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Car Loan upside down--refinance before selling? | Having just gone through selling a car, I can tell you that CarMax will most likely not be the best solution. I recently sold my '09 Pontiac Vibe which had a KBB and Edmonds value (private party sale) of around $6k. Trade-in value was around $4,800. I took it to the local CarMax for a quote, and they came back with $3,500. Refinancing is tricky. Banks have a set limit on how old a car they will finance. Many won't even offer financing if the vehicle has over 100k miles. We looked at refinancing our other car, and even getting the APR down over a point we would only have saved $15/mo or so. Banks typically offer much higher interest rates for used non-dealership cars and refinancing than they do for new cars, or even used cars purchased from a dealership. Assuming you have 2-3 years left on your loan, I don't think that refinancing would save you enough to be worth considering. CarMax sells cars in 1 of 2 ways. They are also up front with you about the process. They do not reference KBB or Edmonds or any other valuation tool other than their own internal system. They either take the car, spruce it up a bit, then resell it on their lot, or they sell it at auction. If they determine your car will be sold at auction, then they will offer you a rock bottom price. The determining factors that come into play include age of the car, mileage, and of course overall condition. If you Mini is still in good shape and doesn't have a lot of miles, then they may try to resell it on their lot, for which they could offer you closer to personal-sale price than trade-in. How many 2007's are for sale in your area? How much are they selling for? I did sell them a truck back in 2005 and received $200 more than KBB valued it for, but it was in great shape, only a couple of years old, relatively low mileage, and it was in high demand. God bless the South and their love for trucks! I ended up selling my Pontiac to another local car dealership. They offered me $5,300 (after negotiating, leaving the dealership, then negotiating more over the phone). It took me a day and a half and really very little effort. I have several friends that have gone through the same thing with selling cars, and all have had similar luck going to other dealerships, where prices can be negotiated, rather than CarMax. CarMax has no incentive to "settle" or forgive your loan. If you really want to pay it off, save up what you believe the difference will be, then shop your car around the local dealerships and get prices for your Mini. Remember that dealers have to turn a profit, so be reasonable with your negotiation. If you can find comparable vehicles in your area listed for $X,000 then knock $1,500 off that price and tell the dealerships that's what you want. |
How would I use Google Finance to find financial data about LinkedIn & its stock? | When fundamentals such as P/E make a stock look overpriced, analysts often point to other metrics. The PEG ratio, for example, can be applied to cast growth companies in a better light. Fundamental analysis is highly subjective. For further discussion on the pitfalls of fundamentals, I suggest A Random Walk Down Wall Street by Burton Malkiel. |
Bonds vs equities: crash theory | I would suggest looking into Relative Strength Asset Allocation. This type of investment strategy keeps you invested in the best performing asset classes. As a result of investing in this manner it removes the guesswork and moves naturally (say into cash) when the stock market turns down. There is a good whitepaper on this subject by Mebane Faber titled Relative Strength Strategies for Investing. |
Tax withheld by USA working in UK (Form 1042-S and Form 1099) | The shares are "imputed income" / payment in kind. You worked in the UK, but are you a "US Person"? If not, you should go back to payroll with this query as this income is taxable in the UK. It is important you find out on what basis they were issued. The company will have answers. Where they aquired at a discount to fair market value ? Where they purchased with a salary deduction as part of a scheme ? Where they acquired by conversion of employee stock options ? If you sell the shares, or are paid dividends, then there will be tax withheld. |
What Happens to Bank Stocks If Country Defaults | Most national banks are required by the regulations of their host countries to hold significant reserves in the form of government debt. A default would likely wipe out their capital and your common stock would become worthless. The common stock only has positive value today because of the option value based on the possibility the host country will evade a default. |
Are there any caveats to withdrawing funds from brokerage? | nan |
Should I trade in a car I own to lower my payments on a new lease? | Trade-in values are generally below what you can get in a private sale. To directly answer your question, you should sell the crossover yourself and use the balance to purchase your new vehicle. I would encourage you to use the $9k to finance directly without a lease, especially if you are planning on financing after the lease term. The lease will not save you money over the time you drive the vehicle in this case, and worse, will likely expose you to risk of having to pay additional fees if you break certain terms in the lease (mileage, wear and tear, etc) Best option mathematically is to use the $9k to purchase a vehicle for cash. This provides the lowest total cost of ownership. Even if you are afraid of purchasing a lemon, leasing a vehicle is awfully expensive insurance against that possibility. You would have to rack up some significant repairs to justify the cost of the lease vs cash over the term of operating the vehicle. |
Why do some companies offer 401k retirement plans? | One important thing that hasn't been mentioned here is that the vast majority of companies have eventually eliminated their Company provided Pension Plans and replaced it with a 401K with some degree of matching. There is a cost advantage to doing this as companies no longer have to maintain or work to maintain a 100% vested pension plan. This takes a great burden off them. They also don't have to manage the pension/annuity that the retirement benefit entails. |
Taking Losses To Save On Tax | Tax questions require that you specify a jurisdiction. Assuming that this is the US, you owe Federal income tax (at the special long-term capital gains tax rate) on the net long-term capital gains (total long-term capital gains minus total long-term capital losses) and so, yes, if these two were your only transactions involving long-term holdings, you would pay long-term capital gains tax on $3000-$50 = $2950. Many States in the US don't tax long-term capital gains at special rates the way the Federal Government does, but you still pay taxes on the net long-term capital gains. I suspect that other countries have similar rules. |
How can I stop wasting food? | Make a menu of 15 (or more) things you like to eat. Write a grocery list for what it takes. Divide that list into perishable and non-perishable. Put those items into a calendar and try to stick to it. Depending on the amount of storage space you have, once a week fulfill your perishable list. Use coupons and shop the sales to keep your prices down. On your way home, stop at the grocery store and buy only the perishables you will need that night for cooking. I personally chose recipes that didn't always need fresh stuff (like canned tomatoes being good enough.) You spend more on the nightly stuff, but you make up some savings with the long term shopping. Just count on going to the store for 10 minutes a night a part of your cooking routine. I used to just look at the wall, but with an app like Evernote this would be pretty easy. |
Why are fund managers' average/minimum purchase price from form 13F the same? | The GuruFocus Link is just reporting the high and low price of the quarter. Price Range (Average) – The estimated trade prices. The average price is calculated from the time weighted average during the period. If no price range is shown, the trade prices are estimated trade prices, which are more accurate estimates. AAPL: $420.05 - $549.03 ($467.26) The numbers for the high and low match what I found for AAPL on Yahoo Finance. Keep in mind their definition uses estimate 3 times. |
Put idle savings to use while keeping them liquid | I'd have a look at Capital One's Online account too, they've got 1.35% interest rate with 10% bonus if you have over $15k deposited. It is still low like all interest rates, but at least it is on top (or at least close)! |
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | There is no interest outstanding, per se. There is only principal outstanding. Initially, principal outstanding is simply your initial loan amount. The first two sections discuss the math needed - just some arithmetic. The interest that you owe is typically calculated on a monthly basis. The interested owed formula is simply (p*I)/12, where p is the principal outstanding, I is your annual interest, and you're dividing by 12 to turn annual to monthly. With a monthly payment, take out interest owed. What you have left gets applied into lowering your principal outstanding. If your actual monthly payment is less than the interest owed, then you have negative amortization where your principal outstanding goes up instead of down. Regardless of how the monthly payment comes about (eg prepay, underpay, no payment), you just apply these two calculations above and you're set. The sections below will discuss these cases in differing payments in detail. For a standard 30 year fixed rate loan, the monthly payment is calculated to pay-off the entire loan in 30 years. If you pay exactly this amount every month, your loan will be paid off, including the principal, in 30 years. The breakdown of the initial payment will be almost all interest, as you have noticed. Of course, there is a little bit of principal in that payment or your principal outstanding would not decrease and you would never pay off the loan. If you pay any amount less than the monthly payment, you extend the duration of your loan to longer than 30 years. How much less than the monthly payment will determine how much longer you extend your loan. If it's a little less, you may extend your loan to 40 years. It's possible to extend the loan to any duration you like by paying less. Mathematically, this makes sense, but legally, the loan department will say you're in breach of your contract. Let's pay a little less and see what happens. If you pay exactly the interest owed = (p*I)/12, you would have an infinite duration loan where your principal outstanding would always be the same as your initial principal or the initial amount of your loan. If you pay less than the interest owed, you will actually owe more every month. In other words, your principal outstanding will increase every month!!! This is called negative amortization. Of course, this includes the case where you make zero payment. You will owe more money every month. Of course, for most loans, you cannot pay less than the required monthly payments. If you do, you are in default of the loan terms. If you pay more than the required monthly payment, you shorten the duration of your loan. Your principal outstanding will be less by the amount that you overpaid the required monthly payment by. For example, if your required monthly payment is $200 and you paid $300, $100 will go into reducing your principal outstanding (in addition to the bit in the $200 used to pay down your principal outstanding). Of course, if you hit the lottery and overpay by the entire principal outstanding amount, then you will have paid off the entire loan in one shot! When you get to non-standard contracts, a loan can be structured to have any kind of required monthly payments. They don't have to be fixed. For example, there are Balloon Loans where you have small monthly payments in the beginning and large monthly payments in the last year. Is the math any different? Not really - you still apply the one important formula, interest owed = (p*I)/12, on a monthly basis. Then you break down the amount you paid for the month into the interest owed you just calculated and principal. You apply that principal amount to lowering your principal outstanding for the next month. Supposing that what you have posted is accurate, the most likely scenario is that you have a structured 5 year car loan where your monthly payments are smaller than the required fixed monthly payment for a 5 year loan, so even after 2 years, you owe as much or more than you did in the beginning! That means you have some large balloon payments towards the end of your loan. All of this is just part of the contract and has nothing to do with your prepay. Maybe I'm incorrect in my thinking, but I have a question about prepaying a loan. When you take out a mortgage on a home or a car loan, it is my understanding that for the first years of payment you are paying mostly interest. Correct. So, let's take a mortgage loan that allows prepayment without penalty. If I have a 30 year mortgage and I have paid it for 15 years, by the 16th year almost all the interest on the 30 year loan has been paid to the bank and I'm only paying primarily principle for the remainder of the loan. Incorrect. It seems counter-intuitive, but even in year 16, about 53% of your monthly payment still goes to interest!!! It is hard to see this unless you try to do the calculations yourself in a spreadsheet. If suddenly I come into a large sum of money and decide I want to pay off the mortgage in the 16th year, but the bank has already received all the interest computed for 30 years, shouldn't the bank recompute the interest for 16 years and then recalculate what's actually owed in effect on a 16 year loan not a 30 year loan? It is my understanding that the bank doesn't do this. What they do is just tell you the balance owed under the 30 year agreement and that's your payoff amount. Your last sentence is correct. The payoff amount is simply the principal outstanding plus any interest from (p*I)/12 that you owe. In your example of trying to payoff the rest of your 30 year loan in year 16, you will owe around 68% of your original loan amount. That seems unfair. Shouldn't the loan be recalculated as a 16 year loan, which it actually has become? In fact, you do have the equivalent of a 15 year loan (30-15=15) at about 68% of your initial loan amount. If you refinanced, that's exactly what you would see. In other words, for a 30y loan at 5% for $10,000, you have monthly payments of $53.68, which is exactly the same as a 15y loan at 5% for $6,788.39 (your principal outstanding after 15 years of payments), which would also have monthly payments of $53.68. A few years ago I had a 5 year car loan. I wanted to prepay it after 2 years and I asked this question to the lender. I expected a reduction in the interest attached to the car loan since it didn't go the full 5 years. They basically told me I was crazy and the balance owed was the full amount of the 5 year car loan. I didn't prepay it because of this. That is the wrong reason for not prepaying. I suspect you have misunderstood the terms of the loan - look at the Variable Monthly Payments section above for a discussion. The best thing to do with all loans is to read the terms carefully and do the calculations yourself in a spreadsheet. If you are able to get the cashflows spelled out in the contract, then you have understood the loan. |
