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Why invest for the long-term rather than buy and sell for quick, big gains? | The problem is that short-term trends are really unpredictable. There is nobody who can accurately predict where a fund (or even moreso, a single stock or bond) is going to move in a few hours, or days or even months. The long-term trends of the entire market, however, are (more or less) predictable. There is a definite upward bias when you look at time-scales of 5, 10, 20 years and more. Individual stocks and bonds may crash, and different sectors perform differently from year to year, but the market as a whole has historically always risen over long time scales. Of course, past performance never guarantees future performance. It is possible that everything could crash and never come back, but history shows that this would be incredibly unlikely. Which is the entire basis for strategies based on buying and holding (and periodically rebalancing) a portfolio containing funds that cover all market sectors. Now, regarding your 401(k), you know your time horizon. The laws won't let you withdraw money without penalty until you reach retirement age - this might be 40 years, depending on your current age. So we're definitely talking long term. You shouldn't care about where the market goes over a few months if you won't be using the money until 20 years from now. The most important thing for a 401(k) is to choose funds from those available to you that will be as diverse as possible. The actual allocation strategy is something you will need to work out with a financial advisor, since it will be different for every person. Once you come up with an appropriate allocation strategy, you will want to buy according to those ratios with every paycheck and rebalance your funds to those ratios whenever they start to drift away. And review the ratios with your advisor every few years, to keep them aligned with large-scale trends and changes in your life. |
What are some good ways to control costs for groceries? | Set aside the amount of grocery money you want to spend in a week in cash. Then buy groceries only from this money. The first week make it a generous amount so you don't get rediculous and give up. And stick to it when you are out of money (make sure you have some canned goods or something around if you run out of money a day short). And do not shop when you are hungry. |
How do I make a small investment in the stock market? What is the minimum investment required? | A rough estimate of the money you'd need to take a position in a single stock would be: In the case of your Walmart example, the current share price is 76.39, so assuming your commission is $7, and you'd like to buy, say, 3 shares, then it would cost approximately (76.39 * 3) + 7 = $236.17. Remember that the quoted price usually refers to 100-share lots, and your broker may charge you a higher commission or other fees to purchase an odd lot (less than 100 shares, usually). I say that the equation above gives an approximate minimum because However, I second the comments of others that if you're looking to invest a small amount in the stock market, a low cost mutual fund or ETF, specifically an index fund, is a safer and potentially cheaper option than purchasing individual stocks. |
Why would you sell your bonds? | Investment strategies abound. Bonds can be part of useful passive investment strategy but more active investors may develop a good number of reasons why buying and selling bonds on the short term. A few examples: Also, note that there is no guarantee in bonds as you imply by likening it to a "guaranteed stock dividend". Bond issuers can default, causing bond investors to lose part of all of their original investment. As such, if one believes the bond issuer may suffer financial distress, it would be ideal to sell-off the investment. |
Trade? Buy and hold? Or both? | You mentioned three concepts: (1) trading (2) diversification (3) buy and hold. Trading with any frequency is for people who want to manage their investments as a hobby or profession. You do not seem to be in that category. Diversification is a critical element of any investment strategy. No matter what you do, you should be diversified. All the way would be best (this means owning at least some of every asset out there). The usual way to do this is to own a mutual or index fund. Or several. These funds own hundreds or thousands of stocks, so that buying the fund instantly diversifies you. Buy and hold is the only reasonable approach to a portfolio for someone who is not interested in spending a lot of time managing it. There's no reason to think a buy-and-hold portfolio will underperform a typical traded portfolio, nor that the gains will come later. It's the assets in the portfolio that determine how aggressive/risky it is, not the frequency with which it is traded. This isn't really a site for specific recommendations, but I'll provide a quick idea: Buy a couple of index funds that cover the whole universe of investments. Index funds have low expenses and are the cheapest/easiest way to diversify. Buy a "total stock market" fund and a "total bond fund" in a ratio that you like. If you want, also buy an "international fund." If you want specific tickers and ratios, another forum would be better(or just ask your broker or 401(k) provider). The bogleheads forum is one that I respect where people are very happy to give and debate specific recommendations. At the end of the day, responsibly managing your investment portfolio is not rocket science and shouldn't occupy a lot of time or worry. Just choose a few funds with low expenses that cover all the assets you are really interested in, put your money in them in a reasonable-ish ratio (no one knows that the best ratio is) and then forget about it. |
Understanding a Trailing Limit if Touched Order | This is rather simple if you understand a trailing limit order but to be sure I am going to explain a limit, trailing limit, and trailing LIT order. I am going to use an example assuming that you already own a stock and want to sell it. Limit Order I place an order to sell 100 PG @ 65.00. This order will only be executed if the bid price of PG is at $65.0000 or greater. Trailing Limit Order I place an order to sell 100 CAT @ 85.25 with a trailing 5%. This order will be executed when CAT drops 5% below the highest point it reaches after you place this order. So if you place this order at 85.25 and the stock drops 5% to $80.9875, your order will be executed. However, if the stock jumps to $98, the order will not be executed until the stock falls to $93.10. The sell point will go up with the stock and will always remain at the specified % or $ amount behind the high point. Trailing Limit If Touched Order I place an order to sell 100 INTC @ 24.75 with a trailing 5% if the stock touches $25.00. Essentially, this is the same as the trailing limit except that it doesn't take effect until the stock first gets $25.00. I think the page they provide to explain this is confusing because I think they are explaining it from the shorting a stock perspective instead of the selling a stock you want to profit from. I could also be wrong in how I understand it. My advice would be to either call their customer support and ask for a better explanation or what I do in my finances, avoid things I don't understand. |
Is person-person lending/borrowing protected by law? | For person A to be protected (meaning able to recover some or all of the money should the other party try to welsh on the deal), the two of them must have entered into a valid, binding contract where both parties acknowledge and agree to the debt and the terms. Such a contract is subject to the Statute of Frauds, a collection of laws governing contracts which is mostly borrowed from English common law. The basics are that in all cases, a "contract" is only formed when both parties agree, technically when one party accepts an offer made by the other party. Both the offer and acceptance must be made sincerely. For a contract, once entered, to be enforceable, proof of the contract's existence and terms must itself exist. Certain types of transactions (real estate, large amounts of money) require contracts to be in written form, and witnessed by a trusted third party (in most cases this party is required to be a notary public). And contracts must have a certain amount of quid-pro-quo; contracts that provide a unilateral benefit can be thrown out on a case-by-case basis. A contract that simply states that Person B owes Person A money, without stating what benefit Person A had provided Person B in return for the money (in this case A gives B the money to begin with), is unenforceable. The benefits must of course be legal on both sides; a contract to deliver 5 tons of cocaine will not be upheld by any court in any free country, and neither will any contract attempting to enforce hush money, kickbacks, bribery etc (though some toe the line; one could argue that a signing bonus is tantamount to bribery). In some cases even seemingly benign clauses, like "escape clauses" allowing one party a "free out", can make the contract unenforceable as they could be abused to the severe detriment of one party. There are also jurisdiction-specific rules, such as limits on "finance charges" for debts not owed to a "bank" (a bar, for instance, cannot charge 10% on an outstanding tab in the United States). This is HUGE for your example, because if Person A had specified an interest rate in excess of the allowed rate for non-bank lenders, not only will the contract get thrown out even though Person B agreed to the terms, but Person A could find themselves on the hook for punitive damages payable to Person B, FAR in excess of the contracted amount. Given that the agreement meets all tests of validity for a contract, if either party fails to perform in accordance with the contract, causing a loss or "tort" for the other party, the injured party can sue. Generally the two options are "strict performance" (the injuring party is ordered by the court to comply exactly with the terms of the contract), or payment of net actual damages and dissolution of the contract. In your example, if Person A had lent Person B money, strict performance would mean payment of the debt in the installments agreed, at the rate agreed; actual damages would be payment of the outstanding balance plus current interest charges (without any further penalty). Notice that it's "net" damages; if Person A was to issue the loan in installments, and missed one, causing Person B to suffer damages from the loss of expected cash flow directly resulting in their failure to pay according to the terms, then Person B's proven damages are subtracted from A's; very often, the plaintiff in a suit to recover money can end up owing the defendant for a prior failure to perform. There are further laws governing bankruptcy; basically, if the other person cannot satisfy the contract and cannot pay damages, they will pay what they can, and the contract is terminated with prejudice ("no blood from a turnip"). |
Merchant dispute with airline over missed flight, and which credit cards offer protection? | EDIT To answer what I think you question is: I do not know of anything other than trip cancellation insurance. And you must be very careful that the policy you purchase for your trip covers the circumstance you described. Essentially, you opted not to take the flight. Not all trip cancellation policies will cover that. How to Find Trip Cancellation Insurance Getting Your Money Back Now This is an Act of God in the insurance world. You cannot reasonably expect the airline to know the future weather pattern anymore than you could, and therefore, since the plane did fly, you owe them the money based on the ticket you bought. You didn't just buy a ticket, there is a contract with rules about refunds and transferring and such. It is a bummer situation, and I understand you point of view, but this isn't the airline's fault. If anybody is to blame for you missing your flight, and therefore not getting a refund, it is your employer. Their requirements for you be in one city and then another are the cause. While your employer cannot predict the weather, they are ultimately the ones who could give you the okay to be late. If you absolutely cannot be late, and it was critical that you drive out and miss your flight, then your company gets to pay for the flight AND the car. That is the cost of doing business for them. This is also why, when flying for business, that you pay the higher price and get the refundable / transferable ticket. They cost more, but situations like these illustrate they are worth it for the company. |
