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Does gold's value decrease over time due to the fact that it is being continuously mined? | The previous answers have raised very good points, but I believe one facet of this has been neglected. While it's true that the total accessible supply of gold keeps growing(although rather slowly as was mentioned earlier) the fact remains that gold, like oil, is a non-renewable natural resource. So, at some point, we are going to run out of gold to mine. Due to this fact, I believe gold will always be highly valued. Of course it can certainly always fluctuate in value. In fact, I expect in the reasonably near future to see a decline in the price of gold due to investors selling it en masse to re-enter the stock market when the economy has recovered more substantially. |
Is a debt collector allowed to make a hard inquiry on your credit report? | According to the Fair Credit Reporting Act: any consumer reporting agency may furnish a consumer report [...] to a person which it has reason to believe [...] intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer See p12 (section 604). The usual interpretation of this that I've heard is that a debt collection agency that owns or has been assigned a debt can make hard pulls on your credit report without your consent. This link seems to support that (and references the same part of the act, among others): According to the Fair Credit Reporting Act, [...], any business can access your credit history without your permission provided the business has a valid "permissible purpose." The FCRA notes that one such permissible purpose is to review your credit information in connection with the collection of a debt. Thus, if you owe money to a debt collector, the debt collector has the legal right to pull and review your credit report. If they haven't been assigned the debt or own it outright, I believe you have a legal right to dispute it. Consult a lawyer if this is actually a situation you face. Once use for this is if the debt collection agency has trouble locating you; since your credit report normally contains current and past addresses, this is one way to locate you. |
Should I Have Received a 1099-G? | When you itemize your deductions, you get to deduct all the state income tax that was taken out of your paycheck last year (not how much was owed, but how much was withheld). If you deducted this last year, then you need to add in any amount that you received in state income tax refunds last year to your taxes this year, to make up for the fact that you ended up deducting more state income tax than was really due to the state. If you took the standard deduction last year instead of itemizing, then you didn't deduct your state income tax withholding last year and you don't need to claim your refund as income this year. Also, if you itemized, but chose to take the state sales tax deduction instead of the state income tax deduction, you also don't need to add in the refund as income. For whatever reason, Illinois decided that you don't get a 1099-G. It might be that the amount of the refund was too small to warrant the paperwork. It might be that they screwed up. But if you deducted your state income tax withholding on last year's tax return, then you need to add the state tax refund you got last year on line 10 of this year's 1040, whether or not the state issued you a form or not. Take a look at the Line 10 instructions starting on page 22 of the 1040 instructions to see if you have any unusual situations covered there that you didn't mention here. (For example, if you received a refund check for multiple years last year.) Then check your tax return from last year to verify that you deducted your state income tax withholding on Schedule A. If you did, then this year add the refund you got from the state to line 10 of this year's 1040. |
Can I get a discount on merchandise by paying with cash instead of credit? | There are two fundamentally different reasons merchants will give cash discounts. One is that they will not have to pay interchange fees on cash (or pay much lower fees on no-reward debit cards). Gas stations in my home state of NJ already universally offer different cash and credit prices. Costco will not even take Visa and MasterCard credit cards (debit only) for this reason. The second reason, not often talked about but widely known amongst smaller merchants, is that they can fail to declare the sale (or claim a smaller portion of the sale) to the authorities in order to reduce their tax liability. Obviously the larger stores will not risk their jobs for this, but smaller owner-operated ("mom and pop") stores often will. This applies to both reduced sales tax liability and income tax liability. This used to be more limited per sale (but more widespread overall), since tax authorities would look closely for a mismatch between declared income and spending, but with an ever-larger proportion of customers paying by credit card, merchants can take a bigger chunk of their cash sales off the books without drawing too much suspicion. Both of the above are more applicable to TVs than cars, since (1) car salesmen make substantial money from offering financing and (2) all cars must be registered with the state, so alternative records of sales abound. Also, car prices tend to be at or near the credit limit of most cards, so it is not as common to pay for them in this way. |
Does high inflation help or hurt companies with huge cash reserves? | This is a reasonable question about inflation. I would just like to note that inflation is nearly zero at the moment. And interest rates are very low. For a stable enterprise, borrowing cash is very easy right now. Naturally, things could change in a year. But the reason a company like Microsoft (but not just them) might hoard cash right now is that it gives them weight for buying up smaller firms, muscling rivals, and signaling their comfort level with the way things look for them. It could also be because they are out of ideas for what to invest in, and/or are waiting for conditions to change before making any big decisions. But with an interest rate at close to zero, and an inflation rate at close to zero, at the moment, inflation is not going to be a consideration in evaluating such a company. |
Who owned my shares before me? | The answer in theory is yes. The answer in reality is no. Let me explain: Combine all of these lists and perhaps you could get a complete record. |
How do you calculate the rate of return (ROR) when buying and selling put options? | RoR for options you bought is fairly easy: (Current Value-Initial Cost)/Initial Cost gives you the actual return. If you want the rate of return, you need to annualize that number: You divide the return you got above by the number of days the investment was in place, and then multiply that number by the number of days in a year. (365 if you're using calendar days, about 255 if you're using trading days.) RoR for options you sold is much more complex: The problem is that RoR is basically calculating the size of your return relative to the capital it tied up to earn it. That's simple when you bought something; the capital tied up is the money you put up. It's more complex on a position like a short option, where the specific transaction in question generates cash when it's put on. The correct way to deal with this is to A) Bundle your strategy (options, stock and collateral) into one RoR where appropriate, and B) include any needed collateral to support the short option in the calculation. So, if you sell a "cash-secured" put, where you have to post the money that you'd need to take delivery of the shares if they were put to you, the initial cost is the total amount you'd need to put the trade on: in this case, it's the cash amount, less the premium you collected for selling the put. That's just one example. But the approach holds more broadly: if you're using covered calls, your original cost is the cost of the stock less the premium generated by the sale of the call. |
When do I sell a stock that I hold as a long-term position? | The psychology of investing is fascinating. I buy a stock that's out of favor at $10, and sell half at a 400% profit, $50/share. Then another half at $100, figuring you don't ever lose taking a profit. Now my Apple shares are over $500, but I only have 100. The $10 purchase was risky as Apple pre-iPod wasn't a company that was guaranteed to survive. The only intelligent advice I can offer is to look at your holdings frequently, and ask, "would I buy this stock today given its fundamentals and price?" If you wouldn't buy it, you shouldn't hold it. (This is in contrast to the company ratings you see of buy, hold, sell. If I should hold it, but you shouldn't buy it to hold, that makes no sense to me.) Disclaimer - I am old and have decided stock picking is tough. Most of our retirement accounts are indexed to the S&P. Maybe 10% is in individual stocks. The amount my stocks lag the index is less than my friends spend going to Vegas, so I'm happy with the results. Most people would be far better off indexing than picking stocks. |
Research for Info | quid's link should give you a definitive answer, but just to set expectations, here's an article from the UPI: Essex Chemical Corp. has agreed to be acquired by Dow Chemical Co. in a $366 million, $36-a-share deal ... Any shares that remain outstanding after the merger will be converted into the right to receive $36 each in cash, the companies said. There's no mention of exchange for Dow stock, so it's likely that you would get $36 for this share of stock, if anything. |
Strategy for accounting personal finance in multiple currency? | How can I correctly account for having money in different currencies, without currency transfers or currency fluctuations ending up as gains or losses? In my view, your spreadsheet should be in multiple currencies. i.e. if you have gained some in specific currency, make a note of it in that specific currency. If you have spent something in a specific currency, then make a note accordingly. You can use an additional column for reporting this in a neutral currency say GBP. If you are transferring the money from account of one currency to account of another; change the balances as appropriate with the actual conversion rate. If you need this record keeping for tax purposes, then get a proper advise from accountant. |
Paid off oldest CC keep it open or close it? | First off, congratulations on taking care of your finances and paying off your cards! Takes a lot of discipline. If your next oldest card is just a year apart, you can safely close this card. |
Why is “cheque cashing” a legitimate business? | This answer is based on my understanding of the US banking system. We have check cashing businesses here too, which are just like what you describe, except for the spelling :-) Let's consider what "cash it for free at the bank" really means, and why it might not be an option for everyone. One key issue is "which bank?" As an example, suppose that I have an account at ABC Bank. I take out my checkbook for that account and write you a check for $500. (Terminology: In this case, I am the drawer or maker of the check, ABC Bank is the drawee bank, and you, user54609, are the payee. Disclaimer: "You" here is meant as a generic pronoun and I do not mean to insinuate that anything here actually applies to you personally.) There are two common things you might do with the check: If you have an account at some bank, say XYZ Bank, you might take the check to XYZ Bank and deposit it in your account. (You might be able to do this through an ATM, mobile app, or by mail, instead of in person.) XYZ Bank does not have a way to verify with certainty that the check is valid (e.g. they don't know what my signature looks like, nor whether I actually have $500 in my account at ABC), so they send it to ABC Bank, which verifies the check and transfers $500 to XYZ. (This is usually done through a central clearinghouse, such as the Federal Reserve in the US, and in some cases an image of the check may be sent electronically, instead of the physical check.) This process takes some time, so XYZ may not make the $500 available to you right away - there may be a hold period before you can withdraw that $500 from your account. You could take the check to ABC Bank, in person. They will verify on the spot that the check is valid and that you are in fact user54609. If everything looks good, they will hand you $500 in cash (perhaps subtracting a fee of a few dollars). Now we can see some possible problems with each of these approaches. For 1: Maybe you don't have a bank account at all. There are many possible reasons: You don't have enough money to meet the minimum balance that a bank account would require. You used to have an account, but you overdrew or otherwise misused an account, so the bank closed it. They then entered you in a registry such as ChexSystems which ensures that other banks know about this, and so no other bank will open a new account for you. You immigrated to the country illegally and cannot get the documents (driver's license, social security number, etc) that a bank normally requires to open an account. You simply don't like the idea of keeping your money in a bank. Maybe you do have an account at XYZ Bank, but it's in another town. You need the cash today, so you can't use mail or a mobile app, and third-party ATMs usually don't accept deposits. Maybe you need to spend the money today, and XYZ Bank would place a hold. For 2: ABC Bank may not have a branch you can conveniently visit. Maybe the nearest one is a long way away, in another city or across the country. Or maybe ABC is an online bank with no physical branches at all. Maybe it's in the same city, but you don't have transportation to get you there. Or maybe it's simply less convenient than the check-cashing business on the corner. Maybe it is after usual banking hours, or a weekend, and ABC Bank is closed, but you need cash now. In any of these situations, "cash it at the bank" might not be a viable option, and so you might reasonably turn to a check cashing business instead. As you say, you will pay a much higher fee there, but maybe it is worth it to you, or you just don't have any choice. Another possibility, of course, is that you are poorly educated about the banking system, and you don't really understand that 1 and 2 are options, or how to go about them. But there's this storefront on the corner that says "Check Cashing", so this seems like a low-stress, uncomplicated way to exchange this piece of paper for money. As such, there certainly are people who legitimately might want to cash a valid check at a check-cashing business. Check cashing business do of course take some risk of fraud, since they can't necessarily verify the check. There are sometimes steps they can take to minimize this risk. Sometimes they can call ABC Bank and check that I have sufficient money in my account. Maybe they'll only accept certain kinds of checks, such as payroll checks from well-known companies for which you can produce a matching pay stub. And they can demand identification from you (perhaps allowing more flexible options than a bank), which helps ensure that you are the payee, and would make you easier to track down if you did commit fraud. But they will probably lose some money this way, so they will have to make their fees high enough to cover those losses. |