What is the formula for determining estimated stock price when I only have an earning per share number? | What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. "Annual earnings are $1. What is the share price?" "Question has no answer" |
How can I find the historical stock price for a specific stock on a specific date? | Go to a large reference library and ask to see the Wall Street Journal for October 13 1992. |
Ways to avoid being labeled a pattern day trader | Sorry but you already provided the answer to your own question. The simple answer is to 'not day trade' but hold things for a longer period and don't trade a large number of different stocks every week. Seriously, have a look at the rules and see what it implies.. an average of 20 buys and sells of longer term positions PER DAY is a pretty fair bit of trading, that's really churning through the positions compared to someone who might establish positions with say 25 well picked stocks and might change even 5 of those a week to a different stock. Or even a larger number of stocks but seeking to hold them for over a year so you get taxed at the long term cap gains rate. If you want to day trade, be prepared to be labeled as such and deal with your broker on that basis. Not like they will hate you given all the fees you are likely to rack up. And the government will love you also, since you'll be paying short term gains taxes. (and trust me, us bogelheads appreciate the liquidity the speculative and short term folks bring to the market.) In terms of how it would impact you, Expect to be required to have a fairly substantial balance ($25K) if you are maintaining a margin account. I'd suggest reading this thread My account's been labeled as "day trader" and I got a big margin call. What should I do? What trades can I place in the blocked period? |
Making an offer on a property - go in at market price? | From then on we've felt he was really pushy and rushing us to make a decision (we need to lock in a good rate, its a sellers market, it'll go fast, snooze loose, etc). This is the first reason for walking away. I understand that all those factors might be true but my question is: How do I know we made a good offer? I'm going to be blunt, here: You don't. You work out ahead of time what you will pay (ignore the agent) and you make the offer on the basis of your own research, research you spent months undertaking. The listed price on the location is $375,000 and according to our agent similar units over the last few years had sold for that amount. So our agent suggested making an offer at market price. According to the agent. I'm going to be blunt here, what do any of the real estate sites out there - that offer a wealth of information for free - indicate? If you don't know, then yet again you don't know if you made the right offer or not. Do some research now by yourself. I would be shocked if your offer was at the right level. Set your emotions aside - there are a gazillion houses out there. |
I just made $50K from selling my house. How should I invest the proceeds? | First pay off all existing debt. Then set up at least 6 month emergency fund. Freelancing exposes you to way more risks than employment. Then buy GIC's to cover and match the maturity of your expected education fees. Only 'play' with what is left. Don't over think it. Buy a low-cost (less than 0.5%) passive large-index mutual fund covering either the S&P or TSX. |
mortgage vs car loan vs invest extra cash? | Since you've already maxed out your 401k and your IRA, if you wanted to invest more-- then it would either be in a brokerage account or a 529 (if you have kids/ intend on going back to school). As to investing versus paying off your loans -- the interest on them are small enough that it will depend on your preference. If you need the cash flow for investment purposes (ie if you are going to buy an investment property) then I would pay off the car loan first -- otherwise I would invest the money. Since you've already expressed that you wouldn't be too interested in paying the mortgage off early, I've left that off the table (I would prioritize car loan over mortgage for the cash flow reason) If you do open a brokerage account -- make sure you are minimizing your taxes by putting the 'right' type of assets in a tax advantaged account. |
Organizing Expenses/Income/Personal Finance Documents (Paperless Office) | If you're curious, here are my goals behind this silly madness You said it... The last two words, I mean...:-) If you're auditing your statements - why do you need to keep the info after the audit? You got the statement for last month, you verified that the Starbucks charge that appears there is the same as in your receipts - why keeping them further? Done, no $10 dripping, throw them away. Why do you need to keep your refrigerator owner's manual? What for? You don't know how to operate a refrigerator? You don't know who the manufacturer is to look it up online in case you do need later? Read it once, mark the maintenance details in your calendar (like: TODO: Change the water filter in 3 months), that's it. Done. Throw it away (to the paper recycle bin). You need the receipt as a proof of purchase for warranty? Make a "warranty" folder and put all of them there, why in expenses? You don't buy a refrigerator every months. That's it, this way you've eliminated the need to keep monthly expenses folders. Either throw stuff away after the audit or keep it filed where you really need it. You only need a folder for two months at most (last and current), not for 12 months in each of the previous 4 years. |
How can I transfer and consolidate my 401k's and other options? | The simplest way to consolidate the funds your old 401(k) plans is by doing what's called a Direct Rollover (whereby the funds go directly into the new plan and skips you completely) from each of the old plans into either an IRA that you establish with a provider of your choice or even into your current employer's 401(k) plan if that is available. That way, the funds are in one central account and available to invest. Plus it eliminates the mandatory 20% withholding if the rollover is indirect and is sent to you first before the deposit into the new plan. It is important to bear in mind that you have 60 calendar days from the date of distribution to get the full amount into the new plan and a rollover is considered a tax reportable, but not necessarily a taxable event provided you deposit the funds within the time frame allotted. |
What are some good, easy to use personal finance software? [UK] | Update: I am now using another app called toshl and I am very satisfied with it. In fact, I am a paying customer. It is web based, but it has clients for iPhone, Android and Windows Phone as well. Another one, I tried is YNAB. Did you consider trying an online app? I am using Wesabe and I am happy with it. I found it much better these web-based ones because I can access my data from anywhere. |
How much is inflation? | There is a thing called the consumer price index (CPI) There is a basket of goods that the people who keep the index basically shop for. It is much more detailed for the sake of accuracy, but bottom line is they shop for the same stuff each year. They measure the difference from year to year and that gives you a pretty good idea of inflation from a regular person point of view. http://www.inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx But it isn't without its faults, people bicker about the methodology and what constitutes the index. http://www.investopedia.com/articles/07/consumerpriceindex.asp?viewed=1 |
What should I reserve “emergency savings” for? | Emergency funds are good to keep yourself out of debt, for whatever reason. Job loss is a big place where an emergency fund can help you out. It buys you time to find another job before hauling out the credit cards for your groceries, falling behind on your mortgage and car payments, etc. But it can just as easily be used for major car repairs, serious medical issues, home repairs, etc. ... anything that needs to be done quickly, and isn't a discretionary item. The bigger your cash reserves, the better, especially now that the economy is bad. |
what is the meaning of allowing FDI in Insurance and pension funds | Insurance in India is offered by Private companies as well [ICICI, Maxbupa, SBI, Max and tons of other companies]. These are priavte companies, as Insurance sectors one has to look for long term stability, not everyone can just open an Insurance company, there are certain capital requirements. Initially the shareholding pattern was that Indian company should have a majority shareholding, any foreign company can have only 26% share's. This limit has now been extended to 49%, so while the control of the private insurance company will still be with Indian's the foreign companies can invest upto 49%. It's a economic policy decission and the outcome whether positive or negative will be known after 10 years of implemenation :) Pro's: - Brings more funds into the Insurance segment, there by bringing strength to the company - Better global practise on risk & data modelling may reduce premium for most - Innovation in product offering - More Foreign Exchange for country that is badly needed. Con's: - The Global companies may hike premium to make more profits. - They may come up with complex products that common man will not understand and will lead to loss - They may take back money anytime as they are here for profit and not for cause. Pension today is offered only by Government Companies. There is a move to allow private companies to offer pension. Today life insurance companies can launch Pension schemes, however on maturity the annuity amount needs to be invested into LIC to get an annuity [monthly pension]. |
Why does selling and then rebuying stock not lead to free money? | There are several reasons. First, if you sell your stock "at any price", you may be selling it for less than you originally bought it for. Thus you will take a loss right at the beginning of your scheme. If you "rinse and repeat", the problem only gets worse. Every time you sell your stock, you will have to sell it at an even lower price in order to lower the price even more. Then you buy it back and. . . just resell it an even lower price? It should be clear that you are not making any money this way. Second, even if you don't sell it at an absolute loss, you must sell it at a relative loss in order to lower the price. In other words, if someone will currently buy your shares for $X, and you want to lower the price, you must sell them for less than $X. But you could have made more money by selling them for $X, since someone was already willing to buy them at that price. In order to bring the price down significantly, you have to sell the stock for less than people currently believe it is worth, which means you're incurring a loss relative to just selling it at the market rate. Of course, you can still make money if it goes back up again, but selling it at an extra loss this way just makes it harder to break even. Third, if you sell the stock at $X, whoever you sold it to is not going to sell it right back to you at $X, because then they would not make any money. You could in theory buy it from someone else, but the same principle holds: if the stock price has just gone down, people who have it may be waiting for it to go back up. This is doubly true if anyone suspects you have been trying to manipulate the stock price, because they will then suspect that the price drop is artificial and it will soon go back up. Fourth, even if someone did sell it right back to you at the price you sold it for, then what? You now hold the stock at a lower price, but you don't gain unless it goes back up. If it wasn't going up before until you took action, there is no reason to suppose it will go back up now. In fact, if you had enough shares to significantly influence the price, other people may have been fooled into thinking the value is actually lower now. The basic problem is that, in order for you to buy it at a low price, someone else has to sell it at that low price. It is easy to sell someone a stock for less than it's worth, but it will be hard to get people to sell it back to you for less than it's worth. If you engage in deceptive practices to get people to do this, you may be guilty of securities fraud. |
Are there index tracking funds that avoid the “buy high - sell low” problem? | In a cap-weighted fund, the fund itself isn't buying or selling at all (except to support redemptions or purchases of the fund). As the value of a stock in the index goes up, then its value in the fund goes up naturally. This is the advantage of a cap-weighted fund, that it doesn't have to trade (buy and sell), it just sits on the stocks. That makes a cap-weighted fund inexpensive (low trading costs) and tax-efficient (doesn't trigger capital gains due to sales). The buying high and selling low referred to by "fundamental indexation" advocates like Wisdom Tree is buying high and selling low on the part of the investor. That is, when you purchase the market-cap-weighted fund, at that time that you purchase, you will spend more on the higher-priced stocks, just because they account for more of the value of the fund, and less money goes to the cheaper stocks which account for less of the value of the fund. In the prospectus for a fund they should tell you which index they use, and if the prospectus doesn't describe the weighting of the index, you could do a web search for the index name and find out how that index is constructed. A market-cap-weighted fund is the standard kind of weighting which is what you get if you buy the stocks in the index and then hold them without buying or selling. Most of the famous indexes (e.g. S&P500) are cap-weighted, with the notable exception of the Dow Jones Industrial Average which is "price-weighted" http://en.wikipedia.org/wiki/Price-weighted_index. Price-weighting is just an archaic tradition, not something one would use for a new index design today. A fund weighted by "fundamentals" or equal-weighted, rather than cap-weighted, is effectively doing a kind of rebalancing, selling what's gone up to buy more of what's gone down. Rather than buying an exotic fund, you could get a similar effect by buying a balanced fund (one that mixes stocks and bonds). Then when stocks go up, your fund would sell them and buy bonds, and the fund would sell the most of the highest-market-cap stocks that make up more of the index. And vice versa of course. But the fundamental-weighted funds are fine, the more important considerations include your stocks vs. bonds percentages (asset allocation) and whether you make irrational trades instead of sticking to a plan. |
