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When writing a covered call, what's the difference between a “net debit” and a “net credit”? | I am not familiar with this broker, but I believe this is what is going on: When entering combination orders (in this case the purchase of stocks and the writing of a call), it does not make sense to set a limit price on the two "legs" of the order separately. In that case it may be possible that one order gets executed, but the other not, for example. Instead you can specify the total amount you are willing to pay (net debit) or receive (net credit) per item. For this particular choice of a "buy and write" strategy, a net credit does not make sense as JoeTaxpayer has explained. Hence if you would choose this option, the order would never get executed. For some combinations of options it does make sense however. It is perhaps also good to see where the max gain numbers come from. In the first case, the gain would be maximal if the stock rises to the strike of the call or higher. In that case you would be payed out $2,50 * 100 = $250, but you have paid $1,41*100 for the combination, hence this leaves a profit of $109 (disregarding transaction fees). In the other case you would have been paid $1,41 for the position. Hence in that case the total profit would be ($1,41+$2,50)*100 = $391. But as said, such an order would not be executed. By the way, note that in your screenshot the bid is at 0, so writing a call would not earn you anything at all. |
Do mutual fund companies deliberately “censor” their portfolios/funds? | If I invest in individual stocks I will, from time to time, sell stocks that aren't performing well. If the value of my portfolio has gone up by 10%, then the value of my portfolio has gone up by 10%, regardless of whether selling those stocks is labeled as "delete[ing] failures". Same thing for mutual funds: selling underperforming stocks is perfectly ordinary, and calling it "delete[ing] failures" in order to imply some sort of dishonesty is simply dishonest. |
Got charged ridiculous amount for doctor's walk in visit. What are my options? | You will often receive a lower bill if you simply wait for a second or third billing statement. I was once given the advice to never pay a medical bill until after they had sent three notices, because they will almost certainly reduce the amount due. Sounds crazy, right? I have excellent credit, so the idea of risking it by ignoring bills disturbed me greatly, and I scoffed at the advice. I then had a similar experience to you, and decided to take the advice. By the third statement, the bill was reduced to less than half of the original, with zero intervention on my part. I then paid it without any impact to my credit whatsoever. I've since done that every time I receive healthcare services, and the bill is always reduced on subsequent statements, generally to less than half of the original bill. Sometimes it's because insurance finally got around to paying. Sometimes a credit is mysteriously added. Sometimes line items disappear without explanation. (Line items sometimes appear over time, too, but the overall balance generally goes down.) I don't know the reason for it, but it works. This has happened with a variety of providers, so it's not just one company that does it. Granted, I never called to negotiate the price, so I can't say if I would've gotten a better deal by doing that. I like it because it requires no time or effort on my part, and it has greatly reduced my medical bills with zero impact to my credit. I only have personal anecdotes to back it up, but it's worked for me. |
Does a US LLC need to file taxes if owned by a foreign citizen? | There is no such thing as double taxation. If you pay tax in the US, you CAN claim tax credits from India tax authority. For example, if you pay 100 tax in USA and your tax liability in India is 200, then you will only pay 100 (200 India tax liability minus 100 tax credits on foreign tax paid in the USA). This is always true and not depending on any treaty. If there is a treaty, the tax rate in the United States is set on the treaty and you CAN claim that final tax rate based upon that treaty. If you operate an LLC, and the income is NOT derived from United States and you have no ties with the US and that LLC is register to a foreign person (not company but a real human) then you will not have to submit tax return in the US... I advice you to read this: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html |
Is there a way to create a limit order with both an upper and lower limit | Yes there is, it is called a One-Cancels-the-Other Order (OCO). Investopedia defines a OCO order as: Definition of 'One-Cancels-the-Other Order - OCO' A pair of orders stipulating that if one order is executed, then the other order is automatically canceled. A one-cancels-the-other order (OCO) combines a stop order with a limit order on an automated trading platform. When either the stop or limit level is reached and the order executed, the other order will be automatically canceled. Seasoned traders use OCO orders to mitigate risk. I use CMC Markets in Australia, and they allow free conditional and OCO orders either when initially placing a buy order or after already buying a stock. See the Place New Order box below: Once you have selected a stock to buy, the number of shares you want to buy and at what price you can place up to 3 conditional orders. The first condition is a "Place order if..." conditional order. Here you can place a condition that your buy order will only be placed onto the market if that condition is met first. Say the stock last traded at $9.80 and you only want to place your order the next day if the stock price moves above the current resistance at $10.00. So you would Place order if Price is at or above $10.00. So if the next day the price moves up to $10 or above your order will be placed onto the market. The next two conditional orders form part of the OCO Orders. The second condition is a "Stop loss" conditional order. Here you place the price you want to sell at if the price drops to or past your stop loss price. It will only be placed on to the market if your buy order gets traded. So if you wanted to place your stop loss at $9.00, you would type in 9.00 in the box after "If at or below ?" and select if you want a limit or market order. The third condition is a "Take profit" conditional order. This allows you to take profits if the stock reaches a certain price. Say you wanted to take profits at 30%, that is if the price reached $13.00. So you would type in 13.00 in the box after "If at or above ?" and again select if you want a limit or market order. Once you have bought the stock if the stop order gets triggered then the take profit order gets cancelled automatically. If on the other hand the take profit order gets triggered then the stop loss order gets cancelled automatically. These OCO conditional orders can be placed either at the time you enter your buy order or after you have already bought the stock, and they can be edited or deleted at any time. The broker you use may have a different process for entering conditional and OCO orders such as these. |