Pay bill now or later? | Another, perhaps simpler approach to the same result as @BenMiller. Firstly, if you can pay off the debt today, for 1695.70 cash, then that is the amount of your debt to the hospital. There is no such thing as a discount for cash; just extra money to pay if don't pay immediately. This extra money is called interest, and the hospital is indeed charging you interest. Use any mortgage program to find the interest rate if you pay off a debt of 1695.70 with 60 monthly payments of 37.68. The program should tell you that you are paying 12.64% effective annual interest. If you can earn more than that, after taxes, with your money somewhere else, then invest the cash there and pay off the hospital over time. If you can't, then pay off the debt immediately, and avoid writing 60 cheques. EDIT: Incorrect calculation revised as per @Ben Miller |
Trouble sticking to a budget when using credit cards for day to day transactions? | Discipline. If you have to have a hard limit on your account that prevents you from spending - credit cards are not for you. If you can discipline yourself not to make purchases in excess of your budget even if the plastic technically allows it - then you can go on using the credit card. Make sure to stay on top of your spendings by frequently checking your current activity on the card (on line, don't wait for statements), and making sure you're below the limit you have set for your budget. Mint.com visualizes your spendings and shows where you are with regards to your preset budgets on various types of spendings, you should consider using it as an aid. |
Historical share price at exact day and time | An alternative to paying thousands of dollars for historical prices by the minute: Subscribe to real time data for as low as USD$1.5/month from your broker, then browse the chart. |
How will the after market affect the open of the market tomorrow? | In general a stock can open at absolutely any price with no regard for the closing price or after hours price the previous day. The opening price will be determined by the best bid and offer made by people who decide to trade the next day. Some of the those people may have put orders in on a prior day that are still on the books and matter, but there's a lot of time overnight for people to cancel orders and enter new ones, which is especially likely to happen if there was substantive news overnight. As for what you can do in your case, you have the same options that you always had: Sell or hold. If you're selling, you can sell after hours, in the pre-open hours, or during the trading day. There's nothing we can say about this case that's really any different than we can say about any other stock on any other day. |
Why do some people say a house “not an investment”? | Your house is not an asset, it is a liability. Assets feed you. Liabilites eat you. Robert Kiyosaki From a cash flow perspective your primary residence (ie your house) is an investment but it is not an asset. If you add up all the income your primary residence generates and subtract all the expenses it incurs, you will see why investment gurus claim this. Perform the same calculations for a rental property and you're more likely to find it has a positive cash flow. If it has a negative cash flow, it's not an asset either; it's a liability. A rental property with a negative cash flow is still an investment, but cash flow gurus will tell you it's a bad investment. While it is possible that your house may increase in value and you may be able to sell it for more than you paid, will you be able to sell it for more than all of the expenses incurred while living there? If so, you have an asset. Some people will purchase a home in need of repair, live in it and upgrade it, sell it for profit exceeding all expenses, and repeat. These people are flipping houses and generating capital gains based on their own hard work. In this instance a person's primary residence can be an asset. How much of an asset is calculated when the renovated house is sold. |
Potential pitfalls of this volume trading strategy | First challenge: Creating a system which can understand written English well enough to read the news. Nothing short of IBM's Watson has proven very good at extracting meaning from unstructured text. Second challenge: By the time it reaches "the news", the big actors already know and have responded. Third challenge: It's not uncommon for a stock to drop on good news, or rise on bad, because the price had previously adjusted to an expectation of even better/worse news and is now correcting itself. Basic principle: It it was simple and obvious, everyone would already be doing it. |
Is it worth buying real estate just to safely invest money? | You are mixing issues here. And it's tough for members to answer without more detail, the current mortgage rate in your country, for one. It's also interesting to parse out your question. "I wish to safely invest money. Should I invest in real estate." But then the text offers that it's not an investment, it's a home to live in. This is where the trouble is. And it effectively creates 2 questions to address. The real question - Buy vs Rent. I know you mentioned Euros. Fortunately, mortgages aren't going to be too different, lower/higher, and tax consequence, but all can be adjusted. The New York Times offered a beautiful infographing calculator Is It Better to Rent or Buy? For those not interested in viewing it, they run the math, and the simple punchline is this - The home/rent ratio can have an incredibly wide range. I've read real estate blogs that say the rent should be 2% of the home value. That's a 4 to 1 home/rent (per year). A neighbor rented his higher end home, and the ratio was over 25 to 1. i.e. the rent for the year was about 4% the value of the home. It's this range that makes the choice less than obvious. The second part of your question is how to stay safely invested if you fear your own currency will collapse. That quickly morphs into too speculative a question. Some will quickly say "gold" and others would point out that a stockpile of weapons, ammo, and food would be the best choice to survive that. |
How should I handle taxes for Minecraft server donations? | Technically, this is considered "income" for you, and is actually not considered a "donation" for your donors, but is instead a "gift" (not tax-deductible for your donors). So, you are technically required to report it, and there is a pretty significant audit trail that can be followed to prove you made that money. I don't know if PayPal is required to file 1099s for payments received, but if you've ever received such a document, so has the IRS, and they'll match it to the income you claimed and see a discrepancy, triggering an audit. Depending on the amount that it affects your taxes (it can be significant; if you have a $50k/yr day job, you'd owe the government 25 cents on every dollar donated), they can let it slide, they may simply dock your next return, or they may come after you for interest and penalties or even charge you with criminal tax fraud if they could prove you maliciously attempted to conceal this revenue. Now, if you already itemize using a Schedule A, then you can erase this income by deducting the costs of the server, not to exceed the amount of the donations. The best you can do is offset it; you cannot use this deduction to reduce taxable income from other sources. Also, you must itemize; you can't take your standard deduction, and with a maximum possible deduction of the actual costs of running the server ($1500, IF you receive enough donations to fully pay for it) compared to one person's standard deduction ($5800), you'll want to take the standard deduction if you don't have other significant deductions (medical expenses, mortgage interest/property taxes, etc). If you were charging users a monthly fee for use of the server, then you've basically created a de facto sole proprietorship, and you would still have to count the fees as income, but could then deduct the full cost of running the server. You'd fill out a Schedule C listing the revenue and expenses, and back them up with statements from your ISP/hosting company and from PayPal. Now, this would apply if you were running the server with the primary goal of making a regular profit; Schedule C cannot be used for income from a "hobby", undertaken primarily for enjoyment and where a few bucks in revenue is gravy. Whether you think you can get away with that in your current situation is your prerogative; I don't think you would, given that the donations are solicited and optional, and thus there is no expectation of ever turning a profit on this game server. |
I bought a new car for a month and wanted to return it | Following up on @petebelford's answer: If you can find a less expensive loan, you can refinance the car and reduce the total interest you pay that way. Or, if your loan permits it (not all do; talk to the bank which holds the loan and,/or read the paperwork you didn't look at), you may be able to make additional payments to reduce the principal of the loan, which will reduce the amount and duration of the loan and could significantly reduce the total interest paid ... at the cost of requiring you pay more each month, or pay an additional sum up front. Returning the car is not an option. A new car loses a large portion of its value the moment you drive it off the dealer's lot and it ceases to be a "new" car. You can't return it. You can sell it as a recent model used car, but you will lose money on the deal so even if you use that to pay down the loan you will still owe the bank money. Given the pain involved that way, you might as well keep the car and just try to refinance or pay it off. Next time, read and understand all the paperwork before signing. (If you had decided this was a mistake within 3 days of buying, you might have been able to take advantage of "cooling down period" laws to cancel the contract, if such laws exist in your area. A month later is much too late.) |
How can I get a mortgage I can't afford? | Honestly I would look for a house you can afford and one that is below the maximum amount of what they are willing to lend you. The reason is owning a house is not a quick loan that you can pay off in a year or two (unless you're rich then I would question why are you even bothering with a loan). This is a long term commitment; can you honestly say your job will provide the money for the mortgage, the upkeep and remodeling of the house (even if it's the perfect house you will want to change something, make the bathroom bigger, put in a pool table etc.. etc..), living expenses and any hiccups life throws at you? Like most of us, that answer will be no. Always have money and supplies for that rainy day, for those lean days. For that mortgage payment. And if nothing happens you can always use the money to pay the mortgage off faster or take a vacation. |
What is most time-efficient way to track portfolio asset allocation? | I want to mention I've found 2 options for more powerful tools that can be used to manage asset allocation: Advantages/Disadvantages: Vanguard Morningstar X-ray I hope this helps others struggling with asset allocation. |
No-line-of-credit debit card? | We have a pre-paid mastercard. This will only allow the spending up to the amount already paid into the card account. Visa Electron is a bank account linked debit card that will not allow the account to go overdrawn but this card type is getting quite rare. |
Are you preparing for a possible dollar (USD) collapse? (How?) | Invest in other currencies and assets that have "real" value. And personally I don't count gold as something of real value. Of course its used in the industry but besides that its a pretty useless metal and only worth something because everybody else thinks that everybody thinks its worth something. So I would buy land, houses, stocks, ... |