Is gold really an investment or just a hedge against inflation? | Over time, gold has mainly a hedge against inflation, based on its scarcity value. That is, unless finds some "killer app" for it that would also make it a good investment. The "usual" ones, metallurgical, electronic, medicine, dental, don't really do the trick. It should be noted that gold performs its inflation hedge function over a long period of time, say $50-$100 years. Over shorter periods of time, it will spike for other reasons. The latest classic example was in 1979-80, and the main reason, in my opinion, was the Iranian hostage crisis (inflation was secondary.) This was a POLITICAL risk situation, but one that was not unwarranted. An attack on 52 U.S. hostages (diplomats, no less), was potenially an attack on the U.S. dollar. But gold got so pricey that it lost its "inflation hedge" function for some two decades (until about 2000). Inflation has not been a notable factor in 2011. But Mideastern political risk has been. Witness Egypt, Libya, and potentially Syria and other countries. Put another way, gold is less of an investment that a "hedge." And not just against inflation. |
Recourse with Credit Card company after victimized by fraud? | Concealing parts of a document in order to obtain a signature is illegal. The company committed signature forgery because they effectively modified the document after you signed it (i.e. unfolded the parts that were previously folded). I suggest that you go to your local police department to file a report, citing "signature forgery". Once you have the police report, call your bank's fraud department (not the general billing dispute line) and cite the police report right away, specifically calling out "signature forgery". I would be surprised if you don't get a favorable outcome. |
Loan for car buy “cash” (third party) or bank loan | The car dealership doesn't care where you get the cash; they care about it becoming their money immediately and with no risk or complications. Any loan or other arrangements you make to raise the cash is Your Problem, not theirs, unless you arrange the loan through them. |
When's the best time to sell the stock of a company that is being acquired/sold? | This is but one opinion. Seek others before your act. "When someone puts a million dollars in your hand, close your hand." A 50% gain in two weeks is huge. |
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan? | When you pay off a loan early, you pay the remaining principal, and you save all of the remaining interest. So you do save on interest, but it's the interest you would have paid in the future, not the interest you have paid in the past. (Your remaining balance when you pay off the loan only includes the principal, not the projected interest.) Interest is a factor of the amount borrowed, the interest rate and the amount of time you borrow the money. The sooner you repay the money, the less interest you pay. Imagine if you had taken a 30 year loan at 4% interest but were allowed to make no payments until the loan term ended. If you waited 15 years to make your first payment, you wouldn't owe the same money as if you'd made payments every month. No, instead of owing ~$64k, you'd owe ~$182k, because you had borrowed $100k for 15 years (plus the interest due) rather than borrowing a declining sum. So that's why you don't get a refund on interest for previous months. If you had started with a 16 year loan, then you would have been paying more principal every month, and your monthly amount due would have been higher to reflect that. As you paid the principal off faster, the interest each month would drop faster. Paying a huge portion of the principal at the end of the loan is not the same as steadily paying it down in the same time frame. You will pay a lot more interest in the former case, and rightfully so. It might help to consider a credit card payment in comparison. If you run up a balance and pay only the minimum each month, you pay a lot of interest over time, because your principal goes down slowly. If you suddenly pay off your credit card, you don't have to pay any more interest, but you also don't get any interest back for previous months. That's because the interest accrued each month is based on your current balance, just like your mortgage. The minimum payments are calculated differently, but the interest accrued each month uses essentially the same mechanism. |
Should I set a stop loss for long term investments? | The only time I've bothered with stop orders is when I think the position is in a particularly volatile state and there is an earnings report pending. In this situation it's an easily debatable thing to do. If I'm so concerned that the earnings report will be enough to cause a wild downswing that I'd place a stop order, maybe I should just drop the position now. I subscribe to the school of thought that you don't sell your MVPs. I've bought a few things on a whim that really performed well over the few years to follow. To me it doesn't make sense to pick a return at which I would turn off the spigot. So generally it doesn't make sense to hold orders that would force a sale, either after some upside or downside occurs. Additionally, if I've chosen something as a long term hold. I never spend all my cash opening up a position. I've frequently opened positions that subsequently experienced a decline, when that happens I buy more. Meaningless side thought: With the election coming I've been seriously considering pulling some of my gains off the table. My big apprehension with doing that is that I have no near-term alternative use for the money. So what's the point of selling a position I'm otherwise comfortable with just to pay taxes on the gain then probably buy back in? |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | The billion dollar jackpot is a sunk cost, a loss for prior bettors. If you had $250M and could buy every ticket combination, you'd be betting that not more than 4 other tickets will win on the next drawing. Even if 5 won, you'd have all the second place, third place, etc tickets, and would probably break even at worst. Forget this extreme case. If I gave you a game where you had a chance to bet $100,000 for a 1 in 9 chance to win a million dollars, would you do it? Clearly, the odds are in your favor, right? But, for this kind of money, you'd probably pass. There's a point where the market itself seems to reflect a set of probable outcomes and can be reduced to gambling. I've written about using options to do this very thing, yet, even in my writing, I call it gambling. I'm careful not to confuse the two (investing and gambling, that is.) |
Does a larger down payment make an offer stronger? | There is a lot of your financial information that the selling agent handles in the course of a real estate transaction, including but not limited to your pre-approval letter which states what maximum purchase price might be. Closing costs and interest rate are not details they would know unless you shared that with them, given that that is done after you go binding. I agree with xiaomy in that, while in absolute monetary terms the higher amount should always be more attractive, the selling agent wants to ensure the transaction goes as smoothly as possible. With contracts falling through due to first-time buyers not making it through mortgage underwriting, it is in the seller's interest - and thus the seller's agent's concern - that the buyer not present such hurdles. Insofar as a higher down payment is a signal for that, then I can understand why it would be more attractive. |
How to evaluate stocks? e.g. Whether some stock is cheap or expensive? | If you are looking for numerical metrics I think the following are popular: Price/Earnings (P/E) - You mentioned this very popular one in your question. There are different P/E ratios - forward (essentially an estimate of future earnings by management), trailing, etc.. I think of the P/E as a quick way to grade a company's income statement (i.e: How much does the stock cost verusus the amount of earnings being generated on a per share basis?). Some caution must be taken when looking at the P/E ratio. Earnings can be "massaged" by the company. Revenue can be moved between quarters, assets can be depreciated at different rates, residual value of assets can be adjusted, etc.. Knowing this, the P/E ratio alone doesn't help me determine whether or not a stock is cheap. In general, I think an affordable stock is one whose P/E is under 15. Price/Book - I look at the Price/Book as a quick way to grade a company's balance sheet. The book value of a company is the amount of cash that would be left if everything the company owned was sold and all debts paid (i.e. the company's net worth). The cash is then divided amoung the outstanding shares and the Price/Book can be computed. If a company had a price/book under 1.0 then theoretically you could purchase the stock, the company could be liquidated, and you would end up with more money then what you paid for the stock. This ratio attempts to answer: "How much does the stock cost based on the net worth of the company?" Again, this ratio can be "massaged" by the company. Asset values have to be estimated based on current market values (think about trying to determine how much a company's building is worth) unless, of course, mark-to-market is suspended. This involves some estimating. Again, I don't use this value alone in determing whether or not a stock is cheap. I consider a price/book value under 10 a good number. Cash - I look at growth in the cash balance of a company as a way to grade a company's cash flow statement. Is the cash account growing or not? As they say, "Cash is King". This is one measurement that can not be "massaged" which is why I like it. The P/E and Price/Book can be "tuned" but in the end the company cannot hide a shrinking cash balance. Return Ratios - Return on Equity is a measure of the amount of earnings being generated for a given amount of equity (ROE = earnings/(assets - liabilities)). This attempts to measure how effective the company is at generating earnings with a given amount of equity. There is also Return on Assets which measures earnings returns based on the company's assets. I tend to think an ROE over 15% is a good number. These measurements rely on a company accurately reporting its financial condition. Remember, in the US companies are allowed to falsify accounting reports if approved by the government so be careful. There are others who simply don't follow the rules and report whatever numbers they like without penalty. There are many others. These are just a few of the more popular ones. There are many other considerations to take into account as other posters have pointed out. |
Ongoing things to do and read to improve knowledge of finance? | For learning about finances my main two financial resources are this site, and the Motley Fool. My secondary sources are keeping up with columns by my favourite economic journalists - in the press in the US, Australia, England, and India. Regarding your comment about feeling green on the basics despite the reading - you're not alone. I've been interested in financials for better than 10 years, but there are a lot of questions on this site where I say to myself, "I've no idea of what the answer could be, what are our resident experts saying?" Having said that, there are some topics where I feel as though I can weigh in - and they tend to be where I have a little book knowledge and a lot of personal experience. |
Why invest for the long-term rather than buy and sell for quick, big gains? | If they return to their earlier prices Assuming I don't make too many poor choices That's your problem right there: you have no guarantee that stocks, will in fact return to their earlier prices rather than go down some more after the time you buy them. Your strategy only looks good and easy in hindsight when you know the exact point in time when stocks stopped going down and started going up. But to implement it, you need to predict that time, and that's impossible. I would adopt a guideline of "sell when you've made X%, even if it looks like it might go higher." Congratulations, you've come up with the concept of technical analysis. Now go and read the hundreds of books that have been written about it, then think about why the people who wrote them waste time doing so rather than getting rich by using that knowledge. |
Is a “total stock market” index fund diverse enough alone? | Brendan, The short answer is no, there is no need to get into any other funds. For all intents and purposes the S&P 500 is "The Stock Market". The news media may quote the Dow when the market reaches new highs or crashes but all of the Dow 30 stocks are included in the S&P 500. The S&P is also marketcap weighted, which means that it owns in higher proportion the big "Blue Chip" stocks more than the smaller less known companies. To explain, the top 10 holdings in the S&P represent 18% of the total index, while the bottom 10 only represent 0.17% (less than 1 percent). They do have an equal weighted S&P in which all 500 companies represent only 1/500th of the index and that is technically even more diversified but in actuality it makes it more volatile because it has a higher concentration of those smaller less known companies. So it will tend to perform better during up markets and worse during down markets. As far as diversification into different asset classes or other countries, that's non-sense. The S&P 500 has companies in it that give you that exposure. For example, it includes companies that directly benefit from rising oil prices, rising gold prices, etc known as the Energy and Materials sector. It also includes companies that own malls, apartment complexes, etc. known as the Real Estate sector. And as far as other countries, most of the companies in the S&P are multi-national companies, meaning that they do business over seas in many parts of the world. Apple and FaceBook for example sell their products in many different countries. So you don't need to invest any of your money into an Emerging Market fund or an Asia Fund because most of our companies are already doing business in those parts of the world. Likewise, you don't need to specifically invest into a real estate or gold fund. As far as bonds go, if you're in your twenties you have no need for them either. Why, because the S&P 500 also pays you dividends and these dividends grow over time. So for example, if Microsoft increases its dividend payment by 100% over a ten year period , all of the shares you buy today at a 2.5% yield will, in 10 years, have a higher 5% yield. A bond on the other hand will never increase its yield over time. If it pays out 4%, that's all it will ever pay. You want to invest because you want to grow your money and if you want to invest passively the fastest way to do that is through index ETFs like the $SPY, $IVV, and $RSP. Also look into the $XIV, it's an inverse VIX ETF, it moves 5x faster than the S&P in the same direction. If you want to actively trade your money, you can grow it even faster by getting into things like options, highly volatile penny stocks, shorting stocks, and futures. Don't get involved in FX or currency trading, unless it through futures. |