Should I open a Roth IRA or invest in the S&P 500? | A Roth IRA is simply a tax-sheltered account that you deposit funds into, and then invest however you choose (within the limits of the firm you deposit the funds with). For example, you could open a Roth IRA account with Vanguard. You could then invest the $3000 by purchasing shares of VOO, which tracks the S&P 500 index and has a very low expense ratio (0.04 as of last time I checked). Fidelity has a similar option, or Schwab, or whatever brokerage firm you prefer. IRAs are basically just normal investment accounts, except they don't owe taxes until you withdraw them (and Roth don't even owe them then, though you paid taxes on the funds you deposit). They have some limitations regarding options trading and such, but if you're a novice investor just looking to do basic investments, you'll not notice. Then, your IRA would go up or down in value as the market went up or down in value. You do have some restrictions on when you can withdraw the funds; Roth IRA has fewer than a normal IRA, as you can withdraw the capital (the amount you deposited) without penalty, but the profits cannot be withdrawn until you're retirement age (I won't put an actual year, as I suspect that actual year will change by the time you're that old; but think 60s). The reason not to invest in an IRA is if you plan on using the money in the near future - even as an "emergency fund". You should have some money that is not invested aggressively, that is in something very safe and very accessible, for your emergency fund; and if you plan to buy a house or whatever with the funds, don't start an IRA. But if this is truly money you want to save for retirement, that's the best place to start. **Note, this is not investment advice, and you should do your own homework prior to making any investment. You can lose some or all of the value of your account while investing. |
Freehold and Leasehold for Pub/Bar? | In the strictest sense of the words, Freehold and leasehold mean what you think they do. Freehold is that you own it outright and leasehold is a rental situation. That being said, there are scenarios like what Peter K. mentioned in his comment, where you're purchasing the building and business outright, but the land it sits on is actually being leased from a separate land-owner. You may also be seeing the business itself being offered as freehold or leasehold. In this case, you may be purchasing the business of the pub from a pub company, but the building the pub resides in is leased from a property owner. The "pub" would be the business plan, decor, alcohol partnerships, etc. but not the physical structure in which it resides. You should really look into hiring an Estate Agent to help you find what you're looking for. They will be able to assist in narrowing down your list, and may know of opportunities you're not seeing in ads. |
Understanding the phrase “afford to lose” better | It's a phrase that has no meaning out of context. When I go to Las Vegas (I don't go, but if I did) I would treat what I took as money I plan to lose. When I trade stock options and buy puts or calls, I view it as a calculated risk, with a far greater than zero chance of having the trade show zero in time. A single company has a chance of going bankrupt. A mix of stocks has risk, the S&P was at less than half its high in the 2008 crash. The money I had in the S&P was not money I could afford to lose, but I could afford to wait it out. There's a difference. We're not back at the highs, but we're close. By the way, there are many people who would not sleep knowing that their statement shows a 50% loss from a prior high point. Those people should be in a mix more suited to their risk tolerance. |
Should I get an accountant for my taxes? | I don't know if I would go so far as to hire an accountant. None of those things you listed really complicates your taxes all that much. If you were self-employed, started a business, got a big inheritance, or are claiming unusually large deductions, etc. then maybe. The only thing new from your post seems to be the house and a raise. The 3rd kid doesn't substantially change things on your taxes from the 2nd. I'd suggest just using tax preparation software, or if you are especially nervous a tax-preparation service. An accountant just seems like overkill for an individual. |
Advantages/Disadvantages to refinancing online? | If you can deal with phone calls instead of a face to face meeting, for the average person with an average refinance online tools just offer another way to shop for deals. For new mortgages, I think having a person you can meet face to face will avoid problems, but for just a simple refi, online is one of the places you should check. Compete your current mortgage company, your bank (hopefully credit union), a local broker or two and the online places. The more competition you have, the more power you have in making a good choice. |
What to do with your savings in Japan | Been here in Japan 12 years mate, and you're right, the investment options here suck. Be very wary of them, they will take all your money in outrageous fees--3% in and 3% out of some "investment" options. It's a scam. Send the money back home and manage it there. I recommend setting up a Vanguard account back in the UK, then you can invest in Vanguard index funds. Vanguard charges no commission for buying and selling their funds when you have a Vanguard account. I have nearly all my money there (Vanguard US), and I use the free Personal Capital online software to understand how to best manage the allocations in my portfolio. Of course you'll lose a bit of money on wire transfer fees, but you'll more than make up for it if in the long-term, and they may also be offset by currency rate anyway (right now the yen is strong, so a good time to use it to buy GBP). Also you may never need to send the money back to Japan unless you plan on retiring here. |