Working Capital Definition | As you say, if you delay paying your bills, your liabilities will increase. Like say your bills total $10,000 per month. If you normally pay after 30 days, then your short-term liabilities will be $10,000. If you stretch that out to pay after 60 days, then you will be carrying two months worth of bills as a short-term liability, or $20,000. Your liabilities go up. Assume you keep the same amount of cash on hand after you stretch out your payments like this as you did before. Now your liabilities are higher but your assets are the same, so your working capital goes down. For example, suppose you kept $25,000 in the bank before this change and you still keep $30,000 after. Then before your working capital was $25,000 minus $10,000, or $15,000. After it is $25,000 minus $20,000, or only $5,000. So how does this relate to cash flow? While presumably if the company has $10,000 per month in bills, and their bank balance remains at $25,000 month after month, then they must have $10,000 per month in income that's going to pay those bills, or the bank balance would be going down. So now if they DON'T pay that $10,000 in bills this month, but the bank account doesn't go up by $10,000, then they must have spent the $10,000 on something else. That is, they have converted that money from an on-going balance into cash flow. Note that this is a one-time trick. If you stretch out your payment time from 30 days to 60 days, then you are now carrying 2 months worth of bills on your books instead of 1. So the first month that you do this -- if you did it all at once for all your bills -- you would just not pay any bills that month. But then you would have to resume paying the bills the next month. It's not like you're adding $10,000 to your cash flow every month. You're adding $10,000 to your cash flow the month that you make the change. Then you return to equilibrium. To increase your cash flow every month this way, you would have to continually increase the time it takes you to pay your bills: 30 days this month, 45 days the next, 60 the next, then 75, 90, etc. Pretty soon your bills are 20 years past due and no one wants to do business with you any more. Normally people see an action like this as an emergency measure to get over a short-term cash crunch. Adopting it as a long-term policy seems very short-sighted to me, creating a long-term relationship problem with your suppliers in exchange for a one-shot gain. But then, I'm not a big corporate finance officer. |
How to calculate new price for bond if yield increases | I am currently trying out some variations (moving terms around ...) of the formula for the present value of money The relationship between yield and price is much simpler than that. If you pay £1015 for a bond and its current yield is 4.69%, that means you will receive in income each year: 4.69% * £1015 = £47.60 The income from the bond is defined by its coupon rate and its face value, not the market value. So that bond will continue to pay £47.60 each year, regardless of the market price. The market price will go up or down according to the market as a whole, and the credit rating of the issuer. If the issuer is likely to default, the market price goes down and the yield goes up. If similar companies start offering bonds with higher yields, the market price goes down to make the bond competitive in the market, again raising yield. So if the yield goes up to 4.87%, what is the price such that 4.87% of that price is £47.60? £47.60 / 4.87% = £977.48 Another way to think of it: if the yield goes up from 4.69% to 4.87%, then yield has increased by a factor of: 4.87% / 4.69% = 1.0384 Consequently, market price must decrease by the same factor: £1015 / 1.0384 = £977.48 |
How does the process of “assignment” work for in-the-money Options? | When the strike price ($25 in this case) is in-the-money, even by $0.01, your shares will be sold the day after expiration if you take no action. If you want to let your shares go,. allow assignment rather than close the short position and sell the long position...it will be cheaper that way. If you want to keep your shares you must buy back the option prior to 4Pm EST on expiration Friday. First ask yourself why you want to keep the shares. Is it to write another option? Is it to hold for a longer term strategy? Assuming this is a covered call writing account, you should consider "rolling" the option. This involves buying back the near-term option and selling the later date option of a similar or higher strike. Make sure to check to see if there is an upcoming earnings report in the latter month because you may want to avoid writing a call in that situation. I never write a call when there's an upcoming ER prior to expiration. Good luck. Alan |
What's the point of a chargeback when they just ask the merchant whether they owe money to the buyer? | You may be using the wrong method to get your money back. As others have said, this is not a valid use for chargeback; that is when a fraudulent charge occurred, or when a merchant charges you incorrectly. However, many cards have various kinds of guarantees, one of which might cover this situation. Particularly in some european countries, such as the United Kingdom which has Section 75 allowing you a recourse, services are included with goods. Goods are typically the only covered elements in the US, though, but check your credit card agreement to be sure. Second, you can go through the FTC. They will provide you a sample form letter to request a refund of your money, and if the merchant is not cooperative might choose to help you directly (especially if many others are in your situation). |
Why are american call options more valuable than european options ONLY if the underlying asset pays cash flows? | Really all you need to know is that American style can be exercised at any point, European options cannot be exercised early. Read on if you want more detail. The American style Call is worth more because it can be exercised at any point. And when the company pays a dividend, and your option is in the money, if the extrinsic value is worth less than the dividend you can be exercised early. This is not the case for a European call. You cannot be exercised until expiration. I trade a lot of options, you wont be exercised early unless the dividend scenario I mentioned happens. Or unless the extrinsic value is nothing, but even then, unless the investor really wants that position, he is more likely to just sell the call for an equivalent gain on 100 shares of stock. |
How do I get a list of the top performing funds between two given dates? | I found one such tool here: Point-to-Point Returns tool |
Should I change 401k investment options to prepare for rising interest rates? | The bond funds should tell you their duration. My 401(k) has similar choices, and right now, I'm at the short maturity, i.e. under 1 year. The current return is awful, but better than the drop the longer term funds will experience as rates come back up. Not quite mathematically correct, but close enough, "duration" gives you the time-weighted average maturity in a way that tells you how the value responds to a rate change. If a fund has a 10 year duration, a .1% rate rise will cause the fund value to drop 1.0%. |
Stocks in India, what is the best way to get money to US | From India Point of view; someone may put the US point of view ... As an NRI you are not supposed to hold an Ordinary Demat Account. Please have this converted to NRO NON-PINS ASAP. Related Question Indian Demat account If the shares were purchased before 1-Oct-2004, they are liable for Long Term Capital Gains tax in India. |
How to find a good third-party, 401k management/advice service? | Another option to a human advisor is FutureAdvisor, a web service that (if it supports your 401k plan) gives personalized algorithmic advice on what you should hold in your 401(k) and other retirement accounts. If it doesn't support your 401(k) plan just yet you can sign up to be emailed when your plan is added. [Disclosure: I work here, but I believe in the product and it's designed to solve this exact problem so I'm mentioning it here] Note from JoeTaxpayer - bolu's disclosure is much appreciated. The fee is $39/yr, with a free trial. Consider that a commissions based advisor won't even take on a $10K level account, and at $100K, you'd be hard pressed to gain by more than his 1% fee. So while I've not dug deeper into this site, a rules-based methodology is likely to be worth the cost if over time it gains you even a fraction of a percent compared to what you'd have done blindly. |
Optimal Asset Allocation | Generally a diversified portfolio will give you a better overall return --a couple of factors that may address what you are looking at - 1) Correlation - The correlation between your two funds is still very high -- it's partially a function of how global economies are related and many companies are now multi-national. It may help if you diversified into other types of products. 2) Diversification - Following up from before, you may want to also look into diversifying into some bonds, commodities, reits, etc. They will have a much smaller correlation with a total domestic stock fund. 3) Returns - I'm not sure if by dominate you mean that it has better overall returns, but the point of diversification is to to get you the highest returns. It's really the ability to limit the risk for the returns - this really translates to limiting the volatility. This may mean that overall your max returns could be lower-- ie: maybe VTSAX gives potential average returns between 3%-11%. A diversified portfolio may give you potential average returns of 5%-9%. A similar article debating the merits of 'smart beta ETFs' if you are curious. Hope that helps. |
My bank often blocks my card during purchases - what is the most reliable bank card? (UK) | Having worked in the financial industry, I can say 9:10 times a card is blocked, it is not actually the financial industry, but a credit/credit card monitoring service like "Falcon" for VISA. If you have not added travel notes or similar, they will decline large, our of country purchases as a way to protect you, from what is most likely fraud. Imagine if you were living in Sweden and making regular steady purchases, then all of a sudden, without warning your card was used in Spain. This would look suspicious on paper, even it was obvious to you. This is less to do with your financial institution, and more to do with increased fraud prevention. Call your bank. They will help you. |
United Kingdom: Where to save money for a property deposit | The chancellor announced an ISA in this week's budget intended for people saving to buy their first home. For every £200 put in the government will add £50 to the account so I would strongly encourage you to put the money into that as it is also tax free. |
Covered call when stock position is at a loss | An expired option is a stand-alone event, sold at $X, with a bought at $0 on the expiration date. The way you phrased the question is ambiguous, as 'decrease toward zero' is not quite the same as expiring worthless, you'd need to buy it at the near-zero price to then sell another covered call at a lower strike. Edit - If you entered the covered call sale properly, you find that an in-the-money option results in a sale of the shares at expiration. When entered incorrectly, there are two possibilities, the broker buys the option back at the market close, or you wake up Sunday morning (the options 'paperwork' clears on Saturday after expiration) finding yourself owning a short position, right next to the long. A call, and perhaps a fee, are required to zero it out. As you describe it, there are still two transactions to report, the option at $50 strike that you bought and sold, the other a stock transaction that has a sale price of the strike plus option premium collected. |
