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What is an accounting term that factors growth as a function of time and discount rate? | Since you are trying to compare corporate bonds that have a defined coupon over the specified time of the bond. Why not use a simple Net Present Value (NPV) calculation. Refer: Net Present Value (NPV) You could use the discounting factor as the current repo rate of your central bank. As I said, this would be a simple fast measure (not considering risk rating of the bonds, inflation and other considerations). Take a notional 1000 as invetment in each instrument and calculate the NPV, higher it is better the investment. Another method, in terms of percentage return would be Internal rate of Return (IRR). Though the calcualtionis a bit more complicated, it would give you a percentage figure. Note, the above 2 measures are used when the cashflow over the time period is known. It will not work for instruments where the cashflow/value over different time are not known. Like stocks. |
What is the next step to collect money after a judgment has been ignored? | A lawyer might be overkill for recovering a judgment. Do a google search for "judgment recovery service" in your area. They specialize in what you're trying to do. The service will charge you a fee (usually 10%) for any monies recovered. What happens is that you assign the right to collect on the judgment to the service, and their staff can run with it from there. Whoever you contract with will get as much information as possible about your ex-husband: employment, businesses, and so forth. This information can be used to have levies issued by the state, wage garnishment and so forth. There is no given timetable for how long it takes. If your ex is indigent, it would be hard to collect by way a recovery service or an attorney, because you can't collect what he doesn't have. |
Risk of buying stock | If you buy stock in established companies, it is vey unlikely that they will lose all their value. Spreading your money across multiple stocks -- diversifying -- reduces that risk because it is extremely unlikely that they all lose all their value at once. Spreading them across multiple industries and adding bonds to the mix increases diversification. Of course the trade-off is that if one of the stocks skyrockets you don't benefit as much as if you had been lucky enough to put all your money in that one stock. You need to decide for yourself how much risk you are willing to tolerate in exchange for the chance of gains. Other answers on this site have dealt with this in more detail. |
Buying a house, Bank or rent to own? | With no numbers offered, it's not like we can tell you if it's a wise purchase. -- JoeTaxpayer We can, however, talk about the qualitative tradeoffs of renting vs owning. The major drawback which you won't hear enough about is risk. You will be putting a very large portion of your net worth in what is effectively a single asset. This is somewhat risky. What happens if the regional economy takes a hit, and you get laid off? Chances are you won't be the only one, and the value of your house will take a hit at the same time, a double-whammy. If you need to sell and move away for a job in another town, you will be taking a financial hit - that is, if you can sell and still cover your mortgage. You will definitely not be able to walk away and find a new cheap apartment to scrimp on expenses for a little while. Buying a house is putting down roots. On the other hand, you will be free from the opposite risk: rising rents. Once you've purchased the house, and as long as you're living in it, you don't ever need to worry about a local economic boom and a bunch of people moving into town and making more money than you, pushing up rents. (The San Francisco Bay Area is an example of where that has happened. Gentrification has its malcontents.) Most of the rest is a numbers game. Don't get fooled into thinking that you're "throwing away" money on renting - if you really want to, you can save money yourself, and invest a sum approximately equal to your down payment in the stock market, in some diversified mutual funds, and you will earn returns on that at a rate similar to what you would get by building equity in your home. (You won't earn outsized housing-bubble-of-2007 returns, but you shouldn't expect those in the housing market of today anyway.) Also, if you own, you have broad discretion over what you can do with the property. But you have to take care of the maintenance and stuff too. |
Is Peter Lynch talking about the Dividend Adjusted PEG Ratio in this quote? | Essentially, yes, Peter Lynch is talking about the PEG Ratio. The Price/Earnings to Growth (PEG) Ratio is where you take the p/e ratio and then divide that by the growth rate (which should include any dividends). A lower number indicates that the stock is undervalued, and could be a good buy. Lynch's metric is the inverse of that: Growth rate divided by the p/e ratio. It is the same idea, but in this case, a higher number indicates a good value for buying. In either case, the idea behind this ratio is that a fairly priced stock will have the p/e ratio equal the growth rate. When your growth rate is larger than your p/e ratio, you are theoretically looking at an undervalued stock. |
What would happen if I were to lose all equity in my condo when it's time to renew the mortgage? | It doesn't matter. You will just renew your mortgage at the prevailing rates. That's part of the mortgage contract. The problem that happens is if you want to move your mortgage to another bank for a better rate, they may not accept you. Your re-negotiating position is limited. Most mortgages have a portability option where you can even transfer the mortgage to another property, but you'd have to buy a cheaper house. |
Is interest on a personal loan tax deductible? | Can you deduct interest paid to your father on your personal income taxes? Interest paid on passive investments can be deducted from the amount earned by that investment as an investment expense as long as the amount earned is greater than the total paid for the interest expense. Also beware if the amount of interest paid is greater than the yearly gift tax exclusion, as the IRS might interpret this as a creative way of giving gifts to your father without paying gift tax. Do you pay taxes on the interest you pay? No, because is an expense, not income, you would not count interest paid to him as taxable income. Does your father owe taxes on the interest he collects from you? Yes, that is income to him. And the last question you didn't ask, but I expect it is implied: Do you owe taxes on the quarterly profits? Yes, that is income to you. The Forbes article How To Arrange A Loan Between Family Members is a bit dated, but still a good source of information. You really should write a formal note (signed by both you and your father) indicating the amount borrowed, the interest rate you are paying on that amount, and when the loan will be repaid. If your father has set the interest rate too low, this could also be considered a gift to you, though we would really be talking about large amounts of money to hit the gift tax limit on interest alone. |
How can I identify a likely bull trap? | Remember the 1st Law of Technical Analysis: "For every analysis there exists an equal and opposite analysis." And the 2nd Law of Technical Analysis: "They're both wrong." Technical analysis in the absence of hard data is just a lot of hand-waving meant to dazzle CNBC viewers and rope would-be day traders into paying for colored-plot-filled trading platforms. How, mathematically, do you define a bull trap? Does the lead in trendline have to have a certain minimum/maximum slope? Does the trough have to be below/above a certain percentage of the peaks? Does the entire period have to encompass less/more than a certain number of trading days? Etc. Before you attempt to use such an analysis to predict the future direction of a stock price you need to be able to answer the above questions (and more) rigorously. Only then can you test your definition against historical stock movements to see whether it has predictive power. If it doesn't have predictive power, then you start over or tweak your definition until it does. Notice that once you're done with all of the above work you are no longer doing technical analysis and are now doing statistics! |
Buying an option in the money, at the money, or out of the money | 1 reason is Leverage.... If you are buying out of the money options you get much more bang for your buck if the stock moves in your favor. The flipside is it is much more likely that you would lose all of your investment. |
What intrinsic, non-monetary value does gold have as a commodity? | Borrowing Wikipedia for a bit, it seems like the intrinsic uses are these. I've ordered these approximately in technology-level order: The importance of any of these uses largely depends on the state of a civilization and the level of technology of that civilization. However, most of these applications have far cheaper substitutes available. |
Why can't poor countries just print more money? | Printing money doesn't mean that their wealth increases. It just devalues the money they already have. So it will just take more money to buy goods from another country. Printing money will also lead to over inflation which has its own set of problems such as: |
On a debt collection agency's letter, what does “balance” refer to? | The balance is the amount due. |
How good is Wall Street Survivor for learning about investing? | I find this site to be really poor for the virtual play portion, especially the options league. After you place a trade, you can't tell what you actually traded. The columns for Exp and type are blank. I have had better luck with OptionsXpress virtual trader. Although they have recently changed their criteria for a non funded accounts and will only keep them active for 90 days. I know the cboe has a paper trading platform but I haven't tried it out yet. |
Financing with two mortgages: a thing of the past? | You can't get a HELOC, to the best of my knowledge, without actually "owning" the house. If you get an 80% mortgage (of the purchase price - not the appraised value, btw), you still need 20% as a down payment. Once you own the home, you can apply for a HELOC ... presuming you have enough equity (eg, the purchase price is $40k less than the appraised value). We haven't looked at the norm, at least where I live, of 5% down for a traditional mortgage and 3.5% for an FHA (which your question touches on). If you can do 5% down, on a $1,000,000 mortgage you need $50,000 on the day of closing. If the home is worth (ie appraises for) $1,250,000, you're getting 20% of the house "for free". Presuming the bank(s) will go for it, you could likely then open a HELOC for as much as $250,000 (again, depending on individual lender rules). tl;dr: If you don't have the money ready on the day of signing (via seasoning, if it is a loan/gift, or because you have been saving), you cannot afford the house. To clarify from comments with the OP, I am in no way speaking to the buyer's ability to afford the monthly payments - this is only about affording the initial costs associated with the home buying process (down payment, closing, whatever else the bank(s) require, etc). |
What can I replace Microsoft Money with, now that MS has abandoned it? | Uh, Quicken is virtually identical to MS Money. If you liked money and don't want to change, use that. |
What are some good ways to control costs for groceries? | Cooking cheaply is time consuming. We cook cheaply, but we take more time to do it. May be hard for a busy family. If you cook everything from scratch, it's usually a lot cheaper. Also pre-planning meals helps. If you can coordinate your ingredients, you can save money. Saving money takes time and practice. I find that when we're rushed, we waste a lot more food than when we properly take the time required. |