How much of a down payment for a car should I save before purchasing it? | If you're getting 0% on the financing, it's not costing you anything to borrow that money. So its basically free money. If you are comfortable with the monthly payments, consider going with no downpayment at all. Keep that money aside for a rainy day, or invest it somewhere so that you get some return on it. If you need to lower the payments later you can always use that money to pay down part of the loan later (check with the dealer that it is an open loan). If you're not comfortable with the payments at 0 down, put enough down to bring the monthly payment to a level where you are comfortable. |
Should I invest in real estate to rent, real estate to live in, or just stocks and bonds to earn 10-15%? | That your asking is a good first step towards taking control of your future. But truly, you must seek the advice of a personal consultant that is much more in tune with your finances that anyone out here in the public will be. You can get this type of advice locally, or if you want something online, I suggest oDesk or something similar to find a large pool of people and to efficiently find the right person for suited for your situation. |
Why does gold have value? | To start with gold has value because it is scarce, durable, attractive and can be made into jewellery. But that does not explain its current value. In the current economic climate, it is difficult for many investors to get a positive return on conventional investments such as equities or bonds. I theorise that, in such conditions, investors decide to park their money in gold simply because there are few other good options. This in itself drives the price of gold up, making it a better investment and causing a speculative boom. As you will see here, here, and here the gold price is negatively correlated with stock market indices. |
How can I minimize the impact of the HST? | The HST is a sales tax levied on most goods and services. It is important to realize that in both BC and Ontario, the new HST does not (in most cases) result in an increase in sales tax paid. For example, in Ontario the PST is 8% and when combined with the GST the sales tax is 13%. With the HST, the GST and PST are replaced by a single HST of 13% so the tax bill does not change. Some services that were previously not subject to PST (such as mutual fund service fees and labour) will now be subject to the HST. So some things will increase. Over time, this should not have a material impact on the consumer due to the way businesses remit GST/HST. |
Am I responsible for an annual fee on a credit card I never picked up? | Have you signed anything? If not - then tell them you don't know who they are and have not agreed to pay. If you did sign that piece of paper at the airport, then you have probably agreed to pay. Either way, it won't go away. As you've already discovered, ignoring things doesn't make them go away. You should make an effort, as hard as it may be, and call them. Notify them that you have never asked for this card, never activated it, and in fact never had it in your possession. You should stress out that it was issued without your authorization, which is probably illegal. And you wish the account to be closed and the charge reversed. Otherwise it will just grow and make your life miserable. |
Do “Instant Approved” credit card inquires appear on credit report? | Those two hard inquiries will only count as one on your score because you applied for the two cards immediately one after the other. Credit bureaus see this as just credit card shopping, so will hit your score only once as a single hard inquiry. If you had applied for these two cards days apart, then your score would have been hit with two hard inquiries. Find more details here, specifically under the "What to know about rate shopping" section. |
Paying extra on a mortgage. How much can I save? [duplicate] | When is the best time to pay? At the end of each year? If you save $1,000 each month at 1% so as to pay $12,000 at EOY on a 4.75% loan, you've lost "4.75% - 1% = 3.75%" over that year. (And that's presuming you put the money in a "high yield" online savings account.) Thus, the best time to pay is as soon as you have the money. EDIT: This all assumes that you have an emergency fund (more than the bare minimum $1K), zero other debt with a higher rate than 4.75% and that you are getting the full company match from 401(k). |
Is there a Canadian credit card which shows holds? | As for PC Mastercard like stated by @nullability, VISA Desjardins list the "Pending Authorizations" almost instantly (the time it's take to get back home) in AccesD (Their Web portal for managing accounts). |
How to invest in gold at market value, i.e. without paying a markup? | ETF's are great products for investing in GOLD. Depending on where you are there are also leveraged products such as CFD's (Contracts For Difference) which may be more suitable for your budget. I would stick with the big CFD providers as they offer very liquid products with tight spreads. Some CFD providers are MarketMakers whilst others provide DMA products. Futures contracts are great leveraged products but can be very volatile and like any leveraged product (such as some ETF's and most CFD's), you must be aware of the risks involved in controlling such a large position for such a small outlay. There also ETN's (Exchange Traded Notes) which are debt products issued by banks (or an underwriter), but these are subject to fees when the note matures. You will also find pooled (unallocated to physical bullion) certificates sold through many gold institutions although you will often pay a small premium for their services (some are very attractive, others have a markup worse than the example of your gold coin). (Note from JoeT - CFDs are not authorized for trading in the US) |
What can we conclude/learn from inst. own %? | There are a LOT of reasons why institutional investors would own a company's stock (especially a lot of it). Some can be: The company is in one of the indices, especially big ones. Many asset management companies have funds that are either passive (track index) or more-or-less closely adhere to a benchmark, with the benchmark frequently being (based on/exactly) an index. As such, a stock that's part of an index would be heavily owned by institutional investors. Conclusion: Nothing definitive. Being included in an equity index is usually dependent on the market cap; NOT on intrinsic quality of the company, its fundamentals or stock returns. The company is considered a good prospect (growth or value), in a sector that is popular with institutional investors. There's a certain amount of groupthink in investing. To completely butcher a known IT saying, you don't get fired for investing in AAPL :) While truly outstanding and successful investors seek NON-popular assets (which would be undervalued), the bulk is likely to go with "best practices"... and the general rules for valuation and