Strategic countermeasures to overcome crisis in Russia | You could of course request payment in EUR or USD, maybe keep a PayPal account and just leave the funds in PayPal unless you need to withdraw the money in local currency? Either currency would be fine because the problem you are trying to overcome is the instability in the ruble. EUR and USD both accomplish that. If you can get local clients to pay in EUR or USD (again, PayPal seems like an easy way to accomplish that) you avoid the ruble, but at the risk that your services become more expensive to local clients because they have to convert a weaker currency to a stronger one. You should also solicit some international clients! You are obviously perfectly fluent in English and that's a significant advantage. And they'll be happy to pay in dollars and euros. |
I have about 20 000 usd. How can invest them to do good in the world? | Shariah compliant investments attempt to achieve your "ethical investing" ideals. Many countries around the world have a long list of shariah compliant investments and lots of journalists will go great lengths to reveal when a company is not really shariah compliant. Standard & Poors (S&P), an American financial services company, hosts a Shariah compliant index too, but on the Toronto Stock Exchange in Canada due to the Islamaphobia rampant in the United States. But of course, international companies are indifferent to any single country's social problems, and in your new pastime as an international speculator you will get the same luxury too and exemption from the political spectrum. S&P/TSX 60 information can be found here: http://web.tmxmoney.com/tmx_indices.php?section=tsx&index=%5ETXSI Business sectors prohibited from the Shariah index include: Gambling, Pornography, Tobacco, amongst others. In the United States, the concept has been renamed "B-Corporation" (a play on the federal term C-Corporation and S-Corporation), and has garnered enough of a movement that several states have created these as entities people can actually register them with the state, but these are not recognized as "B-Corporations" to the federal government. Shariah compliant investments will be easier to find worldwide, due to the popularity of the associated religion. |
When I ask a broker to buy stock, what does the broker do? | My answer isn't a full one, but that's because I think the answer depends on, at minimum, the country your broker is in, the type of order you place (limit, market, algo, etc.,) and the size of your order. For example, I can tell from watching live rates on regular lot limit orders I place with my UK-based broker that they hold limit orders internally until they see a crossing rate on the exchange my requested stock is trading on, then they submit a limit order to that exchange. I only get filled from that one exchange and this happens noticeably after I see my limit price print, and my fills are always better than my limit price. Whereas with my US-based broker, I can see my regular lotsize limit order in the order book (depth of book data) prior to any fills. I will routinely be notified of a fill before I see the limit price print. And my fills come from any number of US exchanges (NYSE, ARCA, BATS, etc.) even for the same stock. I should point out that the "NBBO" rule in the US, under SEC regulation NMS, probably causes more complications in handling of market and limit orders than you're likely to find in most countries. |
Why can't house prices be out of tune with salaries | They can't keep rising with respect to people's income because eventually you run out of buyers. If there's roughly one house for every five people, then you'd better make sure that the price you set to sell your house is affordable to people in the upper fifth of income scales, or else you are mathematically guaranteed not to have any customers. Now, it's true that the price of particular houses can get much higher, but they tended to be higher in the first place. Housing isn't exactly an efficient market, but for the most part you have to pay for the house that you get, or else someone else will outbid you. An individual area might, temporarily, buck these trends because it suddenly becomes popular and there are a lot of extra buyers putting money on the table. In the long run, someone is going to build for those buyers, even if it means moving up the chain from enormous rural lots to suburban single-family homes to low-density garden apartments to residential towers. |
Is inflation inapplicable in a comparison of paying off debt vs investing? | I'd agree, inflation affects the value of the dollar you measure anything in. So, it makes your debt fade away at the same rate it eats away at dollar denominated assets. I'd suggest that one should also look at the tax effect of the debt or assets as well. For example, my 3.5% mortgage costs me 2.625% after tax. But a 4% long term cap gain in stocks, costs me .6% in tax for a net 3.4%. |
What is a Student Loan and does it allow you to cover a wide range of expenses relating to school? | Short answer: student loans are loans given to people that are currently enrolled in school and yes, you can use them for personal expenses. Long answer: be very careful because you can easily be financially ruined if you borrow too much and can't repay it quickly. Once the loans get beyond a certain size relative to your income, you can find it hard to stay ahead of the interest payments let alone actually pay off the principal. These are the facts you need to know: |
Why does capital gains tax apply to long term stock holdings? | Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying "this company will grow". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex. |
The best credit card for people who pay their balance off every month | BillShrink.com lets you compare credit cards based on all your specifics (miles vs. cash, where you shop the most, etc) and tells you what the best card is for your specific habits. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team |
Should I pay off my 50K of student loans as quickly as possible, or steadily? Why? | The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time. |
Do company-provided meals need to be claimed on my taxes? | I believe there is an overtime meal allowance. That is, if an employee works "overtime" (defined as 7:00 p.m. for a 9:00 start, or ten-plus hours after the shift starts), the company can provide a non-taxable meal free of charge, or give a "reasonable" allowance ($15-$20) that must be spent outside on a meal (no drinks). This is because the employee is working extra hours at the convenience of the company. Lunches can be subsidized. That is the company can provide lunch on company premises, and must charge employees the direct costs of the food and preparing it, but can forego charging for "overhead" (e.g. the implied rent for the lunch facility) and profit. |
Can I fully deduct capital losses against discounted capital gains? | The short answer is no - the CGT discount is only applied against your net capital gain. So your net capital gain would be: $25,000 - $5,000 = $20,000 Your CGT discount is $10,000 You will then pay CGT on $10,000 Of course you could sell ABC in this financial year and sell DEF next financial year. If you had no other share activities next financial year than that net capital loss can be carried forward to a future year. In that case your net capital gain this year would be $25,000 Your CGT discount is $12,500 You will then pay CGT on $12,500 Next year if oyu sell DEF, you'll have a $5000 net capital loss which you can carry forward to a future year as an offset against capital gains. Reference: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-net-capital-gain-or-loss/ |
CEO entitlement from share ownership? | In its basic form, a corporation is a type of 'privileged democracy'. Instead of every citizen having a vote, votes are allocated on the basis of share ownership. In the most basic form, each share you own gives you 1 vote. In most public companies, very few shareholders vote [because their vote is statistically meaningless, and they have no particular insight into what they want in their Board]. This means that often the Board is voted in by a "plurality" [ie: 10%-50%] of shareholders who are actually large institutions (like investment firms or pension funds which own many shares of the company). Now, what do shareholders actually "vote on"? You vote to elect individuals to be members of the Board of Directors ("BoD"). The BoD is basically an overarching committee that theoretically steers the company in whatever way they feel best represents the shareholders (because if they do not represent the shareholders, they will get voted out at the next shareholder meeting). The Board members are typically senior individuals with experience in either that industry or a relevant one (ie: someone who was a top lawyer may sit on the BoD and be a member of some type of 'legal issues committee'). These positions typically pay some amount of money, but often they are seen as a form of high prestige for someone nearing / after retirement. It is not typically a full time job. It will typically pay far, far less than the role of CEO at the same company. The BoD meets periodically, to discuss issues regarding the health of the company. Their responsibility is to act in the interests of the shareholders, but they themselves do not necessarily own shares in the company. Often the BoD is broken up into several committees, such as an investment committee [which reviews and approves large scale projects], a finance committee [which reviews and approves large financial decisions, such as how to get funding], an audit committee [which reviews the results of financial statements alongside the external accountants who audit them], etc. But arguably the main role of the BoD is to hire the Chief Executive Officer and possibly other high level individuals [typically referred to as the C-Suite executives, ie Chief Financial Officer, Chief Operating Officer, etc.] The CEO is the Big Cheese, who then typically has authority to rule everyone below him/her. Typically there are things that the Big Cheese cannot do without approval from the board, like start huge investment projects requiring a lot of spending. So the Shareholders own the company [and are therefore entitled to receive all the dividends from profits the company earns] and elects members of the Board of Directors, the BoD oversees the company on the Shareholders' behalf, and the CEO acts based on the wishes of the BoD which hires him/her. So how do you get to be a member of the Board, or the CEO? You become a superstar in your industry, and go through a similar process as getting any other job. You network, you make contacts, you apply, you defend yourself in interviews. The shareholders will elect a Board who acts in their interests. And the Board will hire a CEO that they feel can carry out those interests. If you hold a majority of the shares in a company, you could elect enough Board members that you could control the BoD, and you could then be guaranteed to be hired as the CEO. If you own, say, 10% of the shares you will likely be able to elect a few people to the Board, but maybe not enough to be hired by the Board as the CEO. Short of owning a huge amount of a company, therefore, share ownership will not get you any closer to being the CEO. |
Will a small investment in a company net a worthwhile gain? | If you bought 5 shares @ $20 each that would cost you $100 plus brokerage. Even if your brokerage was only $10 in and out, your shares would have to go up 20% just for you to break even. You don't make a profit until you sell, so just for you to break even your shares need to go up to $24 per share. Because your share holding would be so small the brokerage, even the cheapest around, would end up being a large percentage cost of any overall profits. If instead you had bought 500 shares at $20, being $1000, the $20 brokerage (in and out) only represents 2% instead of 20%. This is called economies of scale. |
