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What kind of life insurance is cheaper? I'm not sure about term vs. whole vs. universal, etc | TL;DR: Only term is pure insurance and is the cheapest. The rest are mixtures of insurance and savings/investment. Typically the mixtures are not as efficient as doing it yourself, except that there can be tax advantages as well as the ability to borrow from your policy in some cases. |
What ways are there to invest in stocks, options, indexes, etc, and where should one start (what funds)? | I take the route of the tortoise. I subscribe to the adage that you invest in an excellent index fund like VFINX and forget about day trading and trying to make short term gains. Just like I would do at a casino I do gamble a bit for fun. Using etrade you can purchase some Vanguard or a billion of other things. I purchased some Apple, Google, Verizon, and Ford (when it was at 1.3) and all of those have been good investments. However, I don't invest the majority of my money in to individual stocks. I just do this with some 'play' money. After maxing out 401k, etc. I put away my 6 months of safety net in a money mark and put the rest in Vanguard. |
What's the folly with this stock selection strategy | You are probably going to hate my answer, but... If there was an easy way to ID stocks like FB that were going to do what FB did, then those stocks wouldn't exist and do that because they would be priced higher at the IPO. The fact is there is always some doubt, no one knows the future, and sometimes value only becomes clear with time. Everyone wants to buy a stock before it rises right? It will only be worth a rise if it makes more profit though, and once it is established as making more profit the price will be already up, because why wouldn't it be? That means to buy a real winner you have to buy before it is completely obvious to everyone that it is going to make more profit in the future, and that means stock prices trade at speculative prices, based on expected future performance, not current or past performance. Now I'm not saying past and future performance has nothing in common, but there is a reason that a thousand financially oriented websites quote a disclaimer like "past performance is not necessarily a guide to future performance". Now maybe this is sort of obvious, but looking at your image, excluding things like market capital that you've not restricted, the PE ratio is based on CURRENT price and PAST earnings, the dividend yield is based on PAST publications of what the dividend will be and CURRENT price, the price to book is based on PAST publication of the company balance sheet and CURRENT price, the EPS is based on PAST earnings and the published number of shares, and the ROI and net profit margin in based on published PAST profits and earnings and costs and number of shares. So it must be understood that every criteria chosen is PAST data that analysts have been looking at for a lot longer than you have with a lot more additional information and experience with it. The only information that is even CURRENT is the price. Thus, my ultimate conclusive point is, you can't based your stock picks on criteria like this because it's based on past information and current stock price, and the current stock price is based on the markets opinion of relative future performance. The only way to make a good stock pick is understand the business, understand its market, and possibly understand world economics as it pertains to that market and business. You can use various criteria as an initial filter to find companies and investigate them, but which criteria you use is entirely your preference. You might invest only in profitable companies (ones that make money and probably pay regular dividends), thus excluding something like an oil exploration company, which will just lose money, and lose it, and lose some more, forever... unless it hits the jackpot, in which case you might suddenly find yourself sitting on a huge profit. It's a question of risk and preference. Regarding your concern for false data. Google defines the Return on investment (TTM) (%) as: Trailing twelve month Income after taxes divided by the average (Total Long-Term Debt + Long-Term Liabilities + Shareholders Equity), expressed as a percentage. If you really think they have it wrong you could contact them, but it's probably correct for whatever past data or last annual financial results it's based on. |
I spend too much money. How can I get on the path to a frugal lifestyle? | As others have said getting on a written budget before each month starts is the most important part. Also, I'm a big fan of cash budgets as well. They aren't for everyone and they take a little getting used to, but once you get used to them you'll never want to go back. In a cash budget you take whatever you have budgeted for the month for each category and withdraw the amount needed from the bank. These go into an envelope for each category, i.e. food, clothes, entertainment, etc. If a 3 weeks into the month you run out of money in that envelope you are done spending money in that category. For example, if it's the food envelope and you run out it's time for you to start eating leftovers and whatever you've got in the pantry. You lose out on advantages like points gained on credit cards and whatnot but statistically people that spend cash spend much less overall and you get some enforced self control that you otherwise might not have. |
Why is the dominant investing advice for individuals to use mutual funds, exchanged traded funds (ETFs), etc | Why is that? With all the successful investors (including myself on a not-infrequent basis) going for individual companies directly, wouldn't it make more sense to suggest that new investors learn how to analyse companies and then make their best guess after taking into account those factors? I have a different perspective here than the other answers. I recently started investing in a Roth IRA for retirement. I do not have interest in micromanaging individual company research (I don't find this enjoyable at all) but I know I want to save for retirement. Could I learn all the details? Probably, as an engineer/software person I suspect I could. But I really don't want to. But here's the thing: For anyone else in a similar situation to me, the net return on investing into a mutual fund type arrangement (even if it returns only 4%) is still likely considerably higher than the return on trying to invest in stocks (which likely results in $0 invested, and a return of 0%). I suspect the overwhelming majority of people in the world are more similar to me than you - in that they have minimal interest in spending hours managing their money. For us, mutual funds or ETFs are perfect for this. |
What are the economic benefits of owning a home in the United States? | Is all interest on a first time home deductible on taxes? What does that even mean? If I pay $14,000 in taxes will My taxes be $14,000 less. Will my taxable income by that much less? If you use the standard deduction in the US (assuming United States), you will have 0 benefit from a mortgage. If you itemize deductions, then your interest paid (not principal) and your property tax paid is deductible and reduces your income for tax purposes. If your marginal tax rate is 25% and you pay $10000 in interest and property tax, then when you file your taxes, you'll owe (or get a refund) of $2500 (marginal tax rate * (amount of interest + property tax)). I have heard the term "The equity on your home is like a bank". What does that mean? I suppose I could borrow using the equity in my home as collateral? If you pay an extra $500 to your mortgage, then your equity in your house goes up by $500 as well. When you pay down the principal by $500 on a car loan (depreciating asset) you end up with less than $500 in value in the car because the car's value is going down. When you do the same in an appreciating asset, you still have that money available to you though you either need to sell or get a loan to use that money. Are there any other general benefits that would drive me from paying $800 in rent, to owning a house? There are several other benefits. These are a few of the positives, but know that there are many negatives to home ownership and the cost of real estate transactions usually dictate that buying doesn't make sense until you want to stay put for 5-7 years. A shorter duration than that usually are better served by renting. The amount of maintenance on a house you own is almost always under estimated by new home owners. |
Covered call when stock position is at a loss | It's unclear what you're asking. When I originally read your question, it seemed that you had closed out one options position and opened another. When I read your question the second time, it seemed that you were writing a second option while the first was still open. In the second case, you have one covered and one naked position. The covered call will expire worthless, the naked call will expire in the money. How your broker will resolve that is a question best left for them, but my expectation is that they will assign the non-worthless calls. Whereas, if both options expired in the money, you would be assigned and you would have to come up with the additional shares (and again, that depends on how your broker works). In general, for both cases, your net is the premiums you received, plus the difference between strike price and the price that you paid for the stock, minus any cost to close out the position. So whether you make a profit is very much dependent on how much you received for your premiums. Scenario #1: close first call, write second: Scenario #2: write covered + naked, one expires worthless Scenario #3: write covered + naked, both expire in the money Disclaimer: the SEC does not consider me a financial/investment advisor, so this is not financial/investment advice |
Buying from an aggressive salesperson | I often spend weeks or months (and sometimes even years) deciding whether to buy something. Certainly the dealer should recognize you by now if you take a third opportunity to look at the same instrument. You could politely remind him that you've twice declined his excellent prices. From there you can assert that you will purchase only when you are ready. |
How to find historical stock price for a de-listed or defunct company? | http://www.euroinvestor.com/exchanges/nasdaq/macromedia-inc/41408/history will work as DumbCoder states, but didn't contain LEHMQ (Lehman Brother's holding company). You can use Yahoo for companies that have declared bankruptcy, such as Lehman Brothers: http://finance.yahoo.com/q/hp?s=LEHMQ&a=08&b=01&c=2008&d=08&e=30&f=2008&g=d but you have to know the symbol of the holding company. |
A calculator that takes into account portfolio rebalancing? | Note that if 1) The stock prices are continuously differentiable (they aren't) 2) You rebalance continuously in the absence of trading fees and taxes then the return fraction (future price / original price) will be the geometric mean of the return fractions for each investment. If you don't rebalance then the return fraction will be the arithmetic mean. But the arithmetic mean is ALWAYS greater than or equal to the geometric mean, so continuous rebalancing in the case of continuously differentiable prices will always hurt you, even abscent trading costs/taxes. Any argument in favor of blind rebalancing which does not somehow fail in the continuously differentiable case is simply wrong. See https://dl.dropboxusercontent.com/u/38536036/to%20karim.pdf -JT |
What tax advantage should I keep an eye for if I am going to relocate? | Look for states that have no income tax. A lot of these states supplement their revenue with higher property taxes, but if you rent and do not own property in the state, then you will have no state tax liability. Similarly, many states treat capital gains no differently than income tax, so if you make your earnings due to a large nest egg, then way you will still incur no tax liability on the state level Look for "unincorporated" areas, as these are administrative divisions of states that do not have a municipal government, and as such do not collect local taxes. Look for economic development perks of the new jurisdiction. Many states have some kind of formal tax credit for people that start business or buy in certain areas, but MONEY TALKS and you can make an individual arrangement with any agency, municipality etc. If the secretary at city hall doesn't know about a prepackaged formal arrangement that is offered to citizens, then ask for the "expedited development package" which generally has a "processing fee" involved. This is something you make up ie. "What is the processing fee for the expedited development package, quote on quote" States like Maryland and Nevada have formalized this process, but you are generally paying off the Secretary of State for favorable treatment. You'll always be paying off someone. |
I'm 13. Can I buy supplies at a pet store without a parent/adult present? | As long as your money is green and you aren't buying something prohibited to youngsters (booze, cigarettes, etc.) I doubt any store is going to refuse your business. |
A friend wants to use my account for a wire transfer. Is this a scam or is it legitimate? | I know people who work in the gulf and most contracts are of the 14 days on/ 14 days (or so) off flavor. I've never heard of someone being onboard a ship or platform for a year. I bet this is a scam. |
How to share income after marriage and kids? | What equal percentage of both you and your girlfriend's income will cover the essential household expenses? Although we earned different amounts, both of us turned over half our income over to the household. Between us this percentage slice from each of our earnings neatly covered all the essentials. The amounts contributed were different, but the contributions where nonetheless equal. Beyond this the financial relationship was fast and loose. |
Where can you find historical PEs of US indices? | Internet sites Books Academic |