What size “nest egg” should my husband and I have, and by what age? | One more thing to consider is that $1M today is not the same as $1M 30 years from now because of inflation. Consider that just 30 years ago (1980) the average house price in the US was only about $69K and a new car cost around $7K on average. When you retire, it isn't much of a stretch to assume that you could be paying $1.5M for a typical house, $100K for mid-grade car, by the time you retire in 30 years. Of course, over the rest of your working life your salary will likely increase due to inflation too, so that will help. In 1980 the average US income was around $19K/year. So even though that number seems huge, it is because it is denominated in currency that has been devalued significantly. |
$700 guaranteed to not be touched for 15 years+, should I put it anywhere other than a savings account? | If you plan on holding the money for 15 years, until your daughter turns 21, then advanced algebra tells me she is 6 years old. I think the real question is, what do you intend for your daughter to get out of this? If you want her to get a real return on her money, Mike Haskel has laid out the information to get you started deciding on that. But at 6, is part of the goal also teaching her about financial stewardship, principles of saving, etc.? If so, consider the following: When the money was physically held in the piggy bank, your daughter had theoretical control over it. She was exercising restraint, for delayed gratification (even if she did not really understand that yet, and even if she really didn't understand money / didn't know what she would do with it). By taking this money and putting it away for her, you are taking her out of the decision making - unless you plan on giving her access to the account, letting her decide when to take it out. Still, you could talk her through what you're doing, and ask her how she feels about it. But perhaps she is too young to understand what committing the money away until 21 really means. And if, for example, she wants to buy a bike when she is 10, do you want her to see the fruits of her saved money? Finally, consider that if you (or you & your daughter, depending on whether you want her to help in the decision) decide to put the money in a financial institution in some manner, the risk you are taking on may need to be part of the lesson for her. If you want to teach the general principles of saving, then putting it in bonds/CD's/Savings etc., may be sufficient, even if inflation lowers the value of the money. If you want to teach principles of investing, then perhaps consider waiting until she can understand why you are doing that. To a kid, I think the principles of saving & delayed gratification can be taught, but the principles of assuming risk for greater reward, is a bit more complex. |
Will I get taxed on withdrawals from Real Cash Economy games? | Income from a hobby is tax exempt under Dutch law. To consider whether it's hobby, a few rules are applied such as: How much time do you spend on the activity? And is the hourly wage low? Obviously, having a boss is a sure sign of it not being a hobby. The typical example is making dolls and selling them on a crafts fair. If you travel the country and sell each weekend on a different fair, that's a lot of time. If you only sell them on the fair in your home town, it's a hobby. Situation 3 is the most difficult. If you just happened to luck out, it's still a hobby. If you spent significant time to improve the value of your holdings, e.g. by trading in-game, then it might be seen as work. In the latter case, you simply file it as "income from other sources, not yet taxed". For the purpose of determining income from a hobby, you may deduct actual expenses. So, in your case they'd look at the net income of $-1000, which is not unusual for a hobby. It wouldn't be any different if you took up horse riding, decided that you didn't like it, and sell your horse at a loss. |
IRS “convenience of the employer” test when employee lives far from the office | If your employer does not provide you with a place to work but nevertheless expects you to get work done, then having a place to work is a condition of employment. |
What does it mean that stocks are “memoryless”? | It reminds me of the Efficient Market Hypothesis, except that just states in its weakest form that the current market price accounts for all information embedded in previous market prices. In other words, people buying today at 42 know it was selling for 40 yesterday, and the patterns and such. To say that stock is memoryless strikes me as not quite right -- to the extent that stocks are valued based on earnings, much of what we infer about future earnings relies on past and present earnings. One obvious counterexample to this "memoryless" claim is bankruptcy. If a stock files bankruptcy, and there isn't enough money to pay senior debt, your shares are worth 0 in perpetuity. |
How can I save on closing costs when buying a home? | For example: do I need a realtor, or can I do their job myself? In general in the United States the real estate agent fee is paid by the seller of the property. Their agent will be more than happy keep the entire fee if they don't have to split it with your agent. If you don't have an agent you will be missing somebody who can help you find the property that meets your needs. They can also help explain what the different parts of the contract mean and give you advice regarding making an offer. Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught? Inspections are optional. Though the amount you are risking is the entire value of the purchase. If the property has a problem in the foundation, or the septic system, or the plumbing or electrical the cost to fix the issue could render the purchase not worth doing. If you discover the problem a year later and you have to repair the house and have to find temporary housing for a few months, you will regret skipping the inspection. What are some of the ways I can cut expenses on closing costs? Is there any low-hanging fruit? You need to do your homework. When you are ready to purchase a property take good look at the good faith estimate and look at each item. Ask them what the expense covers. Push back against those that seem optional or excessive. Keep in mind that moving the closing date from the end of a month to the start of the next month only changes the timing those charges, it doesn't really save you money. Rolling the costs into the loan sound easy but you have to think about. It means that you will be paying interest on those charges for the life of the loan. It is good that you are starting to think about all the costs. |
What are some pre-tax programs similar to FSA that I can take advantage of? | 2014 Limit: $2,500 Notes 2014 Limit: $3,300 individual, $6,550 family Notes 2014 Limit: $5,000 Notes 2014 Limit: $2,500 Notes 2014 Limit: $250/month Notes 2014 Limit: $130/month Notes |
Debit cards as bad as credit cards? | This sounds more like a behavioral than a debit card issue to me TBH. Did you put the money you're putting away into a separate savings account that you (mentally) labelled 'for investment'? That's pretty much what I do (and I have a couple of savings accounts for exactly that reason) and even though I know I've got $x in the savings accounts, the debit card I carry only lets me spend money from my main bank account. By the time I've transferred the money, the urge to spend has usually gone away, even though it often only takes seconds to make the transfer. |
If the U.S. defaults on its debt, what will happen to my bank money? | I have been through default in Ukraine august 1998. That was a real nightmare. The financial system stopped working properly for 1 month, about 30% of businesses went bankrupt because of chain effect, significant inflation and devaluation of currency. So, it is better to be prepared, because this type of processes result in unpredictable situation. |
If banksimple.com is not a bank, what is it? | I don't see how this concept takes off. First and foremost, BankSimple is NOT a bank but a tech company masquerading as one. BankSimple leaves industry regulation and treasury management -- the CORE of banking, to outside parties. Call me old fashioned, but I prefer to have as few stops between me and my money as possible. If not for a fear of losing it in a robbery and inability to earn interest, I'd shove it under a mattress. So why would I want to bank with an intermediary, who admittently doesn't understand how the process works? How is that "looking out for my interests"? And how is your security better than other institutions that offer 128-bit encryption and multiple security questions to test a customer's identity? I'd like to add that not charging overdraft fees and providing lines of credit to help customers out in the event they spend more than they have is nice in concept, but what happens when those same customers do not make deposits to cover their shortfalls? When it comes to money, people will take advantage of any opportunities they have to circumvent the system. Especially if funds are tight. |
What U.S. banks offer two-factor authentication (such as password & token) for online banking? | There are very few banks which offer two-factor authentication. Part of the reason is cost. Providing a token to every account-holder is expensive, not just in the device or system, but in providing support and assistance to the millions of people who won't have the faintest idea how it works and complain that they no longer have access to their accounts. That said, it is sometimes available on request for personal accounts and many banks require it for their business clients. My HSBC Business account comes with two-factor as default and it works extremely well. There is also the pseudo-two-factor security offered by Visa and MasterCard (3-D secure) which performs a similar function. |
Transfering money from NRE account in India to family member | I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide here and here for more details. There are some conditions; (iv) Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that - a) the loan is free of interest; b) the minimum maturity period of the loan is seven years; c) The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender; d) The loan is utilised for the borrower's personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending. Although it is mentioned as Seven years, this is revised to one year. Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account. A repatriate-able loan as above can be deposited into NRE Account. Is there any illegality here doing such transaction? No. Please ensure proper paper work to show this as loan and document the money trail. Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited? This question does not arise. |
Free brokerage vs paid - pros and cons | Emotion aside, you can calculate the cost of the funds you have tied up at the bank. If I can earn 5% in a CD, my "free" checking with minimum $5000 balance really costs me $250/yr. You have money tied up, I understand, but where would you place it otherwise, and at what return? The subject of frequent trading even at zero cost is worth addressing, but not the real subject of your question. So, I'll leave it for elsewhere. |
What should I do with my $25k to invest as a 20 years old? | Waiting for the next economic downturn probably isn't the best plan at this point. While it could happen tomorrow, you may end up waiting a long time. If you would prefer not to think much about your investment and just let them grow then mutual funds are a really good option. Make sure you research them before you buy into any and make sure to diversify, as in buy into a lot of different mutual funds that cover different parts of the market. If you want to be more active in investing then start researching the market and stick to industries you have very good understanding of. It's tough to invest in a market you know nothing about. I'd suggest putting at least some of that into a retirement savings account for long term growth. Make sure you look at both your short term and long term goals. Letting an investment mature from age 20 through to retirement will net you plenty of compound interest but don't forget about your short term goals like possible cars, houses and families. Do as much research as you can and you will be fine! |