What is the opposite of a hedge? | I guess the opposite of being hedged is being unhedged. Typically, a hedge is an additional position that you would take on in order to mitigate the potential for losses on another position. I'll give an example: Say that I purchase 100 shares of stock XYZ at $10 per share because I believe its price will increase in the future. At that point, my full investment of $1000 is at risk, so the position is not hedged. If the price of XYZ decreases to $8, then I've lost $200. If the price of XYZ increases to $12, then I've gained $200; the profit/loss curve has a linear relationship to the future stock price. Suppose that I decide to hedge my XYZ position by purchasing a put option. I purchase a single option contract (corresponding to my 100 shares) with a strike price of $10 and an expiration date in January 2013 for a price of $0.50/share. This means that until the contract expires, I can always sell my XYZ shares for a minimum of $10. Therefore, if the price of XYZ decreases to $8, then I've only lost $50 (the price of the option contract), compared to the $200 that I would have lost if the position was unhedged. Likewise, however, if the price increases to $12, then I've only gained a net total of $150 due to the money I spent on the hedge. (the details of how much money you would actually lose in the hedged scenario are simplified out above; even out-of-the-money options retain some value before expiration, but pricing of options is outside of the scope of this post) So, as a more pointed answer to your question, I would say that the hedged/unhedged status of a position can be characterized by its potential for loss. If you don't have any other assets that will increase in value to offset losses on your position of interest, I would call it unhedged. |
Is there an investment account where I can owe taxes only if the net of capital gain and dividend payment is positive? | No such account exists as capital gains aren't realized until holdings are sold. For example: OR Both scenarios would result in you owing the appropriate taxes on a $40 gain from the dividends. The $100 gain or $100 loss that isn't realized (you haven't sold the stock) isn't accounted for until the year of sale. |
interest rate on online banks | I beg to differ: Israel has an incredibly well managed central bank, and the usury market is wonderfully competitive. It's a shame Stanley Fischer has retired. His management is the case study in central bank management. Rates are low because inflation is low. The nominal rate is irrelevant to return because a 2% nominal return with 1% inflation is superior to a 5% nominal return with 9% inflation. A well-funded budget is the best first step, so now a tweak is necessary: excess capital beyond budgeting should be moved quickly to internationally diversified equities after funding, discounted and adjusted, longer term budgets. Credit will not pay the rate necessary for long term investment. Higher variance is the price to pay for higher returns. |
If there's no volume discount, does buying in bulk still make sense? | Let me add a counterpoint. I don't know about you, but for some psychological reason, when I know I have an abundance of something I tend to be less frugal about the way I consume it. For example: When there is a six pack of cokes in the fridge I feel like I am more prone to not drink them up so quickly so I have some for later on. However, if I knew I had 3 more cases in the pantry, I seem to go through a lot more of them. |
Why doesn’t every company and individual use tax-havens to pay less taxes? | In a nutshell, there are significant entrance hurdles, legally and especially financially. The fixed cost and effort to get it set up is high (although later, the proportional cost and efforts are negligible). Therefore, this is only of interest for taxable amounts of seven digits or more - which most people don’t reach. |
Are bond ETF capital gains taxed similar to stock or stock funds if held for more than 1 year? | Appreciation of a Capital Asset is a Capital Gain. In the United States, Capital Gains get favorable tax treatment after being held for 12 months. From the IRS newsroom: Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%. The IRS defines a Capital Asset as "most property you own" with a list of exclusions found in Schedule D Instructions. None of the exclusions listed relate to Bond ETFs. |
Do I even need credit cards? | A credit card can be a long running line of credit that will help to boost your FICO score. However if you have student loans, a mortgage, or car payments those will work just as well. If you ever get to the point where you don't have any recent lines of credit, this may eventually end up hurting your score, but until then you really don't need any extras. |
How is it possible that a preauth sticks to a credit card for 30 days, even though the goods have already been delivered? | The answer to your question is very simple: The preauth and the shipment of the goods have no connection within the credit card system. It is possible to process a payment that does not cancel a preauthorization. This is needed for the case where you place two orders and the one you placed second ships first. A preauth can remain active for some time unless it is captured or cancelled. So in your case a preauth was placed and remained active. That you were shipped and billed for some goods had no effect on the preauth because one side or the other failed to attach them. |
How to understand the caculation of interest for credit cards? | Suppose you have been paying interest on previous charges in the past. Your monthly statement is issued on April 12, and (since you just received your income tax refund), you pay it off in full on April 30. You don't charge anything to the card at all after April 12. Thus, on April 30, your credit card balance shows as zero since you just paid it off. But your April 12 statement billed you for interest only till April 12. So, on May 12, your next monthly bill will be for the interest for your nonzero balance from April 13 through April 30. Assuming that you still are not making any new charges on your card and pay off the May 12 bill in timely fashion, you will finally have a zero bill on June 12. What if you charge new items to your credit card after April 12? Well, your balance stopped revolving on April 30, and that's when interest is no longer charged on the new charges. But you do owe interest for a charge on April 13 (say) until April 30 when your balance is no longer revolving, and this will be added to your bill on May 12. Purchases made after April 30 will not be charged interest unless you fall off the wagon again and don't pay your May 12 bill in full by the due date of the bill (some time in early June). |
Buying a multi-family home to rent part and live in the rest | There's nothing wrong with it. Living in a two-family house and renting the downstairs was a fairly standard path to the middle class and home ownership in the 20th century. Basically, if market conditions are good, you'll have someone else paying your mortgage. The disadvantage of the situation is that you're a landlord. So you have to deal with your tenant, who is also a neighbor. Most tenants are fine, but the occasional difficult person may come out of the woodwork. That model of achieving home ownership became less popular in the late 60's-early 70's when the law allowed two incomes to be used for mortgage underwriting. Also, as suburbanization became a national trend, absentee landlords became more common Sounds like you are in the right place at the right time, and have stumbled into a good deal. |
Is it possible to take advantage of exceptions to early withdrawal penalties on a 401(k)? | Your question doesn't make much sense. The exceptions are very specific and are listed on this site (IRS.GOV). I can't see how you can use any of the exceptions regularly while still continuing being employed and contributing. In any case, you pay income tax on any distribution that has not been taxed before (which would be a Roth account or a non-deductible IRA contribution). Including the employer's match. Here's the relevant portion: The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: |
To pay off a student loan, should I save up a lump sum payoff payment or pay extra each month? | Simply, you should put your money into whatever has the higher interest rate, savings or repayment of debt. Let's say at the beginning of month A you put $1000 into each account. In the case of the savings, at the end of month A you will have $1001.6 ($1000 + 1000 x 2% annual interest / 12) In the case of a loan, at the end of month A you will have $1005.7. ($17000 plus 6.8 interest for one month is 17096.3. On $16000, the new value is 16090.6. The difference between these is $1005.7. 5.7 / 1.6 = 3.56 Therefore, using your money to repay your loan nets you a return about 3.5 times greater. |
How should I allocate short-term assets in a rising-interest rate environment? | How should I allocate short-term assets in a rising-interest rate environment? Assuming that the last part is correct, there could be bear bond funds that short bonds that could work well as a way to invest. However, bear in that the the "rising-interest rate environment" is part of the basis that may or may not be true in the end as I'm not sure I've seen anything to tell me why rates couldn't stay where they are for another couple of years or more. Long-Term Capital Management would be a cautionary tale before about bonds that had assumptions that backfired when something that wasn't supposed to happen, happened. Thus, while you can say there is "rising-interest rate environment" what else are you prepared to assume and how certain are you of that happening? An alternate theory here would be that "junk bonds" may do well because the economy has to be heating up for rates to rise and thus the bonds that are priced down so much because of default risk may turn out to not go bust and thus could do well. Course this would carry the "Your mileage may vary" and without a working time machine I couldn't say which funds will be good and which would suck. As for what I would do if I was dealing with my own money: Money market funds and CDs would likely be my suggestion for the short-term where I want to prevent principal risk. This is likely what I would do if I believed the rising rate environment is here. |
Why is property investment good if properties de-valuate over time? | I just read this: Housing and inflation Adjusted for inflation the price of a house has increased a miniscule amount. A better investment would be an ETF that buys REIT stocks. You would be investing in real estate but can cash in and walk away at any time. Here is a list of mREITs: Stockchart of REITs |
Strategies for putting away money for a child's future (college, etc.)? | Saving for college you have a couple of options. 529 plans are probably the best bet for most people wanting to save for their kids college education. You can put a lot of money away ~$300k and you may get a state tax deduction. The downside is if you're kid doesn't go to college you may end up eating the 10% penalty. State specific prepaid tuition plans. The upside is you know roughly the return you are going to get on your money. The downside is your kid has to go to a state school in the state you prepaid or there are likely withdrawal penalties. For the most part these really aren't that great of a deal any more. ESAs are also an option but they only allow you to contribute $2k/year, but you have more investment options than with the 529 plans. Traditional and ROTH IRA accounts can also be used to pay for higher education. I wouldn't recommend this route in general but if you maxed out your 401k and weren't using your IRA contribution limits you could put extra money here and get more or really different flexibility than you can with a 529 account. I doubt IRA's will ever be asked for on a FAFSA which might be helpful. Another option is to save the money in a regular brokerage account. You would have more flexibility, but lower returns after taxes. One advantage to this route is if you think your kid might be borderline for financial aid a year or two before he starts college you could move this money into another investment that doesn't matter for financial aid purposes. A few words of caution, make sure you save for retirement before saving for your kids college. He can always get loans to pay for school but no one is going to give you a loan to pay for your retirement. Also be cautious with the amount of money you give your adult child, studies have shown that the more money that parents give their adult children the less successful they are compared to their peers. |
