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Making a big purchase over $2500. I have the money to cover it. Should I get a loan or just place it on credit? | There are a couple of things to consider here that are relevant to your situation: |
Do you avoid tax when taking a home equity loan? | Loans are not taxable events. The equity you took out is not income. It's a loan, and you pay it back with interest. You pay taxes on the capital gain of the home when you sell it. The tax does not take into account any mortgages, HELOCs, or other loans secured by the house. Instead the tax is calculated based on the price you sold it for, minus the price you bought it for, which is known as the capital gain. You can exclude $250k of that gain for a single person, $500k for a married couple. (There are a few other wrikles as well.) That would be true regardless of the loan balance at the time. |
As a 22-year-old, how risky should I be with my 401(k) investments? | Current evidence is that, after you subtract their commission and the additional trading costs, actively managed funds average no better than index funds, maybe not as well. You can afford to take more risks at your age, assuming that it will be a long time before you need these funds -- but I would suggest that means putting a high percentage of your investments in small-cap and large-cap stock indexes. I'd suggest 10% in bonds, maybe more, just because maintaining that balance automatically encourages buy-low-sell-high as the market cycles. As you get older and closer to needing a large chunk of the money (for a house, or after retirement), you would move progressively more of that to other categories such as bonds to help safeguard your earnings. Some folks will say this an overly conservative approach. On the other hand, it requires almost zero effort and has netted me an average 10% return (or so claims Quicken) over the past two decades, and that average includes the dot-bomb and the great recession. Past results are not a guarantee of future performance, of course, but the point is that it can work quite well enough. |
Is there a difference between managerial accounting and financial accounting? | From Wikipedia: Managerial accounting is used primarily by those within a company or organization. Reports can be generated for any period of time such as daily, weekly or monthly. Reports are considered to be "future looking" and have forecasting value to those within the company.** Financial accounting is used primarily by those outside of a company or organization. Financial reports are usually created for a set period of time, such as a fiscal year or period. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company. At my university, managerial accounting focused more on the details of how costs were managed in the company, the future of the business, etc. while the courses that were considered financial accounting were more from the point of view of a financial analyst or investor, like you said. The financial accountancy material covered analysis of financial statements and the associated investment decisions, among other things. These areas overlapped in areas like the production of financial statements, since the company also needs to consider how analysts will interpret these statements, and dividend policy, corporate tax accounting, etc. The Wikipedia articles on managerial accounting and financial accounting may provide helpful information as well. Disclaimer: I took an introductory accounting course in university and nothing more, so my knowledge of the course structures, even at my alma mater, is secondhand recollection at best. I'm sure there are more similarities and differences of which I'm unaware, and I would assume that forensic accountants, auditors, etc. dabble in both these areas and others. |
Do Americans really use checks that often? | It is possible to not use checks in the US. I personally use a credit card for almost everything and often have no cash in my wallet at all. I never carry checks with me. If we wanted to, we could pay all of our monthly bills without checks as well, and many people do this. 30 years ago, grocery stores didn't generally accept credit cards, so it was cash or check, though most other kinds of stores and restaurants did. Now, the only stores that I have encountered in years that do not accept credit cards are a local chicken restaurant, and the warehouse-shopping store Costco. (Costco accepts its own credit card, but not Mastercard or Visa.) Still, we do pay the majority of our monthly bills via check, and it would not be shocking to see someone paying for groceries with a check. I can't name the last time I saw someone write a check at a store exactly, but I've never seen any cashier or other patrons wonder what a check-writer was trying to do. Large transactions, like buying a car or house, would still use checks -- probably cashier's or certified checks and not personal checks, though. |
How to trade large number of shares? | You need to negotiate with your broker to allow you to do more exotic order types. One in particular I recommend is a "hidden" aka iceberg order. You enter two numbers. The first is the number of shares for your entire order, the second is the amount that will be displayed in the book (this is the tip of the iceberg, the remaining shares are hidden below the surface). The maker/taker rule applies as follows: The amount displayed will receive the rebate for providing liquidity. The amount hidden will be charged the fee for taking liquidity. Example: You want to sell 10,000 shares total. You enter a hidden order for 10,000 shares with 1,000 displayed. On the level 2 screen traders will see 1,000 shares, and those shares will stay displayed there until the entire order is filled. You receive a rebate for 1,000 shares, you pay the brokerage fee for 9,000 shares. Also, like one of the previous posters mentioned, only trade high liquidity stocks. Large market cap companies with high volume. This is why day traders love Tesla, Amazon, Netflix, etc. Large market cap, high volume, and high volatility. Easy to catch $10+ moves in price. Hope this helps Happy trading |
Can the U.S. government retroactively tax gains made earlier in the fiscal year? | You're certainly referring to "Ex Post Facto" laws, and while the US is constitutionally prohibited from passing criminal laws that are retroactive, the US Supreme Court has upheld many tax laws that apply tax code changes retroactively. You might ask a similar question on Law.SE for a more thorough treatment of the legalities of congress passing those laws, but I will stick to the personal finance portion of the question. What this means is that you can't expect that the current tax laws will be in force in the future, and your investment/retirement plans should be as flexible as possible. You may wish to have some money in both Roth and traditional 401(k) accounts. You might not want to have millions of dollars in Roth accounts, because if congress does act to limit the tax benefits of those accounts, it will probably be targeting the larger balances. If you are valuing tax deductions, you should put slightly more weight on deductions that you can take today than deductions that would apply in the future. If you do find yourself in trouble because of a retroactive change, be sure to consult a tax lawyer that specializes in dealing with the IRS to possibly negotiate a settlement for a lower amount than the full tax bill that results from the changes. |
How can I find ISIN numbers for stock options? | Because an equity option can be constructed at essentially any price by two willing counterparties on an exchange, there are not enough ISINs to represent the entire (i.e. infinite) option chain for even a single stock on a single expiration date. As a result, ISINs are not generated for each individual possible options contract. Instead the ISIN is used only to refer to the "underlying" symbol, and a separate formula is used to refer to the specific option contract for that symbol: So that code you pasted is not an ISIN but rather the standard US equity option naming scheme that you need to provide in addition to the ISIN when talking to your broker. Note that ISINs and formulas for referring to option contracts in other countries can behave quite differently. Also, there are many countries and markets that don't need ISINs because the products in question only exist on a single exchange. In those cases the exchange is pretty much free to make up whatever ID scheme it wants. P.S. Now I'm curious how option chains are identified for strike prices above $99,999. I looked up the only stock I can think of that trades above that price (BRK.A), but it doesn't seem to have an option chain (or at least Google doesn't show it) ... |
Trouble sticking to a budget when using credit cards for day to day transactions? | Similar to what Adam F says above, except instead of just transfering the amount you spend on the credit card into the high interest account, why not keep the majority of your funds (apart from a small amount, say a couple of hundred for emergencies) in the high interest account until the credit card needs to be paid off. Even better, if you have a mortgage with an 100% offset account keep all your funds in this, and pay off your credit card in full from it on or before the due date. Being a 100% offset to your mortgage interest rate you will be saving at a higher rate than a high interest rate savings account, and you will be able to do all your normal banking from it unlike a high interest account which you usually have to link to an additional account to deposit and withdrawl money to and from. If you are to use a credit card keep these simple rules in mind: Hope this has helped, Regards Victor |
Does FHA goes hand in hand with PMI ? | I don't know that FHA loans have better rates than conventional loans. I've never heard that and some quick googling didn't yield anything (please correct me if I'm wrong). So if you have the necessary down payment to get a conventional loan, I'm not sure I see any benefit for looking at FHA loans. I think the only benefit outside of a low down payment is the ability to (possibly) get a loan with a lower credit score. |
Tax withheld by USA working in UK (Form 1042-S and Form 1099) | Why was I sent both 1042-S and 1099. Which amount is the right amount that has been withheld. Generally, each tax form you get will be about a separate income; for instance, you might get a 1099-DIV for dividends you earned from an investment and then a 1099-B for the profit or loss on selling that investment, in which case you'd report them both to the IRS. In this case, you've also had money withheld as a non-resident alien, which is why you've been issued a 1042-S. So you need to report both amounts to the IRS. |
If I have AD&D through my employer, should I STILL purchase term life insurance? | It probably does make sense for you to buy term life insurance separate from your employer, for a few reasons: There are a number of life insurance calculators on the web. Try two or three -- some of them ask different questions and can give you a range of answers regarding how much coverage you should have. Then take a look at some of the online quote sites -- there are a couple that don't require you to enter your personal information, just general age/health/zip code so you can get an accurate quote for a couple of different coverage levels without having to deal with a salesman yet. (It was my experience that these quotes were very close -- within $20/year -- of what I was quoted through an agent.) Using this information, decide how much coverage you need and can afford. If you're a homeowner, and the insurance company with whom you have your homeowner's policy offers life insurance, call them up and get a quote. They may be able to give you a discount because of your existing relationship; sanity check this against what you got from the quotes website. |
Insurance company sent me huge check instead of pharmacy. Now what? | Deposit check and send a personal check (resulting in tax and IRS reporting issues) That's a bad idea, unless maybe the check you're receiving is a certified bank draft. Suppose the insurance company are crooks and the check is fraudulent. It could take weeks or months for some investigation to catch up to that, long after your own personal check was cashed by the pharmacy. The bank will then put you on hook for the 20 grand by reversing the check, even though the funds had been deposited into your account. Do not put yourself into the position of a money handler; you don't have the cash base, insurance, government protection and whatever else that a bank has. And, of course, you're being a free money handler if you do that. (You're not even compensated for postage, time and whatnot). If you're handling money between two parties, you should collect a percentage, or else refuse. That percentage has to be in proportion to the risk, since cashing a check for someone carries a risk similar to (and is effectively a form of) making a loan. |
Maxing out HSA after maxing out Roth IRA | Unless the hypothetical fellow is immune to disease, and indestructible, with no risk of injury, the HSA is an ideal place for this money. It offers a pretax deposit, and if used for medical expenses, a tax free withdrawal. This combination can't be beat for those who have the medical insurance that qualifies them for the HSA. |