Are warehouse clubs like Costco and Sam's Club worth it? | Silly as it sounds, we belong to both BJ's and Sam's club (we don't have Costco in this area). The produce at our local Sam's is top-notch, especially in the winter. The prices on fruit there are unbeatable in the winter time, and more than cover the membership cost. I also find the price/quality of canned/box grocery items like tomatoes, flour, etc is better than our supermarkets. Our local BJ's has an excellent meat department, and we tend to buy alot of non-perishable groceries like ketchup, cheese, etc as well as soap/cleaning stuff because they accept coupons. They are closer to my home and also have a member-only gas pump that is $0.10-0.30 cheaper. |
Company asking for card details to refund over email | While I agree with Ben a lot I feel like his answer is really poor here. You do not call a number to give your credit card information out for a refund. That is ridiculous. Just from his answer - he has had 5 cases of fraud lately - you should know that you shouldn't follow this advice. I personally don't ever give my credit card number over the phone, unless it is the very very very last resort. It is not just about money and safety but it is about time. Every time that you give your number out over the phone there is a chance that the employee on the other end (by either scam or legitimate business) will use or sell your info. So you need to determine if the time saved by doing a transaction over the phone is worth hours/days of your time if your card has a fraud issue. And note that fraud sometimes is easily negated, but if done smartly can be hard to prove via a quick call or email to card company. What should you do? Tell company that you will simply get the refund through your credit card company. And if we go back to time element... You fill out form on card website. Card company goes back to vendor and says - "Why are you asking for card numbers via email?" Card company either cancels vendor contract or more likely helps them understand the technology available so they don't have to do this. Therefore that quick form that you filled out will now keep this company from bugging you again. By going through their archaic "systems" you are enabling their behavior. |
Less than a year at my first job out of college, what do I save for first? | Too long for a comment - It's great that you are saving to the match on the 401(k). Does your company offer a Roth 401(k)? If so, you might consider that, instead. From the numbers you offered, you are likely in the 15% bracket now, but will find you move to 25% in years to come. The 2014 tax rates are out and how the 15% bracket ending at $36,900. (Over $47,000 gross income). I'd rather see you pay tax at 15% now, and use pre-tax accounts as your income rises. If the Roth is available. |
Who Bought A Large Number Of Shares? | Schedule 13D (or the abbreviated version, schedule 13G) would be the most likely place to find this info. When a person or group of persons acquires beneficial ownership of more than 5% of a voting class of a company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934, they are required to file a Schedule 13D with the SEC. Schedule 13D reports the acquisition and other information within ten days after the purchase. Any material changes in the facts contained in the schedule require a prompt amendment. You can find the Schedules 13D for most publicly traded companies in the SEC’s EDGAR database. A 1% change in the amount of ownership is considered material. |
May 6, 2010 stock market decline/plunge: Why did it drop 9% in a few minutes? | Trading error at Citi |
Should I buy or lease a car given that its not a super luxury car and I only drive 15 miles/d on avg? | Leasing is not exactly a scam, but it doesn't seem to be the right product for you. The point of leasing over buying is that it turns the capital purchase of a car which needs to be depreciated for tax purposes into what is effectively a rental expense. Rent is an expense that can be deducted directly without depreciation. If you are not operating a business where you can take advantage of leasing's tax advantages, leasing is probably not for you. Because of the tax advantages, a lease can be more profitable for the car dealer. They can get a commission or finder's fee on the lease as well as the commission on the car sale. That extra profit comes from somewhere, presumably from you. If a business, you can then pass part of that to the government. As an individual, you lose that advantage. At this point, the best financial decision that you could make would be to buy out the lease on your current car. Lease prices are set based on the assumption that the car will have been abused during the course of the lease. If you are driving the car less than expected, its value is probably higher than the cost of buying out the lease. If you buy that car, you can drive it for years. Save up some money and buy your next car for cash rather than using financing. Of course, if you really want a new car and can afford it, you may not want to buy out the lease. That is of course your decision. You don't have to maximize your current financial position if buying a new car would return more satisfaction for the money in the long run. I would try to avoid financing for what is essentially a pleasure purchase though. |
Is it sensible to keep savings in a foreign currency? | would you say it's advisable to keep some of cash savings in a foreign currency? This is primarily opinion based. Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup There is no way to predict what will happen in such large events. For example if one keeps funds outside on UK in say Germany in Euro's. The UK may bring in a regulation and clamp down all funds held outside of UK as belonging to Government or tax these at 90% or anything absurd that negates the purpose of keeping funds outside. There are example of developing / under developed economics putting absurd capital controls. Whether UK will do or not is a speculation. If you are going to spend your live in a country, it is best to invest in country. As normal diversification, you can look at keep a small amount invested outside of country. |
How do exchanges match limit orders? | The Limit Order are matched based on amount and time. The orders are listed Highest to Lowest on the Buy Side. The orders are listed Lowest to Highest on the Sell Side. If there are 2 Sell orders for same amount the order which is first in time [fractions of milliseconds] is first. The about is the example as to how the orders would look like on any exchange. Now the highest price the buyer is ready to pay is 20.21 and the lowest price a seller is ready to sell for is 20.25. Hence there is no trade. Now if a new Buy order comes in at 20.25, it matches with the sell and the deal is made. If a new Buy order comes in at 20.30, it still matches at 20.25. Similarly if a Sell order come in at 20.21, it matches and a deal is made. If a Sell order come in at 20.11, it still matches 20.21. Incase of market order, with the above example if there is a Buy order, it would match with the lowest sell order at 20.25, if there is not enough quantity , it would match the remaining quantity to the next highest at 20.31 and continue down. Similarly if there is a Sell market order, the it would match to the maximum a seller is ready to buy, ie 20.21, if there is not sufficient buy quantity at 20.21, it will match with next for 20.19 If say there are new buy order at 20.22 and sell orders at 20.24, these will sit first the the above queue to be matched. In your above example the Lowest Sell order was at 20.10 at time t1 and hence any buy order after time t1 for amount 20.10 or greater would match to this and the price would be 20.10. However if the Buy order was first ie at t1 there was a buy order for 20.21 and then at time later than t1, there is a sell order for say 20.10 [amount less than or equal to 20.21] it would match for 20.21. Essentially the market looks at who was the first to sell at lower price or who was the first to buy at higher price and then decide the trade. Edit [To Clarify xyz]: Say if there is an Sell order at $10 Qty 100. There is a buyer who is willing to pay Max $20 and is looking for Qty 500. Your key assumption that the Buyer does not know the current SELL price of $10 is incorrect. Now there are multiple things, the Buyer knows the lowest Sell order is at $10, he can put a matching Buy order at $10 Qty 100, and say $11 Qty 100 etc. This is painful. Second, lets say he puts a Buy order at $10 Qty 100, by the time the order hits the system someone else has put the trade at $10 and his order is fulfilled. So this buyer has to keep looking at booking and keep making adjustments, if its a large order, it would be extremely difficult and frustrating for this Buyer. Hence the logic of giving preference. The later Buy order says ... The Max I can pay is $20, match eveything at the current price and get the required shares. |
When a stock price rises, does the company get more money? | Not directly. But companies benefit in various ways from a higher stock price. One way a high stock price can hurt a company is that many companies do share buybacks when the price is too high. Economically speaking, a company should only buy back shares when those shares are undervalued. But, management may have incentives to do buybacks at irrationally high prices. |
Online tools for monitoring my portfolio gains/losses in real time? | I use Google Finance too. The only thing I have problem with is dividend info which it wouldn't automatically add to my portfolio. At the same time, I think that's a lot to ask for a free web site tool. So when dividend comes, I manually "deposit" the dividend payment by updating the cash amount. If the dividend comes in share form, I do a BUY at price 0 for that particular stock. If you only have 5 stocks, this additional effort is not bad at all. I also use the Hong Kong version of it so perhaps there maybe an implementation difference across country versions. Hope this helps. CF |
How can I report pump and dump scams? | Start with your local police department then move on to these sites. Fill out the United States Postal Service fraud complaint form http://ehome.uspis.gov/fcsexternal/ Contact your State Attorneys General. Your state Attorney General or local office of consumer protection is also listed in the government pages of your telephone book Write to the Federal Trade Commission: spam@uce.gov If you are aware of a securities (e.g., stocks) scam, insider trading, etc., you will want to contact the SEC (Securities and Exchange Commission). http://www.consumerfraudreporting.org/SEC.php |
Is compounding interest on investments a myth? | Compound growth isn't a myth, it just takes patience to experience. A 10% annual return will double the investment not in 10 years, but just over 7. Even though a mortgage claims to use simple interest, if your loan is 5% and there's 14 years to go, $100 extra principal will knock off $200 from the final payment. The same laws of compounding and Rule of 72 are at play. |