183 day rule in conjunction with expatriate | There's no "183 days" rule. As a US citizen you must pay taxes on all your income, where you live is irrelevant. |
How an ETF pays dividend to shareholders if a holding company issues dividend | The amount, reliability and frequency of dividends paid by an ETF other than a stock, such as an index or mutual fund, is a function of the agreement under which the ETF was established by the managing or issuing company (or companies), and the "basket" of investments that a share in the fund represents. Let's say you invest in a DJIA-based index fund, for instance Dow Diamonds (DIA), which is traded on several exchanges including NASDAQ and AMEX. One share of this fund is currently worth $163.45 (Jan 22 2014 14:11 CDT) while the DJIA itself is $16,381.38 as of the same time, so one share of the ETF represents approximately 1% of the index it tracks. The ETF tracks the index by buying and selling shares of the blue chips proportional to total invested value of the fund, to maintain the same weighted percentages of the same stocks that make up the index. McDonald's, for instance, has an applied weight that makes the share price of MCD stock roughly 5% of the total DJIA value, and therefore roughly 5% of the price of 100 shares of DIA. Now, let's say MCD issued a dividend to shareholders of, say, $.20 per share. By buying 100 shares of DIA, you own, through the fund, approximately five MCD shares, and would theoretically be entitled to $1 in dividends. However, keep in mind that you do not own these shares directly, as you would if you spent $16k buying the correct percentage of all the shares directly off the exchange. You instead own shares in the DIA fund, basically giving you an interest in some investment bank that maintains a pool of blue-chips to back the fund shares. Whether the fund pays dividends or not depends on the rules under which that fund was set up. The investment bank may keep all the dividends itself, to cover the expenses inherent in managing the fund (paying fund management personnel and floor traders, covering losses versus the listed price based on bid-ask parity, etc), or it may pay some percentage of total dividends received from stock holdings. However, it will virtually never transparently cut you a check in the amount of your proportional holding of an indexed investment as if you held those stocks directly. In the case of the DIA, the fund pays dividends monthly, at a yield of 2.08%, virtually identical to the actual weighted DJIA yield (2.09%) but lower than the per-share mean yield of the "DJI 30" (2.78%). Differences between index yields and ETF yields can be reflected in the share price of the ETF versus the actual index; 100 shares of DIA would cost $16,345 versus the actual index price of 16,381.38, a delta of $(36.38) or -0.2% from the actual index price. That difference can be attributed to many things, but fundamentally it's because owning the DIA is not the exact same thing as owning the correct proportion of shares making up the DJIA. However, because of what index funds represent, this difference is very small because investors expect to get the price for the ETF that is inherent in the real-time index. |
Loan to son - how to get it back | He's paying the interest and you're paying the principal. If you're making minimum monthly payments, you'll still be doing the same thing 25-30 years from now. I think Parker's advice was very, very good, but I'd like to add to it a little of my own. Whatever dollar amount your son is sending to you as payment, encourage him to continue doing that. Only instead of paying you, have him put that money into a savings plan of some kind. You mentioned that he's struggling now, yet able to come up with approximately (my best guess) $200/mo. I guarantee you that if he puts that $200/mo back into his pocket, he'll still be struggling every month yet have nothing to show for it. My suggestion changes nothing in his daily life, yet gives him $2400 at the end of every year. I was in a somewhat similiar situation as your son, only to the tune of $13,000. About 20 years ago, I got a loan and bought a new truck in which to use to go back and forth to work every day. The first 5 months the payments to the bank went as planned. Then my wife announces that "we're" pregnant. So my parents figured it would be best to just pay off my loan to the bank, avoiding any further interest charges, and take that truck payment and put it away for a rainy day. At 33 y/o, with my first child on the way, I finally started saving some of my money. It was good advice on their part because the rainy days came! They never asked me to pay them back, however I did offer. I've been tucking away $300-400/mo in the bank every month since then because I just got into the habit. Good thing I did too. In the past 10 years I've had to bury both of my parents, one sister and two wives and I'll tell ya, one thing that was comforting was the fact that I had the money. The little truck I bought 20 years ago is now my son's. It has around 260,000 miles on it now. When he trades it in for a newer vehicle, I will probably loan him the money and have him make payments to me rather than the bank. I, too, am not one to pay interest if I can help it. If he defaults, he's my son. I just won't buy him another vehicle! Or maybe he'll get into the same habit of saving money the same way I did. Like JohnFx said, money loaned to family should be regarded as a gift, otherwise you'll end up losing your money AND your family member! Hope some of this helps you make your decision. |
Capital gains on no-dividend stocks - a theoretical question | Berkshire Hathaway would be a good example of a company that has yet to pay dividends, yet is a highly valued stock. A couple of key points here to note is how on the first hand you have that the dividend policy will never change, yet couldn't one argue that there will always be new investors wanting more shares and thus the price keeps going up until someone gains control and decides to issue dividends? I'm just pointing out how on the one hand you are claiming a never changing and yet on the other thinking there will be a termination when the reality is that unless there is a zombie apocalypse of some form, life will continue and there will be new people to want to buy the stock and some people be willing to sell at the new prices. |
Pros & cons in Hungary of investing retirement savings exclusively in silver? What better alternatives, given my concerns? | This sound like a very bad idea. If you invest exclusively in silver, your investment is not diversified in any way. This is what I would call risky. Have a look at index funds and ETFs and build a diversified portfolio. It does not take much time, and you don't need to let it do by someone else. They are risky too, but I see "silver only" as much riskier. You reduce the risk by holding on to the funds for a long time. |
How should I handle taxes for Minecraft server donations? | Its is considered a "hobby" income, and you should be reporting it on the 1040 as taxable income. The expenses (what you pay) are hobby expenses, and you report them on Schedule A (if you itemize). You can only deduct the hobby expenses to the extent of your hobby income, and they're subject to the 2% AGI threshold. |
Buy index mutual fund or build my own? | If you are a "small" investor (namely, not an accredited investor), then the transaction costs (commissions) for purchasing the stocks while attempting to duplicate DJIA will defeat any benefit. My personal preference is to purchase mutual funds rather than ETFs. |
ETF's for early retirement strategy | This is the chart going back to the first full year of this fund. To answer your question - yes, a low cost ETF or Mutual fund is fine. Why not go right to an S&P index? VOO has a .05% expense. Why attracted you to a choice that lagged the S&P by $18,000 over this 21 year period? (And yes, past performance, yada, yada, but that warning is appropriate for the opposite example. When you show a fund that beat the S&P short term, say 5 years, its run may be over. But this fund lagged the S&P by a significant margin over 2 decades, what makes you think this will change? |
I file 83(b) election, but did't include a copy of it in that year’s tax return | I've consulted with 5-6 accountants and people who've had the issue before. The advice I received boils down to: "If you do not attach your 83b with your personal tax return it is not effective. However you can still correct the requirement to file it along with your tax return, because you are within the 3 year window of when the return was originally due." So you can amend your return/file it late within a certain window and things should be OK. The accountants that have confirmed this are Vanessa Kruze, Wray Rives and Augie Rakow - all of them corporate and credible accountants. You also need to keep onto the confirmation the IRS sent you in case of an audit. There is nothing on IRS.gov about attaching your 83b on a filed late or amended return but those accountants are people who say they've seen it happen frequently, have consulted with the IRS for solutions and that's the one they'd advise one to do in such situation. disclaimer: I am not a CPA |
Buying under my bid price | It definitely depends on the exchange you are trading on. I'm not familiar with Scottrade, but a standard practice is to fulfill limit orders in the order they are placed. Most of the time, you wouldn't see stocks trade significantly under your bid price, but since penny stocks are very volatile, it's more likely their price could drop quickly past your bid and then return above it while only fulfilling a portion of the orders placed. Example 1. Penny stock priced at $0.12 2. Others place limit orders to buy at $0.10 3. You place limit order to buy at $0.10 4. Stock price drops to $0.07 and some orders are filled (anything $0.07 or higher) based on a first-come first-served basis 5. Due to the increase in purchases of the penny stock, the price rises above $0.10 before your order is filled ***EDIT*** - Adding additional clarification from comment section. A second example If the price drops from $0.12 to $0.07, then orders for all prices from $0.07 and above will start to be filled from the oldest order first. That might mean that the oldest order was a limit buy order for 100 shares at $0.09, and since that is above the current ask price, it will be filled first. The next order might be for 800 shares at $0.07. It's possible for a subset of these to be filled (let's say 400) before the share's price increases from the increased demand. Then, if the price goes above $0.10, your bid will not be filled during that time. |
Why sometimes payable date is BEFORE the ex-dividend date? | Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July. |
Do I need to write the date on the back of a received check when depositing it? | Changed to answer match the edited version of the question No, you do not need to write the date of your endorsement, but you can choose to do so if you want to. The bank stamp on the back will likely have the date and perhaps even the exact time when the check was deposited. The two lines are there in case you want to write something like "For deposit only to Acct# uvwxyz" above your signature (always a good idea if you are making the deposit by sending the paper check (with or without a deposit slip) by US mail or any other method that doesn't involve you handing the check to a bank teller). If you are wanting to get encash the check, that is, get cash in return for handing the check over to the bank instead of depositing the check in your account, then the rules are quite a bit different. |