Investing in dividend-yielding stocks with money borrowed from margin account? | My gut is to say that any time there seems to be easy money to be made, the opportunity would fade as everyone jumped on it. Let me ask you - why do you think these stocks are priced to yield 7-9%? The DVY yields 3.41% as of Aug 30,'12. The high yielding stocks you discovered may very well be hidden gems. Or they may need to reduce their dividends and subsequently drop in price. No, it's not 'safe.' If the stocks you choose drop by 20%, you'd lose 40% of your money, if you made the purchase on 50% margin. There's risk with any stock purchase, one can claim no stock is safe. Either way, your proposal juices the effect to creating twice the risk. Edit - After the conversation with Victor, let me add these thoughts. The "Risk-Free" rate is generally defined to be the 1yr tbill (and of course the risk of Gov default is not zero). There's the S&P 500 index which has a beta of 1 and is generally viewed as a decent index for comparison. You propose to use margin, so your risk, if done with an S&P index is twice that of the 1X S&P investor. However, you won't buy S&P but stocks with such a high yield I question their safety. You don't mention the stocks, so I can't quantify my answer, but it's tbill, S&P, 2X S&P, then you. |
How does the person lending shares to the short selller protect themselves if the short sellers are correct? | Lending of shares happens in the background. Those who have lent them out are not aware that they have been lent out, nor when they are returned. The borrowers have to pay any dividends to the lenders and in the end the borrowers get their stock back. If you read the fine print on the account agreement for a margin account, you will see that you have given the brokerage the permission to silently loan your stocks out. Since the lending has no financial impact on your portfolio, there's no particular reason to know and no particular protection required. Actually, brokers typically don't bother going through the work of finding an actual stock to borrow. As long as lots of their customers have stocks to lend and not that many people have sold short, they just assume there is no problem and keep track of how many are long and short without designating which stocks are borrowed from whom. When a stock becomes hard to borrow because of liquidity issues or because many people are shorting it, the brokerage will actually start locating individual shares to borrow, which is a more time-consuming and costly procedure. Usually this involves the short seller actually talking to the broker on the phone rather than just clicking "sell." |
How can someone with a new job but no credit history get a loan to settle another debt? | I believe the best way to go about it is to approach a good friend or relative to borrow the money, interest free. Do discuss with them the repayment schedule. If you have any assets such as house / stocks, you can pledge them in exchange for $5000 cash. I believe the banks would be more than happy to lend to you. You could try one of these Peer to Peer lending sites where you could borrow money from other people instead of banks. |
Why are US target retirement funds weighted so heavily towards US stocks? | A target date fund is NOT a world market index. There is no requirement that it be weighted based on the weights of the various world stock markets. If anything, historically (since the invention of target date funds), a 2:1 ratio is actually pretty low. 6:1 is, or was, probably more common. Just a token amount to non-US investments. |
Is IRS Form 8938 asking me to double-count foreign assets? | Yes, you effectively need to "double count" when shifting balances between foreign accounts. |
Is sales tax for online purchases based on billing- or shipping address? | The technical answer is defined by the laws of state you live in but most (all?) states with a sales tax have some form of use tax. Where if you buy something in another state for use in your home state you are technically liable for sales tax on it regardless of whether the merchant charged you tax on it or not. I don't think many people actually pay the use taxes, and enforcement generally seems rare. |
F-1 student investing in foreign markets | You cannot have off-campus employment in your first year, but investments are considered passive income no matter how much time you put into that effort. Obviously you need to stay enrolled full-time and get good enough grades to stay in good standing academically, so you should be cautious about how much time you spend day trading. If the foreign market is also active in a separate time zone, that may help you not to miss class or otherwise divert your attention from your investment in your own education. I have no idea about your wealth, but it seems to me that completing your degree is more likely to build your wealth than your stock market trades, otherwise you would have stayed home and continued trading instead of attending school in another country. |
Does it make any sense to directly contribute to reducing the US national debt? | At its heart, I think the best spirit of "donation" is helping others less fortunate than yourself. But as long as the US remains solvent, the chief benefit of paying down the national debt is - like paying off a credit card - lowering the future interest payments the U.S. taxpayer has to make. Since the wealthy pay a disproportionately large portion of taxes (per capita), your hard earned money would be disproportionately benefitting the wealthy. So I'd recommend you do one or both of the following: instead target your donations to a charity whose average beneficiary is less fortunate than yourself take political action with an aim towards balancing the federal budget (since the US national debt is principally financed in the form of 30 year treasuries, the U.S. will be completely out of debt if it can maintain a balanced budget for 30 years recanted, see below) |
Obtaining California SOS number for out-of-state LLC | SOS stands for Secretary of State. The California Department of State handles the business entities registration, and the website is here. See "Forms" in the navigation menu on the left. Specifically, you'll be looking for LLC-5. |
Are there any caveats to withdrawing funds from brokerage? | Assuming a USA taxable account: Withdrawing funds from a brokerage account has nothing to do with taxes. Taxes are owed on the profit when you sell a stock, no matter what you do with the funds. Taxes are owed on any dividends the stock produces, no matter what you do with the dividend. The brokerage sends you a form 1099 each year that shows the amounts of dividends and profits. You have to figure out the taxes from that. |
In Canada, how much money can I gift a friend or family member without them being taxed on it? | When you give a gift to another person or receive a gift from another person there is no impact on your taxes. You do not have to report certain amounts in your income, including the following: ... -most gifts and inheritances; http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/nttxd-eng.html If you give a gift to a charity or similar organization you can reduce your taxes. It is my recollection that when a family member gives a large amount of money to a child, tax on the income that money earns (typically interest) should be paid by the giver, not the child, but I can't find any publications to that effect on the CRA Site. There is a bit of language about "Gifts" from an employer that are really employment income: Gifts and other voluntary payments 1.3 The term gift is not defined in the Act. In common law jurisdictions, the courts have said that a bona fide gift exists when: •There is a voluntary transfer of property, •A donor freely disposes of his or her property to a donee, and •The donee confers no right, privilege, material benefit, or advantage on the donor or on a person designated by the donor. 1.4 Whether a transfer of property has been made voluntarily is a question of fact. In order for a transfer to be considered voluntary, there must be no obligation to make such a transfer. Amounts received as gifts, that is, voluntary transfers without consideration and which cannot be attributed to an income-earning source, are not subject to tax in the hands of the recipient. 1.5 However, sometimes individuals receive a voluntary payment or other valuable transfer or benefit by virtue of an office or employment from an employer, or from some other person. In such cases, the amount of the payment or the value of the transfer or benefit is generally included in employment income pursuant to subsection 5(1) or paragraph 6(1)(a). (See also Guide T4130, Employers’ Guide - Taxable Benefits and Allowances.) Similarly, voluntary payments (or other transfers or benefits) received by virtue of a profession or in the course of carrying on a business are taxable receipts. http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s3/f9/s3-f9-c1-eng.html#N10244 If the people in question are adults who are not related to each other and don't have a business or employment relationship, then you should find that regardless of the amount of the gift, neither giver nor recipient will have a tax consequence. |
What is a subsidy? | subsidy - financial support. For example subsidized housing - when the government pays a part of your rent (usually for low income families). or subsidized student loan - when somebody else is paying interest on the money you borrowed while you are in school. |
I got my bank account closed abruptly how do I get money out? | First, if your account has been closed you should not be able to use your debit card in any format. As you mentioned that you are able to use that so your back account is active. So this indicates it is a scam In case account is closed, bank confirms your address and will send you a cheque for the amount in your account. Don't worry. You money will never be lost |
Online stock screener to find stocks that are negatively correlated to another stock/index? | There are lists with Top 1,000 Most and Less correlated stocks for different markets, I think you'll find the solution here: https://unicornbay.com/tools/most-less-correlated-assets |
Company revenue increased however stock price did not | If you believe in the efficient market hypothesis then the stock price reflects the information known to market participants. Consequently, if the 'market' expected earnings to rise, and they did, then the price won't change. Clearly there are circumstances, especially in the short term and for illiquid stocks, where this isn't true, but a lot of work points to this being the case on average. |
Why do most banks in Canada charge monthly fee? | The other answers in this thread do a fine job of explaining the economic situation that banks are in. In addition to that information, I would like to point out that it is not hard to avoid a monthly fee for Canadian bank accounts. Usually this involves keeping a minimum balance of a few thousand dollars at all times. Actual examples (as of Dec 2016) for the lowest tier chequing accounts. Includes information on the minimum balance to waive the monthly fee, and the monthly fee otherwise: |
Credit card statement dates follow pattern? | Each bank is different. Usually in my experience for newer credit card accounts, there is a specific number of days in a billing cycle (something like 28) and then a 20-25 day grace period. Older accounts usually have 30+ day billing cycles. Back in the 90's, many cards also had 30-40 day grace periods. The language specific to your card is in the card agreement. |
InteractiveBrokers: How to calculate overnight commissions for CFD? | IB's overnight financing cost for US CFDs below $100,000 is the Benchmark Rate + 1.5% for long positions and the Benchmark Rate -1.5% for short positions. You can check the IB CFD Contract Interest for their full list of financing costs for share CFDs. IB's commissions for an executed trade (where your monthly volume is below $300,000) is $0.005 per share with a minimum per order of $1.00. Commissions and overnight financing are 2 different fees, the overnight financing is charged because CFDs are leveraged. An order is just that, it is not a trade. It means your order has not been executed yet and is still an active order which you have not paid any commissions for yet. Regarding the orders that persist overnight, an example might be, you place an order to buy to open 200 CFDs. If only 100 CFDs are traded on that day, and the remaining 100 CFDs of your order remains active overnight, it will be considered a new order for the purposes of determining commission minimums. |
Dollar-cost averaging: How often should one use it? What criteria to use when choosing stocks to apply it to? | Why do people keep talking about 401K's at work? That is NOT dollar cost averaging. DCA refers to when you have a large sum of money. Do you invest it all at once or spread it out over several smaller purchases over a period of time? There really isn't a "when" should I use it. It is simply a matter of where your preferences lie on the risk/reward scpectrum. DCA has lower risk and lower reward than lump sum investing. In my opinion, I don't like it. DCA only works better than lump sum investing if the price drops. But if you think the price is going to drop, why are you buying the stock in the first place? Example: Your uncle wins the lottery and gives you $50,000. Do you buy $50,000 worth of Apple now, or do you buy $10,000 now and $10,000 a quarter for the next four quarters? If the stock goes up, you will make more with lump-sum(LS) than you will with DCA. If the stock goes down, you will lose more with LS than you will with DCA. If the stock goes up then down, you will lose more with DCA than you will with LS. If the stock goes down then up, you will make more with DCA than you will with LS. So it's a tradeoff. But, like I said, the whole point of you buying the stock is that you think it's going to go up! So why pick the strategy that performs worse in that scenario? |
New car price was negotiated as a “cash deal”. Will the price change if I finance instead? | So there are a few angles to this. The previous answers are correct in saying that cash is different than financing and, therefore, the dealer can rescind the offer. As for financing, the bank or finance company can give the dealership a "kickback" or charge a "fee" based on the customer's credit score. So everyone saying that the dealers want you to finance....well yes, so long as you have good credit. The dealership will make the most money off of someone with good credit. The bank charges a fee to the dealership for the loan to a customer with bad credit. Use that tactic with good credit...no problem. Use that tactic with bad credit.....problem. |