Why do stock prices of retailers not surge during the holidays? | While there are lots of really plausible explanations for why the market moves a certain way on a certain day, no one really knows for sure. In order to do that, you would need to understand the 'minds' of all the market players. These days many of these players are secret proprietary algorithms. I'm not quibbling with the specifics of these explanations (I have no better) just pointing out that these are just really hypotheses and if the market starts following different patterns, they will be tossed into the dust bin of 'old thinking'. I think the best thing you can explain to your son is that the stock market is basically a gigantic highly complex poker game. The daily gyrations of the market are about individuals trying to predict where the herd is going to go next and then after that and then after that etc. If you want to help him understand the market, I suggest two things. The first is to find or create a simple market game and play it with him. The other would be to teach him about how bonds are priced and why prices move the way they do. I know this might sound weird and most people think bonds are esoteric but there are bonds have a much simpler pricing model based on fundamental financial logic. It's much easier then to get your head around the moves of the bond markets because the part of the price based on beliefs is much more limited (i.e. will the company be able pay & where are rates going.) Once you have that understanding, you can start thinking about the different ways stocks can be valued (there are many) and what the market movements mean about how people are valuing different companies. With regard to this specific situation, here's a different take on it from the 'priced in' explanation which isn't really different but might make more sense to your son: Pretend for a second that at some point these stocks did move seasonally. In the late fall and winter when sales went up, the stock price increased in kind. So some smart people see this happening every year and realize that if they bought these stocks in the summer, they would get them cheap and then sell them off when they go up. More and more people are doing this and making easy money. So many people are doing it that the stock starts to rise in the Summer now. People now see that if they want to get in before everyone else, they need to buy earlier in the Spring. Now the prices start rising in the Spring. People start buying in the beginning of the year... You can see where this is going, right? Essentially, a strategy to take advantage of well known seasonal patterns is unstable. You can't profit off of the seasonal changes unless everyone else in the market is too stupid to see that you are simply anticipating their moves and react accordingly. |
What is the opposite of Economic Bubble? | A financial panic is in my mind would be the opposite of a bubble. A bubble is irrational exuberance -- uncontrolled exhilaration. People will ignore anything negative and exclusively focus on the positive. People are focused on investments that offer huge returns in a short timeframe. If you recall 1999, there were books published about the Dow being at 30,000 by 2010. A panic is the direct opposite -- people are irrationally fearful. Any negative news is focused on exclusively, and positive things ignored. People are focused on preserving wealth and by pursing "safety". Today, you turn on the radio and people are advertising canned food and gold coins. |
What is the correct answer for percent change when the start amount is zero dollars $0? | As has been said before, going from nothing to something is an infinite percent increase! It is not 100%. Maybe you had a dollar and now have $101 that is a 10000% increase! Quite remarkable. I often work with symmetrized percent changes like: spc = 100 * (y2-y1)/(0.5 * (y1+y2)) Where I compute the percent with respect to the average. First this is more stable as often measurements can have noise, the average is more reliable. Second advantage is also that this is symmetric. So going from 95 to 105 is a 10 % increase while going from 105 to 95 a 10% decrease. Of course you need to explain what you show. |
Should I set a stop loss for long term investments? | Patience is the key to success. If you hold strong without falling to temptations like seeing a small surge in the price. If it goes down it comes up after a period of time. Just invest on the share when it reaches low bottom and you could see you money multiplying year after year |
Book or web site resources for an absolute beginner to learn about stocks and investing? | There is only one book worth reading in my opinion: One Up on Wall Street. It's short and no other book even comes close to it for honesty, correctness and good sense. Also, it is written by the second most successful investor of all time, Peter Lynch. The Intelligent Investor has some good technical content, but the book is dated and a lot of it is irrelevant to the modern investment environment. When I was younger I used to ready books like this and when a friend of mine asked for investment advice. I said "Look at stocks with a PE ratio of 5-10". A few days later he comes back to me and says "There are none". Right. That pretty much sums up the problem with the I.I. Graham himself in interviews during the 1970s said that his book was obsolete and he no longer recommended those methods. |
Making money through CFD | What is being described in Longson's answer, though helpful, is perhaps more similar to a financial spread bet. Exactly like a bookmaker, the provider of a spread bet takes the other side of the bet, and is counter party to your "trade". A CFD is also a bet between two parties. Now, if the CFD provider uses a market maker model, then this is exactly the same as with a spread bet and the provider is the counter party. However, if the provider uses a direct market access model then the counter party to your contract is another CFD trader, and the provider is just acting as an intermediary to bring you together (basically doing the job of both a brokerage and an exchange). A CFD entered into through a direct market access provider is in many ways similar to a Futures contract. Critically though, the contract is traded 'over-the-counter' and not on any centralized and regulated exchange. This is the reason that CFDs are not permitted in the US - the providers are not authorized as exchanges. Whichever model your CFD provider uses, it is best to think of the contract as a 'bet' on the future price movements of the underlying stock or commodity, in much the same way as with any other derivative instrument such as futures, forwards, swaps, or options. Finally, note that because you don't actually own the underlying stock (just as Longson has highlighted) you won't be entitled to any of the additional benefits that can come with ownership of a stock, such as dividend payments or the right to attend shareholder meetings. RESPONSE TO QUESTION So if I understand correctly, the money gained through a direct market access model comes from other investors in the same CFD who happened to have invested in the "wrong" direction the asset was presumed to take. What happens then, if no one is betting in the opposite direction of my investment. Your understanding is correct. If literally nobody is betting in the opposite direction to you, then you will not be able to trade. This is true for any derivative market; if suddenly every single buyer were to remove their bids from the S&P futures, then no seller would be able to sell. This is a very extreme scenario, as the S&P futures market is incredibly liquid (loads of buyers and sellers at all times). However, if something like this does happen (the flash crash of 2010, for example), then the centralized futures exchanges such as the CME have safeguards in place - the market become locked-limit so that it can only fall so far, there may be no buyers below the lock limit price, but the market cannot fall through it. CFD providers are not obliged to provide such safeguards, which is why regulators in the US don't permit them to operate. It may be the case that if you're trying to buy a CFD for a thinly traded and ill-liquid stock there will be no seller available. One possibility is that the provider will offer a 'hybrid' model, and in the absence of an independent counter party they will take the opposite side of your bet, and then offset their risk by taking an opposing position in the underlying stock. |
Is it better for a public company to increase its dividends, or institute a share buyback? | In some sense, the share repurchasing program is better if the company does not foresee the same profit levels down the road. Paying a dividend for several years and then suddenly not paying or reducing a dividend is viewed as a "slap in the face" by investors. Executing a share repurchase program one year and then not the next is not viewed as negatively. From an investor's standpoint, I would say a dividend is preferred over a share repurchase program for a similar reason. Typically companies that pay a dividend have been doing so for quite some time and even increasing it over time as the company increases profits. So, it can be assumed that if a company starts paying a dividend, it will do so for the long-run. |
How much is inflation? | FYI...prices don't always go up. Inflation is a monetary phenomenon. I'm simplifying greatly here: if more money is printed (or the money supply increases through fractional reserve banking) and it is chasing the same amount of goods then prices will go up. Conversely, if money is held constant and the economy becomes more productive, producing more goods, then a constant amount of money is chasing an increasing amount of goods and prices go down. After the Civil War the greenback went back to being on a gold standard in 1879. After 1879 greenbacks could be redeemed for gold. Gold restricts money growth since it is difficult to obtain. Here are the price and wage indexes from 1869 - 1889 (from here): Notice from 1879 to 1889 that wholesale and consumer prices fall but wages start to increase. Imagine your salary staying the same (or even increasing) but the prices of items falling. Still don't think inflation is a monetary phenomenon? Here is a CPI chart from 1800 to 2007: Notice how the curve starts to go drastically up around 1970. What happen then? The US dollar went off the gold-exchange standard and the US dollar became a purely fiat currency backed by nothing but government decree which allows the Federal Reserve to print money ad nauseum. |
How should I report earning from Apple App Store (from iTunes Connect) in Washington state? | If you're waiting for Apple to send you a 1099 for the 2008 tax season, well, you shouldn't be. App Store payments are not reported to the IRS and you will not be receiving a 1099 in the mail from anyone. App Store payments are treated as sales commissions rather than royalties, according to the iTunes Royalty department of Apple. You are responsible for reporting your earnings and filing your own payments for any sums you have earned from App Store. – https://arstechnica.com/apple/2009/01/app-store-lessons-taxes-and-app-store-earnings The closest thing to sales commissions in WA state seems to be Service and Other Activities described at http://dor.wa.gov/content/FileAndPayTaxes/BeforeIFile/Def_TxClassBandO.aspx#0004. When you dig a little deeper into the tax code, WAC 458-20-224 (Service and other business activities) includes: (4) Persons engaged in any business activity, other than or in addition to those for which a specific rate is provided in chapter 82.04 RCW, are taxable under the service and other business activities classification upon gross income from such business. - http://apps.leg.wa.gov/wac/default.aspx?cite=458-20-224 I am not a lawyer or accountant, so caveat emptor. |
Can PayPal transfer money automatically from my bank account if I link it in PayPal? | As the other answers stated: Yes PayPal will transfer money from your bankaccount automatically if your PayPal balance isn't sufficient. Let's add some proof to the story: (Note, I am in the EU, specifically the Netherlands, situation might be different in other parts of the world) If I login to PayPal and go to my wallet, I have a section that looks like this: If I click on it, I am presented with a screen with details about the connection. Note the "Direct debit instruction". If I click on the "view" link I am presented with the following text (emphasis mine): [snip some arbitrary personal details] This authorisation allows (A) PayPal to send instructions to your bank account and (B) your bank to debit your account in accordance with the instructions from PayPal. As part of your rights, you are entitled to a refund from your bank under the Terms and Conditions of your agreement with your bank. A refund must be claimed within 8 weeks starting from the date on which your account was debited. Your rights are explained in a statement that you can obtain from your bank. Below this text is a button to delete the authorization. |
If NYSE has market makers, what is the role of NYSE ARCA which is an ECN | Electronic trading is many orders of magnitude cheaper and more liquid than floor trading and is rapidly displacing it. Stil, electronic trading accounts for 79% of stock trading volume in the U.S. Polcari is losing the battle. Floor trading is still offered, but it's only used for bulk orders, so electronic trading is servicing small trades at minimum prices while floor trading is now the concierge service. |