Online Foreign Exchange Brokerages: Which ones are good & reputable for smaller trades? | For "smaller trades", I'm not sure you can beat FXCM.com, a large, dedicated FX trading shop with extremely tight spreads, and a "Micro" account that you can open for as little as $25(US). Their "main" offering has a minimum account size of $2k (US), but recommends an account size of $10k or more. But they also have a "micro" account, which can be opened for as little as $25, with a $500 or higher recommended size. I haven't used them personally, but they're well known in the discount FX space. One strong positive indicator, in my opinion, is that they sell an online FX training course for $19.99. Why is that positive? It means that their margins on your activity are small, and they're not trying to get you "hooked". If that were not the case, they'd give the course away, since they'd be able to afford to, and they would expect to make so much of your subsequent activity. They do have some free online materials, too, but not the video stuff. Another plus is that they encourage you to use less leverage than they allow. This does potentially serve their interests, by getting more of your deposits with them, but a lot of FX shops advertise the leverage to appeal to users' hope to make more faster, which isn't a great sign, in my opinion. Note that the micro account has no human support; you can only get support via email. On the other hand, the cost to test them out is close to nil; you can literally open an account for $25. |
How to calculate money needed for bills, by day | I think you might benefit from adopting a zero-sum budget, in which you plan where each dollar will be spent ahead of time, rather than simply track spending or worry about the next expense. Here's a pretty good article on the subject: How and Why to Use a Zero-Sum Budget. This is the philosophy behind a popular budgeting tool You Need a Budget, I am not advocating the tool, but I am a fan of the idea that a budget is less about tracking spending and more about planning spending. That said, to answer your specific question, one method for tracking your min-needed for upcoming expenses would be to record the date, expense, amount due, and amount paid as shown here: Then the formula to calculate the min-needed (entered in E1 and copied down) would be: As you populate amounts paid, the MinNeeded is adjusted for all subsequent rows. You could get fancier and only populate the MinNeeded field on dates where an expense is due using IF(). |
Buy home and leverage roommates, or split rent? | ...instead of all of us draining our money into a landlord... Instead, you are suggesting that still everyone (except you) will drain their money into a landlord, just that now the landlord is you. I guess what that really means is that you will need to have landlord tenant agreements between you and your roommates. When things break or need replacing you'll have to foot the bill and as your tenants, your "roomies" might not be too forgiving when things need fixing. When the fridge breaks down, you'll have to buy a new one immediately. Yard work is your sole responsibility, unless you offer discounted rent or other perks. What about service bills: energy, water, sewage, internet, television, etc? |
Do I have to pay taxes on income from my website or profits? | Income is income... it depends how it's structured.. personal or corporate.. but still you need to pay taxes... if you get audited, the tax man could look at your bank statements and ask, "where is this money coming from" |
Is there a dollar amount that, when adding Massachusetts Sales Tax, precisely equals $200? | Don't worry about it. The State doesn't care about rounding error. All you need to do is say "We charge our prices with tax included" - you know, like carnivals and movie theaters. Then follow the procedures your state specifies for computing reportable tax. Quite likely it wants your pre-tax sales total for the reporting period. To get that, total up your gross sales that you collected, and divide by (1 + tax rate). Just like DJClayworth says, except do it on total sales instead of per-item. If you need to do the split per-transaction for Quickbooks or something, that's annoying. What Quickbooks says will be pennies off the method I describe above. The state don't care as long as it's just pennies, or in their favor. |
Trading : how to deal with crashes (small or big) | caveat: remember that complex derivatives can be very bad for your wealth (even if you FULLY understand them). |
Wardrobe: To Update or Not? How-to without breaking the bank | The best way to save on clothes is up to you. I have friends who save all year for two yearly shopping trips to update anything that may need updating at the time. By allowing themselves only two trips, they control the money spent. Bring it in cash and stop buying when you run out. On the other hand in my family we shop sales. When we determine that we need something we wait until we find a sale. When we see an exceptionally good sale on something we know we will need (basic work dress shoes, for example), we'll purchase it and save it until the existing item it is replacing has worn out. Our strategy is to know what we need and buy it when the price is right. We tend to wait on anything that isn't on sale until we can find the right item at a price we like, which sometimes means stretching the existing piece of clothing it is replacing until well after its prime. If you've got a list you're shopping from, you know what you need. The question becomes: how will you control your spending best? Carefully shopping sales and using coupons, or budgeting for a spree within limits? |
Recovering over-contribution to Social Security between two employers? | This is a common occurrence when somebody has multiple jobs in one year. The employer can't know if you have reached the annual limit. They know to stop when you have hit the maximum for their company, but don't have information on the other jobs. In fact the IRS doesn't let them factor in the other jobs. They have to keep making their payment until you hit the max for their company. When you fill out the 1040 there will be a line that checks that the total social security amount for each person was not over the annual limit. The extra will be refunded when you file your taxes. In the future if this happens again you can adjust your withholding to minimize the overage. For the example given in the question to get the 4K extra sooner, increase the number of allowances on the W-4. You can under withhold federal income tax because you will over withhold social security tax. |
How To Assign Payments Received Properly In GnuCash? | When I receive a check from a customer whom I previously sent an invoice, I go to the customer report for that customer, click on the link "Invoice" for that invoice, then click on the Pay Invoice button (very far right side). I then do a customer report and see that there is no balance (meaning all the invoices have been paid). I don't process invoices using the same method you do. Instead I go to Business -> Customer -> Process Payment. From there I can select the applicable customer, and a list of unpaid invoices will come up. I've never experienced the issue you've described. On a related topic: are you posting your invoices? From experience that has caused issues for me; when you post the invoice it should show up in your Accounts Receivable (or whichever account you've designated), and after you process the payment the A/R should go down accordingly. When posting your invoice, you specify which account it gets posted to: So that account should show a balance once you have posted it: Then, when a client pays you, your cash will go up, and A/R will go down. |
If early exercise is a bad idea, why American option is more expensive than European [duplicate] | There are a few situations in which it may be advantageous to exercise early. Wikipedia actually has a good explanation: Option Style, Difference in value To account for the American's higher value there must be some situations in which it is optimal to exercise the American option before the expiration date. This can arise in several ways, such as: An in the money (ITM) call option on a stock is often exercised just before the stock pays a dividend that would lower its value by more than the option's remaining time value. A put option will usually be exercised early if the underlying asset files for bankruptcy.[3] A deep ITM currency option (FX option) where the strike currency has a lower interest rate than the currency to be received will often be exercised early because the time value sacrificed is less valuable than the expected depreciation of the received currency against the strike. An American bond option on the dirty price of a bond (such as some convertible bonds) may be exercised immediately if ITM and a coupon is due. A put option on gold will be exercised early when deep ITM, because gold tends to hold its value whereas the currency used as the strike is often expected to lose value through inflation if the holder waits until final maturity to exercise the option (they will almost certainly exercise a contract deep ITM, minimizing its time value).[citation needed] |
Do credit ratings (by Moody's, S&P, and Fitch) have any relevance? | I like Muro questions! No, I don't think they do. Because for me, as a personal finance investor type just trying to save for retirement, they mean nothing. If I cannot tell what the basic business model of a company is, and how that business model is profitable and makes money, then that is a "no buy" for me. If I do understand it, they I can do some more looking into the stock and company and see if I want to purchase. I buy index funds that are indexes of industries and companies I can understand. I let a fund manager worry about the details, but I get myself in the right ballpark and I use a simple logic test to get there, not the word of a rating agency. If belong in the system as a whole, I could not really say. I could not possibly do the level of accounting research and other investigation that rating agencies do, so even if the business model is sound I might lose an investment because the company is not an ethical one. Again, that is the job of my fund manager to determine. Furthermore and I mitigate that risk by buying indexes instead of individual stock. |
Are capitalization rate and net profit margin the same thing? | Capitalization rate and "Net Profit margin" are two different things. In Capitalization rate note that we are taking the "total value" in the denominator and in Net profit margin we are taking "Revenue/Sales". Capitalization Rate: Capitalization Rate = Yearly Income/Total Value For example (from Investopedia: ) if Stephane buys a property that will generate $125,000 per year and he pays $900,000 for it, the cap rate is: 125,000/900,000 = 13.89%. Net Profit margin: Net Profit margin = Net Profit/Revenue For example (from finance formulas): A company's income statement shows a net income of $1 million and operating revenues of $25 million. By applying the formula, $1 million divided by $25 million would result in a net profit margin of 4%. Although the formula is simplistic, applying the concept is important in that 4% of sales will result in after tax profit. |
Is an analyst's “price target” assumed to be for 12 months out? | I wouldn't put too much stock in the guidance generically... it's more a measure of confidence in the company. When you listen to the earnings calls and start following a particular analyst, you'll understand where they come from when they kick out a number. |
What is the easiest way to back-test index funds and ETFs? | check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills |
Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country? | I believe that tax will be withheld (at 30%?) on dividends paid to non-residents. You can claim it back if your country has a tax treaty with the USA, but you will need to file. You probably also need to file a W-series withholding form (eg a W9-BEN). Interesting question. I would like to hear a more definitive answer. |
One company asks for picture of my debit card | Believe it or not, what they're asking you is not as unusual as you might think. Our company sells a tremendous amount of expensive merchandise over the Internet, and whenever there's something odd or suspicious about the transaction, we may ask the customer to provide a picture of the card simply to prove they have physical possession of it. This is more reassurance to us (to the extent that's possible) that the customer isn't using a stolen card number to order stuff. It doesn't help too much, but if the charge is disputed, at least we have something to show we made reasonable efforts to verify the ownership of the card. I think it's pretty thin, but that's what my employer does. |
Should I take contributions out of my Roth IRA to live off of? | That's up to you, but I wouldn't play around with my retirement money if I was in your situation. Your earning potential during your retirement years will likely be at its nadir. Do you really want to risk being forced to be a Wal-Mart greeter when you are 80? Also, considering your earning potential now is probably at or near the peak, your opportunity cost for each hour of your life is much higher now than it will be later. So ultimately you'd be working a little harder now or a lot harder later for less money. |