I'm 20 and starting to build up for my mortgage downpayment, where should I put my money for optimal growth? | Good job. Assuming that you are also contributing to retirement, you are bound to be a wealthy person. I'm not really sure how Australia works as far as retirement, but I am pretty sure you are taking care of that too. Given your time frame (more than 5 years) I would consider investing at least a portion of the money. If I was you, I would tend to make that amount significant, say 75% in mutual funds, 25% in your high interest savings. The ratio you choose is up to you, but I would be heavier in the investment than savings side. As the time for home purchase approaches, you may want more in savings and less in investments. You may want to look at a mutual fund with a low beta. Beta is a measure of the price volatility. I did a google search on low beta funds, and came up with a number of good articles that explains this further. Having a fund with a low beta insulates you, a bit, from radical swings in the market allowing you to count more on the money being there when needed. One way to get to the proper ratio, is to contribute all new money to the mutual fund until it is in proper balance. This way you don't lower your interest rate for a month. Given your time frame, salary, and sense of responsibility you may be able to do the 100% down plan. Again, good work! |
What to do with your savings in Japan | As an alternative to investing you'll find at least some banks eg. Rakuten that will give you preferential interest rates(still 0.1% though) just for opening a free brokering account. As this is still your individual savings account your money is as safe as it was before opening your account. I certainly wouldn't buy to hold any stock or fund that is linked to the Nikkei right now. Income stocks outside of the 225 may be safer, but you'd still need to buy enough of them that their individual results don't affect your bottom line. |
Is the concept of an “odd lot” adjusted to stock price? | I will assume that you are not asking in the context of high frequency trading, as this is Personal Finance Stack Exchange. It is completely acceptable to trade odd lots for retail brokerage customers. The odd lot description that you provided in your link, from Interactive Brokers is correct. But even in that context, it says, regarding the acceptability of odd lots to stock exchanges: The exception is that odd lots can be routed to NYSE/ARCA/AMEX, but only as part of a basket order or as a market-on-close (MOC) order. Google GOOG is traded on the NASDAQ. Everything on the NASDAQ is electronic, and always has been. You will have no problem selling or buying less than 100 shares of Google. There is also an issue of higher commissions with odd lots: While trading commissions for odd lots may still be higher than for standard lots on a percentage basis, the popularity of online trading platforms and the consequent plunge in brokerage commissions means that it is no longer as difficult or expensive for investors to dispose of odd lots as it used to be in the past. Notice what it says about online trading making it easier, not more difficult, to trade odd lots. |
On what quantity the Dividend is given in India? | In India, the amount of dividend you get is based on the face value of the stock. If the stock's face value is Rs. 10 and the company announced a dividend of 20%, you will receive Rs.2 per share.To see whether you qualify to receive a dividend, see the ex-dividend date of the company. If you purchased shares before that date, you will receive the dividend, else you will not |
What can I do with “stale” checks? Can I deposit/cash them? | Check is an obligation to pay, and is unconditional. In the US, checks don't expire (there are countries where they do). Endorsements such as "void after X days" are meaningless and don't affect the obligation to pay. The bank is under no obligation to honor a check that is more than 6 months old (based on the date on the check, of course). This is from the Unified Commercial Code 4-404. However, this refers to the bank, not to the person who gave you the check. The bank may pay, if the check is deposited in good faith and there's nothing wrong with it or with the account. So the first thing you can do is deposit the check. If asked - you can say that the person just wrote the wrong date, which is true. Worst case the check bounces. If the check bounces - you can start with demand letters and small claim courts. The obligation to pay doesn't go away unless satisfied, i.e.: paid. |
What is the risk-neutral probability? | You have actually asked several questions, so I think what I'll do is give you an intuition about risk-neutral pricing to get you started. Then I think the answer to many of your questions will become clear. Physical Probability There is some probability of every event out there actually occurring, including the price of a stock going up. That's what we call the physical probability. It's very intuitive, but not directly useful for finding the price of something because price is not the weighted average of future outcomes. For example, if you have a stock that is highly correlated with the market and has 50% chance of being worth $20 dollars tomorrow and a 50% chance of being worth $10, it's value today is not $15. It will be worth less, because it's a risky stock and must earn a premium. When you are dealing with physical probabilities, if you want to compute value you have to take the probability-weighted average of all the prices it could have tomorrow and then add in some kind of compensation for risk, which may be hard to compute. Risk-Neutral Probability Finance theory has shown that instead of computing values this way, we can embed risk-compensation into our probabilities. That is, we can create a new set up "probabilities" by adjusting the probability of good market outcomes downward and increasing the probability of bad market outcomes. This may sound crazy because these probabilities are no longer physical, but it has the desirable property that we then use this set of probabilities to price of every asset out there: all of them (equity, options, bonds, savings accounts, etc.). We call these adjusted probabilities that risk-neutral probabilities. When I say price I mean that you can multiply every outcome by its risk-neutral probability and discount at the risk-free rate to find its correct price. To be clear, we have changed the probability of the market going up and down, not our probability of a particular stock moving independent of the market. Because moves that are independent of the market do not affect prices, we don't have to adjust the probabilities of them happening in order to get risk-neutral probabilities. Anyway, the best way to think of risk-neutral probabilities is as a set of bogus probabilities that consistently give the correct price of every asset in the economy without having to add a risk premium. If we just take the risk-neutral probability-weighted average of all outcomes and discount at the risk-free rate, we get the price. Very handy if you have them. Risk-Neutral Pricing We can't get risk-neutral probabilities from research about how likely a stock is to actually go up or down. That would be the physical probability. Instead, we can figure out the risk-neutral probabilities from prices. If a stock has only two possible prices tomorrow, U and D, and the risk-neutral probability of U is q, then Price = [ Uq + D(1-q) ] / e^(rt) The exponential there is just discounting by the risk-free rate. This is the beginning of the equations you have mentioned. The main thing to remember is that q is not the physical probability, it's the risk-neutral one. I can't emphasize that enough. If you have prespecified what U and D can be, then there is only one unknown in that equation: q. That means you can look at the stock price and solve for the risk neutral probability of the stock going up. The reason this is useful is that you can same risk-neutral probability to price the associated option. In the case of the option you don't know its price today (yet) but you do know how much money it will be worth if the stock moves up or down. Use those values and the risk-neutral probability you computed from the stock to compute the option's price. That's what's going on here. To remember: the same risk-neutral probability measure prices everything out there. That is, if you choose an asset, multiply each possibly outcome by its risk-neutral probability, and discount at the risk-free rate, you get its price. In general we use prices of things we know to infer things about the risk-neutral probability measure in order to get prices we do not know. |
why do I need an emergency fund if I already have investments? | Let me first start by defining an emergency fund. This is money which is: Because emergency's usually need to be deal with ASAP, boiler breaks, gears box in a car. Generally you need these to be solved as soon as possible, because ou depend on these things working and you can't budget for this type of expenditure using just your monthly salary. This is a personal opinion but I prefer investment types that don't have another fee on access. I really don't like having another fee on top on money that I need right now. Investment Options: Market based investments should be seen as long term investments, therefore they do not really satisfy requirement one, they can also have broker fees, therefore you might pay a small extra charge for taking money out, and so do not satisfy requirement two. Investment Options for Emergency Funds You want to get the best return on your money even if it's your emergency fund. So use regular saving accounts, but from you emergency fund or use tax effective savings accounts, like a cash ISA if based in the UK. Don't think of an emergency money as just sitting there, you have options just makes sure the options fit the requirements. UPDATE Given feedback I appreciate there are levels of emergency fund, the above details things which might be about 1-2 month salary in cost, car repairs, leaks, boiler repairs. Now I have another fund which is in P2P funds which is higher risk than a deposit account but then gives me a better return and is less subject to market fluctuations and it would be the place I go to for loss of job level emergencies say 6 months of salary, this takes a bit longer to access but given I have the above emergency fund I have given myself time to get the money from the P2P account. |
Is it worth buying real estate just to safely invest money? | The main point to consider is that your payments toward your own home replace your rent. Any house or apartment you buy will have changes in value; the value is generally going slowly up, but there is a lot of noise, and you may be in a low phase at any time, and for a long time. So seeing it as an investment is not any better than buying share or funds, and it has a much worse liquidity (= you cannot as easily make it to cash when you want to), and not in parts either. However, if you buy for example a one-room apartment for 80000 with a 2% mortgage, and pay 2% interest = 1600 plus 1% principal = 800, for a total of 2400 per year = 200 per month, you are paying less than your current rent, plus you own it after 30 years. Even if it would be worth nothing after 30 years, you made a lot of money by paying half only every month, and it probably is not worthless. You need to be careful not to compare apples with oranges - if you buy a house for 200000 instead, your payments would be higher than your rent was, but you would be living in your house, not in a room. For most people, that is worth a lot. You need to put your own value to that; if you don't care to have a lot more space and freedom, the extra value is zero; if you like it, put a price to it. With current interest rates, it is probably a good idea for most people to buy a house that they can easily afford instead of paying rent. The usual rules should be considered - don't overstretch yourself, leave some security, etc. Generally, it is rather difficult to buy an affordable house instead of renting today and not saving a lot of money in the process, so I would say go for it. |
Should I buy a house with a friend? | Unlike others who have answered the question - I have done this. Here is my experience - your mileage and friendship may vary: I bought a condo years ago with a longtime childhood friend. We did it for all the reasons you mentioned - sick of renting and not building equity, were both young, single professionals who had the money. The market crashed we have both since married and moved on to own other properties with our spouses. Now we rent out the condo as selling in the current market is not doable.. It's not an ideal situation but that is because of the real estate market - not who I bought with. You need to discuss very openly all of the following scenarios, as well as others I can't think of right now I am sure: If you aren't both 100% in sync with these questions then do not do it. I never understand why some people would buy with a girlfriend/boyfriend but not a good personal friend. You're more likely to have a falling out with your significant other then a long time close friend. My advice, have honest, open conversations, about all possible scenarios. If you feel necessary put somethings down into some sort of legal agreement - with us it was not, and still isn't necessary. |
What should I do with the 50k I have sitting in a European bank? | You can do many things: Risk free: Risk of losing: |