Mortgage refinancing fees | tl;dr: I think you can find a much better deal. Doing a strait refi will cost you some amount of money. However, a 2.5% fee ont top of closing costs seems really high. You can get a quote from Quicken loans pretty quick and compare their fee. Also I would check with a local bank, preferably one you already do business with. The 2.5% is probably their commission for originating the loan. If you are in the Southeast I have had great luck with Regions bank. They are large enough, but also small enough. Please know that I have no affiliation with either company. BTW the rate also seems high. Doing a quick search of Bank Rate, it seems you can get 3.25% with zero fee as of this writing. The worse deal they show is 3.46 with a .75% fee, much better than you were quoted. If you can afford it I would also encourage you to think outside the box. A client of mine was able to obtain a Home Equity Loan (not line of credit) to replace their mortgage. They went for a 7 year pay off, with the loan in first position, at a rate about .75 below the then current 15 year rate. The key was there was zero closing costs. It saved them quite a bit of money. Also look at a 10 year fixed. It might not be much more than you are paying now. |
How to pay bills for one month while waiting for new job? | A traditional bank is not likely to give you a loan if you have no source of income. Credit card application forms also ask for your current income level and may reject you based on not having a job. You might want to make a list of income and expenses and look closely at which expenses can be reduced or eliminated. Use 6 months of your actual bills to calculate this list. Also make a list of your assets and liabilities. A sheet that lists income/expenses and assets/liabilities is called a Financial Statement. This is the most basic tool you'll need to get your expenses under control. There are many other options for raising capital to pay for your monthly expenses: Sell off your possessions that you no longer need or can't afford Ask for short term loan help from family and friends Advertise for short term loan help on websites such as Kijiji Start a part-time business doing something that you like and people need. Tutoring, dog-walking, photography, you make the list and pick from it. Look into unemployment insurance. Apply as soon as you are out of work. The folks at the unemployment office are willing to answer all your questions and help you get what you need. Dip into your retirement fund. To reduce your expenses, here are a few things you may not have considered: If you own your home, make an appointment with your bank to discuss renegotiation of your mortgage payments. The bank will be more interested in helping you before you start missing payments than after. Depending on how much equity you have in your home, you may be able to significantly reduce payments by extending the life of the mortgage. Your banker will be impressed if you can bring them a balance sheet that shows your assets, liabilities, income and expenses. As above, for car payments as well. Call your phone, cable, credit card, and internet service providers and tell them you want to cancel your service. This will immediately connect you to Customer Retention. Let them know that you are having a hard time paying your bill and will either have to negotiate a lower payment or cancel the service. This tactic can significantly reduce your payments. When you have your new job, there are some things you can do to make sure this doesn't happen again: Set aside 10% of your income in a savings account. Have it automatically deducted from your income at source if you can. 75% of Americans are 4 weeks away from bankruptcy. You can avoid this by forcing yourself to save enough to manage your household finances for 3 - 6 months, a year is better. If you own your own home, take out a line of credit against it based on the available equity. Your bank can help you with that. It won't cost you anything as long as you don't use it. This is emergency money; do not use it for vacations or car repairs. There will always be little emergencies in life, this line of credit is not for that. Pay off your credit cards and loans, most expensive rate first. Use 10% of your income to do this. When the first one is paid off, use the 10% plus the interest you are now saving to pay off the next most expensive card/loan. Create a budget you can stick to. You can find a great budget calculator here: http://www.gailvazoxlade.com/resources/interactive_budget_worksheet.html Note I have no affiliation with the above-mentioned site, and have a great respect for this woman's ability to teach people about how to handle money. |
What is a good service that will allow me to practice options trading with a pretend-money account? | Try https://sparkprofit.com/ You practice with real market prices, and it's free. Plus you can get real money pay outs if you do well. I earned 1 cent! hahaha I gave up trying to make money from it, but you get an idea of doing trades and how impossible it is to predict what the price will be. It has some tutorials and helpful things too. |
Relation between interest rates and currency for a nation | What you are asking about is called Interest Rate Parity. Or for a longer explanation the article Interest Rate Parity at Wikipedia. If the US has a rate of say zero, and the rate in Elbonia is 10%, one believes that in a year the exchange rate will be shifted by 10%, i.e. it will take 1.1 unit of their currency to get the dollars one unit did prior. Else, you'd always profit from such FOREX trades. (Disclaimer - I am not claiming this to be true or false, just offering one theory that explains the rate difference effect on future exchange rates. |
Principal 401(k) managed fund fees, wow. What can I do? | Would anything happen if you bring this issue to the attention of the HR department? Everyone in the company who participates in the 401(k) is affected, so you'd think they'd all be interested in switching to a another 401k provider that will make them more money. |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | Is there anyway to salvage my investment for short-term? No. If by "salvage" you mean "get back as much as you paid", the only way to salvage it is to wait as long as you consider "short-term" and see if goes up again. If by "salvage" you mean "get some money back", the only thing you can do to guarantee that is sell it now. By doing so, you guarantee that you will get neither more nor less than it is worth right now. Either way, there is nothing you can do other than sell the stock or hold it. The stock price went down. You can't make it go back up. Would it be better if I sell my stocks now and buy from other company? Or should I just wait for it's price to go up again? This depends on why you bought the stock, and what you think it will do in the future. You said a family member persuaded you. Does that family member still think the stock will go up again? If so, do you still trust them? You didn't even say what stock it is in your question, so there's no way anyone here can tell you whether it's a good idea to sell it or not. Even if you do say what stock it is, all anyone can do is guess. If you want, you could look the stock up on Motley Fool or other sites to see if analysts believe it will rise. There are lots of sources of information. But all you can do with that information is decide to sell the stock or not. It may sound obvious, but you should sell if you think the stock will go lower, and hold it if you think it could still go back up. No one can tell you which of those things is going to happen. |
Why would you ever turn down a raise in salary? | One "economic reason" to turn down a raise is if your company gives bonuses based on performance reviews. When you get a raise in salary, your boss usually expects a better performance from you. That being said, if you get the raise, and your performance review is worse, you might get a smaller annual income. |
How important is disability insurance, e.g. long-term, LTD? Employer offers none | (My wife works for an insurance broker in the US, so take that grain of salt with my answer) Disability insurance covers your income should you be unable to work. Some disability will be paid before social security (so you get both incomes) and some will be paid after (so your insurance will fill whatever gap SS leaves) Everybody in the US gets Social Security, which has a disability provision you can use. The additional disability insurance is a good idea for people with a family who will rely on your income for the future, or even for yourself should you work in a dangerous position. My family has it, and we consider it essential for our well being, but I consider insurance on many things a necessity not a luxury. (except pet insurance, I find that to be a luxury.) |
Personal Loan issuer online service | http://www.calcamo.net/loancalculator/simulation/fixed-rate-loan.php5 This website is a calculator only and has some extra features that take into account late payments, paying extra to reduce principal, and has the ability to export amortization table to excel that you could use to keep track of the loan. If you are looking for a web site to manage and keep track of the whole process, reminder emails, accepting credit card payments, etc.. paybaq.com may be right for you. |
Dry cleaners lost $160 pants, what should I do? | Do you have the claim ticket? I'll assume yes. Do a Google search for "Dry Cleaner Regulations for [state you live in]" and see if there is a regulatory agency because some states have them, although that might just be for environmental concerns. Worth a shot to call one and ask if they handle customer complaints. Otherwise, the goal is to have them either find your pants or compensate you for the loss. I'd try one last time on the phone or in person. If that fails: Send them a nastygram in the mail demanding $160 by x date or you will pursue "further actions". Keep the letter short and sweet. You can use Google to find example demand letters. After they ignore the letter, file in small claims court. It will cost you ~$50 in filing fees which will be included in the judgement if you win. Go to court, explain why you feel they owe you $160. Bring the claim ticket, the matching suit jacket, and proof that replacing it will cost $160. Step 4: win! Or if that sounds like too much work, you can just write a nasty review on Yelp. You won't get your pants back but it'll feel good. I'd avoid the complaining to the BBB because they have no teeth and the dry cleaner is not obligated to respond to a BBB complaint. Standing right outside their door handing out pamphlets might be a bad idea since it's likely private property and they'll make you leave. But you could always do the labor union thing and hold a "shame on the drycleaners for losing my pants!" sign out by the street or entrance to the parking lot. (That seems like a lot of effort, although it'll look great on your Facebook feed!) |
Stocks: do Good Till Cancelled orders get executed during after hours? | You typically need to specify that you want the GTC order to be working during the Extended hours session. I trade on TD Ameritrade's Thinkorswim platform, and you can select DAY, GTC, EXT or GTC_EXT. So in your case, you would select GTC_EXT. |
Do real nappies (reusable / cloth diapers) really save money? | I only used disposable diapers for my baby's first month. However, I now use half disposable diapers (for part-time daycare) and half cloth. My son is now 1 year and during a normal weekday, I go through 4 disposable diapers and 3-4 cloth diapers (this count includes a double thick cloth diaper for night). On the weekend, I use about 7-8 cloth diapers a day. For disposable, I buy Costco's Kirkland brand diapers which gives me about 200 diapers for $50. I tend to go through one pack every other month. For cloth, I bought FuzziBunz One-Size Diapers. These are pretty expensive diapers (about $19/each) but I wanted ones that would last over multiple children (I chose these over the BumGenius because I thought snaps would last longer than velcro). I bought 24 new cloth diapers which means I wash diapers every 2-3 days. A couple of weeks ago I totaled up my receipts for cloth and disposable diapers and determined that I will recoup my diaper costs at around 16 months of part-time use. Notes: |