Can I withdraw from my Roth IRA retirement account to fund a startup? | Yes, it is possible to withdraw money from your Roth IRA before retirement (but I wouldn't necessarily advise you to do so.) Here's the good news, and the bad news: The good news: Unlike a traditional IRA, money contributed to a Roth IRA is done so on an after-tax basis, meaning you don't benefit from a tax deduction on contributions. So, the money you withdraw from your Roth IRA will not be taxed entirely as ordinary income. In fact, you are allowed to withdraw the amount of your original contributions (also known as basis) without any taxes or penalties. Let's imagine you originally deposited $9000 of that current $10K total value – then in such a case, $9000 could be withdrawn tax and penalty free. The bad news: When it comes to the investment earnings – the other $1000 in my example – it's a different story: Since you wouldn't be age 59 1/2 at the time of withdrawal, any money taken out beyond your original contributions would be considered a non-qualified withdrawal and subject to both ordinary income taxes plus a 10% early withdrawal penalty. Ouch! Perhaps you might want to restrict your withdrawal to your original contributions. I would imagine if you've had the account for such a short period of time that much or all of your account value is original contributions anyway. A good article about the rules for early IRA withdrawals is About.com's Tax Penalty for Early Distribution of Retirement Funds. Note: If your Roth IRA funds were the result of a rollover from another account type, other rules may apply. See Roth IRA (Wikipedia) for more detail; search for "rollover". Regarding the withdrawal process itself and the timing, you should check with your account custodian on how to proceed. |
Reporting software subscriptions | Generally prepaid services should be capitalized over the period prepaid. But if it is up to a year - you can just expense them. As to the technicalities - you can contact Intuit support, but you should be able to put it in the same area where you put all your other business expenses. If you're a sole proprietor - that would be Schedule C. |
What is a “fiat” currency? Are there other types of currency? | In short. A fiat currency is money that has value only because (usually) a government says it does. A counter example (non-fiat currency) is a gold coin that has intrinsic value usually because it is made of valuable materials that people would trade goods/services. That is the value comes from what you are holding more than what it represents. |
Should I avoid credit card use to improve our debt-to-income ratio? | For scoring purposes, having a DTI between 1-19% is ideal. From Credit Karma: That being said, depending on the loan type you looking at receiving (FHA, VA, Conventional, etc), there are certain max DTIs that you want to stay away from. As a rule, for VA, you want to try to stay away from 41% DTI. Exceptions are made for people with sufficient funds in the bank (3-9 months) to go to higher DTIs. If you keep a 19% utilization overall, that will get you a higher score but it will also show that you have a monthly payment on a particular revolving credit account. While the difference between 729 and 745 seems like a lot of points, there are rules as to how the interest rates are determined. So you will find that many banks have the same or similar rates due to recent legislation in Dodd-Frank. In the days of subprime mortgages, this was not the case. Adjustable rate mortgages did not necessarily go away, the servicer just has to make sure that the buyer can weather the full amount once it reaches maturity, not the lower amount. That is what got a lot of people in trouble. From "how interest rates are set": Before quoting you an interest rate, the loan officer will add on how much he and his branch want to earn. The branch or company sets a policy on how little that can be (the minimum amount the loan officer adds on to his cost) but does not want to overcharge borrowers either (so they set a maximum the loan officer can charge) Between that minimum and maximum, the loan officer has a great deal of flexibility. For example, say the loan officer decides he and his branch are going to earn one point. When you call and ask for a rate quote, he will add one point to the cost of the loan and quote you that rate. According to the rate sheet above, seven percent will cost you zero points. Six and three-quarters percent will cost you one point. In our example, at 7.125% the loan officer and branch would earn one point and have some money left over. This could be used to pay some of the fees (processing, documents, etc), which is how you get a "no fees -no points" mortgage. You just pay a higher interest rate. Where this scoring helps you is in credit card interest rates and auto loan and personal loan rates, which have different rate structures. My personal opinion is to avoid the use of the credit cards. Playing games to try to maximize your score in this situation won't help you when you are talking about 20 points potentially. If you were at the bottom level and were trying to meet a minimum score to qualify, then I would recommend you try to game this scoring system. Take the extra money you would put on a credit card and save it for housing expenses. Taking the Dave Ramsey approach, you should have at least $1000 in emergency funds as most problems you encounter will be less than $1000. That advice rings true. |
How do euro hedged index funds work? | When you invest in an S&P500 index fund that is priced in USD, the only major risk you bear is the risk associated with the equity that comprises the index, since both the equities and the index fund are priced in USD. The fund in your question, however, is priced in EUR. For a fund like this to match the performance of the S&P500, which is priced in USD, as closely as possible, it needs to hedge against fluctuations in the EUR/USD exchange rate. If the fund simply converted EUR to USD then invested in an S&P500 index fund priced in USD, the EUR-priced fund may fail to match the USD-priced fund because of exchange rate fluctuations. Here is a simple example demonstrating why hedging is necessary. I assumed the current value of the USD-priced S&P500 index fund is 1,600 USD/share. The exchange rate is 1.3 USD/EUR. If you purchase one share of this index using EUR, you would pay 1230.77 EUR/share: If the S&P500 increases 10% to 1760 USD/share and the exchange rate remains unchanged, the value of the your investment in the EUR fund also increases by 10% (both sides of the equation are multiplied by 1.1): However, the currency risk comes into play when the EUR/USD exchange rate changes. Take the 10% increase in the price of the USD index occurring in tandem with an appreciation of the EUR to 1.4 USD/EUR: Although the USD-priced index gained 10%, the appreciation of the EUR means that the EUR value of your investment is almost unchanged from the first equation. For investments priced in EUR that invest in securities priced in USD, the presence of this additional currency risk mandates the use of a hedge if the indexes are going to track. The fund you linked to uses swap contracts, which I discuss in detail below, to hedge against fluctuations in the EUR/USD exchange rate. Since these derivatives aren't free, the cost of the hedge is included in the expenses of the fund and may result in differences between the S&P500 Index and the S&P 500 Euro Hedged Index. Also, it's important to realize that any time you invest in securities that are priced in a different currency than your own, you take on currency risk whether or not the investments aim to track indexes. This holds true even for securities that trade on an exchange in your local currency, like ADR's or GDR's. I wrote an answer that goes through a simple example in a similar fashion to the one above in that context, so you can read that for more information on currency risk in that context. There are several ways to investors, be they institutional or individual, can hedge against currency risk. iShares offers an ETF that tracks the S&P500 Euro Hedged Index and uses a over-the-counter currency swap contract called a month forward FX contract to hedge against the associated currency risk. In these contracts, two parties agree to swap some amount of one currency for another amount of another currency, at some time in the future. This allows both parties to effectively lock in an exchange rate for a given time period (a month in the case of the iShares ETF) and therefore protect themselves against exchange rate fluctuations in that period. There are other forms of currency swaps, equity swaps, etc. that could be used to hedge against currency risk. In general, two parties agree to swap one quantity, like a EUR cash flow, payments of a fixed interest rate, etc. for another quantity, like a USD cash flow, payments based on a floating interest rate, etc. In many cases these are over-the-counter transactions, there isn't necessarily a standardized definition. For example, if the European manager of a fund that tracks the S&P500 Euro Hedged Index is holding euros and wants to lock in an effective exchange rate of 1.4 USD/EUR (above the current exchange rate), he may find another party that is holding USD and wants to lock in the respective exchange rate of 0.71 EUR/USD. The other party could be an American fund manager that manages a USD-price fund that tracks the FTSE. By swapping USD and EUR, both parties can, at a price, lock in their desired exchange rates. I want to clear up something else in your question too. It's not correct that the "S&P 500 is completely unrelated to the Euro." Far from it. There are many cases in which the EUR/USD exchange rate and the level of the S&P500 index could be related. For example: Troublesome economic news in Europe could cause the euro to depreciate against the dollar as European investors flee to safety, e.g. invest in Treasury bills. However, this economic news could also cause US investors to feel that the global economy won't recover as soon as hoped, which could affect the S&P500. If the euro appreciated against the dollar, for whatever reason, this could increase profits for US businesses that earn part of their profits in Europe. If a US company earns 1 million EUR and the exchange rate is 1.3 USD/EUR, the company earns 1.3 million USD. If the euro appreciates against the dollar to 1.4 USD/EUR in the next quarter and the company still earns 1 million EUR, they now earn 1.4 million USD. Even without additional sales, the US company earned a higher USD profit, which is reflected on their financial statements and could increase their share price (thus affecting the S&P500). Combining examples 1 and 2, if a US company earns some of its profits in Europe and a recession hits in the EU, two things could happen simultaneously. A) The company's sales decline as European consumers scale back their spending, and B) the euro depreciates against the dollar as European investors sell euros and invest in safer securities denominated in other currencies (USD or not). The company suffers a loss in profits both from decreased sales and the depreciation of the EUR. There are many more factors that could lead to correlation between the euro and the S&P500, or more generally, the European and American economies. The balance of trade, investor and consumer confidence, exposure of banks in one region to sovereign debt in another, the spread of asset/mortgage-backed securities from US financial firms to European banks, companies, municipalities, etc. all play a role. One example of this last point comes from this article, which includes an interesting line: Among the victims of America’s subprime crisis are eight municipalities in Norway, which lost a total of $125 million through subprime mortgage-related investments. Long story short, these municipalities had mortgage-backed securities in their investment portfolios that were derived from, far down the line, subprime mortgages on US homes. I don't know the specific cities, but it really demonstrates how interconnected the world's economies are when an American family's payment on their subprime mortgage in, say, Chicago, can end up backing a derivative investment in the investment portfolio of, say, Hammerfest, Norway. |
Calculating profits on a covered call. What method do you use? | yes, you are double counting. Your profit is between ($7.25 and $8) OR ($7.75 and $8.50). in other words, you bought the stock at $7.75 and sold at $8.00 and made $0.50 on top. Profit = $8.00-$7.75+$0.50 (of course all this assumes that the stock is at or above $8.00 when the option expires. If it's below, then your profit = market price - $7.75 + $0.50 by the way the statement won't call me away until the stock reaches $8.50 is wrong. They already paid $0.50 for the right to buy the stock at $8.00. If the stock is $8.01 on the day of expiration your options will be executed(automatically i believe). |
Table of how many years it takes to make a specified return on the stock market? | Well depends but "on average" the stock market has historically returned somewhere around 10% per year. Note, this can vary wildly from year to year see http://en.wikipedia.org/wiki/S%26P_500#Market_statistics So it would be roughly 2.8 years to get your 30% if you happen to get the average market return for those 3 years, but the chances of that happening exactly are slim to none. You could end up with +50% or -30% over that ~3 year period of time - so the calculation doesn't do you that much good for that short period of time, but if you are talking a span of 30 years then you could plan using that as a very rough ballpark. Good rule of thumb is you shouldn't put any money in the stock market you think you will need anytime in the next 5 years. Formula to figure out total gain would be Principal x (1+ rate of return) ^ years |