analysis everyone uses are reasonably similar. As such, if one company invests in a stock, it's likely a competitor will follow similar reasoning to invest in it. Conclusion: Nothing definitive. You don't know if the price at which those institutional companies bought the stock is way lower than now. You don't know if the stock is held for its returns potential, or as part of an index, or some fancy strategy you as individual investor can't follow. The company's technicals lead the algorithms to prefer it. And they feed off of each other. Somewhat similar in spirit to #2, except this time, it's algorithmic trading making decisions based on technicals instead of portfolio managers based on funamentals. Obviously, same conclusion applies, even more so. The company sold a large part of the stock directly to institutional investor as part of an offering. Sometimes, as part of IPO (ala PNC and BLK), sometimes additional capital raising (ala Buffett and BAC) Conclusion: Nothing definitive. That investor holds on to the investment, sometimes for reason not only directly related to stock performance (e.g. control of the company, or synergies). Also, does the fact that Inst. Own % is high mean that the company is a good investment and/or less risky? Not necessarily. In 2008, Bear Stearns Inst Own. % was 77% |
Why do I not see goods and services all change their price when inflation is high? | How high is high? In countries that suffered hyperinflation such as the Weimar Republic around 1923 and Zimbabwe around the late 1990s this certainly did happen on a daily basis. E.g. One boy, who was sent to buy two bread buns, stopped to play football and by the time he got to the shop, the price had gone up, so he could only afford to buy one. or One father set out for Berlin to buy a pair of shoes. When he got there, he could only afford a cup of coffee and the bus fare home. or At the height of the country's economic crisis that year, prices were rising at least twice day, with Zimbabweans forced to carry cash around in plastic bags just to buy basic items. |
Why should a company go public? | Most businesses want to grow, and there are a variety of ways to raise the money needed to hire new employees and otherwise invest in the business to increase the rate of that growth. You as a stock holder should hope that management is choosing the least expensive option for growth. Some of the options are debt, selling equity to venture capitalists, or selling equity on the open market (going public). If they choose debt, they pay interest on that debt. If they choose to sell equity to venture capitalists, then your shares get diluted, but hopefully the growth makes up for some of that dilution. If they choose to go public, dilution is still a concern, but the terms are usually a little more favorable for the company selling because the market is so liquid. In the US, current regulations for publicly traded companies cost somewhere in the neighborhood of $1M/year, so that's the rule of thumb for considering whether going public makes sense when calculating the cost of fundraising, but as mentioned, regulations make it less advantageous for executives who choose to sell their shares after the company goes public. (They can't sell when good spot prices appear.) Going public is often considered the next step for a company that has grown past the initial venture funding phase, but if cash-flow is good, plenty of companies decide to just reinvest profits and skip the equity markets altogether. |
How can one get their FICO/credit scores for free? (really free) | I visited annualcreditreport.com to get my annual credit report. It is only the report, not the score or FICO score. This is the only outlet I know of that allows you to get your report for free, without a bunch of strings attached or crap to sign up for and cancel later. It was very easy. I was wary of putting in my private information, but how else can they possibly pull you up? Read the instructions carefully. You go to each bureau to fetch your report, and they dutifully give you a free report, but they push hard to try and sell you a score or a report service. It is easy to avoid these if you read carefully. Once you get a report, you have print it out or you can't see it again for another year. Each bureau has a different site, with different rules, and different identity checks to get in. Again, read the instructions and it isn't hard. Instead of printing, I just saved the page as HTML. You get one html file and a folder with all the images and other stuff. This suits me but you might like to print. After you get each report, you have to click a link to back to the annualcreditreport.com site. From there you go to the next bureau. Regarding a score. Everybody does it differently. Free Issac does FICO, but anybody who pulls your credit can generate a score however they like, so getting a score isn't anywhere near as important as making sure your report is accurate. You can use credit.com to simulate a score from one of the bureaus (I can't easily see which one at the moment). It is as easy as annualcreditreport.com and I have no issue getting a simulated score and report card. |
How To Interpret Share Prices? | The missing information is at the end of the first line: the price is from NASDAQ (most specifically Nasdaq Global Select), which is a stock exchange in the USA, so the price is in US Dollars. |
Is the I.T. function in banking considered to be on the expense side, as opposed to revenue side? | I must point that without the IT - no-one in the bank generates any revenue. Not to mention the fraud prevention and informational security. To the best of my knowledge - IT in banks and financial institutoins are paid very well for their services, and they earn every penny of it. IT is not just online banking or computer support. IT is the whole underlying infrastructure of the modern banking. Investor without the proper links to the stock exchanges will go elsewhere, loans that cannot be evaluated fast enough (using of course the IT infrastructure) will be taken from someone else, CD's for which the interest is calculated manually will probably not be as attractive as the CD's managed by the computers at the bank next door, credit and debit transactions, ACH, direct deposit, etc - cannot be done without IT. So IT is not expense, IT is infrastructure (and that is "operations" in the budget books). Every function of the bank that generates revenue - relies and depends on it. |
Will a small investment in a company net a worthwhile gain? | If the shares rise in value 50% over the next few years, you will have the same return that I would see if I bought 100 or 1000 shares. The only issue with a small purchase is that even a $5 commission is a high percent. But the rest of the math is the same. |