How risky is it to keep my emergency fund in stocks? | A major danger of keeping "emergency" funds in the form of stocks is that many of the scenarios where one would need quick access to the money will also momentarily depress the stock market. Someone whose emergency funds were in some other form could avoid selling stocks during a momentary downturn, but someone who has no other emergency funds would have no choice but to sell during the downturn (thus losing money as well as making the downturn more significant for everyone else). |
How to sell a worthless option | Sounds like an illiquid option, if there are actually some bidders, market makers, then sell the option at market price (market sell order). If there are not market makers then place a really low limit sell order so that you can sit at the ask in the order book. A lot of time there is off-book liquidity, so there may be a party looking for buy liquidity. You can also exercise the option to book the loss (immediately selling the shares when they get delivered to you), if this is an American style option. But if the option is worthless then it is probably significantly underwater, and you'd end up losing a lot more as you'd buy the stock at the strike price but only be able to sell at its current market value. The loss could also be increased further if there are even MORE liquidity issues in the stock. |
What kind of technical analysis and indicators available for mutual fund navs | A general mutual fund's exact holdings are not known on a day-to-day basis, and so technical tools must work with inexact data. Furthermore, the mutual fund shares' NAV depends on lots of different shares that it holds, and the results of the kinds of analyses that one can do for a single stock must be commingled to produce something analogous for the fund's NAV. In other words, there is plenty of shooting in the dark going on. That being said, there are plenty of people who claim to do such analyses and will gladly sell you their results (actually, Buy, Hold, Sell recommendations) for whole fund families (e.g. Vanguard) in the form of a monthly or weekly Newsletter delivered by US Mail (in the old days) or electronically (nowadays). Some people who subscribe to such newsletters swear by them, while others swear at them and don't renew their subscriptions; YMMV. |
Can signing up at optoutprescreen.com improve my credit score? | Sounds like a case of false causality. If somebody is taking the time to sign up at opt out sites, then that same person is probably making other smart decisions with their credit, causing scores to rise. Optoutprescreen.com does not help your score, the other actions taken might. People seeing different results can probably be tied to the timeframe they signed up. People who signed up then took care of their credit vs. people whose credit was already good and then signed up. A 10 pt bounce one way or the other is not significant. |
What is the US Fair Tax? | In a nutshell - Value Added Tax. America, as usual, discovers what others have known and used for years. The idea of not taxing income that's tied to it is ridiculous. If you're only taxing spending but not income, people will just take spending elsewhere (Canada, Mexico, further away), and the economy will go down the drain. That's similar to the way people avoid paying sales tax now, except that it will be in orders of magnitude. Why should a corporation by office supplies in the US, if it has a branch in China? Edit Also, Fair Tax doesn't take into account moving money overseas. I've mentioned living elsewhere down below, and that also got me thinking of how I personally would certainly gain from that ridiculous thing called "Fair Tax". Basically, that's exactly how the "rich folks", those who push for it, will gain from it. Being able to move money out of the US basically makes it a perfect tax shelter. You don't pay taxes on the income (that you have in the US), and you don't pay taxes on the spendings (that you have elsewhere, because in that country income is taxable so you only pay VAT or sales taxes). This means that all the wealthy people, while investing and gaining money from the American economy (stocks, property, etc), will actually not be spending it in the US. Thus, no taxes paid to the US, dollars flowing out. Perfect. Actually, I should be all for this stupid idea. Very fair to me, no need to pay any taxes at all, because food will probably be exempt anyway. |
Should I buy my house from my landlord? | Can he legally break your lease if he sells the place? If not I would just keep renting. It doesn't sound like you love the house and you plan on moving or would prefer a different type of place long term. Unless you yourself plan on getting involved in being a renting it out to others in the future - just rent and move on at some point. If he can break your lease upon sale of the property then I'd be casually keeping an eye out for another place to rent if that happens. |
Do the nasdaq small cap stocks or penny stocks get promoted? | Promotion of any stock should be treated with extreme suspicion, since the purpose is generally to make money for the promoter, not to inform the public. |
Flex spending accounts and hsa when changing jobs | Some of this may depend on how your employer chose to deal with your notice period. Most employers employ you for the duration (which means you'd be covered for March on your insurance). They could 'send you home' but pay you (in which case you're an employee for the duration still); or they could terminate you on your notice day, and give you effectively a severance equal to two weeks' pay. That is what it sounds like they did. They should have made this clear to you when you left (on 2/23). Assuming you work in an at-will state, there's nothing wrong (legally) with them doing it this way, although it is not something I believe is right morally. Basically, they're trying to avoid some costs for your last two weeks (if they employ you through 3/6, they pay for another month of insurance, and some other things). In exchange, you lose some insurance benefits and FSA benefits. Your FSA terminates the day you terminate employment (see this pdf for a good explanation of these issues). This means that the FSA administrator is correct to reject expenses incurred after 2/23. The FSA is in no way tied to your insurance plan; you can have one or the other or both. You still can submit claims for expenses prior to 2/23 during your runout period, which is often 60 or 90 days. In the future, you will want to think ahead when leaving employment, and you may want to time when you give notice carefully to maximize your benefits in the event something like this happens again. It's a shady business practice in my mind (to terminate you when you give notice), but it's not unknown. As far as the HSA/FSA, you aren't eligible to contribute to an HSA in a year you're also in an FSA, except that they use "plan year" in the language (so if your benefits period is 6/1/yy - 5/31/yy, that's the relevant 'year'). I'd be cautious about opening a HSA without advice from a tax professional, or at least a more knowledgeable person here. |
Advantages of paying more of your mortgage while you know you won't continue to live there your whole life | The mortgage is a debt and you pay interest on it, typically more than you can earn elsewhere (especially once taxes are taken into account.) By lowering the principal, you lower the total interest you pay. This is true whether you sell the house after 1 year, 10 years, or 100 years. In your case, prepayments made in the next few years would mean that when you sell, your mortgage principal would be lower than it otherwise would have been, and your house equity will be higher. You can therefore either move up to more house for the same monthly payment, or have a lower monthly payment for the same kind of house. Either of those are good things, right? Now is the easiest time to find a little more money, so do it if you can. Later you will have more obligations, and develop a taste for more expensive things (statistically speaking) and therefore find a few hundred a month much harder to come by. |
How Should I Go About Buying a Car? (College Student) | So you want to buy a car but have no money saved up.... That's going to be hard!! I'd suggest you get a part-time job, save up and buy a used car. Even with the minimum wage pay in the U.S., if you are in the U.S., you could save up and buy a car in less than a month. This route would be the quickest way for you to get a car but it would also teach you the responsibility of having one since it appears you have never owned a car before. Now the car will most definitely not be fancy or look like the cars that your peer's parents bought but at least it will get you from point A to point B. I'd look on Craigslist or your local neighborhood for cars that have not moved in a while or have for sale signs. Bring a mechanically inclined friend with you and contact the owner and explain them your situation. There are nice people out there that would give you deep discounts based on the fact that you are a student trying to get by. Now you have to get registration and insurance. There are many insurance companies that give discounts to students as well who have good GPAs and driving records. If you happen to get a car for a good deal, take good car of it. Once you graduate and further your career, you can resell it for a profit. I also would not suggest you get any loans for a car given your situation. |
How risky are penny stocks? | Penny stocks are for the real gambler. Don't even think about holding them long. Buy a lot of shares and profit from a penny uptick. Rake a hundred dollars here and there a few times a week if you can. Don't fall in love with it. Trade for profit. Don't bet the farm. Only play what you can afford to lose at the Great Casino in the sky (the stock market). Sure, you will pick some losers, but you are not married to it, you don't have to keep it. A couple of good winners will erase some loses. Having lost thousands on the Blue Chips, and feeling I have wasted time waiting for an annual $100 gain on an ETF or mutual if I get lucky, has made me more risk tolerant for these "BAD" investments. The "GOOD" investments should do so well. |
Td Ameritrade Roth IRA question | Failing some answers to my comment, I am going to make some assumptions: Based upon a quick review of this article I'd probably be in the Russell 2000 Value Index Fund (IWN). Quite simply it gives you broad market exposure so you can be diversified by purchasing one fund. One of the key success factors is starting, not if you pick the best fund at the onset. I can recall, 20 years ago being amazed (and it was quite a feat) at someone who was able to invest $400 per month. These days that won't get you to the ROTH maximum and smart 20 somethings are doing just that. |
Does SIPC protect securities purchased in foreign exchanges? | I have received a response from SIPC, confirming littleadv's answer: For a brief background, the protections available under the Securities Investor Protection Act ("SIPA"), are only available in the context of a liquidation proceeding of a SIPC member broker-dealer and relate to the "custody" of securities and related cash at the SIPC member broker-dealer. Thus, if a SIPC member broker-dealer were to fail at a time when a customer had securities and/or cash in the custody of the SIPC member broker-dealer, in most instances it would be SIPC's obligation to restore those securities and cash to the customer, within statutory limits. That does not mean, however, that the customer would necessarily receive the original value of his or her purchase. Rather, the customer receives the security itself and/or the value of the customer's account as of the day that the liquidation commenced. SIPC does not protect against the decline in value of any security. In a liquidation proceeding under the SIPA, SIPC may advance up to $500,000 per customer (including a $250,000 limit on cash in the account). Please note that this protection only applies to the extent that you entrust cash or securities to a U.S. SIPC member. Foreign broker dealer subsidiaries are not SIPC members. However, to the extent that any assets, including foreign securities, are being held by the U.S. broker dealer, the assets are protected by SIPC. Stocks listed on the LSE are protected by SIPC to the extent they are held with a SIPC member broker dealer, up to the statutory limit of $500,000 per customer. As I mentioned in the comments, in the case of IB, indeed they have a foreign subsidiary, which is why SIPC does not cover it (rather they are insured by Lloyds of London for such cases). |