Insurance for a house which is not homeowners insurance? | What you need will depend on a number of factors that aren't clear from the question. This coverage is simply called "Vacant home insurance", but not all companies are willing to offer this coverage. Unfortunately, in New York, insurers can also legally drop your standard homeowners' coverage if they become aware that your property has become vacant for 30 days or more. The Insurer's Concerns Typically, a "standard" homeowners policy will have an exclusion clause for vacant homes. The insurance company's concern is that without someone in the home, they will be at risk for break-ins, squatters and vandalism. If you've ever seen "Flip Men" on Spike, you'll know this is a serious concern (great show, by the way). They will use a risk model to calculate an estimated risk for the property (this is why a seasonal vacation home in a sparsely-populated area is often less of a concern than a family home in an urban area). If they estimate the risk to be low, some insurance companies will allow to you buy back that exclusion so that vacant properties are covered. In your case, they have probably decided that either: Your Options First, you need to find a company that is comfortable with taking on the extra risk of a vacant home. This will vary quite a bit by location, but the main ones are Farmer's (they use the Foremost brand name in New York) and Castle Rock. There are lots of insurance agencies that also advertise these products, but most of them are middlemen and use one of these two companies to actually write the coverage. Additionally, since this is a specialty policy, make sure you understand all of the details of the policy, and how they vary from a regular policy including: How to Reduce your Premium costs These are general tips from the Murray Group's website (an independent broker in NY) on how to lower the additional cost of vacant coverage: This may sound expensive, but these steps will all reduce the risk of something really bad happening when you're not there. Additionally, do you know anyone you completely trust (relative, unemployed friend) that might want to live in your old house rent-free for a while? This could work out for you if they are willing to keep the place 100% clean around the clock so that you can show the house at any time. If you have additional/specific questions, you should be able to find an independent insurance broker in your area that would be willing to advise you on your specific situation for a flat fee. Best of luck with getting the home covered and sold quickly! |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | The way you ask this is interesting, it implies (quite correctly) that for many, an annual bill for house insurance, property tax, etc, can turn into an emergency. My answer to the true emergency is a breakage that can't be foreseen (although you have to know the furnace isn't going to last forever) or a medical bill that's not covered (our dental is limited and the Mrs root canal can be $1000 out of pocket) |
Why do people buy insurance even if they have the means to overcome the loss? | This person could buy another car at any moment without any money problems, so I don't really see any point in insuring, especially with such a ridiculously high price compared to the extremely low risk. Convenience. If you self-insure, then an accident means that you have to make arrangements to get the car towed, fixed, evaluated, etc. If you buy insurance, your insurer would prefer to do all that. They argue with the mechanic over prices, the lawyer over liability, etc. And of course, rich people need more liability insurance than other people, not less. So part of that $1400 is probably money that your friend would have to pay regardless. |
What's the best application, software or tool that can be used to track time? | Time Tracker I'm a software engineer and have been using this tool. It is free and has a good user interface. I believe it can very well be used by professional of other areas too. It does support the features that you're looking for regarding project and task tracking. |
How to properly do background check for future tenant in my own house? | I am a realtor. For our rental business, we use a service that offers a background check. It costs us about $25, and it is passed along in the form of an application fee. I suggest you contact a local real estate agent who you know does rentals. Have a conversation about what you are doing, and see if they will help process the application for you, for a fee of course. If you are truly concerned about your safety (The text you wrote can either read as true concern or sarcasm. Maybe we are really in a wild country?) It's worth even a couple hundred bucks to screen out a potential bad roommate. |
Why do credit cards have minimum limits? | They have a minimum to discourage applications for that particular card. Every application costs them money because they have to pay the credit agencies to pull the applicant's credit history. So one way they save money and reduce their cost of business is to discourage people from applying if they're not creditworthy enough for that product. Credit card companies tailor their products into different income/credit brackets. Those who have less creditworthiness would be better suited for a different product than what you're referring, similar to those with greater creditworthiness. |
What is a subsidy? | A subsidy is a payment made by a group (usually the state) to individuals or corporations in order to shift the balance if the rational economic decision for the individual would be detrimental to the group as a whole otherwise. For example, if there are different quality kinds of crops that can be planted, for example a GM maize that brings in high yields but can only be processed to High Fructose Corn Syrup or a naturally bred corn that brings lower yields but tastes well enough for direct consumption, then if demand for both exceeds supply, the economic choice for the individual farmer is to plant the former. If the claims that HFCS contribute to obesity are founded, then it is in the public interest to produce less of it, and more alternative foods. Given that a market rather than a planned economy is desired, this cannot be achieved by decree, but rather money is used as an incentive. In the long term, this investment may very well pay off through reduced health care costs, so it is a rational economic decision from the state's point of view. In a world where all actors make decisions that are fully in their self interest, in principle subsidies would not be needed as consumers would demand healthy rather than cheap foods, and market mechanisms would provide these. |
Do credit checks affect credit scores? | There are two types of credit checks. First is the hard pull which is typically done when you apply for a credit line. The lender will hard pull your file and make his/her decision based on that. This affects your score negatively. You might lose few points for one hard inquiry. Second type is soft pull, which is done as a background check. Typically done by credit card companies to send you a pre-approved offer, or renting an apartment etc. This does not affect your score. One thing to keep in mind is a company will not do a hard pull without your permission, where as they can do soft pulls without you even knowing. Soft inquiries vs hard inquiries |
How can I set up a recurring payment to an individual (avoiding fees)? | A handful of well-known banks in the United States are part of the clearXchange network, which allows customers of those banks to move money amongst them. The clearXchange service is rebranded differently by each member bank. For example, Chase calls it QuickPay, while Wells Fargo calls it SurePay, and Capital One calls it P2P Payments. To use clearXchange, the sender's bank must be part of the network. The recipient isn't required to be in the network, though if they are it makes things easier, as no setup is required on the recipient's end in that case. Otherwise, they must sign up on the clearXchange site directly. From what I can tell, most payments are fee-free within the network. I have repeating payments set up with Chase's QuickPay, and they do not charge fees. |
What's the point of Ford loosening financing requirements? | Why then did Ford (and the auto industry in general) suddenly decide to court such buyers? Clearly when they felt they had a viable solution to the financing and could open up the market of buyers they were previously ignoring. If more sales are desired, surely the same can be accomplished with simply lowering prices? Millions of people have bad credit. Apparently Ford thinks adding millions of people to the pool of potential buyers is more effective to boosting sales than discounting product for the pool of existing potential buyers. |
I just made $50K from selling my house. How should I invest the proceeds? | It sounds like you want to lock-up your money in something relatively safe, and relatively hard to touch. You may want to consider a GIC (TD has one I found in a quick search) - from what I see it's the closest thing to a US CD. You won't get much back, but if you pick a 5-year term, you can't spend it* easily. Other options might be to buy an ETF, or get into REITs - but that will depend on your risk comfort. Also - to add from the comment Rick left - be sure to pay off any high-interest debts: especially if they're on a credit card, it will help you later on. * easily .. you can withdraw, but there're generally penalties |
When is it necessary to apply taxes for web freelancing services in Quebec, Canada? | AFAIK, there are two kinds of taxes your web freelancing income may be subject to in Quebec: On the income taxes: The net income you realize from your web freelancing activities would be considered taxable income. Assuming you are not operating as an incorporated business, you would need to declare the freelancing income on both your federal and provincial tax returns. You should be able to deduct certain costs related to your business – for instance, if you paid for software, hosting, domain name registration, etc. That is, only the profit from your business would be subject to income tax. With income and expenses arising from self-employment, you may want to use a professional to file your taxes. On the sales taxes: You may also need to charge federal GST and provincial QST (Quebec Sales Tax) on your services: You must enroll and charge GST and QST once you exceed the "small supplier" revenue threshold of $30,000 measured over four consecutive quarters. (You can still choose to enroll for GST/QST before you reach that amount, but over that amount enrollment becomes mandatory. Some businesses enroll before the threshold is reached so they can claim input tax credits for tax paid on expenses, but then there's more paperwork – one reason to perhaps avoid enrolling until necessary.) In Quebec, the Ministère du Revenu du Québec administers both GST (on behalf of the federal government) as well as provincial QST. Be sure to also check out their informative booklet, Should I Register with Revenu Quebec? (PDF). See also General Information Concerning the QST and the GST/HST (PDF). |
How do I choose between buying a car or buying a plot of land in Pakistan? | Your question has an interesting mix of issues. ASAP and 3-4 years doesn't feel like the same thing. ASAP results in bad decisions made in haste. Four years of living very frugally can create a nice down payment on a house. A car is only an investment for Uber drivers and those who are directly financially benefitting from a car's use. For everyone else, it's a necessary expense. What I'd focus on is the decision of buying a plot of land. Unless this is a very common way to do it in your country, I don't recommend that order. Having land and then trying to finance the building of a house has far more complexity than most people need in their lives. In my opinion, the better way is to save the 20% down, and buy a new or existing home you can afford. In the end, spending is a matter of priority. If you truly want to get out in the least time, I'd save every dime I can and start looking for a house that your income can support. |
What is the best approach to save money for College for three kids? | I'm not a 'rule of thumb' guy, but here, I'd suggest that if you can set aside 10% of your income each year for college, that would be great. That turns out to be $900/mo. In 15 years, if you saw an 8% CAGR, you'd have $311K which happens to be in your range of expenses. And you'd still have time to go as the baby won't graduate for 22(?) years. (Yup, 10% is a good rule of thumb for your income and 3 kids) Now, on the other hand, I'd research what grants you'd be able to get if you came up short. If instead of saving a dime, you funded your own retirement and the spouse's IRA if she's not working, and time the mortgage to pay it off in 15 years from now, the lack of liquid funds actually runs in your favor. But, I'm not an expect on this, just second guessing my own fully funded college account for my daughter. |