Why would a bank need to accept deposits from private clients if it can just borrow from the Federal Reserve? | Central Banks are essentially a cartel, designed to let banks in general borrow money from depositors at relatively low interest rates. They do this in two ways: By reassuring depositors that momentary cash flow problems at banks will not result in banks failing, they lower the interest rates that depositors demand. And by imposing strict regulations on banks that are borrowing from depositors at high interest rates. (People who move money to the banks offering the highest interest rates are especially likely to participate in bank runs.) Borrowing "too much" from the Central Bank is considered to be a sign of a bank that is too weak to attract deposits from depositors at "reasonable" interest rates. If a bank borrows "too much" (as a percentage of the bank's assets) from the Central Bank, the bank regulators will subject the bank to heavy scrutiny. If the bank fails to find ways to reduce its borrowing from the Central Bank, the bank regulators are likely to steal the bank from its shareholders, and sell the bank to a "stronger" bank that pays lower interest rates. |
How risky is it to keep my emergency fund in stocks? | I know this is heresy but if you have funds for significantly more than 6 months of expenses (let's say 12 months), how risky would it be to put it all into stock index funds? Quite risky as if you do need to dip into it, how fast could you get the cash? Also, do you realize the tax implications when you do sell the shares should you have an emergency? In the worst-case scenario, let's say you have a financial emergency at the same time the stock market crashes and loses half its value. You could still liquidate the rest and have sufficient funds for 6 months. Am I underestimating the risks of this strategy? That's not worst case scenario though. Worst case scenario would be another 9/11 where the markets are closed for nearly a week and you need the money but can't get the funds converted to cash in the bank that you can use. This is in addition to the potential wait for a settlement in the case of using ETFs if you choose to go that way. In the case of money market funds, CDs and other near cash equivalents these can be accessed relatively easily which is part of the point. A staggered approach where some cash is kept in house, some in accounts that can easily accessed and some in other investments may make sense though the breakdown would differ depending on how much risk people are willing to take. If it truly is an emergency fund then the odds of needing it should be very slim, so why live with near zero return on that money? Something to consider is what is called an emergency here? For some people a sudden $1,000 bill to fix their car that just broke down is an emergency. For others, there could be emergency trips to visit family that may have gotten into accidents or gotten a diagnosis that they may pass away soon. Consider what do you want to call an emergency here as chances are you may not be considering all that people would think is an emergency. There is the question of what other sources of money do you have to cover should issues arise. |
Bonus issue - Increasing share capital | Fully paid up Shares issued in which no more money is required to be paid to the company by shareholders on the value of the shares. When a company issues shares upon incorporation or through an issuance, either initial or secondary, shareholders are required to pay a set amount for those shares. Once the company has received the full amount from shareholders, the shares become fully paid shares. authorised share capital The number of stock units that a publicly traded company can issue as stated in its articles of incorporation, or as agreed upon by shareholder vote. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the company. If so, why not just give the existing shareholders the $500 million, (and do a stock split if desired)? Stock splits, bonus issues doesn't generate any capital for the firm, which it required. |
Contract job (hourly rate) as a 1099: How much would I be making after taxes? | In addition to taking into account your deductions, as mentioned by @bstpierre, you also need to account for vacation, and other time off such as sick days. You also need to estimate what percentage of the year you expect to be working and pro-rate your salary accordingly. For example it is not uncommon to use 40 weeks out of the year which is about 77% of the time. Also check to see if you would be eligible for unemployment for the times you are not working. I suspect not. But in any case, you might want to use worst case scenario figures to see if it is worth it, especially in this economy. |
Search index futures in Yahoo Finance or Google Finance | Options - yes we can :) Options tickers on Yahoo! Finance will be displayed as per new options symbology announced by OCC. The basic parts of new option symbol are: Root symbol + Expiration Year(yy)+ Expiration Month(mm)+ Expiration Day(dd) + Call/Put Indicator (C or P) + Strike price Ex.: AAPL January 19 2013, Put 615 would be AAPL130119P00615000 http://finance.yahoo.com/q?s=AAPL130119P00615000&ql=1 Futures - yes as well (: Ex.: 6A.M12.E would be 6AM12.CME using Yahoo Finance symbology. (simple as that, try it out) Get your major futures symbols from here: http://quotes.ino.com/exchanges/exchange.html?e=CME |
Why is the fractional-reserve banking not a Ponzi scheme? | Your question contains two different concepts: fractional reserve banking and debt-based money. When thinking of these two things I think it is important to analyze these items separately before trying to understand how the whole system works. Fractional Reserve Banking As others have pointed out fractional reserve banking is not a ponzi scheme. It can be fraudulent, however. If a bank tells all its depositors that they can withdrawal their money at any time (i.e. on demand) and the bank then proceeds to loan out some portion of the depositors' money then the bank has committed fraud since there is no way they could honor the depositors' requests for their money if many of them came for their money at one time. This is true regardless of what type of money is deposited - dollars, gold, etc.. This is how most modern banks operate. Debt-based money Historically, the Fed would introduce new money by buying US Treasuries. This means Federal Reserve Notes (FRN) are backed by US Treasuries. I agree that this seems strange. Does this mean if I take my FRNs to the Fed I could redeem them for US Treasuries? But US Treasuries are promises to pay FRNs in the future. This makes my head hurt. Reminds me of the definition for recursion: see recursion. Here is an experiment. What if we wanted to recreate FRNs today and none existed? The US government would offer a note to pay 100 FRNs in one year and pay 5% interest on the note. The Fed would print up its first 100 FRNs to buy the note from the US government. The US government would spend the FRNs. The first 100 FRNs have now entered into circulation. At the end of the note's term the Fed should have 105 FRNs since the government agreed to pay 5% interest on the note. But how is the US government going to pay the interest and principal on the note when only 100 FRNs exist? I think this is the central point to your question. I can come up with only two answers: 1) the Fed must purchase some assets that are not debt based 2) the US government must continue to issue debt that is purchased by newly printed FRNs in order to pay back older debt and interest. This is a ponzi scheme. The record debt levels seem to indicate the ponzi scheme option was chosen. |
How does my broker (optionsXpress) calculate probabilities that the stock will hit a certain price? | Their algorithm may be different (and proprietary), but how I would to it is to assume that daily changes in the stock are distributed normally (meaning the probability distribution is a "bell curve" - the green area in your chart). I would then calculate the average and standard deviation (volatility) of historical returns to determine the center and width of the bell curve (calibrating it to expected returns and implied volaility based on option prices), then use standard formulas for lognormal distributions to calculate the probability of the price exceeding the strike price. So there are many assumptions involved, and in the end it's just a probability, so there's no way to know if it's right or wrong - either the stock will cross the strike or it won't. |
Smart to buy a house in college? | I've heard success stories but personally, I was considering it and I'm so glad I didn't. I ended up hating the atmosphere; left after one semester. To take care of that house I rent out, I'd need to hire someone, or drive 2.5h each way for anything that needed my attention. If you plan to stay in the area, I'd consider the housing prices, the rental market, considering the responsibility of maintenance, your expected margin (trust me, it will be lower. I've never heard a landlord say he didn't encounter significant unintended expenses.) It's such a unique situation, it really requires more detail. After all, you'd be saving rent, have control over the house and who lives there, but you have a whole hell of a lot of responsibility. I met one guy who had basically became the house's mom because he had a vested interest and was always cleaning up spills, preventing staining or damage to the paint, facing awkward social situations as they tried to chase down rent. With the right people I've seen it go very well. Oh, one more caveat. With a live-in super', they can provide notice of any necessary repairs instantly and from there, the clock starts. They can legally withhold rent until the repairs are completed and if you're not too liquid after that down payment and the mortgage payments, plus school, etc.. this could put you between a rock and some hard ass creditors. |
Reducing taxable income in US in December | Depending on the size of the donation, you may be able to reduce taxes further by donating appreciated assets, such as stock or fund shares that have gone up a lot. That lets you dodge the capital gains tax on redeeming the shares, and if you're donating to a tax-exempt organization they don't have to pay that tax either. And as @JoeTaxpayer has confirmed, you still get to deduct the current value of the donation, not just the basis value of those shares. So if you're donating anyway, this comes close to being Free Money in exchange for some slightly annoying paperwork. (Yet another benefit of long-term investing!) Of course folks in the top brackets sometimes set up their own tax-exempt foundations so they can decouple taking the tax break from deciding what to do with the donation. |
What is the purpose of property tax? | Property taxes, at least in Canada, are levied by the municipality or city in which the property is situated. For many cities, it is a significant source of income. Part of the justification from the municipal point of view is that the land is serviced, in that it generally has city services like water, sewer, garbage collection and the like. The taxes also commonly pay for city services like libraries, fire and ambulance. The tax rates vary widely across cities, so where your dream house is located may have a large impact on your overall tax bill. Property tax is more-or-less a government imposed lien on your house. You can be foreclosed on if you are unable to pay. This is a last resort of course, but can and does happen. |
Is it ever a good idea to close credit cards? | It is an issue of both utilization and average age of accounts. If your cards with $0 balances on them are: A) newer cards than the ones you are carrying balances on and you don't want them B) much lower limit cards than the ones you are carrying balances on then you can raise your score by closing them, as the utilization change won't be a large factor and you can raise the average age of your open accounts. |
First time investor and online brokerage accounts | Most mutual funds are designed to make the investment banks that sell them money, not to make investers money. They do this by taking significant fees out. Because they make lots of money on these funds, they advertise them a lot, and give them important-sounding names, like "Advanced technology global diversity long term appreciation". Index funds are the exception; they attempt to mirror the performance of a specific index (such as the S&P 500 index). They generally have very low fees. |