Shifting income to 401k | This will be difficult to achieve. It can be done, but it's very rare to have an agreement where your employer is willing to max out your contribution limit unless you are a partner in the business or a family relation. In this situation the extra employer money would probably come from a profit sharing contribution. If your employer increases your match, others are correct that your employer would have to increase the match for everyone. Not so with a profit sharing contribution. This is assuming 2 things though: Both of those are BIG if's, and I'd say 99% of the time it's not gonna happen for either of those two reasons. Your chances are better if you don't own >5% of the company, don't make over $120,000/year, and are related to you employer. Good luck! |
What are your experiences with 'self directed' 401ks? | My employer matches 1 to 1 up to 6% of pay. They also toss in 3, 4 or 5 percent of your annual salary depending on your age and years of service. The self-directed brokerage account option costs $20 per quarter. That account only allows buying and selling of stock, no short sales and no options. The commissions are $12.99 per trade, plus $0.01 per share over 1000 shares. I feel that's a little high for what I'm getting. I'm considering 401k loans to invest more profitably outside of the 401k, specifically using options. Contrary to what others have said, I feel that limited options trading (the sale cash secured puts and spreads) can be much safer than buying and selling of stock. I have inquired about options trading in this account, since the trustee's system shows options right on the menus, but they are all disabled. I was told that the employer decided against enabling options trading due to the perceived risks. |
what does “private equity structures” mean? | Private equity firms have a unique structure: The general partners (GP's) of the firm create funds and manage the investments of those funds. Limited partners (LP's) contribute the capital to the funds, pay fees to the GP's, and then make money when the funds' assets grow. I believe the article is saying that ultra high net worth individuals participate in the real estate market by hiring someone to act as a general partner and manage the real estate assets. They and their friends contribute the cash and get shares in the resulting fund. Usually this GP/LP structure is used when the funds purchase or invest in private companies, which is why it is referred to as "private equity structure," but the same structure can be used to purchase and manage pools of real estate or any other investment asset. |
Who sets the prices on government bonds? | Who sets the prices? Effectively the market does, like basically all openly traded things. The Greek government could well have said "5% is as high as we will go". As a result, investors may not have chosen to buy the securities. The global bond market is highly liquid, and investors who have a choice could well then choose to go elsewhere. The reasons could well be varied, but primary among them would be that investors view Greek investments as more than 5% risky. If I can get 5% from a country that I deem less risky than from Greece, my choice is clear. Therefore to be compensated for loaning them my money, I am expecting a return of 7% because there is the possibility that they will default. As for not selling them at all, if they could avoid issuing bonds, most governments would. They may not have had much of a choice. If they just print more money, that does other potentially bad things to the economy. The government needs funds to operate, if they are not collecting enough in taxes, for example, and do not want to print money as I mentioned, then bonds are one other common way to raise cash. Notwithstanding that in your example you are referring to the interest rate, not the price, the principal is the same. |
Foreign national currently working in U.S. & investing in 401(k) plan: How will taxes apply? | The 401(k) contribution is Federal tax free, when you make the contribution, and most likely State too. I believe that is true for California, specifically. There was a court case some years ago about people making 401(k) or IRA contributions in New York, avoiding the New York state income tax. Then they moved to Florida (no income tax), and took the money out. New York sued, saying they had to pay the New York income tax that had been deferred, but the court said no. So you should be able to avoid California state income tax, and then later if you were to move to, for example, Texas (no income tax), have no state income tax liability. At the Federal level, you will have different problems. You won't have the money; it will be held by the 401(k) trustee. When you try to access the money (cash the account out), you will have to pay the deferred taxes. Effectively, when you remove the money it becomes income in the year it is removed. You can take the money out at any time, but if you are less than 59 1/2 at the time that you take it, there is a 10% penalty. The agreement is that the Feds let you defer paying the tax because it is going to finance your retirement, and they will tax it later. If you take it out before 59 1/2, they figure you are not retired yet, and are breaking your part of the agreement. Of course you can generally leave the money in the 401(k) plan with your old employer and let it grow until you are 59.5, or roll it over into another 401(k) with a new employer (if they let you), or into an IRA. But if you have returned to your own country, having an account in the U.S. would introduce both investment risk and currency risk. If you are in another country when you want the money, the question would be where your U.S. residence would be. If you live in California, then go to, say France, your U.S. residence would still be California, and you would still owe California income tax. If you move from California to Texas and then to France, your U.S. residence would be Texas. This is pretty vague, as you might have heard in the Rahm Emanual case -- was he a resident of Chicago or Washington, D.C.? Same problem with Howard Hughes who was born in Texas, but then spent most his life in California, then to Nevada, then to Nicaragua, and the Bahamas. When he died Texas, California and Nevada all claimed him as a resident, for estate taxes. The important thing is to be able to make a reasonable case that you are a resident of where ever you want to be -- driver's license, mailing address, living quarters, and so on. |
How can I calculate a “running” return using XIRR in a spreadsheet? | I could not figure out a good way to make XIRR work since it does not support arrays. However, I think the following should work for you: Insert a column at D and call it "ratio" (to be used to calculate your answer in column E). Use the following equation for D3: =1+(C3-B3-C2)/C2 Drag that down to fill in the column. Set E3 to: =(PRODUCT(D$3:D3)-1)*365/(A3-A$2) Drag that down to fill in the column. Column E is now your annual rate of return. |
What does “interest rates”, without any further context, generically refer to? | When "people say", each person is referring to whatever he/she is looking at. Interest rates tend to move roughly the same, but often there is a bias regarding long vs. short term. In the US right now, short term interest rates are very low but there is a lot of chatter saying they will rise in the future. The differential between long term rates and short term rates is high compared to historical norms, suggesting that the market believes this chatter. You can also look at the differences in rates between different quality levels. If the economy is improving, the difference in rate for lower rated debt vs. higher rated debt decreases as people think the chance of businesses failing is decreasing. Right now, any interest rate you look at is well below long term historical averages, so asserting that interest rates are low is quite safe. |
Once stock prices are down, where to look for good stock market deals? | Something you might want to consider, instead of going out bargain hunting in hopes of picking something up on the cheap is to start doing you research now for a stock you would like to have in your portfolio and watch it for news that might cause it to go down before picking it up when it is down for a bit. As you pointed out with the BP stock, prior to the incident it was a solid stock that was being held in a number of funds. By identifying solid stocks now you can also make the decision on the basis of the news to if the fundamentals under the stock are severely impacted or if it just a temporary dip in prices. Also, you might want to index funds such as VTI that are tied to the overall market and also pay dividends. When the market tends down for awhile you can buy some shares that you can either hold for dollar-cost averaging or sell off again once the market picks up. |
Simple income and expense report in gnucash | The official guide can be found here, but that can be a little in depth as well. To make good use of you need at least a little knowledge of double-entry bookkeeping. Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account. From Wikipedia Another way to think of it is that everything is an account. You'll need to set up accounts for lots of things that aren't accounts at your bank to make the double-entry system work. For example you'll need to set up various expense accounts like "office supplies" even though you'll never have a bank account by that name. Generally an imbalanced transfer is when you have a from or to account specified, but not both. If I have imbalanced transactions I usually work them from the imbalance "account", and work each transaction to have its appropriate tying account, at which point it will no longer be listed under imbalance. |
Borrowing 100k and paying it to someone then declaring bankruptcy | This sounds like a crazy idea, but in reality people don't make the wisest decisions when considering bankruptcy in Australia. My suggestion would be to get some advice from an insolvency specialist. |
How profitable is selling your customer base? | There are business that exist by harvesting leads and selling them to other companies. These leads can be access to resumes they sell to business looking for employees; they can be eyeballs that view their adds; they can be list of people that meet a specific credit profile. All are legitimate business and many are growing businesses. But in all these cases they are upfront with the things they are doing. They all have escape mechanisms for you to either stop them from selling your info to other customers, or to restrict the ability of those customers to contact you. There are also companies that are less honest with their collecting and selling of information. They are not honest about what they are collecting, and they have no care about how others use it. There are also cases where when a company buys another company, and one main item in the transaction is the current and potential list of customers. Business with a legitimate product to sell, protect that customer list, that is the keys to the kingdom. They are the likely people who will buy the next version; they are also the ones that their competitors would love to target to convert them to another product. In some businesses, the company that develops the platform will sell to developers of add ons access to the marketplace. They may charge a flat fee for access, or charge a percentage of sales, or both. What you can do, and how you are allowed to do it, and what mechanisms are in place to protect people, are dependent on the country you operate in. |
Why some things are traded in an exchange while others are traded OTC | All securities must be registered with the SEC. Securities are defined as (1) The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. thus currencies are not defined as securities. While OTC transactions of securities is not outright forbidden, there are numerous regulations issued by the SEC as a result of the 1943 Exchange Act and others that make this difficult and/or costly. Many other securities are exempted from registration thus trade in a way that could be called OTC. Different countries have variances upon US law but are very similar. Any security could be traded OTC, but law prohibits it expressly or in such a way to make it relatively expensive; further, stock options are so tightly regulated that expiration dates, expiration intervals, strike intervals, and minimum ticks are all set by the authorities. |
Long term drip (dividend reinvestment plan) stock | If you sold the stock for a profit, you will owe tax on that profit. Whether it is taxed as short-term or long-term capital gains depends on how long you held the stock before selling it. Presumably you're going to invest this money into mutual funds or something of that sort. Those may pay dividends which can be reinvested, and will grow in value (you hope) just as the individual stock shares would (you hope). Assuming the advice you've been given is at all reasonable, there's no need for buyer's remorse here; you're just changing your investing style to a different point on the risk-versus-return curve. (If you have to ask this question, I tend to agree that you should do more homework before playing with shares in individual companieS ... unless you're getting thess shares at employee discount, in which case you should still seriously consider selling them fairly quickly and reinvesting the money in a more structured manner. In a very real sense your job is itself an "investment" in your employer; if they ever get into trouble you don't want that to hit both your income and investments.) |
Stock trading after a crash | If the stock has dropped from $10 to $2 and now is range trading between $2 and $3, and you were not able to sell your shares earlier, then I would no be holding on to them now. As soon as the price hit $3 sell them. After you have sold them and you noticed the stock still range trading one strategy you could apply is to go long after the price bounces off the $2 support placing a stop just below $2, then as the price moves up you trail your stop up with the price. As it starts getting close to $3 tighten your stop. If it keeps range trading and bounces off the resistance at $3 and you get stopped out, you can either go short and reverse the process or wait for it to bounce off the support at $2 again. One word of warning though, the longer a stock range trades, the bigger the outbreak out of the rage (either up or down) will be, that is the reason why you should first wait for confirmation that the price has bounced off support/resistance before opening a position, and secondly why you should use a stop loss to get you out instead of just selling when it hits $3, because if it breaks through $3 you can continue profiting as it moves up. |