Currently sole owner of a property. My girlfriend is looking to move in with me and is offering to pay 'rent'. Am I at risk here? | The rent payment is in principle taxable. However, you should be able to take advantage of the "rent a room" scheme, and the proposed rent falls well under the £7,500/year tax threshold for that. So no tax will be actually payable and you don't have to formally declare it as long as you stay below that threshold. You should also be fairly well legally protected in case you do split up in future and you want to remove her. As you would be living there too, she would just be a lodger, not a tenant (technically, an "excluded occupier"). If you did want her to leave you would only need to give reasonable notice and wouldn't need a formal court order if you needed to force her to go. As JBentley points out, there have been court cases where domestic partners contributing to household expenses while the other partner paid the mortgage have later been able to claim that this implied joint ownership. This was on the basis of a "constructive trust" being implicitly setup by the way they arranged their finances. In your case, if there's a clear intention, formalised in writing, for the money to be treated as rent rather than a contribution towards purchasing the property, I think it should make it very hard to claim the contrary later. I would also suggest you be clear about whether the rent includes a share of the utility bills, and that things like groceries would be handled separately and split 50:50 or whatever. As pointed out in a comment, there are template agreements for lodgers you could use a starting point (e.g. this one), but it's likely you'd need to customise it to your circumstances. Another point made in another answer is that there's potential upcoming legislation to give some rights to cohabiting partners. In the current draft, those would kick in after three years or having children. If the bill does come into effect, you'd also be able to sign an opt out, but only after getting legal advice, and it would still be possible (though presumably hard) to persuade a court to overturn an opt out. Overall that does create a small risk to you, but not one that comes directly from your girlfriend paying rent. It's likely that if you are both on an equal financial footing and had always kept your finances separate, that there wouldn't be any award made anyway. And you can't run your entire life on hypothetical risks. |
If something is coming into my account will it be debit or credit in my account? | The bank will make this even more confusing because they use the terms from their own perspective. From the bank's perspective (printed on your statements) credit: Money into your account (increases the bank's liabilities) debit: Money out of your account (decrease bank liabilities) From your perspective: It depends on the nature of the transfer of money, but here are the most common for a personal account. Income into your account: Credit Expenses out of your account: Debit Payment on a loan made for an asset (house/car): Credit for the loan account, debit for the equity account for the car/house/etc. Yes, it's complicated. Neither credits nor debits are always a + or -. That's why I agree with the advice of the others here that double-entry accounting is overkill for your personal finances. Note: I simplified the above examples for the purpose of clarity. Technically every transaction in double entry accounting includes both a credit and a debit (hence the "double" in the name). In fact, sometimes a transaction involves more than one credit or debit, but always at least one of each. Also, this is for EACH party. So any transaction between you and your bank involves at least FOUR debits and/or credits when all involved are considered. |
Are there extra fees for a PayPal Premier account? | Summary: the fees used to differ but no longer do. Fees are the same. If you have a personal account, feel free to upgrade it to premier to get access to more features. Longer answer: the two account types USED to differ but that changed a few years ago (maybe circa 2011?). PayPal wants person-to-person payments to be free (except where they must pass along credit card charges or else they would loose their shirt) but wants to charge merchants for receiving payments. Originally PayPal required merchants to have premier (or business) accounts, and charged fees for payments made to those account types. Personal accounts had significant limitations on receiving payments, but did not pay fees upon receiving payments. Eventually PayPal decoupled the question of "is this a person-to-person payment or a payment to a merchant for goods and services?" from the paypal account type. So now the same account can receive both a p2p payment (e.g. splitting lunch costs), on which it will NOT pay fees, and can receive a payment for goods or services e.g. from a web checkout, on which it WILL pay fees. Regardless of the account type. |
Can I claim GST/HST Input Tax Credits (ITCs) on Uber, taxi, or limousine fares? | Apparently Canadians have not been paying any tax on Uber rides, and will only begin to do so on July 1, 2017. Source: http://mobilesyrup.com/2017/03/22/uber-canada-gst-hst-budget-2017/ |
How does a CFD work behind the scenes? | There are several ways that the issuers profit from CFDs. If the broker has trades on both sides (buy and sell) they can net the volumes off against each other and profit off the spread whilst using the posted margins to cover p&l from both sides. Because settlement for most securities is not on the same day that the order is placed they can also buy the security with no intention of taking delivery and simply sell it off at the end of day to pass delivery on to someone else. Here again they profit from the spread and that their volumes give them really low commissions so their costs are much lower than the value of the spread. If they have to do this rather than netting the position out the spreads will be wider. Sometimes that may be forced to buy the security outright but that is rare and the spreads will be even wider so that they can make a decent profit. |
What percent of your portfolio should be in a money market account? | I would disagree with your analysis. To me there are two purposes for a money market (MM): Your emergency fund should be from 3 to 6 months of expenses. Think of it of an insurance policy against Murphy. You may want to have some money designated for big expenses, or even sinking funds. For example, I keep some money in a MM for a car as both the wife, daughter, and I driver older vehicles. I may need to replace them. If you were planning on making a larger purchase car, house, boat, engagement ring I would put the money in a MM fund so you are not subject to the whims of the market. After that you are free to invest all your money. Its likely that you should have some money outside of tax advantaged funds so if you want to start a business you will not have to do high cost withdrawals. |
Does the P/E ratio not apply to bond ETFs? | How would you compute the earnings for governments that are some of the main issuers of bonds and debt? When governments run deficits they would have a negative earnings ratio that makes the calculation quite hard to evaluate. |
What is the “substantial difference” that might occur in the google shares? [duplicate] | Presumably you're talking about the different share class introduced in the recent stock split, which mean that there are now three Google share classes: Due to the voting rights, Class A shares should be worth more than class C, but how much only time will tell. Actually, one could very well argue that a non-voting share of a company that pays no dividends has no value at all. It's unlikely the markets will see it that way, though. |
why do I need an emergency fund if I already have investments? | From a budgeting perspective, the emergency fund is a category in which you've budgeted funds for the unexpected. These are things that weren't able to be predicted and budgeted for in advance, or things that exceeded the expected costs. For example you might budget $150 per month for car maintenance, and typically spend some of it while the rest builds up over time for unexpected repairs, so you have a few hundred available for that. But this month your transmission died and you have a $3,000 bill. You'll then fund most of this out of your emergency fund. This doesn't cover where to store that money though, which leads me to my next point. Emergencies are emergencies because they come without warning, without you having a chance to plan. Thefore the primary things you want in an emergency fund account are stability and quick access. You can structure investments to be whatever you think of as safe or stable but you don't want to be thinking about whether it's a good time to sell when you need the money right now. But the bigger problem is access. When you need the funds on a weekend, holiday, anytime outside of market hours, you're not going to be able to just sell some stocks and go to an ATM. This is the reason why it's recommended to have these funds in a checking or savings account usually. The reason I mentioned the budgeting side first is because I wanted to point out that if you're budgeting well, most of the unexpected expenses you have should have been expected in a sense; you can still plan for something without knowing when or if it will happen. So in the example of a car repair, ideally you're already budgeting for possible repairs, if you own a home you're budgeting for things that would go wrong, budgeting for speeding tickets, for surprise out of pocket medical costs, etc. These then become part of your normal budget: they aren't part of the emergency fund anymore. The bright side about budgeting for something unexpected is that you know what that money is for, and do you likely also know how quickly you'll need it. For example you know if you have unexpected medical costs that happen very quickly, you're not likely you need a bag of cash on a moment's notice. So those last two points lead to the fact that your actual emergency fund, the dollars that are for things you simply could not foresee, will be relatively small. A few thousand dollars or so in most cases. If you've got things structured like this, you'll be happy to have a few grand available at a moment's notice. The bulk of the money you would use for other surprise expenses (or things like 6 months of living expenses) is represented in other specific categories and you already know the timeframe in which you need it (probably enough time that it could be invested, risk to taste). In short: by expecting the unexpected, you can sidestep this issue and not worry so much about missed returns on the emergency fund. |
Will I be able to purchase land? | Here are some important things to think about. Alan and Denise Fields discuss them in more detail in Your New House. Permanent work. Where do you want to live? Are there suitable jobs nearby? How much do they pay? Emergency fund. Banks care that you have "reserves" (and/or an unsecured line of credit) in case you have a run of bad luck. This also helps with float the large expenses when closing a loan. Personal line of credit. Who are you building for? If you are not married, then you should consider whether building a home makes that easier, or harder. If you hope to have kids, you should consider whether your home will make it easier to have kids, or harder. If you are married (or seriously considering it), make sure that your spouse helps with the shopping, and is in agreement on the priorities and choices. If you are not married, then what will you do if/when you get married? Will you sell? expand? build another house on the same lot? rent the home out? Total budget. How much can the lot, utilities, permits, taxes, financing charges, building costs, and contingency allowance come to? Talk with a banker about how much you can afford. Talk with a build-on-your-lot builder about how much house you can get for that budget. Consider a new mobile or manufactured home. But if you do choose one, ask your banker how that affects what you can borrow, and how it affects your rates and terms. Talk with a good real estate agent about how much the resale value might be. Finished lot budget. How much can you budget for the lot, utilities, permits required to get zoning approval, fees, interest, and taxes before you start construction? Down payment. It sounds like you have a plan for this. Loan underwriting. Talk with a good bank loan officer about what their expectations are. Ask about the "front-end" and "back-end" Debt-To-Income ratios. In Oregon, I recommend Washington Federal for lot loans and construction loans. They keep all of their loans, and service the loans themselves. They use appraisers who are specially trained in evaluating new home construction. Their appraisers tend to appraise a bit low, but not ridiculously low like the incompetent appraisers used by some other banks in the area. (I know two banks with lots of Oregon branches that use an appraiser who ignores 40% of the finished, heated area of some to-be-built homes.) Avoid any institution (including USAA and NavyFed) that outsources their lending to PHH. Lot loan. In Oregon, Washington Federal offers lot loans with 30% down payments, 20-year amortization, and one point, on approved credit. The interest rate can be a fixed rate, but is typically a few percentage points per year higher than for a mortgage secured by a permanent house. If you have the financial wherewithal to start building within two years, Washington Federal also offers short-term lot loans. Ask about the costs of appraisals, points, and recording fees. Rent. How much will it cost to rent a place to live, between when you move back to Oregon, and when your new home is ready to move into? Commute. How much time will it take to get from your new home to work? How much will it cost? (E.g., car ownership, depreciation, maintenance, insurance, taxes, fuel? If public transportation is an option, how much will it cost?) Lot availability. How many are there to choose from? Can you talk a farmer into selling off a chunk of land? Can you homestead government land? How much does a lot cost? Is it worth getting a double lot (or an extra large lot)? Utilities. Do you want to live off the grid? Are you willing to make the choices needed to do that? (E.g., well, generator, septic system, satellite TV and telephony, fuel storage) If not, how much will it cost to connect to such systems? (For practical purposes, subtract twice the value of these installation costs from the cost of a finished lot, when comparing lot deals.) Easements. These provide access to your property, access for others through your property, and affect your rights. Utility companies often ask for far more rights than they need. Until you sign on the dotted line, you can negotiate them down to just what they need. Talk to a good real estate attorney. Zoning. How much will you be allowed to build? (In terms of home square footage, garage square footage, roof area, and impermeable