Advantages of paying more of your mortgage while you know you won't continue to live there your whole life | In the Netherlands specifically, there are several reasons to pay extra off on your mortgage. First, house prices have dropped significantly in the last several years. They are rising slowly now, but it's region specific and you can still borrow more than 100% of the price of the house. Under these conditions, if you choose to sell your house and the outstanding mortgage amount is greater than the value of your house, you are left with a gap (restschuld) to finance. I think the rules have changed recently around this, allowing you to finance this gap with a new mortgage, but this is not a good idea. The tax implications of this are likely to be complicated in the long run and your new house may not cover this gap for some time. Second, the less you owe on your house, the lower mortgage rates you can get. Mortgages in the Netherlands usually fall into categories based on percentage of the auction price at a foreclosure sale (executiewaarde). If you pay more of your mortgage off, you may qualify for a lower interest rate, possibly making refinancing interesting. This is especially important if interest rates continue to drop but the value of your house does not increase or even decreases. Third, if you choose to keep your house and rent it out, the banks in the Netherlands have very strict rules on this if you want to do it above board. I've read that some banks require the mortgage amount (NB not the value you may have built up in a linked savings or insurance account) to be less than 50% of the foreclosure auction price (executiewaarde). Also, related to point 2, if you have something other than a linear or annuity mortgage, you will need to refinance to do this as the tax advantages around savings mortgages ([bank]spaarhypotheken) do not apply if it is not used as your own residence. Finally, if you choose to sell and you are in the happy position of having the value of your house be greater than the value of your mortgage (you have an overwaarde), there may still be some obstacles. Any value you have accumulated in a linked savings or life insurance account is not available until after you sell your house. Extra value derived purely from the difference between mortgage value and sale price may be easier to deal with. EDIT: As a final note, I've made extra payments on both a "Spaarhypotheek" (linked life insurance) and a "Bankspaarhypotheek" (linked savings account). In one, the principal paid each month reduced and the mortgage lifetime stayed the same. In the other, the principal paid each month stayed the same and the lifetime reduced. In both cases, interest payments were less each month. I would contact your mortgage provider to understand what the expected impact of extra payments will be. |
Market Cap lower than Shares Outstanding x Share Price? | You are comparing "market caps" and "enterprise value". If the company has four billion dollars cash in the bank, then the value would be four billion plus whatever the business itself is worth as a business. If the business itself is only worth 400 million, then you would have 4.4bn market caps and 400 million enterprise value. The "enterprise value" is basically how much the business would be worth if it had no cash or no debt. These numbers would be a very unusual situation. It could happen for example if a big company has sold 90% of its business for cash. When you buy a share of the company, you get a tiny share of the business and you own a tiny share of the cash. This stock will very likely keep its value, but won't make much money. On the other hand, more common would be a company where the business is worth 4bn, but the company has also 4bn debt. So it is worth exactly zero. Market caps close to zero, but enterprise value $4bn, because you ignore the debt in the enterprise value. Edit: Sorry, got the "enterprise value" totally wrong, read millions instead of billions: Your numbers would mean that you have a huge, huge company with close to 440bn debt. Most likely someone made a mistake here. A "normal" situation would be say a company with a business that is worth $500 million, but they have $100 million debt, so market caps = $400 million but enterprise value = $500 million. PS. Yahoo has the same nonsense numbers on their UK site, and for other companies (I just checked Marks and Spencer's which apparently has an enterprise value of 800 billion pound with a totally ridiculous P/E ratio. |
Borrow from 401k for down payment on rental property? | Another option you might consider is rolling over some of that 401K balance into a self-directed IRA or Solo 401K, specifically one with "checkbook privileges". That would permit you to invest directly in a property via your IRA/401K money without it being a loan, and preserving the tax benefits. (You may not be able to roll over from your current employer's 401K while still employed.) That said, regarding your argument that your loan is "paying interest to yourself", while that is technically true, that neglects the opportunity cost -- that money could potentially be earning a much higher (and tax-free) return if it remains in the 401K account than if you take it out and slowly repay it at a modest interest rate. Real Estate can be a great way to diversify, build wealth, and generate income, but a company match and tax-free growth via an employee sponsored retirement account can be a pretty sweet deal too (I actually recently wrote about comparing returns from having a tenant pay your mortgage on a rental property vs. saving in a retirement account on my blog -- in short, tax-free stock-market level returns are pretty compelling, even when someone else is paying your mortage). Before taking rather big steps like borrowing from a 401K or buying a rental property, you might also explore other ways to gain some experience with real estate investing, such as the new crop of REITs open to all investors under SEC Reg A+, some with minimums of $500 or less. In my own experience, there are two main camps of real estate investors: (1) those that love the diversification and income, but have zero interest in active management, and (2) those that really enjoy real estate as a lifestyle and avocation, happy to deal with tenant screening and contractors, etc. You'll want to be careful to be sure which camp you're in before signing on to active investment in a specific property. |
Should I make additional payments on a FHA loan, or save up for a refinance? | You would have to do the specific math with your specific situation to be certain, but - generally speaking it would be smarter to use extra money to pay down the principle faster on the original loan. Your ability to refinance in the future at a more favorable rate is an unknowable uncertainty, subject to a number of conditions (only some of which you can control). But what is almost always a complete certainty is that paying off a debt is, on net, better than putting the same money into a low-yield savings account. |
My university has tranfered me money by mistake, and wants me to transfer it back | You have received some good answers, but since your concern is proper protocol, keep everything in writing (emails, not phone calls). Also, you'll get a quick response by contacting the University "Accounts Payable" department, confirm the situation with a summary as you posted here and ask for the ABA routing number for the transfer. The routing number, email, and you bank statement is all the records you need to cover your but. |
Difference between IRR and ROR | There may be differences in different contexts, but here's my general understanding: Rate of Return (or Return on Investment) is the total gain or loss of an investment divided by the initial investment amount. e.g. if you buy stock for $100 and later sell it for $120 you have a 20% Rate of Return. You would have a 20% ROR regardless of if you sell it tomorrow or in a year. Internal Rate of Return is effectively annualized. It is the annual rate at which each of a series of cashflows is discounted that would give you a net present value of 0. Meaning if you spent $100 today and in exactly one year you received $120 back, you would have an IRR of 20%. If you received the $120 back in 6 months, your IRR would be roughly 40%. An IRR calculation can include multiple cashflows at various times, while ROR is (in my mind) the total net gain or loss relative to the investment (irrespective of the time of the cash flows). IRR is more effective when comparing investments that have different time horizons. Spending $100 to get $120 tomorrow is much better (from an IRR perspective) than getting $120 two years from now, since you could take that $20 gain and invest it for the rest of the two years. |
stock for a particular brand | If you want to invest in the Windows Phone, then you go and find out who makes the Windows Phone i.e. Microsoft. Then you go and decide if Windows Phone is successful will the share price of Microsoft go up (own research/deduction) and if you think that the price of Microsoft has a positive correlation with the Windows Phone, then you could buy shares of Microsoft. There is no way to invest directly in individual products on stock exchanges, you are generally investing in the companies that produce them. You find the ticker of a company by googling. NASDAQ: MSFT |
What are the tax implications of exercising options early? | The difference is whether your options qualify as incentive stock options (ISOs), or whether they are non-qualifying options. If your options meet all of the criteria for being ISOs (see here), then (a) you are not taxed when you exercise the options. You treat the sale of the underlying stock as a long term capital gain, with the basis being the exercise price (S). There is something about the alternative minimum tax (AMT) as they pertain to these kinds of options. Calculating your AMT basically means that your ISOs are treated as non-qualifying options. So if your exercise bumps you into AMT territory, too bad, so sad. If you exercise earlier, you do get a clock ticking, as you put it, because one of the caveats of having your options qualify as ISOs is that you hold the underlying stock (a) at least two years after you were granted the options and (b) at least one year after you exercise the options. |
Why would a car company lend me money at a very low interest rate? | In addition to the other answers, also consider this: Federal bond interest rates are nowhere near the rates you mentioned for short term bonds. They are less than 1% unless you're talking about terms of 5-10 years, and the rates you mentioned are for 10 to 30-years terms. Dealer financed car loans are usually 2-5 years (the shorter the term - the lower the rate). In addition, as said by others, you pay more than just the interest if you take a car loan from the dealer directly. But your question is also valid for banks. |
What is a good investment vehicle for introducing kids to investing? | Buy them a physical stock certificate... you can request them from a broker, or buy through a company like http://www.oneshare.com. Other options: |
Why do people take out life insurance on their children? Should I take out a policy on my child? | Why do people take out life insurance on their children? They do so largely because it's being sold to them. The insurance companies generally push them on the basis that if you have to pay for a funeral and burial, the cost would devastate a family's finances. In some rare instances that might actually be true, but not generally. Should I take out a policy on my child? Generally no. When they sell you a policy they have to dance around a catch-22 - if you have enough money to afford the 'cheap' life insurance, then you have enough money to pay for a funeral and burial that's probably not going to happen. If you don't have enough money to pay those expenses in the rare case that a child does die, then you really can't afford the insurance, even if it's only 'pennies a day for peace of mind.' And why would schools send these home to parents, year-after-year? The schools are paid a commission. It is not much more than a fundraiser for them, just like school pictures. Am I missing something? Yes, in fact, you could be making money hand over fist if you were willing to prey on parental insecurities. Just set up a stand outside the hospital and get parents who are just about to deliver to sign up for your amazing insurance plan in case the tragic occurs. |
How can I make a one-time income tax-prepayment to the US Treasury? | You can make estimated tax payments on Form 1040-ES. Most people who make such payments need to do it quarterly because the typical reasons for making estimated payments is something like self-employment income that a person will get throughout the year. If you have a one-time event like a single, large sale of stock, however, there's nothing wrong with doing it just one quarter out of the year. When it comes time to file your taxes, part of the calculate is whether you were timely quarter-by-quarter not just for the entire year, so if you do have a big "one-time" event mid-year, don't wait until the end of the year to file an estimated payment. Of course, if the event is at the end of the year, then you can make it a 4th quarter estimated payment. |
Should I set a stop loss for long term investments? | My broker offers the following types of sell orders: I have a strategy to sell-half of my position once the accrued value has doubled. I take into account market price, dividends, and taxes (Both LTgain and taxes on dividends). Once the market price exceeds the magic trigger price by 10%, I enter a "trailing stop %" order at 10%. Ideally what happens is that the stock keeps going up, and the trailing stop % keeps following it, and that goes on long enough that accrued dividends end up paying for the stock. What happens in reality is that the stock goes up some, goes down some, then the order gets cancelled because the company announces dividends or something dumb like that. THEN I get into trouble trying to figure out how to re-enter the order, maintaining the unrealized gain in the history of the trailing stop order. I screwed up and entered the wrong type of order once and sold stock I didn't want to. Lets look at an example. a number of years ago, I bought some JNJ -- a hundred shares at 62.18. - Accumulated dividends are 2127.75 - My spreadsheet tells me the "double price" is 104.54, and double + 10% is 116.16. - So a while ago, JNJ exceeded 118.23, and I entered a Trailing Stop 10% order to sell 50 shares of JNJ. The activation price was 106.41. - since then, the price has gone up and down... it reached a high of 126.07, setting the activation price at 113.45. - Then, JNJ announced a dividend, and my broker cancelled the trailing stop order. I've re-entered a "Stop market" order at 113.45. I've also entered an alert for $126.07 -- if the alert gets triggered, I'll cancel the Market Stop and enter a new trailing stop. |
What are the ins/outs of writing-off part of one's rent for working at home? | Before starting to do this, make sure that you are squeaky clean in all aspects of your tax preparation and are prepared to back up any claims that you make with documentation. Home office deductions are a huge red flag that often trigger audits. Follow mbhunter's advice and be incredibly meticulous about following the rules and keeping records. |