Credit card closed. Effect on credit score (USA) | So My question is. Is my credit score going to be hit? Yes it will affect your credit. Not as much as missing payments on the debt, which remains even if the credit line is closed, and not as much as missing payments on other bills... If so what can I do about it? Not very much. Nothing worth the time it would take. Like you mentioned, reopening the account or opening another would likely require a credit check and the inquiry will add another negative factor. In this situation, consider the impact on your credit as fact and the best way to correct it is to move forward and pay all your bills on time. This is the number one key to improving credit score. So, right now, the key task is finding a new job. This will enable you to make all payments on time. If you pay on time and do not overspend, your credit score will be fine. Can I contact the creditors to appeal the decision and get them to not affect my score at the very least? I know they won't restore the account without another credit check). Is there anything that can be done directly with the credit score companies? Depending on how they characterize the closing of the account, it may be mostly a neutral event that has a negative impact than a negative event. By negative events, I'm referring to bankruptcy, charge offs, and collections. So the best way to recover is to keep credit utilization below 30% and pay all your bills and debt payments on time. (You seem to be asking how to replace this line of credit to help you through your unemployment.) As for the missing credit line and your current finances, you have to find a way forward. Opening new credit account while you're not employed is going to be very difficult, if not impossible. You might find yourself in a situation where you need to take whatever part time gig you can find in order to make ends meet until your job search is complete. Grocery store, fast food, wait staff, delivery driver, etc. And once you get past this period of unemployment, you'll need to catch up on all bills, then you'll want to build your emergency fund. You don't mention one, but eating, paying rent/mortgage, keeping current on bills, and paying debt payments are the reasons behind the emergency fund, and the reason you need it in a liquid account. Source: I'm a veteran of decades of bad choices when it comes to money, of being unemployed for periods of time, of overusing credit cards, and generally being irresponsible with my income and savings. I've done all those things and am now paying the price. In order to rebuild my credit, and provide for my retirement, I'm having to work very hard to save. My focus being financial health, not credit score, I've brought my bottom line from approximately 25k in the red up to about 5k in the red. The first step was getting my payments under control. I have also been watching my credit score. Two years of on time mortgage payments, gradual growth of score. Paid off student loans, uptick in score. Opened new credit card with 0% intro rate to consolidate a couple of store line of credit accounts. Transferred those balances. Big uptick. Next month when utilization on that card hits 90%, downtick that took back a year's worth of gains. However, financially, I'm not losing 50-100 a month to interest. TLDR; At certain times, you have to ignore the credit score and focus on the important things. This is one of those times for you. Find a job. Get back on your feet. Then look into living debt free, or working to achieve financial independence. |
Stock not available at home country nor at their local market - where should I buy it | Theoretically, it shouldn't matter which one you use. Your return should only depend on the stock returns in SGD and the ATS/SGD exchange rate (Austrian Schillings? is this an question from a textbook?). Whether you do the purchase "through" EUR or USD shouldn't matter as the fluctuations in either currency "cancel" when you do the two part exchange SGD/XXX then XXX/ATS. Now, in practice, the cost of exchanging currencies might be higher in one currency or the other. Likely a tiny, tiny amount higher in EUR. There is some risk as well as you will likely have to exchange the money and then wait a day or two to buy the stock, but the risk should be broadly similar between USD and EUR. |
How can I stop a merchant from charging a credit card processing fee? | This might not be the answer you are looking for, but the alternative to "don't patronize these merchants" is this: DO patronize these merchants, and pay cash. Credit cards are convenient. (I use a credit card often.) However, there is no denying that they cost the merchants an incredible amount in fees, and that our entire economy is paying for these fees. The price of everything is more than it needs to be because of these fees. Yes, you get some money back with your rewards card, but the money you get back comes directly from the store you made the purchase with, and the reward is paid for by increasing the price of everything you buy. In addition, those among us that do not have the credit score necessary to obtain a rewards card are paying the same higher price for goods as the rest of us, but don't get the cash back reward. Honestly, it seems quite fair to me that only the people charging purchases to a credit card should have to pay the extra fee that goes along with that payment processing. If a store chooses to do that, I pay cash instead, and I am grateful for the discount. |
How much should I be contributing to my 401k given my employer's contribution? | First - yes, take the 2.5%. It could be better, but it's better than many get. Second - choosing from "a bunch" can be tough. Start by looking at the expenses for each. Read a bit of the description, if you can't tell your spouse what the fund's goal is, don't buy it. |
To pay off a student loan, should I save up a lump sum payoff payment or pay extra each month? | As someone in the very same position as you here is what I suggest: Have $1,000 for each possible large expense you currently have. For example, house, car, pregnant wife, etc. As someone who only has a car (living at home still) I only have $1,000 in my eFund (emergency fund). The ABSOLUTE rest of my money goes to paying off the loans as soon as possible. I mean ever single dollar. There is no point for investing unless you have a really good return on investment. I am not too sure how common returns of 6.8% are, but that seems above average. If in fact you're just stashing it in a bank account at ~1%, you're doing it wrong. Getting out of debt is not only just about the financial benefits but the emotional benefits too. It feels really nice to not owe anybody anything. Good luck man! P.S. Try using a tracker like ReadytoZero to show how much you're losing a day by remaining in debt. This will better help you understand if your investments are making you money or losing your money. |
Does a company's stock price give any indication to or affect their revenue? | Most of stock trading occurs on what is called a secondary market. For example, Microsoft is traded on NASDAQ, which is a stock exchange. An analogy that can be made is that of selling a used car. When you sell a used car to a third person, the maker of your car is unaffected by this transaction and the same goes for stock trading. Still within the same analogy, when the car is first sold, money goes directly to the maker (actually more complicated than that but good enough for our purposes). In the case of stock trading, this is called an Initial Public Offering (IPO) / Seasoned Public Offering (SPO), for most purposes. What this means is that a drop of value on a secondary market does not directly affect earning potential. Let me add some nuance to this. Say this drop from 20$ to 10$ is permanent and this company needs to finance itself through equity (stock) in the future. It is likely that it would not be able to obtain as much financing in this matter and would either 1) have to rely more on debt and raise its cost of capital or 2) obtain less financing overall. This could potentially affect earnings through less cash available from financing. One last note: in any case, financing does not affect earnings except through cost of capital (i.e. interest paid) because it is neither revenue nor expense. Financing obtained from debt increases assets (cash) and liabilities (debt) and financing obtained from stock issuance increases assets (cash) and shareholder equity. |
Should I buy a house because Mortgage rates are low | How can people afford 10% mortgage? Part of the history of housing prices was the non-bubble component of the bubble. To be clear, there was a housing bubble and crash. Let me offer some simple math to illustrate my point - This is what happened on the way down. A middle class earner, $60K/yr couple, using 25% of their income, the normal percent for a qualified mortgage, was able to afford $142K for the mortgage payment. At 10% fixed rate. This meant that after down payment, they were buying a house at $175K or so, which was above median home pricing. Years later, obviously, this wasn't a step function, with a rate of 4%, and ignoring any potential rise of income, as in real term, income was pretty stagnant, the same $1250/mo could pay for a $260K mortgage. If you want to say that taxes and insurance would push that down a bit, sure, drop the loan to $240K, and the house price is $300K. My thesis ('my belief' or 'proposal', I haven't written a scholarly paper, yet) is that the relationship between median home price and median income is easily calculated based on current 30 year fixed rate loans. For all the talk of housing prices, this is the long term number. Housing cannot exceed income inflation long term as it would creep up as a percent of income and slow demand. I'm not talking McMansion here, only the median. By definition, the median house targets the median earners, the middle class. The price increase I illustrate was just over 70%. See the famous Shiller chart - The index move from 110 to 199 is an 81% rise. I maintain, 70 of that 81 can be accounted for by my math. Late 80's, 1987 to be exact, my wife got a mortgage for 9%, and we thought that was ok, as I had paid over 13% just 3 years earlier. |
what is a mortgage gift exchange? | The issue is that the lender used two peoples income, debts, and credit history to loan both of you money to purchase a house. The only way to get a person off the loan, is to get a new loan via refinancing. The new loan will then be based on the income, debt, and credit history of one person. There is no paperwork you can sign, or the ex-spouse can sign, that will force the original lender to remove somebody from the loan. There is one way that a exchange of money between the two of you could work: The ex-spouse will have to sign paperwork to prove that it is not a loan that you will have to payback. I picked the number 20K for a reason. If the amount of the payment is above 14K they will have to document for the IRS that this is a gift, and the amount above 14K will be counted as part of their estate when they die. If the amount of the payment is less than 14K they don't even have to tell the IRS. If the ex-souse has remarried or you have remarried the multiple payments can be constructed to exceed the 14K limit. |
Why is auto insurance ridiculously overpriced for those who drive few miles? | First you have to understand that insurance is basically a social system, just with Shareholders. Insurance costs consist of 3 factors: Now, to encourage a low-risk behavior a separating factor is search in the vast amount of statistical data. Drivers experience, miles and type of car being the most common, but also other things like oldtimer-status etc. are possible. If it so happens that the 3-5000 miles driver do only in average have 80% of the damage-costs of a comparable group 5-8000 miles driver, you´ll get the 20% bonus on factor 1. So the answer is, it is not overpriced, there is just no linear relationship to mileage. You can´t divide your insureds in too many groups or you´ll miss the mutual aspect of insurance. If everybody just pays his own risk, he can just do so in his bank and save on overhead and profit. |
Pros/Cons of Buying Discounted Company Stock | Is this an employee stock purchase plan (ESPP)? If so, and there is no required holding period, selling right away is essentially a guaranteed bonus with minimal risk. One caveat is that sometimes it takes a while to actually receive the shares at your brokerage, and in the meantime your company may have an earnings report that could cause the share price to drop. If your discount is only 5%, for example, a bad earnings report could easily wipe that out. The only other cons I can think of is ESPP contributions being withheld from you for months (albeit for a virtually guaranteed return), and it complicates your taxes a bit. On the flip side, another pro is that after you sell the shares, you are more likely to invest that money rather than spend it. |
