies profiting from the DAPL, you are increasing demand for those shares. You are actually making those shares more valuable, not less. If you bought all those shares, then you could simply shut the pipeline down. But that means you'd be spending billions of dollars to do so - and that money would go to the people who own the company now. The concept of 'Shareholder Activism' that you refer to, is actually more that an individual who owns a substantial number of shares (usually in the 10% ballpark) will become outspoken on the direction of the company, and attempt to elect board members who will take action to suit their liking. This is done to increase the profits of the company, so that the shareholder can make more money off of their investment. It is very expensive, and not generally done for reasons of 'ethics', unless those ethics align with a view to long-term profit (in this case, you'd need at least $1Billion to buy enough of a stake in the DAPL to make a difference). What you may instead want to consider is 'ethical investing'. This refers to the concept that you should only put your investments in companies which act ethically. For example, you could buy shares in a solar company, if you felt that was an ethical industry. In this way, you drive up demand for those types of companies, and reward the business owners who act in that fashion. |
What determines deal price on stock exchange? [duplicate] | Price is decided by what shares are offered at what prices and who blinks first. The buyer and seller are both trying to find the best offer, for their definition of best, within the constraints then have set on their bid or ask. The seller will sell to the highest bid they can get that they consider acceptable. The buyer will buy from the lowest offer they can get that they consider acceptable. The price -- and whether a sale/purchase happens at all -- depends on what other trades are still available and how long you're willing to wait for one you're happy with, and may be different on one share than another "at the same time" if the purchase couldn't be completed with the single best offer and had to buy from multiple offers. This may have been easier to understand in the days of open outcry pit trading, when you could see just how chaotic the process is... but it all boils down to a high-speed version of seeking the best deal in an old-fashioned marketplace where no prices are fixed and every sale requires (or at least offers the opportunity for) negotiation. "Fred sells it five cents cheaper!" "Then why aren't you buying from him?" "He's out of stock." "Well, when I don't have any, my price is ten cents cheaper." "Maybe I won't buy today, or I'll buy elsewhere. "Maybe I won't sell today. Or maybe someone else will pay my price. Sam looks interested..." "Ok, ok. I can offer two cents more." "Three. Sam looks really interested." "Two and a half, and throw in an apple for Susie." "Done." And the next buyer or seller starts the whole process over again. Open outcry really is just a way of trying to shop around very, very, very fast, and electronic reconciliation speeds it up even more, but it's conceptually the same process -- either seller gets what they're asking, or they adjust and/or the buyer adjusts until they meet, or everyone agrees that there's no agreement and goes home. |
Why do 10 year-old luxury cars lose so much value? | I think this can be answered by answering the question "Who buys 10 year old cars?". Generally speaking those buyers are very price conscious. They are looking to save money on transportation rather than following the herd of people participating in the car payments merry-go-round. The cost of parts, repairs, and gasoline for those cars do not go down over time. Remember that many of those cars require the use of premium gasoline. This drastically reduces demand for those vehicles, thus lowers the price. Luckily I have a really good and reasonable mechanic near me, and I can float repairs and the higher gas. I love driving my 1999 Mercedes and it is one of the least expensive cars that I have owned while also being one of the most comfortable. |
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