Why are some funds only recommended for investors starting out? | Most articles on investing recommend that investors that are just starting out to invest in index stock or bonds funds. This is the easiest way to get rolling and limit risk by investing in bonds and stocks, and not either one of the asset classes alone. When you start to look deeper into investing there are so many options: Small Cap, Large Cap, technical analysis, fundamental analysis, option strategies, and on and on. This can end up being a full time job or chewing into a lot of personal time. It is a great challenge to learn various investment strategies frankly for the average person that works full time it is a huge effort. I would recommend also reading "The Intelligent Asset Allocator" to get a wider perspective on how asset allocation can help grow a portfolio and reduce risk. This book covers a simple process. |
How can you possibly lose on investments in stocks? | Once you buy stocks on X day of the month, the chances of stocks never actually going above and beyond your point of value on the chart are close to none. How about Enron? GM? WorldCom? Lehman Brothers? Those are just a few of the many stocks that went to 0. Even stock in solvent companies have an "all-time high" that it will never reach again. Please explain to my why my thought is [in]correct. It is based on flawed assumptions, specifically that stock always regain any losses from any point in time. This is not true. Stocks go up and down - sometimes that have losses that are never made up, even if they don't go bankrupt. If your argument is that you should cash out any gains regardless of size, and you will "never lose", I would argue that you might have very small gains in most cases, but there are still times where you are going to lose value and never regain it, and those losses can easily wipe out any gains you've made. Never bought stocks and if I try something stupid I'll lose my money, so why not ask the professionals first..? If you really believe that you "can't lose" in the stock market then do NOT buy individual stocks. You may as well buy a lottery ticket (not really, those are actually worthless). Stick to index funds or other stable investments that don't rely on the performance of a single company and its management. Yes, diversification reduces (not eliminates) risk of losses. Yes, chasing unreasonable gains can cause you to lose. But what is a "reasonable gain"? Why is your "guaranteed" X% gain better than the "unreasonable" Y% gain? How do you know what a "reasonable" gain for an individual stock is? |
A stock just dropped 8% in minutes and now all of a sudden the only way to buy is on the ask, what does this mean? | It doesn't sound fishy at all to me. Just seems like you may be dealing with a company that has relatively light trading volume to begin with, meaning that small trades could easily make the price drop 8% (which isn't much if you're talking about a stocks in the $5 or less range. If someone sells at the bid and the bid happens to be 8% lower than the current price, that bid is now the price, hence the drop. The bid moving up afterward, just means that someone is now willing to place a higher order than what the last trade was, to try to get in. |
are there any special procedures for managing non-petty cash? | After talking to two CPAs it seems like managing it using an imprest system is the best idea. The base characteristic of an imprest system is that a fixed amount is reserved and later replenished as it runs low. This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account. Petty cash imprest system allows only the replenishment of the spend made. So, if you start the month with €100 in your petty cash float and spend €90 of that cash in the month, an amount of €90 will be then placed in your petty cash float to bring the balance of your petty cash float back to €100. The replenishment is credited to the primary cash account, usually a bank account (Dr - Petty Cash a/c, Cr - Bank a/c) and the debits will go to the respective expense accounts, based on the petty cash receipt dockets (Dr- Expense a/c, Cr - Petty Cash a/c). In a non imprest system where a fixed amount is issued every month, e.g., €100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a check for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float. In an imprest system the amount requested is documented, the documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float. |
If you buy something and sell it later on the same day, how do you calculate 'investment'? | You're confused because the source you cite leaves out one number that isn't relevant to the argument they're making: total costs. The number you're expecting, $9 x 365 or $3285 is the total cost of buying the jewelry which, when subtracted from the $3650 sales volume gives us the net profit of $365. The investment is the amount of money original put into a system our company. In this case the merchant bought his first piece of jewelry for $9, sold it for $10, took one dollar in profit and used the other 9 to reinvest by buying a new piece of jewelry. We can extend the analogy further. After 9 days of selling, the merchant will posses $18, allowing him to now buy 2 pieces of jewelry each morning and sell them for $20. Every day his costs will be $18 and he'll turn a $2 profit, all with the original investment of $9. |
Is it ever a good idea to close credit cards? | Credit scoring has changed recently and the answer to this question will have slightly changed. While most points made here are true: But now (as of July 2017) it is possible having a large available credit balance can negatively effect your credit score directly: ... VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly. Those who have prime credit scores may be hurt the most, since they are most likely to have multiple cards open. But those who like to play the credit card rewards program points game could be affected as well. source |
What type of returns Vanguard is quoting? | From the Vanguard page - This seemed the easiest one as S&P data is simple to find. I use MoneyChimp to get - which confirms that Vanguard's page is offering CAGR, not arithmetic Average. Note: Vanguard states "For U.S. stock market returns, we use the Standard & Poor's 90 from 1926 through March 3, 1957," while the Chimp uses data from Nobel Prize winner, Robert Shiller's site. |