Why do banks finance shared construction as mortgages instead of financing it directly and selling the apartments in a building? | Why should a bank get into construction specifically? Lots of business opportunities require capital. Conceivably banks could build factories, develop consumer electronics, complete with SpaceX, etc. It's all capital in, profits out, with varying levels of risk and returns. There's nothing special about constructing apartments. The reason banks don't run businesses is because there are plenty of private firms that compete with each other for business. What's the chance that a bank, with all its bureaucracy, can deliver cheaper apartments than an apartment developer? Pretty low in fact, and that's why they would rather lend to an apartment developer rather than building the apartments themselves. Banks are in the business of competing with other banks. The main work they do is to sort out good investments from poor ones. And if they can do that just a bit more efficiently than their competitors, they make big bucks. For example, it might only take a few additional hours to better vet a deal worth millions. Whereas with an apartment building, you wouldn't be able to make that amount of money per hour even if the materials and labor cost you nothing. |
Why would someone buy a way out-of-the-money call option that's expiring soon? | Perhaps it was to close a short position. Suppose the seller had written the calls at some time in the past and maybe made a buck or two off of them. By buying the calls now they can close out the position and go away on vacation, or at least have one less thing they have to pay attention to. If they were covered calls, perhaps the buyer wants to sell the underlying and in order to do so has to get out of the calls. |
What can I replace Microsoft Money with, now that MS has abandoned it? | How complicated is your budget? We have a fairly in depth excel spreadsheet that does the trick for us. Lots of formulas and whatnot for calculating income, outgo, expected and actual expenses, expenses budgeted over time (i.e. planned expenses that are semi-annual or annual) as well as the necessary emergency funds based on expenses. Took me a few hours to initially create and many tweaks over months to get just right but it's reliable and we know we'll never lose support for it. I'd be willing to share it if desired, I'll just have to remove our personal finance figures from it first. |
Will a credit card issuer cancel an account if it never incurs interest? | I would think it extremely unlikely that an issuer would cancel your card for having an ADB of approximately zero. The issuer charges the vendor that accepts a card a percentage of the transaction (usually up to ~3%, AMEX is generally higher) - so they are making money even if you carry no balance on your card (the specific language for various vendor-side (acceptor) credit card agreements boils down to "we are essentially giving you, the vendor, a short-term loan and you will pay us for it). This why you see credit-card minimum purchase amounts at places like hot-dog stands - they're getting nailed on the percentage. This is also why, when given the choice between "Debit or Credit" for a particular card, I choose where to put the hit on the company I like less - the retailer or the bank. |
What's the difference between Market Cap and NAV? | At any given moment, one can tally the numbers used for NAV. It's math, and little more. The Market Cap, which as you understand is a result of share value. Share value (stock price) is what the market will pay today for the shares. It's not only based on NAV today, but on future expectations. And expectations aren't the same for each of us. Which is why there are always sellers for the buyers of a stock, and vice-versa. From your question, we agree that NAV can be measured, it's the result of adding up things that are all known. (For now, let's ignore things such as "goodwill.") Rarely is a stock price simply equal to the NAV divided by the number of shares. Often, it's quite higher. The simplest way to look at it is that the stock price not only reflects the NAV, but investors' expectations looking into the future. If you look for two companies with identical NAV per share but quite different share prices, you'll see that the companies differ in that one might be a high growth company, the other, a solid one but with a market that's not in such a growth mode. |
Is there any reason to buy shares before/after a split? | Assuming you plan to buy a whole number of shares and have a maximum dollar value you intend to invest, it may be better to wait for the split if the figures don't quite work out nicely. For example, if you are going to invest $1,000 and the stock pre-split is $400 and the split is 2 for 1, then you'd buy 2 shares before the split unless you have an extra $200 to add. Meanwhile, after the split you could buy 5 shares at $200 so that you invest all that you intend. Aside from that case, it doesn't really make a difference since the split is similar to getting 2 nickels for a dime which in each case is still a total value of 10 cents. |
How should we prioritize retirement savings, paying down debt, and saving for a house? | The advice to pay off near-7% debt is tough to argue against. That said, I'd project out a few years to understand the home purchase. Will you plan for the 20% down John recommends? The Crazy Truth about PMI can't be ignored. The way the math works, if you put 15% down, the PMI costs you so much, it's nearly like paying 20% interest on that missing 5%. If your answer is that you intend to save for the full downpayment, 20%, and can still knock off the student loan, by all means, go for it. I have to question the validity of "we will definitely be in a higher tax bracket when we retire." By definition, pretax deposits save tax at the marginal rate. i.e. If you are in the 25% bracket, a $1000 deposit saves you $250 in tax that year. But, withdrawals come at your average rate, i.e. your tax bill divided by gross income. There's the deductions for itemized deductions or the standard. Then 2 exemptions if you are married. Then the 10% bracket, etc. Today, a couple grossing $100K may be in the 25% bracket, but their average rate is 12%. I read this Q&A again and would add one more observation - Student Loans and Your First Mortgage is an article I wrote in response to a friend's similar question. With the OP having plan to buy a house, paying off the loan may be more costly in the long run. It may keep him from qualifying for the size mortgage he needs, or from having enough money to put 20% down, as I noted earlier. With finance, there are very few issues that are simply black and white. It's important to understand all aspects of one's finances to make any decision. Even if thee faster payoff is the right thing, it's not a slam-dunk, the other points should be considered. |
How do I adjust to a new social class? | Housing, eh? Housing costs are driven by salaries and land availability. Over in the Bay Area, $1500/mo for a nice 1-bedroom apartment is a good deal... but a decent software engineer with ~4 years' experience can get $120k, easily. The standard benchmark of affordability of housing is spending a third of your income on it a year: that guy can afford about $3,333/mo on housing. (If you don't fritter away the money and can keep your cost of living down and save money, you can really clean up, especially if you move elsewhere later.) So, to stop thinking about it in terms of dollar value, first try to think of it in terms of time: 33% of someone's salary or a third of their time at work going for housing is pretty nominal. Beyond that, think about it in terms of opportunity cost: If you saved that extra $20, what exactly would you use it for, and how much of that goal does it represent? |
Why do some companies offer 401k retirement plans? | The company itself doesn't benefit. In most cases, it's an expense as the match that many offer is going to cost the company some percent of salary. As Mike said, it's part of the benefit package. Vacation, medical, dental, cafeteria plans (i.e. both flexible spending and dependent care accounts, not food), stock options, employee stock purchase plans, defined contribution or defined benefit pension, and the 401(k) or 403(b) for teachers. Each and all of these are what one should look at when looking at "total compensation". You allude to the lack of choices in the 401(k) compared to other accounts. Noted. And that lack of choice should be part of your decision process as to how you choose to invest for retirement. If the fess/selection is bad enough, you need to be vocal about it and request a change. Bad choices + no match, and maybe the account should be avoided, else just deposit to the match. Note - Keith thanks for catching and fixing one typo, I just caught another. |
What traditionally happens to bonds when the stock market crashes? | It depends on why the stocks crashed. If this happened because interest rates shot up, bonds will suffer also. On the other hand, stocks could be crashing because economic growth (and hence earnings) are disappointing. This pulls down interest rates and lifts bonds. |
Is it ok to use a check without a pre-printed check number? | They are valid checks, but you're going to get hassled when you try to use them. There's a perception that people using starter checks are more likely to bounce or otherwise be troublesome. When more payments were made with checks, some vendors would not accept checks with low numbers either! Checks are very cheap to get printed these days, save yourself some trouble and get some printed. |
First concrete steps for retirement planning when one partner is resistant | I'd try to (gently) point out to your husband that what he thinks he wants to do now and what he might want to do in 20 or 30 years are not necessarily the same thing. When I was 40 I was thinking that I would work until I died. Now I'm 58 and have health problems and I'm counting down the days until I can retire. Even if your husband is absolutely certain that he will not change his mind about retiring in the next 20+ years, maybe something will happen that puts things beyond his control. Like medical problems, or simply getting too old to be able to work. Is he sure that he will be able to continue to put in 40 hour weeks when he's 80? 90? 100? Just because you put money away for retirement doesn't mean that you are required to retire. If you put money away, and when the time comes you don't want to retire, great! Now you can collect the profits on your investments in addition to collecting your salary and live very well. Or have a nice nest egg to leave to your children. Putting money away for retirement gives you options. Retirement doesn't necessarily mean sitting around the house doing nothing until you waste away and die of boredom. My parents were busier after they retired then when they were working. They spent a lot of time on charity work, visiting people in the hospital, working with their church, that sort of thing. Some people start businesses. As they have retirement income coming in, they don't have to worry about the business earning enough to provide a living, so they can do something they want to do because they think it's fun or contributes to society or whatever. Etc. |
Saving tax for long term stock investment capital gain by quiting my current job? | The capital gain is counted as part of your income. So with a million capital gain you will be in a high tax bracket, and have to pay the corresponding capital gains tax rate on the million. |
Taxing GoFundMe Donations | I'm going to post this as an answer because it's from the GoFundMe website, but ultimately even they say to speak with a tax professional about it. Am I responsible for taxes? (US Only) While this is by no means a guarantee, donations on GoFundMe are simply considered to be "personal gifts" which are not, for the most part, taxed as income in the US. However, there may be particular, case-specific instances where the income is taxable (dependent on amounts received and use of the monies, etc.). We're unable to provide specific tax advice since everyone's situation is different and tax rules can change on a yearly basis. We advise that you maintain adequate records of donations received, and consult with your personal tax adviser. Additionally, WePay will not report the funds you collect as earned income. It is up to you (and a tax professional) to determine whether your proceeds represent taxable income. The person who's listed on the WePay account and ultimately receives the funds may be responsible for taxes. Again, every situation is different, so please consult with a tax professional in your area. https://support.gofundme.com/hc/en-us/articles/204295498-Am-I-responsible-for-taxes-US-Only- And here's a blurb from LibertyTax.com which adds to the confusion, but enforces the "speak with a professional" idea: Crowdfunding services have to report to the IRS campaigns that total at least $20,000 and 200 transactions. Money collected from crowdfunding is considered either income or a gift. This is where things get a little tricky. If money donated is not a gift or investment, it is considered taxable income. Even a gift could be subject to the gift tax, but that tax applies only to the gift giver. Non-Taxable Gifts These are donations made without the expectation of getting something in return. Think of all those Patriots’ fans who gave money to GoFundMe to help defray the cost of quarterback Tom Brady’s NFL fine for Deflategate. Those fans aren’t expecting anything in return – except maybe some satisfaction -- so their donations are considered gifts. Under IRS rules, an individual can give another individual a gift of up to $14,000 without tax implications. So, unless a Brady fan is particularly generous, his or her GoFundMe gift won’t be taxed. Taxable Income Now consider that same Brady fan donating $300 to a Patriots’ business venture. If the fan receives stock or equity in the company in return for the donation, this is considered an investment and is not taxable . However, if the business owner does not offer stock or equity in the company, the money donated could be considered business income and the recipient would need to report it on a tax return. https://www.libertytax.com/tax-lounge/two-tax-rules-to-know-before-you-try-kickstarter-or-gofundme/ |