New to investing — I have $20,000 cash saved, what should I do with it? | @mbhunter and @JoeTaxpayer have given good advice. Were I in your situation, the only thing I might do differently is put whatever amount of cash not needed for emergencies in a money market fund with check-writing privileges and/or a debit card. The rate on the account has at least some chance of preserving the value of your principal, and it will be easier to put your money into investments as soon as you're ready. This sort of account is offered by any number of brokerages and financial companies, so pick one you trust and start there. |
Calculate time to reach investment goals given starting balance? | Fairly straightforward to match the result from the calculator soup link. There is a formula to calculate n from the future value s (using natural logs) In Excel This was derived as shown To calculate n from the inflation-adjusted future value si requires using a solver since an algebraic formula cannot be formulated. As demonstrated Calculations done using Mathematica 7. |
Uncashed paycheck 13 years old | Even going to small claims court the burden would be on you to prove that they never paid you. The 13 year gap would be the core of the argument by the company that they have no obligation to keep records from 13 years ago. That is far longer than they need to keep them for tax purposes. Even if they sent you a replacement check the next year, that happened to me once, the record of that transaction would have been 12 years ago. The bank will not cash it because of the date being 13 years ago. As we move forward with more and more of the checks being deposited via phone/scanner the banks will be even less likely to handle stale checks because the fact you have the check in your hand doesn't mean it wasn't cashed. |
What is the smartest thing to do in case of a stock market crash | If the market has not crashed but you know it will, sell short or buy puts. If the market has crashed, buy equities while they are cheap. If you don't know if or when it will crash hold a diversified portfolio including stocks, bonds, real estate, and alternatives (gold, etc). |
Why do stocks tend to trade at high volumes at the end of (or start) the trading day? | Trading volumes are higher at the end of the day as many traders close their open positions. In the morning however, traders incorporate various factors like performance of worldwide markets overnight, any corporate or government announcements, global macro events, etc. |
Buying from an aggressive salesperson | As described by the other answers, there are pretty harmless explanations for that behaviour. You could be slightly worried because he gave you exceptionally good deals for both instruments, but that's neither here nor there. Maybe he simply prices all items way up to be able to give a great discount on either sale. You can't ever know; the actual price you pay in the end is what counts. What I would do: If I expect in advance (or if I notice during the negotiation) that I am put under pressure in this way, I usually try to do exactly the same, in reverse. That is, I take a minute to explain up front that I will not, under any circumstance, buy right now, but that this is a purely informational event. I will make sure not to have my money/card with me. Any high-end salesman worth his sale should have no problem with that at all. Money aside, you are shopping for something that will mean a lot to you. The salesman is not some peddler of arbitrary wares. Everybody understands that not only do you not want to pay too high a price, but also that you want to really get the item you want, and want to be happy with it for a long time. This is a tough decision, often, and if the salesman cannot, or does not want to respect that, then it would be a clear signal for me that dubious things are going on. In fact, you would probably be unhappier if you got the wrong item for a great price than if you got a great item for a slightly too-high price. That is something you should probably not tell the salesman ;), but can keep in mind. So getting the greatest deal of all times is probably not so high on your priority list. |
How to calculate stock price (value) based on given values for equity and debt? | Adding assets (equity) and liabilities (debt) never gives you anything useful. The value of a company is its assets (including equity) minus its liabilities (including debt). However this is a purely theoretical calculation. In the real world things are much more complicated, and this isn't going to give you a good idea of much a company's shares are worth in the real world |
Should I be worried that I won't be given a receipt if I pay with cash? | In some states, it is your responsibility to pay the sales tax on a transaction, even if the party your purchase from doesn't collect it. This is common with online purchases across state lines; for example, here in Massachusetts, if I buy something from New Hampshire (where there is no sales tax), I am required to pay MA sales tax on the purchase when I file my income taxes. Buying a service that did not include taxes just shifts the burden of paperwork from the other party to me. Even if you would end up saving money by paying in cash, as other here have pointed out, you are sacrificing a degree of protection if something goes wrong with the transaction. He could take your money and walk away without doing the work, or do a sloppy job, or even damage your vehicle. Without a receipt, it is your word against his that the transaction ever even took place. Should you be worried that he is offering a discount for an under the table transaction? Probably not, as long as you don't take him up on it. |
Why buy insurance? | The definition of insurance is the transfer of risk. Thus, you're paying for transferring of a risk (of an item/property) to the insurer (carrier), so that they bear the financial burden of a loss/accident and not you. You could always self-insure, but a lot of times, insurance is cheaper, since due to the "Law of Large Numbers" the insurer can just charge a premium that is small percentage in comparison to the cost of self-insuring. |
Is dividend included in EPS | No, dividends are not included in earnings. Companies with no earnings sometimes choose to pay dividends. Paying the dividend does not decrease earnings. It does of course decrease cash and shows up on the balance sheet. Many companies choose to keep the dividend at a fixed rate even while the business goes through cycles of increased and decreased earnings. |
Does Reuters provide the 4pm London Spot rate for currencies? | The interpretation is correct. The Reuters may give you the London 4PM rates if you query after the close for the day. The close rate is treated as the rate. http://uk.reuters.com/business/currencies/quote?srcAmt=1&srcCurr=GBP&destAmt=&destCurr=USD The London 4PM rate may be obtained from Bank of England at the link below; http://www.bankofengland.co.uk/mfsd/iadb/index.asp?Travel=NIxSTxTIx&levels=1&XNotes=Y&XNotes2=Y&Nodes=X3790X3791X3873X33940&SectionRequired=I&HideNums=-1&ExtraInfo=false&A3836XBMX3790X3791.x=4&A3836XBMX3790X3791.y=3 Or any other Bank that provides such data |
Why trade futures if you have options | That question makes assumptions that don't hold in general As to why to deal with futures: Well, there's just one contract per maturity date, not a whole chain of contracts (options come at different strike prices). That in turn means that all the liquidity is in that one contract and not scattered across the chain. Then, moreover, it depends what underlying contracts you're talking about. Often, especially when dealing with commodities, there is no option chain on the spot product but only options on the futures contracts. In summary, the question is somewhat bogus. Options and futures evolved historically and independently, and were not meant to be substitutable by one another. So their rights and obligations are just a historical by-product and not their defining feature. I suggest you refine it to a specific asset class. |
Short term investing vs Leaving money alone? | Should I invest the money I don't need immediately and only withdraw it next year when I need it for living expenses or should I simply leave it in my current account? This might come as a bit of a surprise, but your money is already invested. We talk of investment vehicles. An investment vehicle is basically a place where you can put money and have it either earn a return, or be able to get it back later, or both. (The neither case is generally called "spending".) There are also investment classes which are things like cash, stocks, bonds, precious metals, etc.: different things that you can buy within an investment vehicle. You currently have the money in a bank account. Bank accounts currently earn very low interest rates, but they are also very liquid and very secure (in the sense of being certain that you will get the principal back). Now, when you talk about "investing the money", you are probably thinking of moving it from where it is currently sitting earning next to no return, to somewhere it can earn a somewhat higher return. And that's fine, but you should keep in mind that you aren't really investing it in that case, only moving it. The key to deciding about an asset allocation (how much of your money to put into what investment classes) is your investment horizon. The investment horizon is simply for how long you plan on letting the money remain where you put it. For money that you do not expect to touch for more than five years, common advice is to put it in the stock market. This is simply because in the long term, historically, the stock market has outperformed most other investment classes when looking at return versus risk (volatility). However, money that you expect to need sooner than that is often recommended against putting it in the stock market. The reason for this is that the stock market is volatile -- the value of your investment can fluctuate, and there's always the risk that it will be down when you need the money. If you don't need the money within several years, you can ride that out; but if you need the money within the next year, you might not have time to ride out the dip in the stock market! So, for money that you are going to need soon, you should be looking for less volatile investment classes. Bonds are generally less volatile than stocks, with government bonds generally being less volatile than corporate bonds. Bank accounts are even less volatile, coming in at practically zero volatility, but also have much lower expected rates of return. For the money that you need within a year, I would recommend against any volatile investment class. In other words, you might take whichever part you don't need within a year and put in bonds (except for what you don't foresee needing within the next half decade or more, which you can put in stocks), then put the remainder in a simple high-yield deposit-insured savings account. It won't earn much, but you will be basically guaranteed that the money will still be there when you want it in a year. For the money you put into bonds and stocks, find low-cost index mutual funds or exchange-traded funds to do so. You cannot predict the future rate of return of any investment, but you can predict the cost of the investment with a high degree of accuracy. Hence, for any given investment class, strive to minimize cost, as doing so is likely to lead to better return on investment over time. It's extremely rare to find higher-cost alternatives that are actually worth it in the long term. |
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