Why I cannot find a “Pure Cash” option in 401k investments? | Holding pure cash is a problem for 401K companies because they would then have follow banking rules because they would be holding your cash on their balance sheets. They don't want to be in that business. Instead, they should offer at least one option as a cash equivalent - a money market fund. This way the money is held by the fund, not by 401K administrator. Money Market funds invest in ultra-short term paper, such as overnight loans between banks and other debt instruments that mature in a matter of days. So it is all extremely liquid, as close to "Money" as you can get without actually being money. It is extremely rare for a money market fund to lose value, or "break the buck." During the crisis of 2008, only one or two funds broke the buck, and it didn't last long. They had gotten greedy and their short term investments were a little more aggressive as they were trying to get extra returns. In short, your money is safe in a money market fund, and your 401K plan should offer one as the "cash" option, or at least it should offer a short-term bond fund. If you feel strongly that your money should be in actual cash, you can always stop contributing to the 401K and put the money in the bank. This is not a good idea though. Unless you're close to retirement, you'll be much better off investing in a well diversified portfolio, even through the ups and downs of the market. |
Are banks really making less profit when interest rates are low? | I've read this claim many times in the news: banks are making less profit from the lending business when interest rates are historically low. The issue with most loans is they can be satisfied at any time. When you have falling interest rates it means most of the banks loans are refinanced from nice high rates to current market low interest rates which can significantly reduce the expected return on past loans. The bank gets the money back when it wants it the least because it can only re-lend the money at the current market (lower) interest rates. When interest rates are increasing refinance and early repayment activity reduces significantly. It's important to look at the loan from the point of view of the bank, a bank must first issue out the entire principal amount. On a 60 month loan the lender has not received payments sufficient to satisfy the principal until around 50th or 55th month depending on the interest rate. If the bank receives payment of the outstanding amount on month 30 the expected return on that loan is reduced significantly. Consider a $10,000, 60 month loan at 5% apr. The bank is expected to receive $11,322 in total for interest income of $1,322. If the loan is repaid on month 30, the total interest is about $972. That's a 26% reduction of expected interest income, and the money received can only be re-lent for yet a lower interest rate. Add to this the tricky accounting of holding a loan, which is really a discounted bond, which is an asset, on the books and profitability of lending while interest rates are falling gets really funky. And this doesn't even examine default risk/cost. |
Where can I find historic ratios by industry? | If you would like to find data on a specific industry/market sector, a good option is IBISworld reports. You can find their site here. You can find reports on almost any major US sector. The reports include historical data as well as financial ratios. In college projects, they were very useful for getting benchmark data to compare an individual business against an industry as a whole. |
Assessing the value of an ETF | You can follow the intra-day NAV of an ETF, for instance SPY, by viewing its .IV (intra-day value) ticker which tracks it's value. http://finance.yahoo.com/q?s=spy http://finance.yahoo.com/q?s=^SPY-IV Otherwise, each ETF provider will update their NAV after business each day on their own website. https://www.spdrs.com/product/fund.seam?ticker=spy |
Are mutual funds a good choice for a medium to low risk investment with a two year horizon? | First, you don't state where you are and this is a rather global site. There are people from Canada, US, and many other countries here so "mutual funds" that mean one thing to you may be a bit different for someone in a foreign country for one point. Thanks for stating that point in a tag. Second, mutual funds are merely a type of investment vehicle, there is something to be said for what is in the fund which could be an investment company, trust or a few other possibilities. Within North America there are money market mutual funds, bond mutual funds, stock mutual funds, mutual funds of other mutual funds and funds that are a combination of any and all of the former choices. Thus, something like a money market mutual fund would be low risk but quite likely low return as well. Short-term bond funds would bring up the risk a tick though this depends on how you handle the volatility of the fund's NAV changing. There is also something to be said for open-end, ETF and closed-end funds that are a few types to consider as well. Third, taxes are something not even mentioned here which could impact which kinds of funds make sense as some funds may invest in instruments with favorable tax-treatment. Aside from funds, I'd look at CDs and Treasuries would be my suggestion. With a rather short time frame, stocks could be quite dangerous to my mind. I'd only suggest stocks if you are investing for at least 5 years. In 2 years there is a lot that can happen with stocks where if you look at history there was a record of stocks going down about 1 in every 4 years on average. Something to consider is what kind of downside would you accept here? Are you OK if what you save gets cut in half? This is what can happen with some growth funds in the short-term which is what a 2 year time horizon looks like. If you do with a stock mutual fund, it would be a gamble to my mind. Don't forget that if the fund goes down 10% and then comes up 10%, you're still down 1% since the down will take more. |
Can signing up at optoutprescreen.com improve my credit score? | If I had a business and was able to claim a feature, I would. It's simple marketing. If in fact, opting out helped your score, the site would promote that feature. Soft pulls for prescreened offers are not counted. No more than my constant peek at my score through Credit Karma. Opt out, if you wish. The benefit of course is less mail, which saves trees. Less risk of identity theft, someone can take the application and try to forge from there. Less risk of an infected paper cut opening this mail (don't ask.) I am a compulsive mail shredder, so I peek and these and shred. A year ago I received an offer of $30,000 zero interest, max transfer fee $50. I sent the entire sum to my 5% mortgage. Now I refinanced and paying that back. It saved me $1500 over the year. Too much trouble for some, but how long does it take to make $1500? For 40% of this country's families, that's a week's pay. The monthly extra bill didn't bother me. This last paragraph is an anecdote, not so much addressing question. I did that first. |