surfaces.) How can the home be used? (As a business, as a farm, how many unrelated people can live there, etc.) What setbacks are required? How tall can the building(s) be? Are there setbacks from streams, swamps, ponds, wetlands, or steep slopes? Choosing a builder. For construction loans, banks want builders who will build what is agreed upon, in a timely fashion. If you want to build your own house, talk to your loan officer about what the bank expects in a builder. Plansets and permits. The construction loan process. If you hire a general contractor, and if you have difficulties with the contractor, you might be forced to refuse to accept some work as being complete. A good bank will back you up. Ask about points, appraisal charges, and inspection fees. Insurance during construction. Some companies have good plans -- if the construction takes 12 months or less. Some (but not all) auto insurance companies also offer good homeowners' insurance for homes under construction. Choose your auto insurance company accordingly. Property taxes. Don't forget to include them in your post-construction budget. Homeowners' insurance. Avoid properties that need flood insurance. Apply a sanity check to flood maps -- some of them are unrealistic. Strongly consider earthquake insurance. Don't forget to include these costs in your post-construction budget. Energy costs. Some jurisdictions require you to calculate how large a heating system you need. Do not trust their design temperatures -- they may not allow for enough heating during a cold snap, especially if you have a heat pump. (Some heat pumps work at -10°F -- but most lose their effectiveness between 10°F and 25°F.) You can use these calculations, in combination with the number of "heating degree days" and "cooling degree days" at your site, to accurately estimate your energy bills. If you choose a mobile or manufactured home, calculate how much extra its energy bills will be. Home design. Here are some good sources of ideas: A Pattern Language, by Christopher Alexander. Alexander emphasizes building homes and neighborhoods that can grow, and that have niches within niches within niches. The Not-So-Big House, by Sarah Susanka. This book applies many Alexander's design patterns to medium and large new houses. Before the Architect. The late Ralph Pressel emphasized the importance of plywood sheathing, flashing, pocket doors, wide hallways, wide stairways, attic trusses, and open-truss or I-joist floor systems. Lots of outlets and incandescent lighting are good too. (It is possible to have too much detail in a house plan, and too much room in a house. For examples, see any of his plans.) Tim Garrison, "the builder's engineer". Since Oregon is in earthquake country -- and the building codes do not fully reflect that risk -- emphasize that you want a building that would meet San Jose, California's earthquake code. |
income tax for purchased/sold short term & long term shares | As mentioned by Dilip, you need to provide more details. In general for transacting on stocks; Long Term: If you hold the stock for more than one year then its long term and not taxable. There is a STT [Securities Transaction Tax] that is already deducted/paid during buying and selling of a stock. Short Term: If you hold the stock for less than one year, it's short term gain. This can be adjusted against the short term loss for the financial year. The tax rate is 10%. Day Trading: Is same as short term from tax point of view. Unless you are doing it as a full time business. If you have purchased multiple quantities of same stock in different quantities and time, then when you selling you have to arrive at profit or loss on FIFO basis, ie First in First Out |
Can rent be added to your salary when applying for a mortgage? | I can answer Scenario #3. If you are purchasing a property with buy-to-let intentions […] can you use the rental income exclusively to fund the mortgage repayments? Yes – this is exactly how buy-to-let mortgage applications are evaluated. Lenders generally expect you to fund the mortgage payments with rent. They look for the anticipated monthly rent income to cover a minimum of 125% of the monthly mortgage payment. This is to make sure you can allow for vacant periods, maintenance, compliance with rules and regulations, and still be in profit (i.e. generate a positive yield on your investment). However, buy-to-let (BTL) mortgage lenders also generally expect you to own your own home to begin with. It's up to them, but rare is the lender who will provide a buy-to-let mortgage to a non-owner-occupier. This is because of point 2 above. The lender doesn't want you to end up living in the property because then you'll need to repay the loan capital, since you'll always need somewhere to live. This makes the economics of BTL unfavourable. They look at your application as a business proposal: quite different to a residential mortgage application, which is what your question seems to be addressing. Bottom line: You're right about scenario #3 but it sounds like you're trying to afford a home first, whereas BTL is best viewed as an investment for someone who already has their main residence under ownership (mortgaged or otherwise). As for Scenarios #1 and #2 I can't offer first hand answers but I think Aakash M. and Steve Melnikoff have covered it. |
How are shares used, and what are they, physically? | For some very small private companies I know of (and am part of), paper stocks do exist. You can sit at the table with the damn things in your hand and wave them in people's faces. They tell everyone how much of the company you own as a result of the money you ponied up. On the other hand, most stocks are now electronic. Nothing to hold. Just electronic records to review. They still represent how much you own of the company because of some amount of money you have put at risk, but they aren't anywhere near as much fun as the old-fasioned paper proofs. (As MrChrister notes, you can pay a small fee to get paper if you like, even for some big companies. Some of these paper stocks are remarkably elaborate and fine looking, but hardly necessary.) (You can see more info about what stocks are and what sort of stocks exist here: http://www.wikinvest.com/wiki/What_is_a_stock%3F) |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | You probably bought the stock near the peak because "it's been up a lot lately." That's the easiest way to lose money. You need to go back and do some basic research. The stock appears to have been expensive around 75. Why is that? The stock seems to be in a "comfortable" level around 45. Why is THAT? Maybe it's too expensive around 45 (based on the P/E ratio, or other measures); maybe you should buy more at 45, where it is cheap, even though 75 is too expensive. The key is to study the stock where it is today (45-47). Ask yourself what you would do at TODAY's price, and today's "fundamentals." That will also save you from paying 75 for a stock worth 45, and should save you from paying 45 for a stock if it is only worth 35. |
Am I liable for an auto accident if I'm a cosigner but not on the title, registration, or insurance policy? | It might be possible to sue you successfully if someone brought evidence that your brother was absolutely totally unsuitable to drive a car because of some character flaw, and without your financial help he wouldn't have been able to afford a car. So helping a brother to buy a car, if that brother is a drinking alcoholic, or has only a faked driver's license and you know it, that could get you into trouble. A not unsimilar situation: A rental car company could probably be sued successfully if they rented a car to someone who they knew (or maybe should have known) was disqualified from driving and that person caused an accident. |
How does the Pension system work in Poland? | Pretty simple actually. This is a state-run defined benefit plan, where the benefit is calculated based on the length of the employment and the contributed amounts. This is what in the US is known as the Social Security. This is a defined contribution plan, where the employee can chose the level of risk based on certain pre-defined investment guidelines (more conservative or more aggressive). In Poland, it appears that there's a certain amount of the state-mandated SS tax is transferred to these plans. Nothing in the US is like that, but you can see it as a mandatory IRA with a preset limited choice of mutual funds to invest into, as an analogy. The recent change was to reduce the portion of the madatory contribution that is diverted to this plan from 7+% to 2.3% (on account of expanding the contribution to (1)). Probably the recent crashes of the stock markets that affected these accounts lead to this decision. This is voluntary defined contribution plan, similar to the US 401Ks. This division is actually pretty common, not unique to Poland. I'd say its the "standard" pension scheme, as opposed to what we're used to in the US. |
What's the difference when asked for “debit or credit” by a store when using credit and debit cards? | These are two different ways of processing payments. They go through different systems many times, and are treated differently by the banks, credit card issuers and the stores. Merchants pay different fees on transactions paid by debit cards and by credit cards. Debit transactions require PIN, and are deducted from your bank account directly. In order to achieve that, the transaction has to reach the bank in real time, otherwise it will be declined. This means, that the merchant has to have a line of communications open to the relevant processor, that in turn has to be able to connect to the bank and get the authorization - all that while on-line. The bank verifies the PIN, authorizes the transaction, and deducts the amount from your account, while you're still at the counter. Many times these transactions cannot be reversed, and the fraud protections and warranties are different from credit transactions. Credit transactions don't have to go to your card issuer at all. The merchant can accept credit payment without calling anyone, and without getting prior authorizations. Even if the merchant sends the transaction for authorization with its processor, if the processor cannot reach the issuing bank - they can still approve the transaction under certain conditions. This is, however, never true with debit cards (even if used as "credit"). They're not deducted from your bank account, but accumulated on your credit card account. They're posted there when the actual transaction reaches the card issuer, which may be many days (and even many months) after the transaction took place. Credit transactions can be reversed (in some cases very easily), and enjoy from a higher level of fraud protection. In some countries (and most, if not all, of the EU) fraudulent credit transactions are never the consumer's problem, always the bank's. Not so with debit transactions. Banks may be encouraging you to use debit for several reasons: Merchants will probably prefer credit because: Consumers will probably be better off with credit because: |
I own ASPIRO shares (Jay Z's new company). Now that it is going private, what about my shares? | From the press release Based on Aspiro's closing share price of SEK 0.66 as of 29 January 2015, the Offer values each Aspiro share at SEK 1.05 and the total value of the Offer at approximately SEK 464 million.[3] The Offer represents a premium of..... It seems you will get cash. I can't explain the pop to 11. You don't have any option to keep the shares. |
What drives the stock of bankrupt companies? | What drives the stock of bankrupt companies? Such stock is typically considered "distressed assets". Technically, what drives it is what drives every stock - supply and demand. A more interesting question is of course, why would there be demand? First, who exerts the buying pressure on the stock? Typically, three types of entities: The largest ones are financial institutions specializing in distressed assets (frequently, alternatives specialists - hedge funds, private equity firms etc...). Usually, they invest in distressed debt or distressed preferred equity; but sometimes distressed equity as well. Why? We will discuss their motivations separately in this answer. Second one are existing equity holders. Why? Short answer, behavioral psychology and behavioral economics. Many investors - especially non-professionals - insist on holding distressed stocks due to variety of investment fallacies (sunk cost etc...); usually constructing elaborate theories of why and how the company and the stock will recover Sometimes, people who buy into penny stock scams, pump and dump schemes etc... Why? "There's a sucker born every minute." - P.T. Barnum Let's find out why an investment professional would invest in distressed equity? First, the general process is always the same. Company's assets are used to pay off its liabilities; in accordance with applicable law. There are two ways this can be done - either through selling the company; OR through bankruptcy process. The liabilities are paid according to seniority. The seniority priorities rules are covered by 11 U.S. Code § 507 - Priorities A company in bankruptcy can have one of 2 outcomes: Buyout. Some buyer might decide that the company's assets are worth something to them as a whole; and buy the whole enterprise; rather than risk it being destroyed piecemeal in bankruptcy proceedings. In that case, the proceeds from the sale will be used to fund the liabilities as discussed above. This option is one of the possible reasons people might consider investing in distressed equity. For example, if the company is in bankruptcy because it can't get enough financing right now, but is likely to have good profits in the future. The chances are, some buyer will buy it for a premium that includes those future profits; and that sale amount might possibly exceed the liabilities. Bankruptcy. The assets are sold and liabilities are covered according to priorities. In that case, the investors in distressed equity might be hoping that there are un-obvious assets whose value would also put the total assets above claimed liabilities. Additional possible beneficial factor is that unsecured debtors must file with the court in order to be paid; and the claim must be validated. Some might fail on either count; so total amount of liabilities might lessen once the bankruptcy process goes through. Assets Now, here's where things get interesting. Of course, companies have usual assets. Real estate, inventory, plants, cash, etc... These are all able to be sold to cover liabilities, and at first glance are possibly not enough to cover liabilities, leaving equity holders with nothing (and even that's not a certainty - bankruptcy is simply inability to service debt payments; and while it correlates to assetsliquid assets, not full asset valuation). But some assets are less sure, and are thus rarely included in such calculations. These may include: Chances of winning appeals if specific existing liabilities are results of litigation, e.g. tax appeals, court judgement appeals etc... Clawbacks and lawsuits against former executives, especially in cases where the company's financial distress resulted from executive malfeasance. I was personally involved in one such case as an equity holder, where the company assets were valued at $X; had liabilities of $X*2; but had a real possibility of winning about $X*3 in a lawsuit against former CEO accused of various malfeasance including fraud and insider trading. As such, the best case scenario was literally 100% profit on holding that distressed equity. |