Leasing a car I intend to buy | I have a colleague who always leases cars first. He's very well off, has piles of money in savings, owns a home, and the cherry on top, he could just write a check for the car.... He sees the lease as an insurance policy on the first couple of years of the car's life. If it gets in an accident or he finds something about it he doesn't like, he can give it back to the dealer at the end of the term with no hassle and move on to the next car. Some people value the fact that a lease is a rental. If you're leasing a luxury car or something you couldn't otherwise afford, no amount of mental gymnastics will turn this in to a good idea. Separately, you should never make a down payment on a lease. If the car is totaled early on, you will not recoupe the money you put down. The issue here is that while the numbers all work out the same between a lease and a purchase your situation is different. If the leased car is totaled, the bank gets its money back from an insurer. If that payment doesn't cover the value of the car, the GAP insurance will cover it. In either situation, if there's an excess remaining it will be returned to you. The issue is the excess may not fully replace your down payment. If you then went to lease another car you would need to come up with that down payment again because you couldn't just simply choose to lease a used car; like you could in the case of a purchase. Additionally, GAP is generally included in a lease whether you want it or not. As far as I'm concerned it doesn't make financial sense to mitigate the value of the GAP coverage once you've decided to live in a lease situation. |
New to options trading and need help understanding an options spread risk graph. What am I missing? | You haven't said why you think you will gain at $41, but the graph never lies. Take it one piece at a time: At $41, your stock will lose a big chunk of value. Your short calls will expire. Your puts will gain a bit of value. The stock's loss outweighs the option gains. |
Investment for beginners in the United Kingdom | Before jumping into stock trading, do try Mutual Funds and Index funds, That should give you some good overview of the equity markets. Further, do read up on building a balanced portfolio to suit your need and risk apetite. This would help you decide on Govt. bonds and other debt instruments. |
Is this mortgage advice good, or is it hooey? | Jack "The Mortgage Professor" Guttentag provides a thorough analysis of a similar-sounding system: In addition, I had the feeling that customers of Mortgage Relief should have gotten a spreadsheet for their $45, and wondered why they hadn’t? So I set out to develop a spreadsheet of my own that could quantify the benefits – if there were any. The major question I wanted the spreadsheet to answer was, how large is the benefit of using the Mortgage Relief scheme if you don’t have any surplus income but only just enough to make the scheduled payment? This is the critical question because we know that if you use surplus income to make extra payments to principal, you pay down the mortgage more quickly. This is so whether you apply the income directly to the mortgage, as most borrowers do, or whether you follow the Mortgage Relief procedure where you use a credit line to pay down the mortgage and current income to pay down the credit line. I spent much of my air time between Philadelphia and San Francisco on this project, and finally gave it up. Once I removed surplus income from the equation, I could not find a way to make the Mortgage Relief scheme work. You may also want to read related articles by Guttentag: |
is the bankruptcy of exchange markets possible? | It might be easiest to think of stock exchanges like brokers. If you buy a home, and your broker goes bankrupt, you still own your home, but you could not sell it without the aid of another broker. Same with stocks, you own the stocks you buy, but you would be unable to either purchase new stocks or sell your stock holdings without an exchange. |
Is Cash Value Life Insurance (“whole life” insurance) a good idea for my future? | I am of the strong opinion that life insurance should be purchased as a term product and nothing more. The internal expense is usually high, the returns, poor and the product disclosure is often incomprehensible. The only purpose Cash Value Life Insurance serves, in my opinion, is to fund the retirement and college educations of those selling it. |
Can I deduct the cost of software and/or computer that I need to do my job? | Yes, this is a miscellaneous itemized deduction. https://www.irs.gov/publications/p529/ar02.html For this to impact your taxes, you have to be itemizing deductions (have total deductions greater than standard deduction), and the total of all miscellaneous deductions needs to exceed the "2% floor" described in the IRS link above. |
Definitions of leverage and of leverage factor | This would clear out a lot more. 1) Leverage is the act of taking on debt in lieu of the equity you hold. Not always related to firms, it applies to personal situations too. When you take a loan, you get a certain %age of the loan, the bank establishes your equity by looking at your past financial records and then decides the amount it is going to lend, deciding on the safest leverage. In the current action leverage is the whole act of borrowing yen and profiting from it. The leverage factor mentions the amount of leverage happening. 10000 yen being borrowed with an equity of 1000 yen. 2) Commercial banks: 10 to 1 -> They don't deal in complicated investments, derivatives except for hedging, and are under stricter controls of the government. They have to have certain amount of liquidity and can loan out the rest for business. Investment banks: 30 to 1 -> Their main idea is making money and trade heavily. Their deposits are limited by the amount clients have deposited. And as their main motive is to get maximum returns from the available amount, they trade heavily. Derivatives, one of the instruments, are structured on underlyings and sometimes in multiple layers which build up quite a bit of leverage. And all of the trades happen on margins. You don't invest $10k to buy $10k of a traded stock. You put in, maybe $500 to take up the position and borrow the rest of the amount per se. It improves liquidity in the markets and increases efficiency. Else you could do only with what you have. So these margins add up to the leverage the bank is taking on. |
Do high interest rates lead to higher bond yields or lower? | Imagine that the existing interest rate is 5%. So on a bond with face value of 100, you would be getting a $5 coupon implying a 5% yield. Now, if let's say the interest rates go up to 10%, then a new bond issued with a face value of 100 will give you a coupon of $10 implying a 10% yield. If someone in the bond market buys your bond after interest price adjustment, in order to make the 10% yield (which means that an investor typically targets at least the risk-free rate on his investments) he needs to buy your bond at $50 so that a $5 coupon can give a 10% yield. The reverse happens when interest rates go down. I hope this somewhat clears the picture. Yield = Coupon/Investment Amount Update: Since the interest rate of the bond does not change after its issuance, the arbitrage in the interest rate is reflected in the market price of the bond. This helps in bringing back the yields of old bonds in-line with the freshly issued bonds. |
How does Value get rounded in figuring out Bonds Value? | With the formula you are using you assume that the issued bond (bond A) is a perpetual. Given the provided information, you can't really do more than this, it's only an approximation. The difference could be explained by the repayment of the principal (which is not the case with a perpetual). I guess the author has calculated the bond value with principal repayment. You can get more insight in the calculation from the excel provided at this website: http://breakingdownfinance.com/finance-topics/bond-valuation/fixed-rate-bond-valuation/ |
Save money in company for next year | As was once famously said, Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes. — Benjamin Franklin, 1789 It's very likely that either the company or you personally is going to have to pay taxes on that money. Really the only way to avoid it would be if the company spent that money on next year's expenses, and paid the bill before the end of this year. Of course you can only do that if the recipient is willing to receive their money so far in advance, which isn't necessarily the case since they would pay more taxes this year as a result. As for whether it's better to have the company pay the tax or for you to do as your accountant suggests, there are a lot of factors that go into that equation, and my gut feeling is that your accountant already ran it both ways and is suggesting the better choice. |
How to account for Capital Gains (Losses) in double-entry accounting? | Capital is an Asset. Decreasing value of capital is the decreasing value of an asset. When you buy the forex asset * DR Forex Asset * CR Cash When you sell * DR Cash * CR Forex Asset The difference is now accounted for Here is how: Gains (and losses) are modifications to your financial position (Balance sheet). At the end of the period you take your financial performance (Profit and Loss) and put it into your balance sheet under equity. Meaning that afterwards your balance sheet is better or worse off (Because you made more money = more cash or lost it, whatever). You are wanting to make an income account to reflect the forex revaluation so at the end of the period it is reflected in profit then pushed into your balance sheet. Capital gains directly affect your balance sheet because they increase/decrease your cash and your asset in the journal entry itself (When you buy and sell it). If making money this way is actually how you make you make an income it is possible to make an account for it. If you do this you periodically revalue the asset and write off the changes to the revaluation account. You would do something like *DR Asset *CR Forex Revaluation account; depending on the method you take. Businesses mostly do this because if the capital gains are their line of business they will be taxed on it like it is income. For simplicity just account for it when you buy and sell the assets (Because you as an individual will only recognise a profit/loss when you enter and exit). Its easier to think about income and expenses are extensions of equity. Income increases your equity, expenses decrease it. This is how they relate to the accounting formula (Assets = Liabilities + Owners Equity) |
(Theoretical) Paying credit cards with other credit cards | A "balance transfer" is paying one credit card with another. You probably get offers in the mail to do this all of the time. As other posters have noted, however, this usually comes with finance fees rather than the rewards that you get for normal purchases because it's written into your credit card agreement as a different class of transaction with different rules. I'm not sure if it's urban legend or true, but I have heard stories that suggest there were some "loop holes" in the earliest credit card reward plans that allowed for something like what you want. I doubt that any plan ever allowed exactly what you've written, but I've heard stories about people buying gift cards from merchants and then using the gift cards to pay their bill. This loop hole (if it ever existed) is closed now, but it would have allowed for essentially infinite generation of rewards at no cost to the cardholder. The banks and credit card companies have a lot of years of experience at this sort of thing now, so the threshold for you finding something that works and conforms with the cardholder agreement is pretty small. |