What are some time tested passive income streams? | Interest payments You can make loans to people and collect interest. |
At what damage amount should I pursue a homeowner's insurance claim? | Some builders -- if given the first chance to deal with the problem, instead of being presented with a bill after the fact -- will fix the problem at no charge to the homeowner. Good faith matters. My house was built by such a builder. If I have a problem that I am competent enough to diagnose and fix, I fix it myself, at my cost. If I have a problem that that I cannot diagnose and fix myself, but that I think the builder (or his subcontractor) is competent enough to diagnose and/or fix, I contact the builder (or subcontractor directly). I am willing to pay for the diagnosis and/or fix, especially if it is an aging or wear-and-tear issue, or the logical consequence of a cost-saving measure that I voluntarily chose when the house was being designed. If the problem is a plumbing problem, I contact my preferred plumber for a diagnosis and/or repair. I pay for my preferred plumber's work. On two occasions, my preferred plumber was unable to fix the problem. Both problems turned out to be installation (or testing) errors related to work done specifically for building inspections. In both cases, I paid for my preferred plumber's diagnosis, and the builder (and/or his subcontractor) fixed the problem at no additional cost to me. The diagnosis and repair work that you describe seems like a similar situation to me. (In fact, I had my builder's subcontractor replace a few prematurely damaged shingles on my roof. This repair prevented a roof leak. I noticed the problem while trimming a tree back from the roof. The shingles were damaged because the building permit implied that the tree could not be trimmed back. I'm spotting a pattern with these problems…) In my opinion, the alleged problem with the roof pitch seems like a design flaw that should have been obvious at the time you chose the house design. I expect that any corrections of this design flaw will need to come out of your remodelling budget. In the absence of further details, I doubt that either the builder or the homeowners' insurance company is responsible for it. Some builders make a point of minimizing the warranty work they pay for, regardless of its effect on the builder's reputation. I do not know which kind of builder you have. The lawyer has probably told you whether the relevant statutes of limitations have lapsed. (The statutes of limitations vary from state-to-state, and vary depending on the alleged tort.) Starting a lawsuit is likely to further damage your relationship with your builder. Homeowners' insurance companies now share the number of claims that have been made historically at each property address. Most insurance companies now use this cumulative number of claims when setting rates, even if the claim(s) were made against a different insurance company, or by a different homeowner. I do not know whether any insurance companies ignore claims older than a certain number of years, or ignore the first claim. |
How to measure the cost/value of an Asset in the Financial Statement | Does the friend fix your electrical wiring and the engine of your car? If you need a professional advice - ask a professional. In this case - an accountant (not necessarily a CPA, but at least an experienced bookkeeper). Financial Statements (official documents, that is) must be signed by a public accountant (CPA in the US) or the principle (you). I wouldn't take chances and would definitely have an accountant do that. You need to consider the asset useful life, and the depreciation. The fact that you use it for non-business purposes may be recorded in various ways. One that comes to mind is accounting as a supplement for depreciation: You depreciate the percentage that is used for business, and record as a distribution to owner the rest (which is accounting for the personal use). This way it would also match the tax reporting (in the US, at least). Bottom line: if you're preparing an official financial statement (that you're going to submit to anyone other than yourself) - get a professional advice. |
Home Renovations are expensive.. Should I only pay cash for them? | Is it a safety thing? If the heat pump goes out you replace it immediately, if your floor looks bad but you aren't tripping, I would suggest saving. Use the extra time to find a great deal and educate yourself on your options. Maybe even take a class and learn to do it yourself. In these rough times, anything I can save for and pay cash I would. The exception is if you can finance with 0% interest for a period of time and you have enough money to pay that off. The last consideration I can think of is if you plan to sell the home soon? For that you might be getting more value than the loan and a real estate agent would be probably know best. |
Auto balancing portfolio through new purchases | Finding the "optimal" solution (and even defining what optimal is) would probably take a lot of searching of all the possible combinations of stocks you could buy, given that you can't buy fractional shares. But I'd guess that a simple "greedy" algorithm should get you close enough. For any given portfolio state, look at which stock is furthest below the target size - e.g. in your example, S3 is 3.5% away whereas S1 is only 3.1% away and S2 is over-sized. Then decided to buy one stock of S3, recalculate the current proportions, and repeat until you can't buy more stocks because you've invested all the money. If you have to pay a transaction fee for each kind of stock you purchase you might want to calculate this in larger lot sizes or just avoid making really small purchases. |
Why is property investment good if properties de-valuate over time? | When you buy a property the house or the building goes down in value every year (it gets depreciated) similar to when you drive a new car out of the lot. However, it is the land that increases in value over time. As land becomes scarcer the value of land in that area will increase in value, as does land in sought after areas. If more people want to live in a particular suburb the land value will keep on increasing year after year. Sometimes established areas with houses built in the 1980s or even earlier can be worth much more than newly built areas. It comes down to the supply and demand of land and houses in a particular area. You might even get a situation where a run-down dilapidated house in a very sought after suburb sells for more than a brand new house in a less sought-after suburb nearby. Properties can be a very good investment and they can be a very poor investment. It can largely depend on the decisions you make in buying your investment property. The first thing you need to make a decision on is the location of the property. If you buy a property in a good area that is well sought after you can make good capital and rental returns over the long run. If you buy poorly in an area no one wants to live in then you might have problems renting it out or only be able to rent it out to bad tenants who cause damage, and you may not get any capital gains over many years. The second thing you need to decide on is when in the property cycle you buy the property. If you buy at the right time you can get higher rents and make some quick capital gains over a relatively short time. I can provide a personal example of this situation. I had bought a house (in Australia) in 2007 for $240,000 at a time when interests where at their highest (9%), no one was buying property and rents were on the increase (with low vacancy rates). Today, eight years after, we are getting $410 per week rent and the house next door (in worse condition than ours) has been put on the market asking for between $500,000 to $550,000 (most houses in the area had been selling during this year for over $500,000). So you can say that our house has more than doubled in 8 years. However, up to a few months ago houses were selling within 2 weeks of being listed. The house next door however, has been listed for over a month and has not had very much interest. So from this you can conclude that in 2007 we had bought near the bottom of the market, whilst now we are near the top of the market. What you also need to remember is that different areas of a country can have different cycles, so there is not just one property cycle but many property cycles in the same country. |
What is a subsidy? | It means a government giving out money to encourage a particular product (or service) to be bought or sold. Some people will use the word more loosely to refer to any financial incentive, even if it's not coming from the government. Wikipedia has a list of examples that may be helpful: http://en.wikipedia.org/wiki/Subsidy A commonly-mentioned one is farm subsidies, where farmers are paid to produce certain crops. |
Is it a gift or not? | Part of 'consideration', I imagine, would be the obligation of either party to follow through on an agreement, not only fair market value. Look at the thought experiment from the opposite perspective. If you did not pay him $150 (maybe just $50 or even $0), would you be breaking a contractual obligation to him? If he left after 2 hours because he forgot about a family event and did not finish your move, would he be breaking a contractual obligation to you even if you gave him $150? It seems it can be considered a gift (Update: in all cases) There was no agreement of what either party viewed as full consideration in a mutual exchange. To put it another way: From your examples, there is no evidence that the performance of either party hinged on receiving mutual consideration from the other. More Updates from comments: Patterns Matter Similarly to how the IRS may determine W2 employee vs independent contractor, patterns do matter. If your friend has a pattern of helping people move in exchange for tens of thousands of dollars in gifts every year, the IRS would view that in a different light. A waitress/waiter has a pattern of accepting 'gifts' of tips in exchange for good service as a part of their established job duties. If you gifted your friend with $150/week when they watched your kids every Monday-Wednesday, that would be different. You are establishing a pattern, and I would suggest you may be establishing mutual consideration. In that case, consult a professional if you are worried. Amounts Matter This is why the gift tax exemption was created. The IRS does not care about the amounts in question here. It is too much of a burden to track and account for transactions that are this questionable and this small. You gift your friend with a $20k car? Now you need to pay attention. Consult your CPA. You gift your friend $1k for helping build your new deck? The IRS does not care. Intent Matters Even in the first case, it is not necessarily true that your friend considers $150 to be mutual consideration for his services. Would he open a business where he offers that rate to the general public? I doubt it. He intends to gift you services out of his own free will, not because there will be an equitable exchange of value. The intent of both parties is to give a gift. There is no evidence that would suggest otherwise to the IRS, it seems, even if they cared in the first place. |
Does a growing economy mean the economy is becoming less efficient? | Growth and efficiency can occur independently of each other. For instance, if an economy consists of one inefficient business and then a second more efficient business opens to compete agains the first the overall efficiency increases while the economy grows. New industries tend to be inefficient at the beginning (since initiation is more important than optimisation) and then become more efficient over time. Agriculture is an amazingly efficient business if you consider how many people now produce the amount of food we consume in comparison to only 100 years ago. Plus, efficiency is not only about producing extra widgets. You could produce the same number of widgets for lower cost. Outsourcing to China (taking advantage of their lower cost of production) increases the efficiency of the US economy, but also increases the efficiency of the Chinese economy (since extra work is created producing more things). Lower costs in the US lead to increased investment in other production. Increased production in China leads to the rising wages there. Growth can be achieved in both places for very different reasons. So, no, growth doesn't have to come about through less efficiency. |
Is it legal if I'm managing my family's entire wealth? | Aside from the fact that there are massive problems with taxes, liability, fiduciary responsibility, and (assuming you're accepting any sort of compensation at all) licensing. The mere fact that you're asking this question indicates that you're probably not suitably qualified to handle this for others. Why not have someone qualified handle this? |
Opportunity to buy Illinois bonds that can never default? | If Illinois cannot go bankruptcy This is missing a few, very important words, "...under current law." The United States changed the law so as to allow Puerto Rico to go into a form of bankruptcy. So you cannot rely on a lack of legal support for bankruptcy to protect any bond investments you might make in Illinois. It is entirely possible for the federal government to add a law enabling a state to discharge its debts through a bankruptcy process. That's why the bonds have been downgraded. They are still fine now, but that could change at any time. I don't want to dive too deep into the politics on this stack, but I could quite easily see a bargain between US President Donald Trump and Democrats in Congress where he agreed to special privileges for pension debts owed to former employees in exchange for full discharge of all other debts. That would lead to a complete loss of value for the bonds that you are considering. There still seem to be other options now, but they seem to be getting closer and closer to that. |
How to hedge against specific asset classes at low cost | The essence of hedging is to find an investment that performs well under the conditions that you're concerned about. If you're concerned about China stock dropping, then find something that goes up in value if that asset class goes down. Maybe put options on a Chinese index fund, or selling short one of those funds? Or, if you're already "in the money" on your Chinese stock position, set a stop loss: instruct your broker to sell if that stock hits X or lower. That way you keep some gains or limit your losses. That involves liquidating your position, but if you've had a nice run-up, it may be time to consider selling if you feel that the prospects are dimming. |