What's the catch in investing in real estate for rent? | There are those who are knowledgable in real estate who offer rules of thumb: Don't pay more that 50X the rent for the house. Here, $972 x 50 is $48600. Assume half the rent goes to expenses. So from $972, you net $486, and after that mortgage, you have $111 in profit. Zillow usually assumes 20% down, here $20K. So you are seeing a 6.67% return on your 20K. (Plus appreciation and principal paydown.) For the record, I just bought a 3 family, under renovation now. Expecting total cost to be $160K, and total rent $2500. I missed ratio a by a bit, but $1250 to go toward a $120K mortgage works out fine. $550 profit/mo on the 25% down ($40K). (By the way, a turnover of tenants can cost (a) a month of no rent, (b) a cost to the real estate agent, if you use one, and the cost to paint/repair. This is generally considered 10%. So if the 50% of rent seemed high, here's 10 of it.) |
Do stock prices drop due to dividends? | The Paragraph talks about dividends given by Mutual Funds. Say a fund has NAV of $ 10, as the value of the underlying security grows, the value of the fund would also grow, lets say it becomes $ 12 in 2 months. Now if the Mutual Fund decides to pay out a dividend of $ 1 to all unit holder, then post the distribution of dividend, the value of the Fund would become to $ 11. Thus if you are say investing on 1-April and know that dividends of $1 would be paid on 5-April [the divided distribution date is published typically weeks in advance], if you are hoping to make $1 in 5 days, that is not going to happen. On 6-April you would get $1, but the value of the fund would now be $11 from the earlier $12. This may not be wise as in some countries you would ending up paying tax on $1. Even in shares, the concept is similar, however the price may get corrected immediately and one may not actually see it going down by $1 due to market dynamics. |
Should I pay off my car loan within the year? | Credit reports have line items that, if all is well, say "paid as agreed." A car loan almost certainly gets reported. In your case it probably says the happy "paid as agreed." It will continue to say that if you pay it off in full. You can get the happy "paid as agreed" from a credit card too. You can get it by paying the balance by the due date every month, or paying the mininum, or anything in between, on time. But you'll blow less money in interest if you pay each bill in full each month. You don't have to carry a balance. In the US you can get a free credit report once a year from each of the three credit bureaus. Here's the way to do that with minimal upsell/cross-sell hassles. https://www.annualcreditreport.com/ In your situation you'd probably be smart to ask for a credit report every four months (from each bureau in turn) so you can see how things are going. They don't give you your FICO score for free, but you don't really care about that until you're going for a big loan, like for a condo. It might be good to take a look at one of those free credit reports real soon, as you prepare to close out your car loan. If you need other loans, consider working with a credit union. They sometimes offer better interest rates, and they often are diligent about making credit bureau reports for their good customers; they help you build credit. You mentioned wanting to cut back on insurance coverage. It's a worthy goal, but it's generally called "self-insuring" in the business. If you cancel your collision coverage and then wreck your car, you absorb the cost of replacing it. So think about your personal ability to handle that kind of risk. |
What exactly is a “derivative”? | A derivative in finance is simply any asset whose value is based on the value of another asset or based on the value of a group of assets. A derivative contract is a type of contract (usually a 'standardized contract') with specific payout instruction based on the price changes of a different asset. The basic idea is that it becomes easier to make a claim to an asset or property (and profit from this claim), without needing to physically transfer it (or even the title to said asset), and use much less capital to do so (reduce risk). They become problematic when multiple people may have claims to the real asset, or when the value of the derivatives changes very quickly or are hard to calculate. There are also liquidity problems the further you get from the real asset. This is not a problem for all kinds of derivatives contracts. And you must recognize that derivatives are used colloquially in a way that has nothing to do with reality to cause fear in people/investors that are not financially savvy. Many derivatives also have dubious or no economic purposes such that regulators don't allow them to be traded since they can't see how it is different from gambling. This is seen in financial markets that are less liberalized or cultures with puritanical backgrounds. Typically the trick is to convince regulators that the derivative or financial product helps with reducing risk and hedging and it will get approved. I've mentioned some terminology, but this depends specifically on what kind of derivatives contract you become interested in. Swaps, Credit Default Swaps, Futures, Options, Options on Futures, Leveraged Exchange Traded Funds, Inverse Leveraged Exchange Traded Funds, warrants, and more all have their own terminology. How to trade them in a simulation? It all depends on which financial product you really become interested in. |
How can I invest my $100? | Yes, it is. Got to start somewhere. Typically directly through a company itself. Check out this site that lists a bunch of them and their minimum requirements. Not many only accept $100 but there are a few. ie. ACTIVEnergy Income Fund, CIBC, COMPASS Income Fund, Suncor Energy Inc. and a few others. |
UK Contractor with Limited Company | I know a guy on a much higher rate than me, about £500 per day, and he claims to pay around 18% tax which has me bewildered He will be showing expenses, which are deductible. Check with your accountant about expenses, which can be legally claimed as expenses. This is the main benefit of operating through a limited company. Legtimate business expenses can be claimed, which you cannot do if you are a permanent employee. Your friend might also be claiming false expenses, with a shady accountant. If HMRC does decide to give a call, he might have to pay n times the money he has saved till now. And my suggestion is always ask your accountant first. He(she) knows the legal stuff, so he(she) would give you the legally correct options. If you aren't comfortable with him(her), you can always change accountants. holiday pay, sick pay and job security You miss those that is why you are paid at a rate much higher than an employee. benefit of a limited company You can arrange your salary to pay no PAYE and take the rest as dividends. You willn't have to pay PAYE on that. Secondly if you have a partner(s), all of you can be paid dividends without paying PAYE(if you don't cross the threshold). |
What one bit of financial advice do you wish you could've given yourself five years ago? | 2 things: |
How does one value Facebook stock as a potential investment? | To know if a stock is undervalued is not something that can be easily assessed (else, everybody would know which stock is undervalued and everybody will buy it until it reaches its "true" value). But there are methods to assess the value of a company, I think that the 3 most known methods are: If the assets of the company were to be sold right now and that all its debts were to be paid back right now, how much will be left? This remaining amount would be the fundamental value of your company. That method could work well on real estate company whose value is more or less the buildings that they own minus of much they borrowed to acquire them. It's not really usefull in the case of Facebook, as most of its business is immaterial. I know the value of several companies of the same sector, so if I want to assess the value of another company of this sector I just have to compare it to the others. For example, you find out that simiral internet companies are being traded at a price that is 15 times their projected dividends (its called a Price Earning Ratio). Then, if you see that Facebook, all else being equal, is trading at 10 times its projected dividends, you could say that buying it would be at a discount. A company is worth as much as the cash flow that it will give me in the future If you think that facebook will give some dividends for a certain period of time, then you compute their present value (this means finding how much you should put in a bank account today to have the same amount in the future, this can be done by dividing the amount by some interest rates). So, if you think that holding a share of a Facebook for a long period of time would give you (at present value) 100 and that the share of the Facebook is being traded at 70, then buy it. There is another well known method, a more quantitative one, this is the Capital Asset Pricing Model. I won't go into the details of this one, but its about looking at how a company should be priced relatively to a benchmark of other companies. Also there are a lot's of factor that could affect the price of a company and make it strays away from its fundamental value: crisis, interest rates, regulation, price of oil, bad management, ..... And even by applying the previous methods, the fundemantal value itself will remain speculative and you can never be sure of it. And saying that you are buying at a discount will remain an opinion. After that, to price companies, you are likely to understand financial analysis, corporate finance and a bit of macroeconomy. |
401k compound interest vs other compound interest | A 401K (pre-tax or Roth) account or an IRA (Deductible or Roth) account is a retirement account. Which means you delay paying taxes now on your deposits, or you avoid paying taxes on your earnings later. But a retirement account doesn't perform any different than any other account year-to-year. Being a retirement account doesn't dictate a type of investment. You can invest in a certificate of deposit that is guaranteed to make x% this year; or you can invest in stocks, bonds, mutual funds that infest in stocks or bonds. Those stocks and bonds can be growth focused, or income focused; they can be from large companies or small companies; US companies or international companies. Or whatever mix you want. The graph in your question shows that if you invest early in your adulthood, and keep investing, and you make the average return you should make more money than starting later. But a couple of notes: So to your exact questions: An S&P 500 investment should perform exactly the same this year if it is in a 401K, IRA, or taxable account With a few exceptions: Yes any investment can lose money. The last 6 months have been volatile and the last month and a half especially so. A retirement account isn't any different. An investment in mutual fund X in a retirement account is just as depressed a one in the same fund but from a taxable account. |
Do mutual fund companies deliberately “censor” their portfolios/funds? | Do mutual funds edit/censor underperforming investments to make their returns look better, and if so, is there any way one can figure out if they are doing it? No, that's not what the quote says. What the quote says is that the funds routinely drop investments that do not bring the expected return, which is true. That's their job, that is what is called "active management". Obviously, if you're measuring the fund by their success/failure to beat the market, to beat the market the funds must consistently select over-performers. No-one claims that they only select over-performers, but they select enough of them (or not...) for the average returns to be appealing (or not...) for the investors. |
Does it make sense to buy a house in my situation? | I think your best course of action depends on the likely outcome of the divorce proceedings. The alimony/child support payments are controlled externally. I don't like to plan around things that I have no control over. In your shoes, I would probably avoid buying until things are settled down. |
What's an Exchange-Traded Fund (ETF)? | Wikipedia has a fairly detailed explanation of ETFs. http://en.wikipedia.org/wiki/Exchange-traded_fund |