Which field should I use for getting the income yield of this bond ETF? | What you want is the distribution yield, which is 2.65. You can see the yield on FT as well, which is listed as 2.64. The difference between the 2 values is likely to be due to different dates of updates. http://funds.ft.com/uk/Tearsheet/Summary?s=CORP:LSE:USD |
As a 22-year-old, how risky should I be with my 401(k) investments? | At 22yo, unless you have a terminal illness, you have many years to earn and save a lot more that you will have in your 401k right now (unless you have already been extremely lucky in the market with your 401k investments). This means that even if you lost everything in your 401k right now, it probably wouldn't hurt you that much over the long term. The net present value of all your future savings should far exceed the net present value of your 401k, if you plan to earn and save responsibly. So take as much risk as you want with it right now. There is no real benefit to playing safe with investments at your age. If you were asking me how much risk should you be taking with a $10m inheritance and no income or much prospects of an income, then I'd be giving you a very different answer. |
Can I use a different HSA than PayFlex that came with aetna? | There are some cases I'm aware of where a large employer will offer alternative HSA vendors, but this is not the norm as far as I'm aware, and would only be an option if your employer has already negotiated for this with your insurer. It's likely that this specific vendor is built in for the particular HSA product your employer has elected from Aetna. If this really ticks you off on principle, you can check if they offer a stable value fund. If so, you can essentially treat this money as part of your emergency fund, and somewhat reduce your own emergency fund and invest that money however you see fit. |
Is it ever logical to not deposit to a matched 401(k) account? | The other answers assumed student loan debt -- and for that, it's rarely worth it (unless your company only offers managed plans w/ really bad returns, or the economy recovers to the point where banks are paying 5% again on money market accounts) ... but if it's high rate debt, such as carrying a credit card debt, and the current rate of returns on the 401k aren't that great at the time, it would be worth doing the calculations to see if it's better to pay them down instead. If you're carrying extremely high interest debt (such as 'payday loans' or similar), it's almost always going to be worth paying down that debt as quickly as possible, even if it means forgoing matching 401k payments. The other possible reason for not taking the matching funds are if the required contributions would put you in a significant bind -- if you're barely scraping by, and you can't squeeze enough savings out of your budget that you'd risk default on a loan (eg, car or house) or might take penalties for late fees on your utilities, it might be preferable to save up for a bit before starting the contributions -- especially if you've maxed your available credit so you can't just push stuff to credit cards as a last resort. |
Retirement savings vs building lucrative assets | Well... (in the US, at least) "making investments and building assets" is how you save for retirement. The investments just happen to be in the stock market, and the federal legislature has directed the US version of Inland Revenue Services to give special tax breaks to investments which are not withdrawn until age 59 1/2. I don't know if there are such tax breaks in Pakistan, or what the stock market is like there, so I'm presuming that by saying, "building lucrative assets", your father is referring to buying real estate and/or becoming a trader. Anyway, it's a good thing that you are looking so far ahead in life instead of only thinking of fast cars and pretty girls. |
How to invest with a low net worth | You most definitely can invest such an amount profitably, but it makes it even more important to avoid fees, um, at all costs, because fees tend to have a fixed component that will be much worse for you than for someone investing €200k. So: Edit: The above assumes that you actually want to invest in the long run, for modest but relatively certain gains (maybe 5% above inflation) while accepting temporary downswings of up to 30%. If those €2000 are "funny money" that you don't mind losing but would be really excited about maybe getting 100% return in less than 5 years, well, feel free to put them into an individual stock of an obscure small company, but be aware that you'd be gambling, not investing, and you can probably get better quotes playing Roulette. |
Wash Sales and Day Trading | You are correct. She cannot claim the initial loss of $1,000 on her taxes, she can only report the $500 profit. However, the IRS does allow her to add the $1,000 loss to the basis cost of her replacement shares. e.g. |
Should I give to charity by check or credit card? | This might be blasphemy in the context of an audience that may be most focused on the gift itself, but you should be donating in a manner that helps advance the landscape, as well as your particular favourite charity. Almost 90% of businesses are in the process of trying to move away from issuing and receiving checks, and several countries in the world have already stopped using them. Checks are inefficient, costly and in a resource constrained environment like that facing most charities, create an opportunity cost that is even higher than the manual processing cost that flows directly. As donors, we need to think about scale in a manner that many individual charities don't. Send your donation via ACH! |
Is there such a thing as a deposit-only bank account? | Usually the most significant risk scenarios here are: Third parties can abuse your routing/account numbers to initiate debits, but this is a type of fraud that is easily traced. It can happen, but it is more likely that it would be a scenario where you were specifically targeted vs. the victim of some random fraud. Defending against someone who is specifically going after you is very difficult, especially if you don't know about it. Your SSN isnt used for the bank transfer, you are providing it so that the entity making the payments can report on payments to you for tax purposes. If you are truly worried about this type of scenario, I suggest setting up a dedicated savings account for the purpose of receiving these payments and then sweeping (either manually or automatically) the funds into another account. Most stock brokers will allow you to automate this, and most banks will let you do this manually. |
Should I include retirement funds in calculating my asset allocation? | Personally, I do asset allocation separately for personal investing and for retirement investing, as I the two have vastly different purposes and I have vastly different goals for each. YMMV depending on how you view your non-retirement investments, and how close you are to retirement. |
Option trading: High dollar value stock option and equity exposure | Seems like you are concerned with something called assignment risk. It's an inherent risk of selling options: you are giving somebody the right, but not the obligation, to sell to you 100 shares of GOOGL. Option buyers pay a premium to have that right - the extrinsic value. When they exercise the option, the option immediately disappears. Together with it, all the extrinsic value disappears. So, the lower the extrinsic value, the higher the assignment risk. Usually, option contracts that are very close to expiration (let's say, around 2 to 3 weeks to expiration or less) have significantly lower extrinsic value than longer option contracts. Also, generally speaking, the deeper ITM an option contract is, the lower extrinsic value it will have. So, to reduce assignment risk, I usually close out my option positions 1-2 weeks before expiration, especially the contracts that are deep in the money. edit: to make sure this is clear, based on a comment I've just seen on your question. To "close out an options position", you just have to create the "opposite" trade. So, if you sell a Put, you close that by buying back that exact same put. Just like stock: if you buy stock, you have a position; you close that position by selling the exact same stock, in the exact same amount. That's a very common thing to do with options. A post in Tradeking's forums, very old post, but with an interesting piece of data from the OCC, states that 35% of the options expire worthless, and 48% are bought or sold before expiration to close the position - only 17% of the contracts are actually exercised! (http://community.tradeking.com/members/optionsguy/blogs/11260-what-percentage-of-options-get-exercised) A few other things to keep in mind: certain stocks have "mini options contracts", that would correspond to a lot of 10 shares of stock. These contracts are usually not very liquid, though, so you might not get great prices when opening/closing positions you said in a comment, "I cannot use this strategy to buy stocks like GOOGL"; if the reason is because 100*GOOGL is too much to fit in your buying power, that's a pretty big risk - the assignment could result in a margin call! if margin call is not really your concern, but your concern is more like the risk of holding 100 shares of GOOGL, you can help manage that by buying some lower strike Puts (that have smaller absolute delta than your Put), or selling some calls against your short put. Both strategies, while very different, will effectively reduce your delta exposure. You'd get 100 deltas from the 100 shares of GOOGL, but you'd get some negative deltas by holding the lower strike Put, or by writing the higher strike Call. So as the stock moves around, your account value would move less than the exposure equivalent to 100 shares of stock. |
Is selling put options an advisable strategy for a retiree to generate stable income? | I am close to retirement and sell cash secured puts and covered calls on a regular basis. I make 15 % plus per year from the puts. Less risky than buying stocks, which I also do. Riskier than bonds, but several times the income. Example: I owned 4,000 shares of XYZ, which I bought last year at 6.50 and was at 7.70 two months ago. I sold 3,000 shares, sold 10 Dec puts @ 7.50 (1,000 shares) for $.90 per share and sold 10 Dec calls at 10.00 for $.20. Now I had cash from the sale of 3,000 shares ($23,100) plus $900 cash from the sale of the puts, plus $200 cash from the sale of the calls. Price is now at 6.25. Had I held the 4,000 shares, I would be down $5,800 from when it was 7.70. Instead, I am down $1,450 from the held 1,000 shares, down $550 on the put and up $200 on the calls. So down $1,800 instead of down $5,800. I began buying XYZ back at 6.25 today. |
How can I find a company's P/E ratio based on its given EPS and the P/E ratios of other companies? | Here is how I would approach that problem: 1) Find the average ratios of the competitors: 2) Find the earnings and book value per share of Hawaiian 3) Multiply the EPB and BVPS by the average ratios. Note that you get two very different numbers. This illustrates why pricing from ratios is inexact. How you use those answers to estimate a "price" is up to you. You can take the higher of the two, the average, the P/E result since you have more data points, or whatever other method you feel you can justify. There is no "right" answer since no one can accurately predict the future price of any stock. |
If someone gives me cash legally, can my deposit trigger an audit for them? | Am I right to worry about both of these? Of course. Who carries $75K in cash for no good reason? Your friend got the cash from somewhere, didn't he? If its legit - there's paper trail to show. Same for your parents. If you/they can show the legit paper trail - there's nothing to worry about, the hassle, at worse, is a couple of letters to the IRS. If the money is not legit (your friend is selling crack to the kids in the hood and your parents robbed a 7/11 to give you the money, for example) - there may be problems. |