Is it worth buying real estate just to safely invest money? | House prices do not go up. Land prices in countries with growing economies tend to go up. The price of the house on the land generally depreciates as it wears out. Houses require money; they are called money pits for a reason. You have to replace HVAC periodically, roofs, repairs, rot, foundation problems, leaks, electrical repair; and all of that just reduces the rate at which the house (not the land) loses value. To maintain value (of the house proper), you need to regularly rebuild parts of the house. People expect different things in Kitchens, bathrooms, dining rooms, doors, bedrooms today than they do in the past, and wear on flooring and fixtures accumulate over time. The price of land and is going to be highly determined by the current interest rates. Interest rates are currently near zero; if they go up by even a few percent, we can expect land prices to stop growing and start shrinking, even if the economy continues to grow. So the assumption that land+house prices go up is predicated on the last 35 years of constant rigorous economic growth mixed with interest rate decreases. This is a common illusion, that people assume the recent economic past is somehow the way things are "naturally". But we cannot decrease interest rates further, and rigorous economic growth is far from guaranteed. This is because people price land based on their carrying cost; the cost you have to spend out of your income to have ownership of it. And that is a function of interest rates. Throw in no longer expecting land values to constantly grow and second-order effects that boost land value also go away. Depending on the juristiction, a mortgage is a hugely leveraged investment. It is akin to taking 10,000$, borrowing 40,000$ and buying stock. If the stock goes up, you make almost 5x as much money; if it goes down, you lose 5x as much. And you owe a constant stream of money to service the debt on top of that. If you want to be risk free, work out how you'd deal with the value of your house dropping by 50% together with losing your job, getting a job paying half as much after a period of 6 months unemployment. The new job requires a 1.5 hour commute from your house. Interest rates going up to 12% and your mortgage is up for renewal (in 15 years - they climbed gradually over the time, say), optionally. That is a medium-bad situation (not a great depression scale problem), but is a realistic "bad luck" event that could happen to you. Not likely, but possible. Can you weather it? If so, the risk is within your bounds. Note that going bankrupt may be a reasonable plan to such a bit of bad luck. However, note that had you not purchased the house, you wouldn't be bankrupt in that situation. It is reasonably likely that house prices will, after you spend ~3% of the construction cost of the house per year, pay the mortgage on the land+house, grow at a rate sufficient to offset the cost of renting and generate an economically reasonable level of profit. It is not a risk-free investment. If someone tries to sell you a risk-free investment, they are almost certainly wrong. |
Is it possible that for shares to be reinvested in a stock you already sold? | I believe this depends on the broker's policies. For example, here is Vanguard's policy (from https://personal.vanguard.com/us/whatweoffer/stocksbondscds/brokeragedividendprogram): Does selling shares affect a distribution? If you sell the entire position two days or more before the dividend-payable date, your distribution will be paid in cash. If, however, you sell an entire position within the two day time frame of the security's payable date, the dividend will be reinvested, resulting in additional shares. Selling these subsequent shares will require another sell order, which will incur additional commission charges. Dividends which would have been reinvested into less than one whole share will be automatically liquidated into cash. If you want to guarantee you receive no fractional shares, I'd call your broker and ask whether selling stock ABC on a particular date will result in the dividend being paid in shares. |
Is 6% too high to trade stocks on margin? | Okay so we are assuming that you can sustain 6% or more return on your investments. Personally I would compare that rate to what lines of credit are going for and do what ever is least expensive. Either way your risk is the same. Your net worth is the same. Your assets will be the same. Your liabilities will be the same. Its just a matter of who you owe it to and what the rate is. Don't be afraid of having a second mortgage. If the stocks go down either way you have to sell what's left and pay your debt. Or what I should maybe say is don't be more afraid of a line of credit more than margin in your investment account. |
What prevents interest rates from rising? | A lot of loans are taken out on a fixed rate basis, so the rate is part of the contract and is therefore covered by contract law. If the loan is taken out on a variable basis then in principle the rate can rise within the terms of the contract. If a particular lender tries to raise its rates out of line with the market then its customers will seek alternative, cheaper, loans and pay off their expensive loan if they can. If rates rise sharply in general due to unusual politico-economic circumstances then those with variable rate loans can find themselves in severe trouble. For example the base rate in the UK (and therefore variable mortgage rates closely tied to it) spiked sharply in the late 80s which caused severe stress to a lot of borrowers and undoubtedly pushed some into financial difficulties. |
Does it make sense to talk about an ETF or index in terms of technical indicators? | Yes, it makes sense. Like Lagerbaer says, the usefulness of technical indicators can not be answered with a simple yes or no. Some people gain something from it, others do not. Aside from this, applying technical indicators (or any other form of technical analysis - like order flow) to instruments which are composed of other instruments, such as indexes (more accurately, a derivative of it), does make sense. There are many theories why this is the case, but personally i believe it is a mixture of self fulfilling prophecy, that the instruments the index is composed of (like the stocks in the S&P500) are traded in similar ways as the index (or rather a trade-able derivative of it like ETFs and futures), and the idea that TA just represents human emotion and interaction in trading. This is a very subjective topic, so take this with a grain of salt, but in contrast to JoeTaxpayer i believe that yields are not necessary in order to use TA successfully. As long as the given instrument is liquid enough, TA can be applied and used to gain an edge. On the other hand, to answer your second question, not all stocks in an index correlate all the time, and not all of them will move in sync with the index. |
Is it accurate to say that if I was to trade something, my probability of success can't be worse than random? | It seems to be that your main point is this: No matter what, my chances cannot be worse than random and if my trading system has an edge that is greater than the percentage of the transaction that is transaction cost, then I am probabilistically likely to make a profit? In general, yes, that is true, but... Consider this very bad strategy: Buy one share of stock and sell it one minute later, and repeat this every minute of the day. Obviously you would bleed your account dry with fees. However, even this horrible strategy still meets your criteria because: if this bad strategy had an edge beyond the transaction fees you would likely still make a profit. In other words, your conclusion reduces to an uninteresting statement: If there were no transactions fees, then if your trading system has an edge then you will likely make a profit. Sorry to be the bearer of bad news, but IMHO, that statement, and others made in the question are just obvious things stated in convoluted ways. I don't want to discourage you from thinking about these things though. I personally really enjoy these type of thought experiments. I just feel you missed the mark on this one... |
Is there any US bank that does not charge for incoming wire transfers? | Being into Business since years and having clients worldwide I receive a lot of payments via wire transfers. Some in business and some in personal checking accounts. I have never been charged by my bank for any incoming wire. And by the way I bank with HSBC and BoA in the US. Actually the charges on the account depends on the type of account you are opening/holding with the bank. With a tight competition in the finance and banking industry you can always demand the bank for the services you want and the pricing you want. The best thing to do is ask your bank if they can wave those incoming wire charges for you and if not you have a whole bunch of options. |
Can you explain why it's better to invest now rather than waiting for the market to dip? | With a long enough time horizon, no matter when you buy, equities almost always outperform cash and bonds. There's an article here with some info: http://www.fool.co.uk/investing-basics/how-when-and-where-to-invest/ Holding period where shares have beaten cash There was a similar study done which showed if you picked any day in the last 100 years, no matter if the market was at a high or low, after 1 year your probability of being in profit was only 0.5, but after 10-20 years it was almost certainly 1.0. Equities compound dividends too, and the best place to invest is in diversified stock indices such as the S&P500, FTSE100, DOW30 or indices/funds which pay dividends. The best way to capture returns is to dollar cost average (e.g. place a lump sum, then add $x every month), to re-invest dividends, and oh, to forget about it in an IRA or SIPP (Self invested pension) or other vehicle which discourages tampering with your investment. Yes, values rise and fall but we humans are so short sighted, if we had bought the S&P in 2007 and sold in 2009 in fear, we would have missed out on the 25% gain (excluding dividends) from 2007-2014. That's about 3% a year gain even if you bought the 2007 high -beating cash or bonds even after the financial crisis. Now imagine had you dollar cost averaged the entire period from 2007-2014 where your gain would be. Your equity curve would have the same shape as the S&P (with its drastic dip in 2009) but an accelerated growth after. There are studies if you dig that demonstrate the above. From experience I can tell you timing the market is nigh impossible and most fund managers are unable to beat the indices. Far better to DCA and re-invest dividends and not care about market gyrations! .. |
Recent college grad. Down payment on a house or car? | Given the state of the economy, and the potential of a rough near future for us recent grads (i.e. on/off work), I would recommend holding off on large purchases while your life is in flux. This includes both a NEW car and purchasing a house. My short answer is: you need a reliable vehicle, so purchase a used car, from a major dealer (yes this will add a fairly high premium, but easier financing), that is 4-5 years old, or more. Barring the major dealer purchase, be sure to get a mechanic to check out a vehicle, many will offer this service for a reasonable payment. As people point out, cars these days will run for another 100k miles. You will NOT have to pay anywhere near $27,000 for this vehicle. You may need to leverage your 10k for a loan if you choose to finance, but it should not be a problem, especially as you seem to imply an established credit history. In addition to this, start saving your money for the house you would like to eventually get. We have no idea where you live, but, picking rough numbers, assuming a 2 year buy period, 20% down, and a $250,000 home, the down payment alone will require you to save ~$2,000/month starting now. Barring either of these options, max out your money to tax sheltered accounts (your Roth IRA, work 401k, or a regular IRA) asap. Obviously, do not deplete your emergency fund, if anything, increase it. 10k can be burned through in a heartbeat. Long Answer: I purchased a brand new car, right out of school, at a reasonable interest rate. Like you, I can afford this vehicle, however, if someone were to come to me today (3.5 years later) and offer me the opportunity to take it back and purchase a 4-5 year used vehicle, at a 4-5 year used car price, albeit at a much higher interest rate (since I financed), it would be about a 0.02 second decision. I like my car, but, I'd like the differential cash savings between it and a reliable used car more. $27,000 is also fairly expensive for a new vehicle, there are many, very nice vehicles, for 21-23k. I still would not consider these priced appropriate to spend your money on them, but they exist. However, you do very much need a reliable vehicle, and I think you should get one. On the home front, your $400 all inclusive rent is insanely cheap. Many people spend more than that on property tax and PMI each year, so anyone who throws the "You're throwing money away!" line at you is blowing smoke to justify their own home purchase. Take the money you would have spent on a mortgage, and squirrel it away. Do your own due diligence and research the home market in your area and decide for yourself if you think home prices have bottomed and will stay there, have further to go, or are going to begin to rise. That is a decision only you can make for yourself. I'd add a section about getting expenses under control, but you said you could save 50% of your takehome pay. This is an order of magnitude above the average. Good job. Try doing 50% for 4 months, then calculate your actual amount. Then try to beat it. |
What happens to an ETF if one of the companies in the ETF gets aquired? | There are a number of ways this can result. In a broad ETF, such as SPY, the S&P 500 spider, the S&P index will have 500 stocks no matter what, so a buyout would simply result in a re-shuffling of the index makeup. No buyout will happen so quickly that there's no time to choose the next stock to join the index. In your case, if the fund manager (per the terms of the prospectus) wishes to simply reallocate the index to remove the taken-over stock that's probably how he handle it. Unless of course, the prospectus dictates otherwise. In which case, a cash dividend is a possible alternative. |
Exercising an option without paying for the underlying | Unless you want to own the actual shares, you should simply sell the call option.By doing so you actual collect the profits (including any remaining time-value) of your position without ever needing to own the actual shares. Please be aware that you do not need to wait until maturity of the call option to sell it. Also the longer you wait, more and more of the time value embedded in the option's price will disappear which means your "profit" will go down. |