Didn't apply for credit card but got an application denied letter? | The use of an old address would make me suspect that your data was stolen from some database you had registered to long ago with the old address. I would think that contacting your credit rating firm and the credit card company is urgent. |
Would cross holding make market capitalization apparently more? | I started to work out, step by step, why this doesn't work, but the scenario is too convoluted to make that helpful. Basically, you're making mistakes in some or all of the following spots: |
What does Chapter 11 Bankruptcy mean to an investor holding shares of a Chapter 11 Company? | I held shares in BIND Therapeutics, a small biotechnology company on the NASDAQ that was liquidated on the chapter 11 auction block in 2016. There were sufficient proceeds to pay the debts and return some cash to shareholders, with payments in 2016 and 2017. (Some payments have yet to occur.) The whole process is counter-intuitive and full of landmines, both for tax preparation & planning and receiving payments: Landmine 0: Some shareholders will sell in a panic as soon as the chapter 11 is announced. This would have been a huge mistake in the case of BIND, because the eventual liquidation payments were worth 3 or so times as much as the share price after chapter 11. The amount of the liquidation payments wasn't immediately calculable, because the company's intellectual property had to be auctioned. Landmine 1: The large brokerages (Vanguard, Fidelity, TDA, and others) mischaracterized the distributions to shareholders on form 1099, distributed to both shareholders and the IRS. The bankruptcy trustee considered this to be their responsibility. According to the tax code and to the IRS website, the liquidation is taxed like a sale of stock, rather than a dividend. "On the shareholder level, a complete liquidation can be thought of as a sale of all outstanding corporate stock held by the shareholders in exchange for all of the assets in that corporation. Like any sale of stock, the shareholder receives capital gain treatment on the difference between the amount received by the shareholder in the distribution and the cost or other basis of the stock." Mischaracterizing the distributions as dividends makes them wrongly ineligible to be wiped out by the enormous capital loss on the stock. Vanguard's error appeared on my own 1099, and the others were mentioned in an investor discussion on stocktwits. However, Geoffrey L Berman, the bankruptcy trustee stated on twitter that while the payments are NOT dividends, the 1099s were the brokers' responsibility. Landmine 2: Many shareholders will wrongly attempt to claim the capital loss for tax year 2016, or they may have failed to understand the law in time for proper tax planning for tax year 2016. It does not matter that the company's BINDQ shares were cancelled in 2016. According to the IRS website "When a shareholder receives a series of distributions in liquidation, gain is recognized once all of the shareholder's stock basis is recovered. A loss, however, will not be recognized until the final distribution is received." In particular, shareholders who receive the 2017 payment will not be able to take a capital loss for tax year 2016 because the liquidation wasn't complete. Late discovery of this timing issue no doubt resulted in an end-of-year underestimation of 2016 overall capital gains for many, causing a failure to preemptively realize available capital losses elsewhere. I'm not going to carefully consider the following issues, which may or may not have some effect on the timing of the capital loss: Landmine 3: Surprisingly, it appears that some shareholders who sold their shares in 2016 still may not claim the capital loss for tax year 2016, because they will receive a liquidation distribution in 2017. Taken at face value, the IRS website's statement "A loss, however, will not be recognized until the final distribution is received" appears to apply to shareholders of record of August 30, 2016, who receive the payouts, even if they sold the shares after the record date. However, to know for sure it might be worth carefully parsing the relevant tax code and treasury regs. Landmine 4: Some shareholders are completely cut out of the bankruptcy distribution. The bankruptcy plan only provides distributions for shareholders of record Aug 30, 2016. Those who bought shares of BINDQ afterwards are out of luck. Landmine 5: According to the discussion on stocktwits, many shareholders have yet to receive or even learn of the existence of a form [more secure link showing brokers served here] required to accept 2017 payments. To add to confusion there is apparently ongoing legal wrangling over whether the trustee is able to require this form. Worse, shareholders report difficulty getting brokers' required cooperation in submitting this form. Landmine 6: Hopefully there are no more landmines. Boom. DISCLAIMER: I am not a tax professional. Consult the tax code/treasury regulations/IRS publications when preparing your taxes. They are more trustworthy than accountants, or at least more trustworthy than good ones. |
Should market based health insurance premiums be factored into 6 months emergency fund savings? | Yes, you should budget some amount of your emergency fund for healthcare expenses. How much you budget is really dependent on your particular anticipated costs. Be aware that health insurance likely costs significantly more than your employer charges you for access to its plan. Since healthcare reform mandated guaranteed issue individual coverage you will have the ability to buy individual coverage for you and, if applicable, your family. When buying individual coverage you have essentially two choices, your decision hinges on whether or not you'd qualify for a premium subsidy. If your AGI is below 400% of the poverty line you'll be able to receive subsidized coverage at a state or federal health insurance exchange. If the subsidy is not meaningful to you, or you wouldn't qualify, you can buy an "off exchange" plan offered either directly through a carrier or an insurance agent (some insurance agents are also licensed to sell exchange plans though it's somewhat rare). In order to receive subsidized coverage you must buy through a state or federal exchange, or an agent licensed to sell exchange products specifically. If your employer was large enough to be required to offer its plan via COBRA or you live in a state that extends the COBRA requirement to smaller businesses, you can choose that as well. Bear in mind this option is likely to be expensive relative to individual plans. It's becoming a less relevant solution with the advent of guaranteed issue individual coverage. COBRA is not a special type of insurance, it's a mandate that your employer allow you to remain on its plan but pay the full gross premium plus an up to 2% (10% for calCOBRA) administrative fee. Despide popular vernacular, there is no such thing as Obamacare or ACA coverage. Obamacare reshaped the insurance market. The ACA outlines certain minimum coverage requirements, generally referred to as "Minimum Essential Coverage." While employers and plans are not "required" to meet all of these coverage requirements there is a penalty associated with non-compliance. The single exception to this is grandfathered plans which can still sidestep a few of the requirements. The penalty is harsh enough that it's not worth the cost of offering a non-compliant plan. Whether you buy coverage through a state or federal exchange, through an insurance agent, or via your employer's COBRA program you will have "ACA" coverage (unless on the off chance your employer's plan doesn't check the "Minimum Essential Coverage" box). So generally all plans available to you will have $0 preventive coverage, pregnancy benefits, cancer treatment benefits etc. Another thing to consider is your entire family doesn't need to be on the same plan. If your family is healthy with the exception of one child, you can purchase $0 deductible coverage for the one child and higher deductible more catastrophic plan for the remainder of your family. In fact you could choose COBRA for one child and purchase individual coverage for the remainder of the family. The things to consider when you face a lay-off: I tried to mitigate my use of "all" and "always" because there are some narrow exceptions to these requirements, such as the "Hobby Lobby" decision allowing closely held organizations with highly religious owners the ability to remove certain contraception benefits. Understand that these exceptions are rare and not available to individual plans. |
Why buy bonds in a no-arbitrage market? | Rates are a complex field. I will assume that context wise you are talking about rates for a individual saver quantities. The two rates you are asking about are personal bank saving account and exchange traded bonds. The points you want to compare between them are. In general, a bond is what we called a fixed rate instrument. This means that for the life of the product, it will yield a fixed percentage of its face value at a regular period. Baring any extreme circumstances (such as bankruptcy), no external factors will change the payment schedule on a bond. Conversely, by placing your money into a bank, you will accrue interest rate at some value related to some published interest rate. For example, if tomorrow, the Treasury decided to try to stimulate the economy, they could slash the interest rate, this would directly affect the rate at which your savings account would accrue interest. In general, a bond has a maturity date, where the capital is finally released from the bond. Until such date, you cannot access the money directly (you can however sell the bond, but it would likely be at a discounted value). Therefore, in general, you cannot get access to the money whenever you want it. As for a saving account, normally one can access the funds instantly, if not within a few days. This seems to the reason people seem to be focusing on. For each bond, the issuer of the bond is obligated to pay you the holder of the bond fixed payments at an interval, plus the capital at the maturity. However, obligation does not mean guarantee. If the issuer, is unable to make the payments, they may go into bankruptcy to avoid paying you. There are companies setup to advise people on the likelihood of each bond issuer on their ability to honour their debts. For example Standard and Poor issues a rating which goes all the way up to AAA for bonds. Recently, many sovereign countries have lost their AAA rating from S&P. Meaning that S&P feel that the possibility of these countries going bankrupt is non-zero. Conversely, banks may also be unable to give you your money when requested. In the US, the reserve requirements means that at any one time it only holds 10% of the money it owes to its customers. This can mean that if every customer turns up to the bank to demand their money, that bank would be unable to pay. This situation is called a Bank Run. During such a situation, the bank would likely collapse and default. In many modern countries, the government put into place guarantees on the first xxx amount in saving accounts, but otherwise, your savings could be lost. There are many complex reasons to choose one instrument over another (including some I have avoided), even if at the outset, they could appear to have the same rates. |
Using Loan to Invest - Paying Monthly Installments by Selling Originally Bought Shares | The market can stay irrational longer than you can remain solvent -John Maynard Keynes The stocks could stagnate and trade in a thin range, or decline in value. You assume that your stocks will offer you ANY positive return for every month over 24 months. Just one month of negative returns puts you underwater. Thats whats wrong with it. Even if you identified any stock that has been up every month for a consecutive 24 months in the past, there is nothing that says it will be so in the future, and a broad market selloff will effect both indexes as well as individual stocks. Literally any adverse macroeconomic event in the next two years will put you underwater on your loan, no matter how much research you do on individual stocks. |
Are there any banks in Europe that I can have an account without being in that country? | Opening account in foreign bank is possible, but you must have strong proofs you use it for legitimate purposes. More chances to get an account if you visit Europe and able to stay, for example, for a week, to visit bank in person and wait for all the checks and approvals. Also keep in mind that there will be deposit/withdraw limits and fees applicable, that are significantly stricter and larger for non-EU citizen. In my opinion, if your amounts are not large, it might not worth it. If amounts are large, you might consider business account rather than personal, as is the example of strong proof I meant. |
Does a restaurant have to pay tax on a discount? | In almost any jurisdiction, the restaurant will pay tax on the amount after the discount. Discounting is just a selective way to reduce prices for particular clients and thus achieve some degree of price discrimination. It's no different in principle to cutting prices for everyone or having a sale or similar. It would be very strange for a tax jurisdiction to work any other way, because businesses would end up being taxed on money they never actually got. While tax systems often have that kind of anomaly in rare cases at the edge of the system, discounting via vouchers is extremely common. For example, here are the rules in the UK. |
If I'm going to start doing my own taxes soon, do I need to start keeping receipts for everything? | You don't need to keep receipts for most things, and if you are not going to itemize your deductions (which as a college student, you probably won't), you need even fewer. Things that you should always keep: If you are itemizing your deductions, you want to keep receipts for anything that you can itemize. Some common things are: Another thing that you should do, but few people do, is keep track of your online purchases, since many states require you to pay sales tax on those purchases. Of course, the state has no way of knowing what you buy online, so it is all done on the honor system. |