Ex-dividend date: How long do I have to hold a stock in order to get the next dividend? | You only have to own it for a day (or rather for some amount of time before the close of trading the day before the ex-dividend date). This is governed by exchange rules based on the date of record and payable date set by the company. You might want to look at this article or this one for more details. It should be difficult to make money from changes due to the dividend distribution since it is well known and expected. The exchanges have established rules for handling the various details that can come up, and traders account for the change where appropriate (as in option pricing). Also, note that the favorable U.S. tax treatment of dividends requires a 60-day ownership period for the stock. |
How can I find data on delisted stocks? | You need a source of delisted historical data. Such data is typically only available from paid sources. According to my records, AULT (Ault Inc) began as an OTC stock in the 1980s prior it having an official NASDAQ listing. It was delisted on 27 Jan 2006. Its final traded price was $2.94. It was taken over at a price of $2.90 per share by SL Industries. Source: Symbol AULT-200601 within Premium Data US delisted stocks historical price data set available from http://www.premiumdata.net/products/premiumdata/ushistorical.php Disclosure: I am a co-owner of Norgate / Premium Data. |
Should I finance a new home theater at 0% even though I have the cash for it? | I think so. I am doing this with our furniture. It doesn't cost me any more money to pay right now than it will to pay over the course of 3 years, and I can earn interest on the money I didn't spend. But know this: they aren't offering 0%, they are deferring interest for 3 years. If you pay it off before then great, if you don't you will owe all the accumulated interest. The key with these is that you always pay it, and on time. Miss a payment and you get hosed. If you don't pay on time you will owe the interest that is being deferred. They will also be financing this through a third party (like a major bank) and that company is now "doing business with you" which means in the US they can call you and solicit new services. I am willing to deal with those trade offs though, plus, as you say, you can always pay it off. WHY THEY DO IT (what is in it for them...) A friend of mine works for a major bank that often finances these deals here is how they work. Basically, banks do this to generate leads for their divisions that do cold calls. If you are a high credit, high income customer you go to a classic bank and request cash, if you are building credit or have bad credit, you go to a "financial services" branch. If you tend to finance things like cars and furniture, you get more cold calls. |
Get interest on $100K by spending only $2K using FOREX rollovers? | I work at a FOREX broker, and can tell you that what you want to do is NOT possible. If someone is telling you it is, they're lying. You could (in theory) make money from the SWAP (the interest you speak of is called SWAP) if you go both short and long on the same currency, but there are various reasons why this never works. Furthermore, I don't know of any brokers that are paying positive SWAP (the interest you speak of is called SWAP) on any currency right now. |
What should I consider when I try to invest my money today for a larger immediate income stream that will secure my retirement? | I don't think you should mix the two notions. Not starting out with at least. It takes so much money, time and expertise to invest for income that, starting out at least, you should view it as a goal, not a starting point. Save your money in the lowest cost investments you can find. If you are like me, you can't pick a stock from a bond, so put your money into a target retirement fund. Let the experts manage the risk and portfolio. Start early and save often! At only 35 you have lots of time. Perhaps you are really into finance, in which case you might somebody manage your own portfolio. Great, but for now, let an expert do the heavy lifting. You are an app developer. Your best bet to increase your income stream with via your knowledge and expertise. While you are still so young, you should use labor to make money, and then save that money for retirement. I am going to make an assumption that where you are will software development means you can become a great developer long before you can become a great financier. Play to your strengths. I am also afraid you are over estimating how comfortable you are with risk. Any "investment" that has the kinds of returns you are looking for is going to be wildly risky. I would say those types of opportunities are more "speculation" rather than "investments." There isn't necessarily anything wrong with speculations, but know the difference in risk. Are you really willing to gamble your retirement? |
IRR vs. Interest Rates | IRR is not subjective, this is a response to @Laythesmack, to his remark that IRR is subjective. Not that I feel a need to defend my position, but rather, I'm going to explain his. My company offered stock at a 15% discount. We would have money withheld from pay, and twice per year buy at that discount. Coworkers said it was a 15% gain. I offered some math. I started by saying that 100/85 was 17.6%, and that was in fact, the gain. But, the funds were held by the company for an average of 3 months, not 6, so that gain occurred in 3 months and I did the math 1.176^4 and resulted in 91.5% annual return. This is IRR. It's not that it's subjective, but it assumes the funds continue to be invested fully during the time. In our case the 91.5% was real in one sense, yet no one doubled their money in just over a year. Was the 91% useless? Not quite. It simply meant to me that coworkers who didn't participate were overlooking the fact that if they borrowed money at a reasonable rate, they'd exceed that rate, especially for the fact that credit lines are charged day to day. Even if they borrowed that money on a credit card, they'd come out ahead. IRR is a metric. It has no emotion, no personality, no goals. It's a number we can calculate. It's up to you to use it correctly. |
Getting over that financial unease? Budgeting advice | You sound like you are budgeting too much for food. Try limiting yourself to $200 a month for food and take that out in cash. When it's up, it's up. It's a hard way to learn but if you can tackle that, then budgeting for other things gets easier. In terms of your fear of doing a financial bellyflop, which is valid, it sounds like you may need to both sit down and learn a little more about personal finance. Try mrmoneymustache.com or fivecentnickel, or any of the other frugal living blogs that are out there. There are whole communities that can help you and give you tips to do more with less, and learn budgeting and finance and how to handle your money and your future. And no worries, the fact you are concerned enough to look for direction now means you may be able to avoid your fear completely. |
How much percent of my salary should I use to invest in company stock? | I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain. |
Covered calls: How to handle this trade? | Your broker likely didn't close your position out because it is a covered position. Why interfere with a trade that has no risk to it, from their perspective? There's no risk for the broker since your account holds the shares available for delivery (definition of covered), for if and when the options you wrote (sold) are exercised. And buyers of those options will eventually exercise the options (by expiration) if they remain in-the-money. There's only a chance that an option buyer exercises prematurely, and usually they don't because there's often time value left in the option. That the option buyer has an (ahem) "option" to exercise is a very key point. You wrote: "I fully expected my position to be automatically liquidated by whoever bought my call". That's a false assumption about the way options actually work. I suggest some study of the option exercise FAQs here: Perhaps if your position were uncovered – i.e. you wrote the call without owning the stock (don't try this at home, kids!) – and you also had insufficient margin to cover such a short position, then the broker might have justifiably liquidated your position. Whereas, in a covered call situation, there's really no reason for them to want to interfere – and I would consider that interference, as opposed to helpful. The situation you've described is neither risky for them, nor out of the ordinary. It is (and should be) completely up to you to decide how to close out the position. Anyway, your choices generally are: |
Any experience with maxing out 401(k)? | The answers so far are excellent. I need to respond to your 8-9% withdrawal rate. Uh, wherever you heard that, I'd suggest you listen/read elsewhere. 4% seems to be the "safe" withdrawal rate. I've seen people who were convinced that 7-10% were ok get absolutely trashed in the downturns, both 2000 and 2008. Proper asset allocation and low withdrawal rate will help avoid disaster. I wrote an article about the assumptions we make, looking at 1980-2000 and extrapolating from there. Not pretty. In 2000, I remarked that the near 20%/yr couldn't continue. Understatement of my life. I expected a return to normalcy, maybe 8-10%/yr, and got zero. |
What's a Letter of Credit? Are funds held in my bank for the amount in question? | In a domestic setting, Letters of Credit are often used to build public works needed to support a development. So if you're bulldozing a few 3 story buildings to build a 50 story tower, the municipality will build appropriate water/sewer/gas/road infrastructure, and draw from the developer's letter of credit to fund it. The 'catch' to the developer is that these things usually aren't revokable -- once the city/town/etc starts work, the developer cannot cut-off the funding, even if the project is cancelled. A letter of credit definitely isn't a consumer financing vehicle. The closest equivalent is a "line of credit" tied to an asset like a home. |
Are car buying services worth it? | The buying service your credit union uses is similar to the one my credit union uses. I have used their service several times. There is no direct cost to use the service, though the credit union as a whole might have a fee to join the service. I have used it 4 times over the decades. If you know what make and model you want to purchase, or at least have it narrowed down to just a few choices, you can get an exact price for that make, model, and options. You do this before negotiating a price. You are then issued a certificate. You have to go to a specific salesman at a specific dealership, but near a large city there will be several dealers to pick from. There is no negotiating at the dealership. You still have to deal with a trade in, and the financing option: dealer, credit union, or cash. But it is nice to not have to negotiate on the price. Of course there is nobody to stop you from using the price from the buying service as a goal when visiting a more conveniently located dealership, that is what I did last time. The first couple of times I used the standard credit union financing, and the last time I didn't need a loan. Even if you don't use the buying service, one way to pay for the car is to get the loan from the credit union, but get the rebate from the dealer. Many times if you get the low dealer financing you can't get the rebate. Doing it this way actually saves money. Speaking of rebates see how the buying service addresses them. The big national rebates were still honored during at least one of my purchases. So it turned out to be the buying service price minus $1,000. If your service worked like my experience, the cost to you was a little time to get the price, and a little time in a different dealer to verify that the price was good. |
Potential phishing scam? | Call your bank and inquire if they send out the kinds of notices like the one you received. Don't call the number in the message, because if it is a scam, you're calling the scammers themselves, more than likely. Be very cautious about this situation, and if your bank is local then it might not hurt to pay a visit to a local branch to talk to someone in person. Print out the message(s) you receive to show them and let their fraud division look into it. |