How meaningful is the “stock price” of a stock? | Prices quoted are primarily the offer prices quoted by the numerous market makers on the stock exchange(s) willing to sell you the stock. There is another price which generally isn't seen on these websites, the bid prices, which are lower prices quoted by buyers and market makers willing to buy your shares from you. You wouldn't see those prices, unless you login to your trade terminal. How meaningful are they to you depends on what you want to do buy or sell. If you want to buy then yes they are relevant. But if you want to sell, then no. And remember some websites delay market information by 15 minutes, in case of Google you might have seen that the volume is delayed by 15 minutes. So you need to consider that also while trading, but mayn't be a concern unless you are trying to buy out the company. |
Personal loan to a friend procedure | If this isn't a case where you would be willing to forgive the debt if they can't pay, it's a business transaction, not a friend transaction. Establish exactly what the interest rate will be, what the term of the loan is, whether periodic payments are required, how much is covered by those payments vs. being due at the end of the term as a balloon payment, whether they can make additional payments to reduce the principal early... Get it all in writing and signed by all concerned before any money changes hands. Consider having a lawyer review the language before signing. If the loan is large enough that it might incur gift taxes, then you may want to go the extra distance to make it a real, properly documented, intra-family loan. To do this you must charge (of at least pay taxes on) at least a certain minimal interest rate, and they have to make regular payments (or you can gift them the payments but you still won't up paying tax on the interest income). In this case you definitely want a lawyer to draw up the papers, I think. There are services on the web Antioch specialize in helping to set this up properly, and which offer services such as bookkeeping and monthly billing (aT extra cost) to make it less hassle for the lender. If the loan will be structured as a mortgage on the borrower's house -- making the interest deductible for the borrower in the US -- there are additional forms that need to be filled. The services can help with that too, for appropriate fees. Again, this probably wants experts writing the agreement, to make sure it's properly written for where you and the borrower live. Caveat: all the above is assuming USA. Rules may be very different elsewhere. I've done a formal intractability mortgage -- mostly to avoid gift tax -- and it wasn't too awful a hassle. Your mileage will vary. |
Is there a benefit, long term, to life insurance for a youngish, debt, and dependent free person? | Term life insurance for a healthy 30 year old is a heck of a lot cheaper than for a 40 year old who's starting to break down (and who needs the coverage since he's got a spouse and kids). So, get a long term policy now while it's cheap. |
How do I buy bundled insurance policies? | You have 3 companies now that you work with. I would start there. Ask one of them to show you what would happen if you bought the other two policies from them. This may not be something that they will show via the quotes generated on the web page. So you would be better off talking to a person who can generate a quote with that additional information. Make sure that you are comparing exact matches for the limits and options for the policies. Once you have done that with the first then do the same for the other two. I would have to dig into my policy bills for life insurance, but I do know that the bills for the home and auto insurance do show exactly how much I am saving by having multiple polices. |
What exactly is a “derivative”? | A derivative is a financial instrument of a special kind, the kind “whose price depends on, or is derived from, another asset”. This definition is from John Hull, Options, Futures and Other Derivatives – a book definitely worth to own if you are curious about this, you can easily find old copies for a few dollars. The first point is that a derivative is a financial instrument, like credits, or insurances, the second point is that its price depends closely from the price of something else, the mentioned asset. In most cases derivatives can be understood as financial insurances against some risk bound to the asset. In the sequel I give a small list of derivatives and highlight the assets and the risk they can be bound to. And first, let me point out that the definition is (marginally) wrong because some derivatives depend on things which are not assets, nor do they have a price, like temperature, sunlight, or even your own life in the case of mortgages. But before going in this list, let me go through the remaining points of your question. What is the basic idea and concept behind a derivative? As already noted, in most cases, a derivative can be understood as a financial insurance compensating from a risk of some sort. In a classical insurance contract, one party of the contract is an insurance company, but in the broader case of a derivative, that counterparty can be pretty anything: an insurance, a bank, a government, a large company, and most probably market makers. How is it really used, and how does this deviate from the first point? Briefly, how does is it affecting people, and how is it causing problems? An important point with derivatives is that it can be arbitrarily complicated to compute their prices. Actually what is hidden in the attempt of giving a definition for derivatives, is that they are products whose price Y is a measurable function of one or several random variables X_1, X_2, … X_n on which we can use the theory of arbitrage pricing to get hints on the actual price Y of the asset – this is what the depends on means in technical terms. In the most favorable case, we obtain an easy formula linking Y to the X_is which tells us what is the price of our financial instrument. But in practice, it can be very difficult, if at all possible, to determine a price for derivatives. This has two implications: Persons possessing sophisticated techniques to compute the price of derivatives have a strategic advantage on derivatives market, in comparison to less advanced actors on the market. Organisation owning assets they cannot price cannot compute their bilan anymore, so that they cannot know for sure their financial situation. They are somehow playing roulette. But wait, if derivatives are insurances they should help to mitigate some financial risk, which precisely means that they should help their owners to more accurately see their financial situation! How is this not a contradiction? Some persons with sophisticated techniques to compute the price of derivatives are actually selling complicated derivatives to less knowledgeable persons. For instance, many communes in France and Germany have contracted credits whose reimbursements have a fixed interest part, like in a classical credit, and a variable interest part whose rate is computed against a complicated formula involving the value of the Swiss frank at each quarter starting from the inception of the credit. (So, for a 25 years running credit of theis type, the price Y of the credit at its inception depends on 100 Xs, which are the uncertain prices for the Swiss frank each quarter of the 25 next years.) Some of these communes can be quite small, with 5.000 inhabitants, and needless to say, do not have the required expertise to analyse the risks bound to such instruments, which in that special case led the court call the credit a swindling and to cancel the credit. But what chain of events leads a 5.000 inhabitants city in France to own a credit whose reimbursements depends on the Swiss frank? After the credit crunch in 2007 and the fall of Lehman Brothers in 2008, it has begun to be very hard to organise funding, which basically means to conclude credits running long in time on large amounts of money. So, the municipality needs a 25 years credit of 10.000.000 EUROS and goes to its communal bank. The communal bank has hundreds or thousands of municipalities looking for credits and needs itself a financing. So the communal bank goes to one of the five largest financial institutions in the world, which insists on selling a huge credit whose reimbursements have a variable part depending on hundred of values the Swiss frank will have in the 25 next years. Since the the big bank has better computation techniques than the small bank it makes a big profit. Since the small bank has no idea, how to compute the correct price of the credit it bought, it cuts this in pieces and sell it in the same form to the various communes it works with. If we were to attribute this kind of intentions to the largest five banks, we could ask about the possibility that they designed the credit to take advantage of the primitive evaluation methods of the small bank. We could also ask if they organised a cartel to force communal banks to buy their bermudean snowballs. And we could also ask, if they are so influent that they eventually can manipulate the Swiss frank to secure an even higher profit. But I will not go into this. To the best of my understanding, the subprime crisis is a play along the same plot, with different actors, but I know this latter subject only by what I could read in French newspapers. So much for the “How is it causing problems?” part. What is some of the terminology in relation to derivatives (and there meanings of course)? Answering this question is basically the purpose of the 7 first chapters of the book by Hull, along with deriving some important mathematical principles. And I will not copy these seven chapters here! How would someone get started dealing in derivatives (I'm playing a realistic stock market simulation, so it doesn't matter if your answer to this costs me money)? If you ask the question, I understand that you are not a professional, so that your are actually trying to become the one that has money and zero knowledge in the play I outlined above. I would recommand not doing this. That said, if you have a good mathematical background and can program well, once you are confindent with the books of Hull and Joshi, you can have fun implementing various market models and implementing trading strategies. Once you are confident with this, you can also read the articles on quantitative finance on arXiv.org. And once you are done with this, you can decide for yourself if you want to play the same market as the guys writing these articles. (And yes, even for the simplest options, they have better models than you have and will systematically outperform you in the long run, even if some random successes will give you the feeling that you do well and could do better.) (indeed, I've made it a personal goal to somehow lose every last cent of my money) You know your weapons! :) Two parties agree today on a price for one to deliver a commodity to the other at some future instant. This is a classical future contract, it can be modified in every imaginable way, usually by embedding options. For instance one party could have the option to choose between different delivery points or delivery days. Two parties write today a contract allowing the one party to buy at some future time a commodity to the the second party. The price is written today, as part of the contract. (There is the corresponding option entitling the owner to sell something.) Unlike the future contract, only one party can be obliged to do something, the other jas a right but no obligation. If you buy and option, your are buying some sort of insurance against a change of price on some asset. This is the most familiar to anybody. Credits can come in many different flavours, especially the formula to compute interests, or also embed options. Common options are early settlement options or restructuration options. While this is not completely inutitive, the credit works like an insurance. This is most easily understood from the side of the organisation lending the money, that speculates that the ratio of creanciers going bankrupt will be low enough for her to make profit, just like a fire insurance company speculates that the ratio of fire accidents will be low enough for her to make a profit. This is like a mortgage on a financial institution. Two parties agree that one will recive an upfront today and give a compensation to the second one if some third party defaults. Here this is an explicit insurance against the unfortuante event, where a creancier goes bankrupt. One finds here more or less standard options on electricity. But electricity have delicious particularities as it can practically not be stored, and fallout is also (usually) avoided. As for classical options, these are insurances against price moves. A swap is like two complementary credits on the same amount of money, so that it ends up in the two parties not actually exchanging the credit nominal and only paying interest one to the other — which makes only sense if these interests are computed with different formulas. Typical example are fixed rate vs. EURIBOR on some given maturity, which we interpret as an insurance against fluctuations of the EURIBOR, or a fixed rate vs. the exchange ratio between two currencies, which we interpret as an insurance against the two currencies decorrelating. Swaps are the richest and the most generic category of financial derivatives. The off-the-counter market features very imaginative, very customised insurance products. The most basic form is the insurance against drought, but you can image different dangers, and once you have it you can put it in options, in a swap, etc. For instance, a restaurant with a terrasse could enter in a weather insurance, paying each year a fixed amount of money and becoming in return an amount of money based on the amount of rainy day in a year. Actually, this list is virtually without limits! |
Acquiring first office clothes | Like the other answers, I'm not entirely sure the equivalent exists in your country. But in the US there are thrift stores run by charities like GoodWill or the Salvation Army that sell clothes for very little money. When my wife was in a similar situation very early in her career she learned the trick of driving to thrift stores nearest to the richest neighborhoods in town. She often found high dollar designer clothes that had been worn once (to an event or party) and then donated. Apparently it is quite gauche for the well-to-do to be caught dead in the same outfit twice. It wasn't uncommon for her to find clothes/shoes that retailed for hundreds of dollars for $10 or so. |