How to model fees from trades on online platforms? | Assuming cell A1 contains the number of trades: will price up to A1=100 at 17 each, and the rest at 14 each. The key is the MAX and MIN. They keep an item from being counted twice. If X would end up negative, MAX(0,x) clamps it to 0. By extension, if X-100 would be negative, MAX(0, X-100) would be 0 -- ie: that number doesn't increase til X>100. When A1=99, MIN(a1,100) == 99, and MAX(0,a1-100) == 0. When A1=100, MIN(a1,100) == 100, and MAX(0,a1-100) == 0. When A1=101, MIN(a1,100) == 100, and MAX(0,a1-100) == 1. Of course, if the 100th item should be $14, then change the 100s to 99s. |
Can you short a stock before the ex-div. date to make a profit? | I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me! |
New company doesn't allow 401k deposits for 6 months, what to do with money I used to deposit? | Short answer is fund a Roth. If you are under 50 then you can put in $5500 or $6500 if you are older. Great to have money in two buckets one pre tax and one post tax. Plus you can be aggressive putting money in it because you can always take money you put in the Roth out of the Roth with no tax or penalty. Taxes are historically low so it makes a lot of sense to diversify your retirement. |
What is the meaning of “short selling” or “going short” a stock? | The reason for selling a stock "short", is for when you believe the stock value will decrease in the near future. Here is an example: Today Exxon-Mobile stock is selling for $100 / share. You are expecting the price to decrease, so you want to short the stock, which means your broker (i.e. eTrade, etc) allows you to borrow shares without paying money, and those shares are transferred into your account, and then you sell them and receive money for the sale. But you didn't actually own those shares, you only borrowed them, so you need to return the shares to your broker sometime in the future. Let's say you borrow 10 shares @ $100, and you sell them at the market price of $100, you receive $1,000 in your account. But you owe your broker 10 shares, which you need to return sometime in the future. A few days later, the share price has decreased to $80. Now you can buy 10 shares from the market at a total cost of $800. You get 10 shares, and return those shares to your broker. Since you originally took in $1,000, and you just paid out $800, you keep a resulting profit of $200 |
What are the reasons to get more than one credit card? | I have a fair number of cards floating around some reasons I have opened multiple accounts. I am not saying that it is for everyone but there are valid scenarios where multiple credit cards can make sense. |
Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | Do developing country equities have a higher return and/or lower risk than emerging market equities? Generally in finance you get payed more for taking risk. Riskier stocks over the long run return more than less risky bonds, for instance. Developing market equity is expected to give less return over the long run as it is generally less risky than emerging market equity. One way to see that is the amount you pay for one rupee/lira/dollar/euro worth of company earnings is fewer rupees/lira and more dollars/euros. when measured in the emerging market's currency? This makes this question interesting. Risky emerging currencies like the rupee tend to devalue over time against less risky currencies euro/dollars/yen like where most international investment ends up, but the results are rather wild. Think how badly Brazil has done recently and how relatively well the rupee has been doing. This adds to the returns (roughly based on interest rates) of foreign stocks from the point of view of a emerging market investor on average but has really wild variations. Do you have data for this over a long timeframe (decades), ideally for multiple countries? Not really, unfortunately. Good data for emerging markets is a fairly new phenomenon and even where it does exist decades ago it would have been very hard to invest like we can now so it likely is not comparable. Does foreign equity pay more or less when measured in rupees (or other emerging market currency)? Probably less on average (theoretically and empirically) all things included though the evidence is not strong, but there is a massive amount of risk in a portfolio that is 85% in a single emerging market currency. Think about if you were a Brazilian and needed to retire now and 85% of your portfolio was in the Real. International goods like gas would be really expensive and your local currency portfolio would seem paltry right now. If you want to bet on emerging markets in the long run I would suggest that you at least spread the risk over many emerging markets and add a good chunk developed to the mix. As for investing goals, it's just to maximize my return in INR, or maximize my risk-adjusted return. That is up to you, but the goal I generally recommend is making sure you are comfortable in retirement. This usually involves looking for returns are high in the long run, but not having a ton of risk in a single currency or a single market. There are reasons to believe a little bias toward your homeland is good as fees tend to be lower on local investments and local investments tend to track closer to your retirement costs, but too much can be very dangerous even for countries with stronger currencies, say Greece. |
W2 vs 1099 Employee status | In general that's illegal. If you're a W2 employee, you don't miraculously become a 1099 contractor just because they pay you more. If your job doesn't change - then your status doesn't change just because they give you a raise. They can be sued (by you, and by the IRS) for that. Other issues have already been raised by other respondents, just wanted to point out this legal perspective. |
Change In Cash and Cash Equivalents (cash flow) vs Cash And Cash Equivalents (balance sheet) | tl;dr It's a difference between cash and cash equivalents and net cash and cash equivalents. Download the 2016 annual report from http://www.diageo.com/en-us/investor/Pages/financialreports.aspx On page 99 is the Consolidated Statement of Cash Flows at the bottom is a section "Net cash and cash equivalents consist of:" Net cash and cash equivalents consist of: 2016-06-30 2015-06-30 Cash and cash equivalents 1,089 472 Bank overdrafts (280) (90) 809 382 The difference between net cash of 809 million and 382 million is 427 million, matching the "Change in Cash and Cash Equivalents" from Yahoo. I do not know that bank overdrafts mean in this situation, but appears to cause cash to show up on balance sheet without being reflected in the net cash portions of the cash flow statement. And the numbers seem like balances, not year of year changes like the rest of the statement of cash flows. 2015 net CCE 382 2016 cash flow + 427 ---- 2016 net CCE 809 Cash from overdrafts + 280 ---- 2015 balance sheet cash 1,089 |
What options do I have at 26 years old, with 1.2 million USD? | This may be a great idea, or a very bad one, or it may simply not be applicable to you, depending on your personal circumstances and interests. The general idea is to avoid passive investments such as stocks and bonds, because they tend to grow by "only" a few percent per year. Instead, invest in things where you will be actively involved in some form. With those, much higher investment returns are common (but also the risk is higher, and you may be tied down and have to limit the traveling you want to do). So here are a few different ways to do that: Get a college degree, but only if you are interested in the field, and it ends up paying you well. If you aren't interested in the field, you won't land the $100k+ jobs later. And if you study early-childhood education, you may love the job, but it won't pay enough to make it a good investment. Of course, it also has to fit with your life plans, but that might be easier than it seems. You want to travel. Have you thought about anthropology, marine biology or archeology? Pick a reputable, hard-to-get-into, academic school rather than a vocation-oriented oe, and make sure that they have at least some research program. That's one way to distinguish between the for-profit schools (who tend to be very expensive and land you in low-paying jobs), and schools that actually lead to a well-paying future. Or if your interest runs more in a different direction: start a business. Your best bet might be to buy a franchise. Many of the fast-food chains, such as McDonalds, will let you buy as long as you have around $300k net worth. Most franchises also require that you are qualified. It may often make sense to buy not just one franchised store, but several in an area. You can increase your income (and your risk) by getting a loan - you can probably buy at least $5 million worth of franchises with your "seed money". BTW, I'm only using McDonalds as an example. Well-known fast food franchises used to be money-making machines, but their popularity may well have peaked. There are franchises in all kinds of industries, though. Some tend to be very short-term (there is a franchise based on selling customer's stuff on ebay), while others can be very long-lived (many real-estate brokerages are actually franchises). Do be careful which ones you buy. Some can be a "license to print money" while others may fail, and there are some fraudsters in the franchising market, out to separate you from your money. Advantage over investing in stocks and bonds: if you choose well, your return on investment can be much higher. That's generally true for any business that you get personally involved in. If you do well, you may well end up retiring a multimillionaire. Drawback: you will be exposed to considerable risk. The investment will be a major chunk of your net worth, and you may have to put all your eggs in none basket. If your business fails, you may lose everything. A third option (but only if you have a real interest in it!): get a commercial driver's license and buy an 18-wheeler truck. I hear that owner-operators can easily make well over $100k, and that's with having to pay off a bank loan. But if you don't love trucker culture, it is likely not worth doing. Overall, you probably get the idea: the principle is to use your funds as seed money to launch something profitable and secure, as well as enjoyable for you. |
How can I investigate historical effect of Rebalancing on Return and Standard Deviation? | Doesn't "no rebalancing" mean "start with a portfolio and let it fly?" Seems like incorporation of rebalancing is more sophisticated than not. Just "buy" your portfolio at the start and see where it ends up with no buying/selling, as compared with where it ends up if you do rebalance. Or is it not that simple? |
Blog income taxes? | If the money comes to you, then it's income. If the money goes out from you, it's an expense. You get to handle the appropriate tax documentation for those business transactions. You may also have the pleasure of filing 1099-MISC forms for all of your blogging buddies if you've paid them more than $600. (Not 100% sure on this one.) I was in a blog network that had some advertising deals, and we tried to keep the payments separate because it was cleaner that way. If I were you, I'd always charge a finder's fee because it is extra work for you to do what you're doing. |