Do I need to prove 'Garage Sale' items incurred a loss | -Alain Wertheimer I'm a hobbyist... Most (probably all) of those older items were sold both prior to my establishing the LLC This is a hobby of yours, this is not your business. You purchased all of these goods for your pleasure, not for their future profit. The later items that you bought after your LLC was establish served both purposes (perks of doing what you love). How should I go about reporting this income for the items I don't have records for how much I purchased them for? There's nothing you can do. As noted above, these items (if you were to testify in court against the IRS). "Losses from the sale of personal-use property, such as your home or car, aren't tax deductible." Source Do I need to indicate 100% of the income because I can't prove that I sold it at a loss? Yes, if you do not have previous records you must claim a 100% capital gain. Source Addition: As JoeTaxpayer has mentioned in the comments, the second source I posted is for stocks and bonds. So at year begin of 2016, I started selling what I didn't need on eBay and on various forums [January - September]. Because you are not in the business of doing this, you do not need to explain the cost; but you do need to report the income as Gross Income on your 1040. Yes, if you bought a TV three years ago for a $100 and sold it for $50, the IRS would recognize you earning $50. As these are all personal items, they can not be deducted; regardless of gain or loss. Source Later in the year 2016 (October), I started an LLC (October - December) If these are items that you did not record early in the process of your LLC, then it is reported as a 100% gain as you can not prove any business expenses or costs to acquire associated with it. Source Refer to above answer. Refer to above answer. Conclusion Again, this is a income tax question that is split between business and personal use items. This is not a question of other's assessment of the value of the asset. It is solely based on the instruments of the IRS and their assessment of gains and losses from businesses. As OP does not have the necessary documents to prove otherwise, a cost basis of $0 must be assumed; thus you have a 100% gain on sale. |
Can my employer limit my maximum 401k contribution amount (below the IRS limit)? | Companies are required BY THE IRS to try to get everybody to contribute minimal amounts to the 401K's. In the past, there were abuses and only the execs could contribute and the low paid workers were starving while the execs contributed huge amounts. On a year-by-year basis, if the low-paid employees don't contribute, the IRS punishes the high paid employees. Therefore, most employers provide a matching program to incentivize low-paid employees to contribute. This 9% limitation could happen in any year and it could have happened even before you got your pay raise, what matters is what the low-paid employees were doing at your company LAST YEAR. |
Where can I find a good online fundamental data provider for Hong Kong stocks? | Check out WorldCap.org. They provide fundamental data for Hong Kong stocks in combination with an iPad app. Disclosure: I am affiliated with WorldCap. |
Everyone got a raise to them same amount, lost my higher pay than the newer employees | This is one effect of rising minimum wages: compression of lower pay tiers. The new employees might have been offered a lower starting rate than the result of your raise, but your employer did not have that option as a matter of law. |
What percentage of my stock portfolio should be international (non-US) stocks? | Rephrasing your question: Am I diversified if I have more than 50% US stocks? I would say that you can certainly be diversified and have more than 50% of your portfolio invested in US Stocks. I view the amount of international stocks (non-US) as a risk choice. My observations have been that my international stocks have higher risk which comes with a higher reward. I'm not comfortable with putting too much of my portfolio into a very high risk category. I personally invest 25% directly in mutual funds that invest in foreign stocks. When you couple that with the money I invest in US stocks via mutual funds that have foreign interests (Coke, GE, etc.), I'm somewhat over 25% international in my portfolio. |
How do I know if a dividend stock is “safe” and not a “dividend yield trap”? | Great answers. Here's my two cents: First, don't forget to look at the overall picture, not just the dividend. Study the company's income statement, balance sheet and cash flow statement for the last few years. Make sure they have good earnings potential, and are not carrying too much debt. I know it's dull, but it's better to miss an opportunity than to buy a turkey and watch the dividends and the share price tank. I went through this with BAC (Bank of America) a couple of years ago. They had a 38-year history of rising dividends when I bought them, and the yield was about 8%. Then the banking crisis happened and the dividend went from $2.56/share to $0.04, and the price fell from $40 to $5. (I stuck with it, continuing to buy at lower and lower prices, and eventually sold them all at $12 and managed to break even, but it was not a pleasant experience) Do your homework. :) Still, one of the most reliable ways to judge a company's dividend-paying ability is to look at its dividend history. Once a company has started paying a dividend there is a strong expectation from shareholders that these payments will continue, and the company's management will try very hard to maintain them. (Though sometimes this doesn't work out, e.g. BAC) You should see an uninterrupted stream of non-decreasing payments over a period of at least 5 years (this timeframe is just a rule of thumb). Well-established, profitable companies also tend to increase their dividends over time, which has the added benefit of pushing up their share price. So you're getting increasing dividends and capital gains. Next, look at the company's payout ratio over time, and the actual cost of the dividend. Can the projected earnings cover the dividend cost without going above the payout ratio? If not, then the dividend is likely to get reduced. In the case of CIM, the dividend history is short and erratic. The earnings are also all over the place, so it's hard to predict what will happen next year. The company is up to its eyeballs debt (current ratio is .2), and its earnings have dropped by 20% in the last quarter. They have lost money in two of the last three years, even though earning have jumped dramatically. This is a very young company, and in my opinion it is too early for them to be paying dividends. A very speculative stock, and you are more likely to make money from capital gains than dividends. AAE is a different story. They are profitable, and have a long dividend history, although the dividend was cut in half recently. This may be a good to buy them hoping the dividend comes back once the economy recovers. However, they are trading at over 40 times earnings, which seems expensive, considering their low profit margins. Before investing your money, invest in your education. :) Get some books on interpretation of financial staments, and learn how to read the numbers. It's sort of like looking at the codes in The Matrix, and seeing the blonde in the red dress (or whatever it was). Good luck! |
Is debt almost always the cause of crashes and recessions? | A lack of trust in the regulator can also stop everyone trading. If you don’t believe the bank notes you are getting paid with are real, why do any work? |
Why do people use mortgages, when they could just pay for the house in full? | I believe the reason is because society and the economy is set up a certain way, and re-enforced by the government. Your options are: So, people usually go with the most attractive of their limited options, getting a mortgage. If you want to dig deeper, do some research as to why housing is expensive. Some things to consider: you need the government's permission to build houses, thus limiting the competition in the home building market, the housing bubble, artificially setting house prices, etc.) To summarize: people need mortgages because houses are expensive, and houses are expensive for many reasons, big ones having to do with the government. |
Does an issue of bonus shares improve shareholder value? | The bonus share also improves the liquidity however there is some difference in treatment. Lets say a company has 100 shares, of $10 ea. The total capital of the compnay is 100*10 = 1000. Assuming the company is doing well, its share is now available in the market for $100 ea. Now lets say the company has made a profit of $1000 and this also gets factored into the price of $100. Lets say the company decides to keep this $1000 kept as Cash Reserve and is not distributed as dividends. In a share split say (1:1), the book value of each share is now reduced to $5, the number of shares increase to 200. The share capital stays at 200*5 = 1000. The market value of shares come down to $50 ea. In a Bonus share issue say (1:1), the funds $1000 are moved from Cash Reserve and transferred to share capital. The book value of each share will remain same as $10, the number of shares increase to 200. The share capital increases to 200*10 = 2000. The market value of shares come down to $50 ea. So essentially from a liquidity point of view both give the same benefit. As to why some companies issue bonus and not a split, this is because of multiple reasons. A split beyond a point cannot be done, ie $10 can be split to $1 ea but it doesn't look good to make it $0.50. The other reason is there is adequate cash reserve and you want to convert this into share holders capital. Having a larger share holders capital improves some of the health ratios for the compnay. At times bouns is used to play upon that one is getting something free. |
Can we estimate the impact of a large buy order on the share price? | I may be underestimating your knowledge of how exchanges work; if so, I apologize. If not, then I believe the answer is relatively straightforward. Lets say price of a stock at time t1 is 15$ . There are many types of price that an exchange reports to the public (as discussed below); let's say that you're referring to the most recent trade price. That is, the last time a trade executed between a willing buyer and a willing seller was at $15.00. Lets say a significant buy order of 1M shares came in to the market. Here I believe might be a misunderstanding on your part. I think you're assuming that the buy order must necessarily be requesting a price of $15.00 because that was the last published price at time t1. In fact, orders can request any price they want. It's totally okay for someone to request to buy at $10.00. Presumably nobody will want to sell to him, but it's still a perfectly valid buy order. But let's continue under the assumptions that at t1: This makes the bid $14.99 and the ask $15.00. (NYSE also publishes these prices.) There aren't enough people selling that stock. It's quite rare (in major US equities) for anyone to place a buy order that exceeds the total available shares listed for sale at all prices. What I think you mean is that 1M is larger than the amount of currently-listed sell requests at the ask of $15.00. So say of the 1M only 100,000 had a matching sell order and others are waiting. So this means that there were exactly 100,000 shares waiting to be sold at the ask of $15.00, and that all other sellers currently in the market told NYSE they were only willing to sell for a price of $15.01 or higher. If there had been more shares available at $15.00, then NYSE would have matched them. This would be a trigger to the automated system to start increasing the price. Here is another point of misunderstanding, I think. NYSE's automated system does not invent a new, higher price to publish at this point. Instead it simply reports the last trade price (still $15.00), and now that all of the willing sellers at $15.00 have been matched, NYSE also publishes the new ask price of $15.01. It's not that NYSE has decided $15.01 is the new price for the stock; it's that $15.01 is now the lowest price at which anyone (known to NYSE) is willing to sell. If nobody happened to be interested in selling at $15.01 at t1, but there were people interested in selling at $15.02, then the new published ask would be $15.02 instead of $15.01 -- not because NYSE decided it, but just because those happened to be the facts at the time. Similarly, the new bid is most likely now $15.00, assuming the person who placed the order for 1M shares did not cancel the remaining unmatched 900,000 shares of his/her order. That is, $15.00 is now the highest price at which anyone (known to NYSE) is willing to buy. How much time does the automated system wait to increment the price, the frequency of the price change and by what percentage to increment etc. So I think the answer to all these questions is that the automated system does none of these things. It merely publishes information about (a) the last trade price, (b) the price that is currently the lowest price at which anyone has expressed a willingness to sell, and (c) the price that is currently the highest price at which anyone has expressed a willingness to buy. ::edit:: Oh, I forgot to answer your primary question. Can we estimate the impact of a large buy order on the share price? Not only can we estimate the impact, but we can know it explicitly. Because the exchange publishes information on all the orders it knows about, anyone tracking that information can deduce that (in this example) there were exactly 100,000 shares waiting to be purchased at $15.00. So if a "large buy order" of 1M shares comes in at $15.00, then we know that all of the people waiting to sell at $15.00 will be matched, and the new lowest ask price will be $15.01 (or whatever was the next lowest sell price that the exchange had previously published). |
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