Retirement planning: Pension or personal saving/investing? | You can never depend ONLY on pension. You must get financial education and invest your money. I recommend you to read The Intelligent Investor by Benjamin Graham...it's the bible of Warren Buffet. Besides, you don't need to be a Billionaire for retiring and be happy. I recommend you to get education in ETFs. I quote The Intelligent Investor by Benjamin Graham p. 131. According to Ibboston Associates, the leading financial research firm, if you had invested $12,000 in the Standard & Poor's 500-stock index at the beginning of september 1929, 10 years later you would have had only $7,223 left. But if you had started with a paltry $100 and simply invested another $100 every single month, then by August 1939, your money would have grown to $15,571! That's the power of disciplined buying-even in the face of the Great Depression and the worst bear market of all time. You are still young to make even bolder investments. But seriously you can never depend ONLY on pension. You won't regret learning how to invest your money, it doesn't matter if it's in the stock market, real state market, whatever market... Knowing what to do with your money is priceless. I hope this helps. Happy profits! |
Help Understanding Market/Limit Orders and Bid/Ask Price | At any point of time, buyer wants to purchase a stock at lesser price and seller wants to sell the stock at a higher price. Let's consider this scenario Company XYZ is trading at 100$, as stated above buyer wants to purchase at lower price and seller at higher price, this information will be available in Market depth, let's consider there are 5 buyers and 5 sellers, below are the details of their orders Buyers List Sellers List Highest order in buyers list will contain the bid price and bid quantity, Lowest order in Sellers list will contain the offer price and offer quantity. Now, if I want to buy 50 Stocks of company XYZ, need to place an order first, it can be either limit or Market. Limit Order : In this order, I will mention the price(buy price) at which I wish to buy, if there is any seller selling the stock less than or equal to price I have mentioned, then the order will be executed else it will be added to buyers list Market Order : In this order, I will not mention the price, if I wish to purchase 50 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 101. if I wish to purchase 200 Stocks, then it will find the lowest offer price and buy stocks, in our case it will be 2 transactions, since entire request cannot be accommodated in single order Usually the volume(Ask Volume and Offer Volume) being displayed are all Limit orders and not Market orders, Market orders are executed immediately. This is just an example, However several transactions are executed within a second, hence we will get to know the exact value only after the order is completed(executed) |
I'm about to be offered equity by my employer. What should I expect? | In my experience, any kind of equity you may be offered by the company is just a carrot. Your offer may be written in such a way that your potential ownership represents, say, 1% of the company today. But if the company goes for a round of financing your ownership percentage can get diluted. If this happens a couple of times and the terms of financing aren't very favorable then your percentage can go from that 1% down to 0.001%, making the equity worthless. I've known people who heard their company was being bought and thought they might get some kind of payoff. Come to find out the company hadn't done all that well and there wasn't anything to pay out after the main investors got some money back. (The main investors took a loss.) For obvious reasons, management wasn't keeping the staff up to date about the fact that they were operating in the red and their options were worthless. Some people grumbled about lawyers and filing lawsuits, but at the end of the day, there wasn't any money to be won. Keep this in mind. As to your question regarding what to look out for: |
Simple and safe way to manage a lot of cash | As your question appears in the second half, so will my answer. Like you, I will provide some background. I remember buying gasoline for $1.759 per gallon. I am so old that I remember buying gasoline for $0.759 per gallon. I recently paid $2.759 per gallon. You claim that your relative is not getting a very good return. Some would suggest that, at $2.759 per gallon, I am not getting a very good price on gasoline. Rates, yields, returns and the price of gas are not what they once were. It is actually difficult to get a pretty bad return relative to the current market. I suspect your relative is no longer getting what he used to get but he is getting a fair return. About record keeping. Your Uncle Sam benefits at your expense when you keep poor records. There are substantial penalties for failing to report everything. Most high school graduates can manage one checking account, one savings account, several charge cards and about 20 CDs and stocks at different institutions with little more than the following: a) a wall calendar b) a shoe box and c) a stack of 3 by 5 cards. Don't misplace the shoe box. If you can use a spreadsheet, it is even easier. Backup your data. There are a several reasons why you shouldn't consolidate all his cash and put it in a single mutual fund account and then put together a mix of investments that work well for him. - you are doing it backwards 1st put together a mix of investments that work well for him 2nd consolidate the assets. Your phrasing suggests a general lack of understanding - most CDs have penalties for early withdrawal. - while you enjoy managing your 401K in a single online account, your older relative might not be as comfortable with a lack of paper statements (see shoe box above) Let me tell you a little about my 401K. x% blue chip, y% small cap, z% bonds, w% foreign stock. Once a quarter, I change my current contribution to re-balance current value towards my target percentages. Every 30 months or so, I consider changing my asset allocation. The allocation considers my age, my spouses age, our childrens ages, my risk tolerance and my intermediate view of the markets. Your mileage my vary. to recap |
Why would someone buy a way out-of-the-money call option that's expiring soon? | It could be that the contracts were bought at cheaper prices such as $.01 earlier in the day. What you see there with the bid and ask is the CURRENT bid and CURRENT ask. The high ask price means there is no current liquidity, as someone is quoting a very high ask price just in case someone really wants to trade that price. But as you said, no one would buy this with a better price on a closer strike price. The volume likely occurred at a different price than listed on the current ask. |
When filing taxes in Canada, in what cases does box 39 on the T4 get reported as half of box 38? | Here's the best explanation I found relating to why your T4 box 39 might not have an amount filled in, even when box 38 has one: Department of Finance – Explanatory Notes Relating to the Income Tax Act [...]. It's a long document, but here's the part I believe relevant, with my emphasis: Employee Stock Options ITA 110(1) [...] Paragraph 110(1)(d) is amended to include a requirement that the employee [...] exercise the employee’s rights under the stock option agreement and acquire the securities underlying the agreement in order for the deduction in computing taxable income to be available [...] ensures that only one deduction is available in respect of an employment benefit. In other words, if employee stock option rights are surrendered to an employer for cash or an in-kind payment, then (subject to new subsections 110(1.1) and (1.2)) the employer may deduct the payment but the employee cannot claim the stock option deduction. Conversely, where an employer issues securities pursuant to an employee’s exercise of stock options, the employer can not deduct an amount in respect of the issuance, but the employee may be eligible to claim a deduction under paragraph 110(1)(d). Did you receive real shares based on your participation in the ESPP, or did you get a cash payment for the net value of shares you would have been issued under the plan? From what I can tell, if you opted for a cash payment (or if your plan only allows for such), then the part I emphasized comes into play. Essentially, if conditions were such that your employer could claim a deduction on their corporate income tax return for the compensation paid to you as part of the plan, then you are not also able to claim a similar deduction on your personal income tax return. The money received in that manner is effectively taxed in your hands the same as any bonus employment income would be; i.e. it isn't afforded tax treatment equivalent to capital gains income. Your employer and/or ESPP administrator are best able to confirm the conditions which led to no amount in your box 39, but at least based on above you can see there are legitimate cases where box 38 would have an amount while box 39 doesn't. |
Do stock option prices predicate the underlying stock's movement? | Options reflect expectations about the underlying asset, and options are commonly priced using the Black-Scholes model: N(d1) and N(d2) are probability functions, S is the spot (current) price of the asset, K is the strike price, r is the risk free rate, and T-t represents time to maturity. Without getting into the mathematics, it suffices to say that higher volatility or expectation of volatility increases the perceived riskiness of the asset, so call options are priced lower and put options are priced higher. Think about it intuitively. If the stock is more likely to go downwards, then there's an increased chance that the call option expires worthless, so call options must be priced lower to accommodate the relative change in expected value of the option. Puts are priced similarly, but they move inversely with respect to call option prices due to Put-Call parity. So if call option prices are falling, then put option prices are rising (Note, however, that call prices falling does not cause put prices to rise. The inverse relationship exists because of changes in the underlying factors and how pricing works.) So the option action signifies that the market believes the stock is headed lower (in the given time frame). That does not mean it will go lower, and option traders assume risk whenever they take a particular position. Bottom line: gotta do your own homework! Best of luck. |
Biggest stock price gain vs. biggest mkt cap gain | When you look at those results you'll see that it lists the actual market cap for the stocks. The ones on the biggest price move are usually close the the $1B capitalization cut-off that they use. (The don't report anything with less than $1B in capitalization on these lists.) The ones on the biggest market cap are much larger companies. So, the answer is that a 40% change in price on a company that has $1B capitalization will be a $400M change in market cap. A 4% change on a company with $100B capitalization will be a $4B change in market cap. The one that moved 40% will make the "price" list but not the market cap list and vice versa. |
Where should I invest to hedge against the stock market going down? | Sometimes the simple ways are the best: |
Why do car rental companies prefer/require credit over debit cards? | A few reasons make sense: They have a defined process for rentals, risk assessment, and customer credit. Especially for a large corporation, making changes to that process is not trivial, adds risk/uncertainty, and will be costly. Such changes for a relatively small customer base might not makes sense. Many rental companies DO allow you to rent with a debit card. Why do some businesses take cash only? With a debit card, there is no third party guarantee. With a credit card, the cash is coming from a well-established third party who will pay (assuming no disputes) and has a well-established history of paying. Even if the merchant holds your account, it is still your cash under the control of you and your bank until the deposit clears the merchants bank. It is not surprising they view that as more risk and potentially not worth hassling with debit. |
Am I responsible for an annual fee on a credit card I never picked up? | In the end, I was not required to pay the fee. After some frustrating initial attempts, I ended up writing a letter and sending a copy to card services, customer support, complaints and the legal department. It basically said: 1 - I never signed anything. 2 - I spoke to a very aggressive person at the airport who told me that she was just taking down my information in order to send information about the card, and that I was under no obligation 3 - I never received a card, activated a card, or used a card. 4 - I want this charge canceled immediately 5 - If this ever shows up on my credit report, I will contact my lawyer regarding this unscrupulous business practice. After that I received a notice in the mail confirming that everything had been cancelled and all charges were reversed. |
What are the advantages of paying off a mortgage quickly? | It depends on where you are in life, and where you want to be at some point in the future, and the taxes, expenses and income at those points in your life. You don't get a mortgage to save on taxes, or keep a mortgage to save on taxes. But if somebody said they want to have the house paid off before they retire, that sounds to me like a great plan. They do need to balance it with saving for retirement, emergency fund, and college costs for themselves or their children. Without having the whole picture it is impossible to say doing X is always a good idea. |
If banksimple.com is not a bank, what is it? | Looks more like an idea for a business rather than an actual business -- especially since it hasn't even launched. That said, it does have its merits. What bank actually holds the deposit funds becomes irrelevant, and may actaully change from time to time as they forge better partnerships with different banks. Think of it like a mutual fund -- the individual stocks (if there are stocks) in the fund are less important than the balance of risk vs. income and the leveling of change over the course of time. It offers services banks offer, without fees (at least that is the proposal) with the addition of budgetting capability as well. It does have downsides as well There is an increased level of indirection between you and your money. They propose to simplify the banking business model, but in fact are only hiding it from you. The same complexity that was there before is still there, with the added complexity of their service on top of it. It's just a matter of how much of that complexity you would have to deal with directly. With that in mind, I would reiterate that they are not a business yet -- just a proposed business model. Even the sign up process is a red flag for me. I understand they need to gauge interest in order to forge initial relationships with various banks, but I don't see the need for the 'invitation only' sign up method. It just sounds like a way to increase interest (who doesn't like feeling exclusively invited), and is a bit too 'gimmicky' for my taste. But, like I said, the idea has merit -- I have my reservations, but will reserve full judgement until they are an actual operating business. |