How to share income after marriage and kids? | Some basic thoughts, mostly on fairness. I guess the answer doesn't really fit this site, it's more about ethics, but this fits the question which isn't really just about money either. So when both work the same amount, it seems appropriate that both get the same mount of money, doesn't it? That is, the scheme of (as already contained in your question and in some other answers) is fair by this logic. Pay attention to hidden money: for example the one who works more for money might automatically get a pension funded this way. This is hidden money which already goes to only one partner, so when dividing equally, you'll need to take that into account (or just include "equal pensions for both" in the family's needs directly). |
Why is financial data of some public companies not available on Yahoo Finance? | In general, the short answer is to use SEDAR, the Canadian database that compiles financial statements for Canadian companies. The financial statements for Pacific Rubiales Energy Corp can be found here. The long answer is that the data might be missing because in Canada, each province has their own agency to regulate securities. Yahoo might not compile information from such a wide array of sources. If other countries also have a decentralized system, Yahoo might not take the time to compile financial information from all these sources. There are a myriad of other reasons that could cause this too, however. This is why SEDAR is useful; it 's the Canadian equivalent of the SEC's EDGAR database, and it maintains a sizeable database of financial statements. |
Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't | Time for a lawyer. Essentially, regardless of the situation "it's not right" for him to be paying the mortgage and only get half the value out of the equity in the house. All other things aside, no court I can think of would allow that. The "could happens" are many, but the most common include; Keep in mind that if he keeps paying the mortgage ling enough most courts will end up giving him ownership outright. Essentially, they will say he has already bought her out by paying her half of the debt. Unfortunately, any way he goes he is going to need to take action. When there is a missed mortgage payment, a bad tax year, or some other legal issue (some one is injured on the property), the last thing he is going to want is for the courts to decide the issue for him. For example, John breaks an arm while climbing a tree on the property line. John takes the owners of the property to court. "He" says "but my sister owns half" and the courts decide then and there that because he's been paying the mortgage alone he owns the house alone. Seems like a win, except now he owns the liability alone, and owns John $1,000,000 for a silly lawsuit alone. Point is this. Ownership of property comes with risks and responsibilities. "He" really needs to get those risks and responsibilities under control so he can mitigate them, or he could end up in a very nasty situation in the years to come. |
Why do P/E ratios for a particular industry tend to cluster around particular values? | This falls under value investing, and value investing has only recently picked up study by academia, say, at the turn of the millennium; therefore, there isn't much rigorous on value investing in academia, but it has started. However, we can describe valuations: In short, valuations are randomly distributed in a log-Variance Gamma fashion with some reason & nonsense mixed in. You can check for yourself on finviz. You can basically download the entire US market and then some, with many financial and technical characteristics all in one spreadsheet. Re Fisher: He was tied for the best monetary economist of the 20th century and created the best price index, but as for stocks, he said this famous quote 12 days before the 1929 crash: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929 EDIT Value investing has almost always been ignored by academia. Irving Fisher and other proponents of it before it was codified by Graham in the mid 20th century certainly didn't help with comments like the above. It was almost always believed that it was a sucker's game, "the bigger sucker" game to be more precise because value investors get destroyed during recession/collapses. So even though a recessionless economy would allow value investors and everyone never to suffer spontaneous collapses, value investors are looked down upon by academia because of the inevitable yet nearly always transitory collapse. This expresses that sentiment perfectly. It didn't help that Benjamin Graham didn't care about money so never reached the heights of Buffett who frequently alternates with Bill Gates as the richest person on the planet. Buffett has given much credibility, and academia finally caught on around in 2000 or so after he was proven right about a pending tech collapse that nearly no one believed would happen; at least, that's where I begin seeing papers being published delving into value concepts. If one looks harder, academia's even taken the torch and discovered some very useful tools. Yes, investment firms and fellow value investors kept up the information publishing, but they are not academics. The days of professors throwing darts at the stock listings and beating active managers despite most active managers losing to the market anyways really held back this side of academia until Buffett entered the fray and embarrassed them all with his club's performance, culminating in the Superinvestors article which is still relatively ignored. Before that, it was the obsession with beta, the ratio of a security's variance to its covariance to the market, a now abandoned theory because it has been utterly discredited; the popularizers of beta have humorously embraced the P/B, not giving the satisfaction to Buffet by spurning the P/E. Tiny technology firms receive ridiculous valuations because a long-surviving tiny tech firm usually doesn't stay small for long thus will grow at huge rates. This is why any solvent and many insolvent tech firms receive large valuations: risk-adjusted, they should pay out huge on average. Still, most fall by the wayside dead, and those 100 P/S valuations quickly crumble. Valuations are influenced by growth. One can see this expressed more easily with a growing perpetuity: Where P is price, i is income, r is the rate of return, and g is the growth rate of i. Rearranging, r looks like: Here, one can see that a higher P relative to i will dull the expected rate of return while a higher g will boost it. It's fun for us value investor/traders to say that the market is totally inefficient. That's a stretch. It's not perfectly inefficient, but it's efficient. Valuations are clustered very tightly around the median, but there are mistakes that even us little guys can exploit and teach the smart money a lesson or two. If one were to look at a distribution of rs, one'd see that they're even more tightly packed. So while it looks like P/Es are all over the place industry to industry, rs are much more well clustered. Tech, finance, and discretionaries frequently have higher growth rates so higher P/Es yet average rs. Utilities and non-discretionaries have lower growth rates so lower P/Es yet average rs. |
Why doesn't a mutual fund in my 401(k) have a ticker symbol? | That share class may not have a ticker symbol though "Black Rock MSCI ACWI ex-US Index" does have a ticker for "Investor A" shares that is BDOAX. Some funds will have multiple share classes that is a way to have fees be applied in various ways. Mutual fund classes would be the SEC document about this if you want a government source within the US around this. Something else to consider is that if you are investing in a "Fund of funds" is that there can be two layers of expense ratios to consider. Vanguard is well-known for keeping its expenses low. |
How much life insurance do I need? | After some thought, I follow Dave Ramsey's advice because it's simple and I can do the math in my head - no online calculator needed. :) You need Life Insurance if someone depends on your income. You can replace your income with a single lump sum of 8-10 times your current income where those who need your income, can get roughly your salary each year from the life insurance proceeds. |
Since many brokers disallow investors from shorting sub-$5 stocks, why don't all companies split their stock until it is sub-$5 | I do believe it comes down to listing requirements. That is getting very close to penny stock territory and typical delisting criteria. I found this answer on Ivestopedia that speaks directly the question of stock price. Another thought is that if everyone were to do it, the rules would change. The exchanges want to promote price appreciation. Otherwise, everything trades in a tight band and there is little point to the whole endeavor. Volatility is another issue that they are concerned about. At such low stock prices, small changes in stock prices are huge percentage changes. (As stated in that Ivestopedia answer, $0.10 swing in the price of a $1 stock is a 10% change.) Also, many fraudsters work in the area of penny stocks. No company wants to be associated with that. |
How do I track 401k rollovers in Quicken? | You definitely should NOT do what you are doing now (#2) since this is not a reflection of what actually is going on. (Unless you actually did transfer the equities themselves and not the cash.) Your first option is correct solution. As noted by mpenrow you need to make sure that the target account is also tax deferred. If that still doesn't work and there is a bug you should still do it this way anyway. If it messes up your tax planner just make sure to include a comment so that everyone knows what is really going on. When I have had issues like this in the past I always try to stick to whatever is the closest indication of what actually occurred. |
When a stock price rises, does the company get more money? | Seems like no one in this thread has heard of "treasury stocks", which indeed allow a company to own and sell its own stock. Think about it. When there is a stock buy-back funded by excess profits, where does that stock go? |
Is it a wise decision to sell my ESPP stock based on this situation? | ESPP tax treatment is complicated. If you received a discount on the purchase of your stock, that discount is taxable as ordinary income when you sell the stock. Any profit about the market value when the stock was purchased is taxed based upon the holding period of the stock. If you have held the stock less than a year, the profit is taxed at your marginal tax rate (ie taxed as ordinary income). If the stock is held for more than a year, it is taxed at a special capital gains tax rate, which ranges from 0-20% depending on your marginal tax rate (most people pay 15%). |
Why don't banks allow more control over credit/debit card charges? | Actually in Finland on some bank + debit/credit card + online retailer combinations you type in your card details as you normally do, but after clicking "Buy" you get directed to your own bank's website which asks you to authenticate yourself with online banking credentials. It also displays the amount of money and to which account it is being paid to. After authentication you get directed back to the retailer's website. Cannot say why banks in US haven't implemented this. |
Is Weiss Research, Inc. a legitimate financial research company? | It is a scam organization praying on fear of the simple minded. The facts Edelson presents are not accurate - http://www.sec.gov/litigation/admin/2006/ia-2525.pdf |
How to change a large quantity of U.S. dollars into Euros? | Be careful of transferring through the large banks. They may say no/low fees, but they hide their cut in the spread, or worsen the exchange rate, to their favor. Try: - http://fxglobaltransfer.oanda.com/ |
Can rent be added to your salary when applying for a mortgage? | The decision as to what counts as income is up to the bank. You'll need to ask them whether or not rental income can be included in the total. I can offer some anecdotal evidence: when I applied for a mortgage to buy my home, I already had a rental property with a buy-to-let mortgage on it. Initially the bank regarded that property as a liability, not an asset, because it was mortgaged! However, once I was able to show that there was a good history of receiving enough rent, they chose to ignore the property altogether -- i.e. it wasn't regarded as a liability, but it wasn't regarded as a source of income either. More generally, as AakashM says, residential mortgages are computed based on affordability, which is more than just a multiple of your salary. To answer your specific questions: Covered above; it's up to the bank. If you're married, and you don't have a written tenancy agreement, and you're not declaring the "rent" on your tax return, then it seems unlikely that this would be regarded as income at all. Conversely, if your partner is earning, why not put their name on the mortgage application too? Buy-to-let mortgages are treated differently. While it used to be the case that they were assessed on rental income only, nowadays lenders may ask for proof of the landlord's income from other sources. Note that a BTL cannot be used for a property you intend to live in, and a residential mortgage cannot be used for a property you intend to let to tenants -- at least, not without the bank's permission. |
Why do stock prices of retailers not surge during the holidays? | If you look at S&P 500's closing price for the first trading day on December and January for the last 20 years, you will see that for 10 of these years, stocks did better overall and for 10 others they did worse. Thus you can see that the price of stocks do no necessarily increase. You can play around with the data here |
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