How can I lookup the business associated with a FEIN? | If the organization is a non-profit. You can search by EIN on Charity Navigator's website FOR FREE. https://www.charitynavigator.org/ |
I'm about to be offered equity by my employer. What should I expect? | Yes, what they said. You don't mention where you are on the totem pole. Are you reporting to the top dog, or are you 3 levels down? Not to be a downer, but until you know your cut, I'd not get too excited either way. 1000 shares/options of a LinkedIn turned to nearly $100K. Nothing to sneeze at, to be sure, but not enough to retire, nor bother contacting a lawyer. The details of the equity should be spelled out clearly, nothing against Lawyers, but it's likely to be wasted money. |
Why do I see multiple trades of very small quantities? | It looks more like someone is trying to pocket the spread. The trades are going off at the bid then the ask (from what I can tell without any L1 and L2 data, but the spread could be bigger than what the prices show, since the stock looks pretty volatile given the difference between current price and VWAP...). Looking through the JSE rule books I didn't find any special provisions on how they handle odd lots in their Central Order Book, but the usual practice in other markets is to display only round lot orders. So these 4 share orders would remain hidden from book participants and could be set there to trigger executions from those who are probing for limit orders. Or to make a market with very limited risk. |
5/1 ARM: Lifetime cap, First Adjustment Cap, Margin, and Annual Cap? | I hope this image is clear. A spreadsheet is how I look at these things. Unfortunately, you didn't offer the starting balance so I use $100K which makes it easy to scale. You build a simple spreadsheet and enter the "what if" scenario, this tells me that worse case, an increase of 1% on the rate each year results in a near 60% increase in payments over the 10 years. Of course, this isn't the end of the story, I'd first change the payments to reflect the 5% rate, and see how much that drives the balance down. This would reduce the principal enough that the increase would be much less. On $100K, you'd pay $536.82 based on a 5% rate, regardless of the required payment. At 7.75% the payment is $563.11, not even 5% higher. If you'd like a spreadsheet started for you, I'll put it someplace for you to grab it. |
Trading large volumes with penny profits per share | Currently my online savings account pays an interest rate of 1.25%. With 100K, I can earn about $104 per month in that account. No risk, no timing, no fuss. So in theory you can make money by small changes in the valuations of stock. However there are often better, risk free options for your money; or, there are much better options for returns with much less risk, but more than that of a bank account. |
Passing money through a different account to avoid cash pay-in fees | Let me do the math. .6% * (not large) = really tiny. Since "not large" = "small" , etc. I suggest that even a small chance that you need to explain this to anyone in the future is a sign to avoid the risk. Yes, there are times that it's illegal. A real estate office may not deposit escrow funds into anything but a segregated escrow account. In your case, even if legal, it messes up 'the books' and can cost you more in grief than the 'tiny amount' saves you in cash. |
Is it worth it to re-finance my car loan? | Seems like a good deal to me. You are paying less interest over the lifetime of the loan. And what I would do is take the difference between the new payments and the old, put it into a savings account each month, and when the savings account exceeds the balance of the loan pay it off. |
Does an index have a currency? | From Wikipedia - To calculate the value of the S&P 500 Index, the sum of the adjusted market capitalization of all 500 stocks is divided by a factor, usually referred to as the Divisor. For example, if the total adjusted market cap of the 500 component stocks is US$13 trillion and the Divisor is set at 8.933 billion, then the S&P 500 Index value would be 1,455.28. From a strictly mathematical perspective, the divisor is not canceling out the units, and the S&P index is dollar denominated even though it's never quoted that way. A case in point is that the S&P is often said to have a P/E, and especially an E, the earnings attributed to one 'unit' of S&P. And if you buy a mutual fund sporting a low expense ratio, you can invest exactly that much money (the current S&P index value) and see the dividends accrue to your account, less the fee. |
Should I negotiate a lower salary to be placed in a lower tax bracket? | No, absolutely not. Income tax rates are marginal. The tax bracket's higher tax rate only applies to extra dollars over the threshold, not to dollars below it. The normal income tax does not have any cliffs where one extra dollar of income will cost more than one dollar in extra taxes. Moreover, you are ignoring the personal exemption and standard deduction. A gross salary of $72,000 is not the same as taxable income of $72,000. The deduction will generally be $12,200 and the exemptions will be $3,900 for you, your spouse, and any kids. So married-filing-jointly with the standard deduction will get an automatic $20,000 off of adjusted gross income when counting taxable income. So the appropriate taxable income is actually going to be more like $52,000. Note that getting your compensation package reshuffled may result in different tax treatment. But simply taking a smaller salary (rather than taking some compensation as stock options, health insurance, or fringe benefits), is not a money-saving move. Never do it. |
What is the benefit of investing in retirement plan versus investing directly in stocks yourself? | Because retirement account usually are tax effective vehicles - meaning you will pay less tax on any profits from your investments in a retirement account than you would outside. For example, in my country Australia, for someone on say $60,000 per annum, if you make $10,000 profits on your investments that year you will end up paying 34.5% tax (or $3,450) on that $10,000 profits. If you made the same profits in a retirement account (superannuation fund) you would have only paid 15% tax (or $1,500) on the $10,000 profit. That's less than half the tax. And if you are on a higher income the savings would be even greater. The reason why you can't take the money out of a retirement account is purely because the aim is to build up the funds for your retirement, and not take it out at any time you want. You are given the incentive to pay less tax on any investment profits in order for you to save and grow your funds so that you might have a more comfortable retirement (a time when you might not be able to work any more for your money). |