What ways are there for us to earn a little extra side money? | Your problem is one that has challenged many people. As you said there are two aspects to balancing a budget, reducing expenses or increasing income. And you state that you have done all the cost-cutting that you can find. Looking at ways to increase your income is a good way to balance your budget. How big is your problem? Do you need to find another $100/month, or do you need $1000/month? There are many part-time jobs you could obtain (fast food, retail, grocery), you could obtain a sales-job (cars, real estate, even working for a recruiting firm) where you could connect buyers and sellers. If your need is $100/month, a part-time job on weekends would fill the gap. When I was trying to solve my budget problems a few years ago, I thought that I needed to increase my income. And I did increase my income. But then I realized that my expenses were too high. And I re-evaluated my priorities. I challenge you to revisit your expenses. Often we assume that we need things that we really cannot afford. Consider a few of your (possible) expenses, My problems included mortgage debt, auto loans, high utilities, high car insurance, too much spending on kids activities, and a few other problems. |
How could USA defaulting on its public debt influence the stock/bond market? | This is a speculative question and there's no "correct" answer, but there are definitely some highly likely outcomes. Let's assume that the United States defaults on it's debt. It can be guaranteed that it will lose its AAA rating. Although we don't know what it will drop to, we know it WILL be AA or lower. A triple-A rating implies that the issuer will never default, so it can offer lower rates since there is a guarantee of safety there.People will demand a higher yield for the lower perceived security, so treasury yield will go up. The US dollar, or at least forex rates, will almost certainly fall. Since US treasuries will no longer be a safe haven, the dollar will no longer be the safe currency it once was, and so the dollar will fall. The US stock market (and international markets) will also have a strong fall because so many institutions, financial or otherwise, invest in treasuries so when treasuries tumble and the US loses triple-A, investments will be hurt and the tendency is for investors to overreact so it is almost guaranteed that the market will drop sharply. Financial stocks and companies that invest in treasuries will be hurt the most. A notable exception is nations themselves. For example, China holds over $1 trillion in treasuries and a US default will hurt their value, but the Yuan will also appreciate with respect to the dollar. Thus, other nations will benefit and be hurt from a US default. Now many people expect a double-dip recession - worse than the 08/09 crisis - if the US defaults. I count myself a member of this crowd. Nonetheless, we cannot say with certainty whether or not there will be another recession or even a depression - we can only say that a recession is a strong possibility. So basically, let's pray that Washington gets its act together and raises the ceiling, or else we're in for bad times. And lastly, a funny quote :) I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection. - Warren Buffett |
What is a checking account and how does it work? | A savings account and a checking account (or a "demand" account, or a "transactional" account) have different regulations. For example, fractional reserve requirements are 10% against checking accounts, but 0% against savings accounts. The theory is that savings accounts are sticky, while checking accounts are hot money. So the Fed wants to stop banks from creating accounts that are regulated as savings accounts but have the features of checking accounts. In the past, this was done by forbidding banks to pay interest on checking accounts. They eliminated that rule back in the inflation years, and instead imposed the rule that to qualify as a savings accounts for regulatory purposes, banks must discourage you from using them as transactional accounts. For example, by limiting the number of withdrawals per month that can be made from a savings account. If the Fed gave up on trying to enforce a distinction, I suspect there would soon no longer be a distinction. |
Why REIT prices are not going down while bonds are being hammered? | I don't like REITs because they are more closely correlated to the movement of the stock market. They don't really do the job of diversifying a portfolio because of that correlation. When the stock market dropped in 2008, REITs were hammered as well because the housing bubble burst. Bonds went up, and if you rebalanced (sold the bonds to buy more stock) then you came out much further ahead when the stock market recovered. The point of adding bonds for diversification is that they move in the opposite direction of equities; blunting the major drops (and providing buying opportunities). REITs don't fit that bill. REITs are not undergoing a correction like bonds because the price of real estate is a function of housing supply and buyer demand. Rising interest rates only make it a little harder for buyers to buy, so the effect of rising interest rates on real estate prices is muted. The other effects on real estate prices (more wealth in the economy for buyers) pushes in the opposite direction of the rising interest rates. |
Should a retail trader bother about reading SEC filings | There are many different kinds of SEC filings with different purposes. Broadly speaking, what they have in common is that they are the ways that companies publicly disclose information that they are legally required to disclose. The page that you listed gives brief descriptions of many types, but if you click through to the articles on individual types of filings, you can get more info. One of the most commonly discussed filings is the 10-K, which is, as Wikipedia says, "a comprehensive summary of a company's financial performance". This includes info like earnings and executive pay. One example of a form that some people believe has potential utility for investors is Form 4, which is a disclosure of "insider trading". People with a privileged stake in a company (executives, directors, and major shareholders) cannot legally buy or sell shares without disclosing it by filing a Form 4. Some people think that you can make use of this information in the sense that if, for instance, the CEO of Google buys a bunch of Twitter stock, they may have some reason for thinking it will go up, so maybe you should buy it too. Whether such inferences are accurate, and whether you can garner a practical benefit from them (i.e., whether you can manage to buy before everyone else notices and drives the price up) is debatable. My personal opinion would be that, for an average retail investor, readng SEC filings is unlikely to be useful. The reason is that an average retail investor shouldn't be investing in individual companies at all, but rather in mutual funds or ETFs, which typically provide comparable returns with far less risk. SEC filings are made by individual companies, so it doesn't generally help you to read them unless you're going to take action related to an individual company. It doesn't generally make sense to take action related to an individual company if you don't have the time and energy to read a large number of SEC filings to decide which company to take action on. If you have the time and energy to read a large number of SEC filings, you're probably not an average retail investor. If you are a wheeler dealer who plays in the big leagues, you might benefit from reading SEC filings. However, if you aren't already reading SEC filings, you're probably not a wheeler dealer who plays in the big leagues. That said, if you're a currently-average investor with big dreams, it could be instructive to read a few filings to explore what you might do with them. You could, for instance, allocate a "play money" fund of a few thousand dollars and try your hand at following insider trades or the like. If you make some money, great; if not, oh well. Realistically, though, there are so many people who make a living reading SEC filings and acting on them every day that you have little chance of finding a "diamond in the rough" unless you also make a living by doing it every day. It's sort of like asking "Should I read Boating Monthly to improve my sailing skills?" If you're asking because you want to rent a Hobie Cat and go for a pleasure cruise now and then, sure, it can't hurt. If you're asking because you want to enter the America's Cup, you can still read Boating Monthly, but it won't in itself meaningfully increase your chances of winning the America's Cup. |
Brief concept about price movement of a particular stock [duplicate] | It depends completely on the current order book for that security. There is literally no telling how that buy order would move the price of a stock in general. |
Is 6% too high to trade stocks on margin? | That seems a little high in my experience. I've used a home equity line of credit instead, as the rates are much lower (~3.5%). |
How to calculate tax amounts withheld on mixed pre-tax and Roth 401(k) contributions, and match? | When you adjust your investments the following will happen: Initial condition: Modified condition: This means that after this change you will note that the amount of federal tax you pay each month via withholding will go up. You are now contributing less pre-tax, so your taxable income has increased. If you make no other changes, then in April you will either have increased your refund by 6 months x the additional $25 a month, or decreased the amount you owe by the same amount. There is no change in the total 401K balance at the end of the year, other than accounting for how much is held pre-tax vs. Roth post-tax. Keep in mind that employer contributions must be pre-tax. The company could never guess what your tax situation is. They withhold money for taxes based on the form you fill out, but they have no idea of your family's tax situation. If you fail to have enough withheld, you pay the penalty — not the company. *The tax savings are complex because it depends on marital status, your other pre-tax amounts for medical, and how much income your spouse makes, plus your other income and deductions. |
Which U.S. online discount broker is the best value for money? | I am very happy with Charles Schwab. I use both their investing tools and banking tool, but I don't do much investing besides buy more shares a random mutual fund I purchase 4 years ago I did once need to call in about an IRA rollover and I got a person on the phone immediately who answered my questions and followed up as he said he would. It is anecdotal, but I am happy with them. |
Can I get a discount on merchandise by paying with cash instead of credit? | Cash is very effective at getting a discount when buying from individuals (craigslist, garage sales, estate sales, flea markets, etc.). I'll make an offer, then thumb through the cash while they consider it. There eyes will dart back and forth between my eyes and the cash as they decide whether to take my offer. Car dealers do seem to be very unique. The dealer I bought at recently said that 70% of their deals were cash purchases, JoeTaxpayer's dealer said 1% were cash purchases. I've had good luck negotiating with cash for well-loved cars (under $10K) from both individuals or used dealers. I'm also looking for carpet for my house and the first vendor I went to offered at 5% discount if I paid up front (no financing). |
Do Options take Dividend into account? | The CBOE had a great article on this. I will search for it and edit. The normal dividends are not adjusted. Which is why you see early exercise of just out of the money options sometimes. To get that dividend. A special dividend, say a $50 stock with $1/yr dividend but now has a $3 one time dividend would likely result in an option strike adjustment. |
Health insurance deduction on schedule C if also full time employee with w2? | Do you satisfy the necessary criteria listed there? Then why not?... It sounds like you do. |
Is it safe to accept money in the mail? | On your end of the deal, the biggest risk is probably counterfeiting. That said, I'd think that most of the downside would be for the buyer since they would have no way to prove that they paid you. Perhaps a better alternative is to send the items COD (Collect On Delivery aka Cash on Delivery). The USPS and some other carriers offer this service, which can be an effective way to remotely negotiate a cash sale. I double checked the USPS site and they do accept cash for COD deliveries: Recipient may pay by cash or check (or money order) made out to sender. (Sender may not specify payment method.) You might want to double check this if you go with USPS or FedX. |
Does girlfriend have too much savings, time to invest? | It's time she look into what employer provided retirement plan she can use. She's at the point where she should think about investing for the long term, with retirement in mind. |
When shorting a stock, do you pay current market price or the best (lowest) available ask price? | In terms of pricing the asset, this functions in exactly the same way as a regular sell, so bids will have to be hit to fill the trade. When shorting an equity, currency is not borrowed; the equity is, so the value of per share liability is equal to it's last traded price or the ask if the equity is illiquid. Thus when opening a short position, the asks offer nothing to the process except competition for your order getting filled. Part of managing the trade is the interest rate risk. If the asks are as illiquid as detailed in the question, it may be difficult even to locate the shares for borrowing. As a general rule, only illiquid equities or those in free fall may be temporarily unable for shorting. Interactive Brokers posts their securities financing availabilities and could be used as a proxy guide for your broker. |