Why are currency forwards needed? | To speak to this a little more broadly: apart from groups like hedge funds and other investors investing for purely speculative purposes, one of the major purposes of forwards (and, for that matter, futures) for companies in the "real economy" is to "lock in" a particular price in advance (or to reduce the risk of some kind of investment or transaction). Investopedia defines a currency forward as follows (with a few key points emphasized): [A currency forward is] a binding contract in the foreign exchange market that locks in the exchange rate for the purchase or sale of a currency on a future date. A currency forward is essentially a hedging tool that does not involve any upfront payment. The other major benefit of a currency forward is that it can be tailored to a particular amount and delivery period, unlike standardized currency futures. This can be a major advantage for planning and risk management purposes. For example, if I know I'm going to have to pay $1 million USD in the future and most of my revenue is in Euros, the actual amount I'll have to pay will vary based on the exchange rate between Euros and dollars. Thus, it's very worthwhile for me to be able to "lock in" a particular exchange rate so that I know exactly how much I'm going to pay relative to my projected revenue. The goal isn't necessarily to make money off the transaction (maybe they do, maybe they don't) as much as to reduce risk and improve planning ability. The fact that it doesn't involve an up-front payment is also a major advantage. It's usually a bad practice to "sit on" cash for a year if you can avoid it. Another key point: savings accounts pay less interest than inflation. If inflation is 3% and your savings account pays 1%, that looks remarkably like a guaranteed 2% loss to me. |
Is expense to freelancers tax deductible? | If it's a legitimate cost of doing business, it's as deductible as any other cost of doing business. (Reminder: be careful about the distinctions between employee and contractor; the IRS gets annoyed if you don't handle this correctly.) |
How does refinancing work? | You owe $20,000 to a loanshark, 1% per week interest. I'm happy to get 1% per month, and trust you to pay it back, so I lend you the $20,000. The first lender got his money, and now you are paying less interest as you pay the loan back. This is how a refi works, only the first bank won't try to break the legs of the second bank for moving into their business. This line "reinvested the money into the mortgage to lower his monthly payments" implies he also paid it down a bit, maybr the new mortgage is less principal than the one before. |
Are Index Funds really as good as “experts” claim? | Here is my simplified take: In any given market portfolio the market index will return the average return on investment for the given market. An actively managed product may outperform the market (great!), achieve average market performance (ok - but then it is more expensive than the index product) or be worse than the market (bad). Now if we divide all market returns into two buckets: returns from active investment and returns from passive investments then these two buckets must be the same as index return are by definition the average returns. Which means that all active investments must return the average market return. This means for individual active investments there are worse than market returns and better then market returns - depending on your product. And since we can't anticipate the future and nobody would willingly take the "worse than market" investment product, the index fund comes always up on top - IF - you would like to avoid the "gamble" of underperforming the market. With all these basics out of the way: if you can replicate the index by simply buying your own stocks at low/no costs I don't see any reason for going with the index product beyond the convenience. |
How separate individual expenses from family expenses in Gnucash? | In your words, you want to "easily determine whether an item was purchased as part of our individual accounts, or our combined family account." It's not clear exactly to me what kind of reporting you're trying to get. (I find a useful approach here to be to start with the output you're trying to get from a system, and then see how that maps to the input you want to give the system.) Here's some possibilities: |
Following an investment guru a good idea? | The best answer here is "maybe, but probably not". A few quick reasons: Its not a bad idea to watch other investors especially those who can move markets but do your own research on an investment first. Your sole reason for investing should not be "Warren did it". |
Optimal pricing of close to zero marginal cost content | With near zero marginal cost, and infinite supply, your prices are going to be decided by entry cost, competition, and what the market will bear. Generally speaking, though, there are no accurate models for getting these kinds of optimal prices in advance - your best bet is to test, experiment, and then build a business and market specific model based on what you observe. Look at the Steam network, as an example. They are in the business of selling 0 marginal cost software (games), in a market with a significant but quickly decreasing entry cost, and with solid competition. Despite being around for years in a mature market, they're still discovering unexpected optimal price points when testing how their customers behave. |
How does Google Finance calculate the Institution Owned metric for a stock | Institutional ownership has nearly lost all meaning. It used to mean mutual funds, investment banks, etc. Now, it means pension funds, who hold the rest of the equity assets directly, and insiders. Since the vast majority of investors in equity do not hold it directly, "institutions" are approaching 100% ownership on all major equities. Other sites still segment the data. |
How is it possible that a preauth sticks to a credit card for 30 days, even though the goods have already been delivered? | This is not a normal occurrence, and you have every right to be annoyed, but the technical way it usually happens goes like this: What can happen is when the merchant incorrectly completes the transaction without referencing the pre-authorization transaction. The bank effectively doesn't "know" this is the same transaction, so they process it the same way they process any other purchase, and it has no effect on the pre-authorization and related held/pending transaction. As far as the bank knows, you purchased a second set of blinds in the store for $200 and are still waiting on the first order to come in, they have no idea the store screwed up. The reason this is possible is the purpose of the pre-auth in the first place is that it is a contractual agreement between the bank (credit card) and the merchant that the funds are available, will be available except under rare special circumstances, and thus they can go ahead and process the order. This lets the merchant be secure in the knowledge that they can collect their payment, but you aren't paying interest or monthly payments on something you haven't even gotten yet! This system works reasonably well for everyone - right up until someone screws up and fails to properly release a hold, makes a second transaction instead of properly referencing the first one, or the bank screws up their system and fails to correctly match referenced pre-authorization codes to purchases. The problem is that this should not be a normal occurrence, and the people you are speaking with to try to sort out the issue often do not have the authority or knowledge necessary to properly fix the issue, or its such a hassle for them that they hope you just go away and time fixes the issue on its own. The only sure-fire solution to this is: make sure you have so much extra credit line that this doesn't effect you and you can safely let it time out on its own, or stop doing business with this combination of merchant/payment that creates the problem. Back when my credit limits were being pushed, I would never pay at gas pumps because their hold polices were so weird and unpredictable, and I would only pre-pay inside or with cash to avoid the holds. |
Why doesn't change in accounts receivable on balance sheet match cash flow statement? | I'm not an expert, but here is my best hypothesis. On Microsoft's (and most other company's) cash flow statements, they use the so-called "indirect method" of accounting for cash flow from operations. How that works, is they start with net income at the top, and then adjust it with line items for the various non-cash activities that contributed to net income. The key phrase is that these are accounting for the non-cash activities that contribute to net income. If the accounts receivable amount changes from something other than operating activity (e.g., if they have to write off some receivables because they won't be paid), the change didn't contribute to net income in the first place, so doesn't need to be reconciled on the cash flow statement. |
What is today's price of 15 000 Euro given 15 years ago? | There's often a legal basis to answer this question. For instance, Austria (guessing from your profile) currently uses a 4% Statutory interest rate. You'll need to dig up not just the actual but also the historical rates. Note that you'll want the non-commercial interest rate - some countries differentiate between loans to businesses and loans to individuals. |
Understanding the phrase “afford to lose” better | Keep in mind that it's a cliche statement used as non-controversial filler in articles, not some universal truth. When you were young, did you mom tell you to eat your vegetables because children are starving in Ethiopia? This is the personal finance article equivalent of that. Generally speaking, the statement as an air of truth about it. If you're living hand to mouth, you probably shouldn't be thinking about the stock market. If you're a typical middle class individual investor, you probably shouldn't be messing around with very speculative investments. That said, be careful about looking for some deeper meaning that just isn't there. If the secret of investment success is hidden in that statement, I have a bridge to sell you that has a great view of Brooklyn. |
Where to invest proceeds from home sale to be used to buy new house within five years? | For a two year time frame, a good insured savings account or a low-cost short-term government bond fund is most likely the way I would go. Depending on the specific amount, it may also be reasonable to look into directly buying government bonds. The reason for this is simply that in such a short time period, the stock market can be extremely volatile. Imagine if you had gone all in with the money on the stock market in, say, 2007, intending to withdraw the money after two years. Take a broad stock market index of your choice and see how much you'd have got back, and consider if you'd have felt comfortable sticking to your plan for the duration. Since you would likely be focused more on preservation of capital than returns during such a relatively short period, the risk of the stock market making a major (or even relatively minor) downturn in the interim would (should) be a bigger consideration than the possibility of a higher return. The "return of capital, not return on capital" rule. If the stock market falls by 10%, it must go up by 11% to break even. If it falls by 25%, it must go up by 33% to break even. If you are looking at a slightly longer time period, such as the example five years, then you might want to add some stocks to the mix for the possibility of a higher return. Still, however, since you have a specific goal in mind that is still reasonably close in time, I would likely keep a large fraction of the money in interest-bearing holdings (bank account, bonds, bond funds) rather than in the stock market. A good compromise may be medium-to-high-yield corporate bonds. It shouldn't be too difficult to find such bond funds that can return a few percentage points above risk-free interest, if you can live with the price volatility. Over time and as you get closer to actually needing the money, shift the holdings to lower-risk holdings to secure the capital amount. Yes, short-term government bonds tend to have dismal returns, particularly currently. (It's pretty much either that, or the country is just about bankrupt already, which means that the risk of default is quite high which is reflected in the interest premiums demanded by investors.) But the risk in most countries' short-term government bonds is also very much limited. And generally, when you are looking at using the money for a specific purpose within a defined (and relatively short) time frame, you want to reduce risk, even if that comes with the price tag of a slightly lower return. And, as always, never put all your eggs in one basket. A combination of government bonds from various countries may be appropriate, just as you should diversify between different stocks in a well-balanced portfolio. Make sure to check the limits on how much money is insured in a single account, for a single individual, in a single institution and for a household - you don't want to chase high interest bank accounts only to be burned by something like that if the institution goes bankrupt. Generally, the sooner you expect to need the money, the less risk you should take, even if that means a lower return on capital. And the risk progression (ignoring currency effects, which affects all of these equally) is roughly short-term government bonds, long-term government bonds or regular corporate bonds, high-yield corporate bonds, stock market large cap, stock market mid and low cap. Yes, there are exceptions, but that's a resonable rule of thumb. |
What should I do with my $10K windfall, given these options? | If you need a new roof because your house is full of buckets that fill up every rain :) then that's most likely the item at the top of the list. If you need a new roof because you don't like the color, I'd do something else with it. If you are in the US and the 'education loan' has the same caveats attached as your average student loan, I would eye that one with intent if the roof can soldier on for a few years as is. The simple reason for this is that a student loan would be the one debt that you list that you can never get rid off unless you actually pay it off, no matter what happens (IOW student loans aren't bankruptable). Disregard this if the caveats in the first sentence don't apply... |
How good is Wall Street Survivor for learning about investing? | To be honest, wall street survivor is good but when it comes to learning the stock markets from Europe, Beat wall street is the game to be playing. You can try it out for your self here on http://beatwallstreet.equitygameonline.com/ It is easy to use and there are monthly prizes available to winners, such as Ipads, Iphones and students who play it the game can win internships at top investment banks and brokers |
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