How does owning a home and paying on a mortgage fit into family savings and investment? | Like @littleadv, I don't consider a mortgage on a primary residence to be a low-risk investment. It is an asset, but one that can be rather illiquid, depending on the nature of the real estate market in your area. There are enough additional costs associated with home-ownership (down-payment, insurance, repairs) relative to more traditional investments to argue against a primary residence being an investment. Your question didn't indicate when and where you bought your home, the type of home (single-family, townhouse, or condo) the nature of your mortgage (fixed-rate or adjustable rate), or your interest rate, but since you're in your mid-20s, I'm guessing you bought after the crash. If that's the case, your odds of making a profit if/when you sell your home are higher than they would be if you bought in the 2006/2007 time-frame. This is no guarantee of course. Given the amount of housing stock still available, housing prices could still fall further. While it is possible to lose money in all sorts of investments, the illiquid nature of real estate makes it a lot more difficult to limit your losses by selling. If preserving principal is your objective, money market funds and treasury inflation protected securities are better choices than your home. The diversification your financial advisor is suggesting is a way to manage risk. Not all investments perform the same way in a given economic climate. When stocks increase in value, bonds tend to decrease (and vice versa). Too much money in a single investment means you could be wiped out in a downturn. |
When to use a stop limit order over a stop order | This is to protect your position in specific highly volatile market conditions. If the stock is free falling and you only have a stop order at $90, it's possible that this order could be filled at $50 or even less. The limit is to protect you from that, as there are certain very specific times where it's better to just hold the stock instead of taking a huge loss (ie when price is whipsawing). |
Why are earning credit card rewards often tied to groceries and gas? | There absolutely is a specific model that makes this so popular with so many credit card companies, and that model is "per transaction fees". Card companies also receive cost-sharing incentives from certain merchants. There is also a psychological reasoning as an additional incentive. When you want to accept credit cards as a source of payment as a business, you generally have three kinds of fees to pay: monthly/yearly subscription fees, percentage of transaction fee, and per transaction fee. The subscription fees can be waived and sometimes are expressed as a "minimum cost", so the business pays a certain amount whether you actually have people use credit cards or not. Many of these fees don't actually make it to the credit card companies, as they just pay the service providers and middle-men processing companies. The percentage of transaction fee means that the business accepting payment via credit card must pay a percentage usually ranging from 1-3% of the total transactions they accept. So if they get paid $10,000 a month by customers in the form of credit cards, the business pays out $100-300 a month to the credit card processor - a good portion of which will make it back to the credit card issuing company, and is a major source of income for them. The per transaction fee means that every time a transaction is run involving a card, a set fee is incurred by the business (which is commonly anywhere from $0.05 to $0.30 per transaction). If that $10,000 a month business mentioned previously had 10 customers paying $1,000 each at $0.10 a transaction, that's only $1 in fees to the credit card processors/companies. But if instead that business was a grocery store with an average transaction of $40, that's $25 in fees. This system means that if you are a credit card company and want to encourage people to make a specific kind of purchase, you should encourage purchases that people make many times for relatively small amounts of money. In a perfect world you'd want them to buy $1 bottles of water 5 times a day with their credit card. If the card company had 50,000 card holders doing this, at the end of 1 year the company would have $91,250,000 spread across 91,250,000 transactions. The card company might reasonably make $0.05 per transaction and %1 of the purchase total. The Get Rewarded For Drinking More campaign might earn the card company $912,500 in percentage fees and over $4.5 million in transaction fees. Yet the company would only have to pay 3% in rewards from the percentage fees, or $2.7 million, back to customers. If the card company had encouraged using your credit card for large once-yearly purchases, they would actually pay out more money in rewards than they collect in card-use fees. Yet by encouraging people to make small transactions very often the card company earns a nice net-income even if absolutely every customer pays their balance in full, on time, and pays no annual/monthly fees for their card - which obviously does not happen in the real world. No wonder companies try so hard to encourage you to use your card all the time! For card companies to make real money they need you to use your credit card. As discussed above, the more often you use the card the better (for them), and there can be a built-in preference for small repeated transactions. But no matter what the size of transaction, they can't make the big bucks if you don't use the card at all! Selling your personal information isn't as profitable if they don't have in-depth info on you to sell, either. So how do they get you to make that plastic sing? Gas and groceries are a habit. Most people buy one or the other at least once a weak, and a very large number of us make such purchases multiple times a week. Some people even make such purchases multiple times a day! So how do people pay for such transactions? The goal of the card companies is to have you use their product to pay as much as possible. If you pay for something regularly you'll keep that card in your wallet with you, rather than it getting lost in a drawer at home. So the card companies want you to use your card as a matter of habit, too. If you use a card to buy for gas and groceries, why wouldn't you use it for other things too? Lunch, dinner, buying online? If the card company pays out more and makes less for large, less-regular purchases, then the ideal for them is to have you use the card for small regular purchase and yet still have you use the card for larger infrequent purchases even if you get reduced/no rewards. What better way to achieve all these goals than to offer special rewards on gas and groceries? And because it's not a one-time purchase, you aren't so likely to game the system; no getting that special 5% cash-back card, booking your once-per-decade dream vacation, then paying it off and cancelling it soon after - which would actually make the card company lose money on the deal. In the end, credit card companies as a whole have a business model that almost universally prefers customers who use their products regularly and preferably for small amounts a maximum number of times. They want to reduce their expenses (like rewards paid out) while maximizing their revenue. They haven't figured out a better way to do all of this so well as to encourage people to use their cards for gas and groceries - everything else seems like a losing proposition in comparison. The only time this preference differs is when they can avoid paying some or all of the cost of rewards, such as when the merchants themselves honor the rewards in exchange for reduced or zero payment from the card companies. So if you use an airline card that seems to give you 10% back in airline rewards? Well, that's probably a great deal for the card company if the airline provides that reward at their own expense to try to boost business. The card company keeps the transaction-related fees and pays out almost nothing in rewards - the perfect offer (for them)! And this assumes no shenanigans like black-out periods, "not valid with any other offers" rewards like on cars where only a fool pays full MSRP (and sometimes the rewards are tagged in this sort of way, like not valid on sale/clearance items, etc), expiring rewards, the fact that they know not everyone uses their rewards, annual fees that are greater than the rewards you'll actually be obtaining after accounting for all the other issues, etc. And credit card industries are known for their shenanigans! |
What happens when a (Internation) Central securities depository goes bankrupt? | There is no generic answer and it would depend on case to case basis. CSD are built on strong foundation in the sense they would have very low cost base and generally would not go bankrupt. However if such a situation as CSD provide an essential role, the regulator, central bank and Government would all step in to prevent a total collapse. They would be forced merged with other entity or more capital raised or put under watch by Govt appointed trustee to settle issues so that there is least or No impact. |
What is a bond fund? | As Michael Pryor answered, a bond fund is a mutual fund that invests in bonds. I'd also consider an ETF based on bonds to be a bond fund, but I'm not sure that all investors would consider these as "bond funds". Not all bond funds are the same -- just like stock funds. You can classify bond funds based on the issuer of the bonds: You can also classify funds based on the time to maturity: In general, bond funds have lower risk and lower expected return than stock funds. Sometimes bond funds have price movements that are not tightly correlated to the price movements in the equity markets. This can make them a decent hedge against declines in your equity investments. See Michal Pryor's answer for some info on how you can get tax free treatment for your bond fund investments. |
Is there a correlation between self-employment and wealth? | Many studies show that the wealthiest households are self employed and small business owners. But there is significant risk associated, and so the wealth cannot really be enjoyed. |
Receiving partial payment of overseas loan/company purchase? | Is it equity, or debt? Understanding the exact nature of one's investment (equity vs. debt) is critical. When one invests money in a company (presumably incorporated or limited) by buying some or all of it — as opposed to lending money to the company — then one ends up owning equity (shares or stock) in the company. In such a situation, one is a shareholder — not a creditor. As a shareholder, one is not generally owed a money debt just by having acquired an ownership stake in the company. Shareholders with company equity generally don't get to treat money received from the company as repayment of a loan — unless they also made a loan to the company and the payment is designated by the company as a loan repayment. Rather, shareholders can receive cash from a company through one of the following sources: "Loan repayment" isn't one of those options; it's only an option if one made a loan in the first place. Anyway, each of those ways of receiving money based on one's shares in a company has distinct tax implications, not just for the shareholder but for the company as well. You should consult with a tax professional about the most effective way for you to repatriate money from your investment. Considering the company is established overseas, you may want to find somebody with the appropriate expertise. |
Is there a finance API of some kind to get all holdings for a specific mutual fund? | Generally, the answer to the availability of holdings of a given mutual fund on a daily basis is no. Thus, an API is non-existent. The reasons for the lack of transparency on a daily basis is that it could/would impact the portfolio managers ability to trade. While this information would not necessarily permit individuals from front running the fund manager's trades, it does give insight in to the market outlook and strategy the fund is employing. The closest you'll be able to get to obtaining a list of holdings is by reading the most recent annual report and the quarterly filings each fund is required to file with the SEC. |
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