Uncashed paycheck 13 years old | Under US law, a bank is not obligated to honor a check that is more than six months old. § 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith. Note the law says the bank is not OBLIGATED to honor the check, but they are not forbidden from doing so. I don't have a survey on this, but I think most banks won't honor a check after more than 6 months to a year. I've had a few occasions where early in the year someone accidentally wrote the previous year on a check, like on January 10, 2017 they dated the check January 10, 2016, and the bank has given me a hard time about cashing it. The statute of limitations to challenge payment or non-payment of a check is 6 years: § 3-118. STATUTE OF LIMITATIONS. (b) Except as provided in subsection (d) or (e), if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note must be commenced within six years after the demand. I understand your frustration about being denied money that you presumably worked for and earned. But look at it from the other side. Suppose you wrote a check to someone, and years later they still had not cashed it. At some point you'd want to be able to clear this off your bank account. What if you want to close the account? What happens when you die? Would your heirs have to keep this account open for years ... decades ... centuries ... on the possibility that someday someone will cash this check? Realistically, there has to be SOME time limit. 6 months should be plenty of time for someone to make it to the bank with a check. If the company still exists then you could argue they have a MORAL obligation to pay you. If they have records that show that they did indeed give you this check and you never cashed it there'd be no question that you were trying to cheat them. But a moral obligation and a legal obligation are two different things. Legally, they paid you, and it's your problem that you failed to cash the check. You could talk to a lawyer, but if you live in the US, I think you are out of luck. (Of course other countries have different laws.) |
How can I remove the movement of the stock market as a whole from the movement in price of an individual share? | As others have pointed out, the value of Apple's stock and the NASDAQ are most likely highly correlated for a number of reasons, not least among them the fact that Apple is part of the NASDAQ. However, because numerous factors affect the entire market, or at least a significant subset of it, it makes sense to develop a strategy to remove all of these factors without resorting to use of an index. Using an index to remove the effect of these factors might be a good idea, but you run the risk of potentially introducing other factors that affect the index, but not Apple. I don't know what those would be, but it's a valid theoretical concern. In your question, you said you wanted to subtract them from each other, and only see an Apple curve moving around a horizontal line. The basic strategy I plan to use is similar but even simpler. Instead of graphing Apple's stock price, we can plot the difference between its stock price on business day t and business day t-1, which gives us this graph, which is essentially what you're looking for: While this is only the preliminaries, it should give you a basic idea of one procedure that's used extensively to do just what you're asking. I don't know of a website that will automatically give you such a metric, but you could download the price data and use Excel, Stata, etc. to analyze this. The reasoning behind this methodology builds heavily on time series econometrics, which for the sake of simplicity I won't go into in great detail, but I'll provide a brief explanation to satisfy the curious. In simple econometrics, most time series are approximated by a mathematical process comprised of several components: In the simplest case, the equations for a time series containing one or more of the above components are of the form that taking the first difference (the procedure I used above) will leave only the random component. However, if you want to pursue this rigorously, you would first perform a set of tests to determine if these components exist and if differencing is the best procedure to remove those that are present. Once you've reduced the series to its random component, you can use that component to examine how the process underlying the stock price has changed over the years. In my example, I highlighted Steve Jobs' death on the chart because it's one factor that may have led to the increased standard deviation/volatility of Apple's stock price. Although charts are somewhat subjective, it appears that the volatility was already increasing before his death, which could reflect other factors or the increasing expectation that he wouldn't be running the company in the near future, for whatever reason. My discussion of time series decomposition and the definitions of various components relies heavily on Walter Ender's text Applied Econometric Time Series. If you're interested, simple mathematical representations and a few relevant graphs are found on pages 1-3. Another related procedure would be to take the logarithm of the quotient of the current day's price and the previous day's price. In Apple's case, doing so yields this graph: This reduces the overall magnitude of the values and allows you to see potential outliers more clearly. This produces a similar effect to the difference taken above because the log of a quotient is the same as the difference of the logs The significant drop depicted during the year 2000 occurred between September 28th and September 29th, where the stock price dropped from 26.36 to 12.69. Apart from the general environment of the dot-com bubble bursting, I'm not sure why this occurred. Another excellent resource for time series econometrics is James Hamilton's book, Time Series Analysis. It's considered a classic in the field of econometrics, although similar to Enders' book, it's fairly advanced for most investors. I used Stata to generate the graphs above with data from Yahoo! Finance: There are a couple of nuances in this code related to how I defined the time series and the presence of weekends, but they don't affect the overall concept. For a robust analysis, I would make a few quick tweaks that would make the graphs less appealing without more work, but would allow for more accurate econometrics. |
How do UK Gilts interest rates and repayments work? | A title such as "5% Treasury Gilt 2020" expresses the nominal yield. In other words, 5% is the yield you will receive if you are able to buy the Gilt at the nominal (issue) price of GBP100. Of course, you will not be able to buy such a Gilt in today's market for the nominal price of GBP100. It will be trading at a considerable premium and therefore, if you hold it until maturity you will realise a capital loss to offset the relatively high income you have received. Here is an example. The "8% June 2021 Gilt" has a coupon of 8%. To purchase a GBP100 nominal Gilt in today's market will cost you GBP135.89. Thus, you will pay 135.89 to receive GBP8.00 income annually. This represents a 5.88% yield (8/135.89 = 5.88%). That sounds pretty good. However, if you hold the Gilt until maturity you will only receive GBP100 on redemption and therefore you will experience a capital loss GBP35.89 on each Gilt purchased. When this capital loss is taken into account it means that the 5.88% yield you are receiving as income will be offset by the capital loss so that you have earned the equivalent of 0.757% annually. You can of course sell the Gilt before its 2021 maturity date, however as the maturity date gets closer the market price will get closer to the GBP100 nominal value and you will again face a capital loss. There's no free ride in the markets. 5 year Gilts currently have a redemption yield of about 0.75%, while 10 year Gilts currently have a redemption yield of about 1.15%. You may also wish to note that buying Gilts in the open market requires a minimum purchase of GBP10,000 nominal value. However, you can purchase small Gilt holdings through the post office. |
How to avoid getting back into debt? | The essential (and obvious) thing to avoid getting back into debt (or to reduce debt if you have it) is to make your total income exceed your total expenses. That means either increasing your income or reducing your total expenses. Either take effort. Basically, you need a plan. If your plan is to increase income, work out how. If the plan is to increase hours in your current, you need to allow for your needs (sleep, rest, etc) and also convince your employer they will benefit by paying you to work more hours. If your intent is to increase your hourly rate, you need to convince a current or prospective employer that you have the capacity, skills, etc to deliver more on the job, so you are worth paying more. If your intent is to get qualifications so you can get a better paying job, work out how much effort (studying, etc) you will apply, over how long, what expenses you will carry (fees, textbooks, etc), and how long you will carry them for (will you accept working some years in a higher paying job, to clear the debt?). Most of those options involve a lot of work, take time, and often mean carrying debt until you are in a position to pay it off. There is nothing wrong with getting a job while studying, but you have to be realistic about the demands. There is nothing sacrosanct about studying that means you shouldn't have a job. However, you need to be clear how many hours you can work in a job before your studies will suffer unnecessarily, and possibly accept the need to study part time so you can work (which means the study will take longer, but you won't struggle as much financially). If your plan is to reduce expenses, you need a budget. Itemize all of your spend. Don't hide anything from that list, no matter how small. Work out which of the things you need (paying off debt is one), which you can get rid of, which you need to reduce - and by how much. Be brutal with reducing or eliminating the non-essentials no matter how much you would prefer otherwise. Keep going until you have a budget in which your expenses are less than your income. Then stick to it - there is no other answer. Revisit your budget regularly, so you can handle things you haven't previously planned for (say, rent increase, increase fees for something you need, etc). If your income increases (or you have a windfall), don't simply drop the budget - the best way to get in trouble is to neglect the budget, and get into a pattern of spending more than you have. Instead, incorporate the changes into your budget - and plan how you will use the extra income. There is nothing wrong with increasing your spend on non-essentials, but the purpose of the budget is to keep control of how you do that, by keeping track of what you can afford. |
Retirement Options for Income | I can think of one major income source you didn't mention, dividends. Rather than withdrawing from your pension pot, you can roll it over to a SIPP, invest it in quality dividend growth stocks, then (depending on your pension size) withdraw only the dividends to live on. The goal here is that you buy quality dividend growth stocks. This will mean you rarely have to sell your investments, and can weather the ups and downs of the market in relative comfort, while using the dividends as your income to live off of. The growth aspect comes into play when considering keeping up with inflation, or simply growing your income. In effect, companies grow the size of their dividend payments and you use that to beat the effects of inflation. Meanwhile, you do get the benefit of principle growth in the companies you've invested in. I don't know the history of the UK stock market, but the US market has averaged over 7% total return (including dividends) over the long term. A typical dividend payout is not much better than your annuity option though -- 3% to 4% is probably achievable. Although, looking at the list of UK Dividend Champion list (companies that have grown their dividend for 25 years continuous), some of them have higher yields than that right now. Though that might be a warning sign... BTW, given all the legal changes around buy-to-lets recently (increases stamp duty on purchase, reduction in mortgage interest deduction, increased paperwork burden due to "right to rent" laws, etc.) you want to check this carefully to make sure you're safe on forecasting your return. |
What fiscal scrutiny can be expected from IRS in early retirement? | IRS Pub 554 states (click to read full IRS doc): "Do not file a federal income tax return if you do not meet the filing requirements and are not due a refund. ... If you are a U.S. citizen or resident alien, you must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1-1 below. " You may not have wage income, but you will probably have interest, dividend, capital gains, or proceeds from sale of a house (and there is a special note that you must file in this case, even if you enjoy the exclusion for primary residence) |
Formula for recalculation of a bad loan, i.e. where payments were missed? | There's not quite enough to answer the question in full. For the two years of non-payment, were there any penalties, or just accrued interest? If no penalties, this is a 3 step time-value-of-money calculation. First, take the terms of the loan and figure out the balance after 5 years. Second, for two years, increase the balance by the monthly interest rate. Last, calculate a new payment with a 13 year duration. Excel or any business calculator can handle this. |
How does one determine the width of a candlestick bar? | There's no rule of thumb but the purpose of candlesticks of any kind (fixed, volume weighted etc.) is to display the intra-period price action. So if you'd fit 3 years worth of 1 minute bars on a chart, candlesticks become useless and you might as well use a line chart. |
How can small children contribute to the “family economy”? | (Although I disagree with the idea of getting a child working a real job to early, (I think kids should learn at school, learn manners, learn what the world offers and have responsibility) Here is a list of ideas that a small child can do. This is all assuming the child is to young for a work permit and a "normal" job. I am assuming your live in the United States. Comedy Answer: Amway. But forget about getting invited to birthday parties. |
What is the correct answer for percent change when the start amount is zero dollars $0? | In general, when dealing with quantities like net income that are not restricted to being positive, "percentage change" is a problematic measure. Even with small positive values it can be difficult to interpret. For example, compare these two companies: Company A: Company B: At a glance, I think most people would come away with the impression that both companies did badly in Y2, but A made a much stronger recovery. The difference between 99.7 and 99.9 looks unimportant compared to the difference between 100,000 and 40,000. But if we translate those to dollars: Company A: Y1 $100m, Y2 $0.1m, Y3 $100.1m Company B: Y1 $100m, Y2 $0.3m, Y3 $120.3m Company B has grown by a net of 20% over two years; Company A by only 1%. If you're lucky enough to know that income will always be positive after Y1 and won't drop too close to zero, then this doesn't matter very much and you can just look at year-on-year growth, leaving Y1 as undefined. If you don't have that guarantee, then you may do better to look for a different and more stable metric, the other answers are correct: Y1 growth should be left blank. If you don't have that guarantee, then it might be time to look for a more robust measure, e.g. change in net income as a percentage of turnover or of company value. |
At what point does it become worth it to file an insurance claim? | An article linked from cnn.com has some great advice, which I think are good rules of thumb. Also, at least my insurance gives a premium price for those who haven't filed a claim in 5 or more years for homeowners or rental insurance. See if you have a similar discount, will loose it, and guess how much that will cost you over 5 years. My rule of thumb: Your premium might go up quite a bit, possibly as much as triple, especially for a large claim. But, it is certainly worth it if you are going to get more than triple your premium through your claim. The worst case: Mortgage mandated insurance, which will be about triple your current cost. |
Pay off car loan entirely or leave $1 until the end of the loan period? | In some states there are significantly higher automobile insurance costs and higher coverage requirements for vehicles that have a lien on them. I suspect this is not your scenario, or you probably would not be considering holding the loan open. But it is something to consider. If you live in a state where insurance coverage and costs depend on a clear title, I would certainly recommend closing the loan as soon as possible. |
Shouldn't a Roth IRA accumulate more than 1 cent of interest per month? | The term 'interest' tends to be used loosely when discussing valuation of stocks. Especially when referring to IRAs which are generally the purvey of common-folk who aren't in the finance industry. Often it is used colloquially to include: Using this definition (which is what I'm guessing your IRA Calculator is doing), your stock would have increased in value by a total of $26 over the course of 10 months. Still not terribly good (only a couple percent increase), but certainly not a couple cents. |
What are the top “market conditions” to follow? | If you're investing for the long term your best strategy is going to be a buy-and-hold strategy, or even just buying a few index funds in several major asset classes and forgetting about it. Following "market conditions" is about as useful to the long term trader as checking the weather in Anchorage, Alaska every day (assuming that you don't live in Anchorage, Alaska). Let me suggest treating yourself to a subscription to The Economist and read it once a week. You'll learn a lot more about investing, economics, and world trends, and you won't be completely in the dark if there are major structural changes in the world (like gigantic housing bubbles) that you might want to know about. |
Will depositing $10k+ checks each month raise red flags with the IRS? | You're getting confused between several different things. 10K - cash transactions over $10,000 are reported to FinCEN under BSA. This is to prevent money laundering. IRS - IRS wants to see your tax return with all your income reported there. They don't see your bank deposits unless they audit you. 1 and 2 are not related at all. |
How do I invest in the S&P 500? | The S&P 500 is a stock market index, which is a list of 500 stocks from the largest companies in America. You could open a brokerage account with a broker and buy shares in each of these companies, but the easiest, least expensive way to invest in all these stocks is to invest in an S&P 500 index mutual fund. Inside an index mutual fund, your money will be pooled together with everyone else in the fund to purchase all the stocks in the index. These types of funds are very low expense compared to managed mutual funds. Most mutual fund companies have an S&P 500 index fund; two examples are Vanguard and Fidelity. The minimum investment in most of these mutual funds is low enough that you will be able to open an account with your $4000. Something you need to keep in mind, however: investing in any stock mutual fund is not non-risk. It's not even low-risk, really. It is very possible to lose money by investing in the stock market. An S&P 500 index fund is diversified in the sense that you have money in lots of different stocks, but it is also not diversified, in a sense, because it is all in large cap American stocks. Before investing in the stock market, you should have a goal for the money you are investing. If you are investing for something several years away, an index fund can be a good place to invest, but if you will need this money within the next few years, the stock market might be too risky for you. |
More money towards down payment versus long-term investments | There are two components to any non-trivial financial decision: Assuming that all things remain equal, borrowing money at a low rate while investing for a higher return is a no-brainer. The problem is, all things do not remain equal. For example: I think that you need to assess your position and preferences. I'd err on the side of being in less debt. |
Is it possible to make money off of a private company? | Yes, but only if they're looking for investors. You would need to contact them directly. Unless you're looking to invest a significant sum, they may not be interested in speaking with you. (Think at least 6 figures, maybe 7 depending on their size and needs). This is otherwise known as being a Venture Capitalist. Some companies don't want additional investors because the capital isn't yet needed and they don't want to give up shares in the profit/control. Alternatively, you could try and figure out which investment groups already have a stake in the company you're interested in. If those companies are publicly traded, you could buy stocks for their company with the expectation that their stock price will increase if the company you know of does well in the long run. |
What would be the signs of a bubble in silver? | If markets were perfectly efficient, the price should reflect everything that is currently known about the future of a commodity. If it is known that silver is currently under-valued, then investors would be buying it -- driving the price up. Conversely, if silver is currently over-valued, then investors would be selling and the price would be going down. Added to that is emotion. If the price is currently trending up, then people expect it to keep going up, and the price continues to rise. Until enough people think it can't go any higher and start selling, which drives the price down. Since this is driven by emotion, it cannot be predicted when this will happen. |
Is this investment opportunity problematic? | It would have to be made as a "gift", and then the return would be a "gift" back to you, because you're not allowed to use a loan for a down payment. This is not to evade taxes. This is to evade a credit check. The problem is that banks don't like people to have too much debt. The bank could void the loan and go after your friends for damages under certain circumstances, as this is a fraud on the bank. Perhaps you might be guilty of conspiracy to commit fraud or similar. I'm willing to assume for the sake of argument that there is zero chance of your friend not paying you back intentionally. But even so, there are still potential problems. What if your friends end up without the money to pay? Worse, what if something happens to them? This is an off-books transaction. You couldn't make a claim against the estate, as there can't be a paper trail. You'd be left out the money in those circumstances. You'd both be safer if your friends saved up for the next opportunity rather than trying to grab this one. An alternative would be to buy a share of their current rental house. That would give them the necessary money and would give you paper showing your money. It's not a gift, it's a purchase. You'd have to pay capital gains tax on the 15% profit that they're promising you. But you'd both be above board and honest. |
why would closing price of a stock be different from different sources, and which would you take as the real price? | There is more than one exchange where stock can be traded. For example, there is the New York Stock Exchange and the London Stock Exchange. In fact, if you look at all the exchanges, there is essentially continuous trading 24/7 for many financial instruments (eg US government bonds). The closing price quoted in papers is usually the price at the close on the NYSE. However, options close after that and so there is after-the-close trading in many stocks with active options, so the price at the close of options trading at CBOE is often used. The "real" price is always changing. But for the purpose of discussion, using the closing price in NYSE (for NYSE listed stocks) is pretty standard and unlikely to be questioned. Likewise, using Bloomberg's price makes sense. Using some after-hours or small market quote could lead to differences with commonly accepted numbers - until tomorrow :) |
How to map stock ticker symbols to ISIN (International Securities Identification Number)? | There is no simple way to convert an ISIN into a stock ticker symbol. The only way to even attempt to do so is to map the ISIN to a CUSIP or SEDOL or other national identifier and then map that identifier to a stock ticker symbol. |
Why don't banks give access to all your transaction activity? | Things are the way they are because they got that way. - Gerald Weinberg Banks have been in business for a very long time. Yet, much of what we take for granted in terms of technology (capabilities, capacity, and cost) are relatively recent developments. Banks are often stuck on older platforms (mainframe, for instance) where the cost of redundant online storage far exceeds the commodity price consumers take for granted. Similarly, software enhancements that require back-end changes can be more complicated. Moreover, unless there's a buck (or billion) to be made, banks just tend to move slowly compared to the rest of the business world. Overcoming "but we've always done it that way" is an incredible hurdle in a large, established organization like a bank — and so things don't generally improve without great effort. I've had friends who've worked inside technology divisions at big banks tell me as much. A smaller bank with less historical technical debt and organizational overhead might be more likely to fix a problem like this, but I doubt the biggest banks lose any sleep over it. |
Offered a job: Should I go as consultant / independent contractor, or employee? | Linkedlinked, You might want to seriously take another look at the links that Chris provided you. Specifically the ones on the IRS website: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html From the IRS website: Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. Perhaps more importantly... pay attention to what happens if you're WRONG: Consequences of Treating an Employee as an Independent Contractor If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information. I would STRONGLY recommend that you and your partners give your accountant a call and discuss the matter. They will be able to help you make the right decision. One of biggest mistakes businesses make in this are is to classify their employees as independent contractors. The IRS (who happens to be hungry for money right now) comes in and says, "Nooooooooo... those are employees." ...and the COMPANY gets to pay the employment taxes. I actually have person experience with this as I worked for a company this happened to. Every contractor was re-classified as an employee except for two (myself and one other). The key reason in that case was that none of the other contractors had any other clients. While I understand that you have other clients, I would still recommend talking to your accountant for an hour or so... just to be 100% sure. Sincerely, Andrew Smith TaxQueries.com |
Who can I get to help me roll my 401(k) into an IRA when I live overseas? | It is typically very easy to roll a 401(k) into an IRA. Companies that provide IRA's are very experienced with it, and I would expect that they will take your calls from overseas. You will likely be able to do it over the internet without using a phone at all. Just open an IRA with any brokerage company (Scottrade, Vanguard, Fidelity, Schwab, Ameritrade, etc.) and follow instructions to roll your 401(k) into it. Most likely they will need your signature, but usually a scan of a form you have filled out will do. Be sure to have information on your 401(k) provider, including your account number there, on hand. These companies are all very reputable and this is not a difficult transaction. There's really no downside to rolling into an IRA. 401(k) plans usually have more limited options and/or worse fee structures and are frequently harder to work with, as you have observed. |
What does a well diversified self-managed investment portfolio look like? | Diversified is relative. Alfred has all his money in Apple. He's done very well over the last 10 years, but I think most investors would say that he's taking an incredible risk by putting everything on one stock. Betty has stock in Apple, Microsoft, and Google. Compared to Alfred, she is diversified. Charlie looks at Betty and realizes that she is only investing in one particular industry. All the companies in an individual industry can have a downturn together, so he invests everything in an S&P 500 index fund. David looks at Charlie and notes that he's got everything in large, high-capitalization companies. Small-cap stocks are often where the growth happens, so he invests in a total stock market fund. Evelyn realizes that David has all his money tied up in one country, the United States. What about the rest of the world? She invests in a global fund. Frank really likes Evelyn's broad approach to equities, but he knows that some portion of fixed-income assets (e.g. cash deposits, bonds) can reduce portfolio volatility—and may even enhance returns through periodic rebalancing. He does what Evelyn does, but also allocates some percentage of his portfolio to fixed income, and intends to maintain his target allocations. Being diversified enough depends on your individual goals and investing philosophy. There are some who would say that it is wrong to put all of your money in one fund, no matter what it is. Others would say that a sufficiently broad index fund is inherently diversified as-is. |
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