Investing in commodities, pros and cons? | The main advantage of commodities to a largely stock and bond portfolio is diversification and the main disadvantages are investment complexity and low long-term returns. Let's start with the advantage. Major commodities indices and the single commodities tend to be uncorrelated to stocks and bonds and will in general be diversifying especially over short periods. This relationship can be complex though as Supply can be even more complicated (think weather) so diversification may or may not work in your favor over long periods. However, trading in commodities can be very complex and expensive. Futures need to be rolled forward to keep an investment going. You really, really don't want to accidentally take delivery of 40000 pounds of cattle. Also, you need to properly take into account roll premiums (carry) when choosing the closing date for a future. This can be made easier by using commodities index ETFs but they can also have issues with rolling and generally have higher fees than stock index ETFs. Most importantly, it is worth understanding that the long-term return from commodities should be by definition (roughly) the inflation rate. With stocks and bonds you expect to make more than inflation over the long term. This is why many large institutions talk about commodities in their portfolio they often actually mean either short term tactical/algorithmic trading or long term investments in stocks closely tied to commodities production or processing. The two disadvantages above are why commodities are not recommended for most individual investors. |
End-of-season car sales? | It completely varies by manufacturer, dealer, and time of year, but in general yes, you can get a (sometimes significant) discount on brand new last year models. In general though, it comes down to supply and demand. As an example, in April 2016 I was looking at a brand new 2016 in which the 2017 model had come out that week (I thought April was a little early for next year's model but sometimes that's a marketing tool). The sticker price of the 2017 was only $100 more than the 2016, but the 2016 was selling for $3K under MSRP, and the 2017 was selling at exactly MSRP since they only had 2 in stock. |
How often do typical investors really lose money? | I'll just add this: In the best hedge funds and proprietary trading funds, stock selection is approached very scientifically in order to minimize losses/maximize gains. Researchers think of a trading idea and carefully test it to see which methods of stock selection work and how well, and finally they combine them. Every day researchers update their models based on the past performance of each indicator. All this is just too much work to be done manually. Firms use machine learning methods to understand markets. They try to figure out what is normal, what did not happen correctly at a specific time, what will happen in future. For instance, they use deep learning networks to look at unlabeled data, and figure out what is normal and what is not. These networks can analyze an unstructured haystack of noise, and separate out the signal. This is very relevant to finance and markets because finding the patterns and anomalies in market data has been the bread and butter of traders for decades. Deep learning networks give us applications like feature learning. By 'features,' I'm referring to certain attributes in data that indicate an event. By anticipating them, we can help predict future price movements. New technology is allowing us to break new ground in managing risk, to be a-typical and manage risk in ever-improving ways. It's the responsibility of every trader, whether working for themselves or others, to take advantage of this technology to improve the collective investing experience. I care very deeply about this. I have many close friends, in the finance world and without, who have lost large amounts of money to poor trade tools and lack of transparency. |
What should we consider when withdrawing a large amount of money from a bank account? | withdraw in cash - bank reports it to IRS no matter what. Would this affect my tax filing in the coming year? No, and no. The bank doesn't report to the IRS. In the US - the bank will probably report to FinCEN. It has nothing to do with your tax return. withdraw in check - bank does not seem to report it. Is this correct? Doesn't have to. Still might, if they think it is a suspicious/irregular activity. wire-transfer to another person's account - would this always be slapped with a "gift tax"? If this is a gift it would. Regardless of how you transfer the money. Is it? Answers to your follow up questions: In the US, what documents do we need to prepare in case our large sum withdraw from the bank triggers a flag in relevant government (local and/or federal) divisions and they decide to investigate? Depending on what the investigators request. FinCEN would investigate money laundering, the IRS would investigate tax evasion, the FBI would investigate terrorism sponsorship, etc. Depending on who's investigating and what the suspicions are - different documents may be required. But the bottom line is that you should be able to explain the source of the funds and the destination. For example "I found $1M in cash and sent it to some drug lord because he's such a good friend of mine" will probably not fly. Does the (local/federal) government care if we stash our money (in cash or check) under our mattress, if we purchase foreign properties (taxable? documents needed for proof?), or if we give it away (to individuals or organizations - individual: a gift tax, organization: tax waivable) ? The government cares about taxes, and illegal activities. Stashing money under a mattress is not illegal, but earning cash and not paying income tax on it usually is. In many cases money stashed under the mattress was obtained illegally and/or income taxes were not paid. It seems that no matter what we do (except spreading thin our assets to multiple accounts in multiple banks), the government will always be notified of any large bank transaction and we would be forever flagged since. Is this correct ? Yes, reportable transactions will be reported. Also spreading around in multiple accounts/transactions to avoid reporting is called "structuring" and is on its own a crime. This is for cash/cash equivalent transactions only, of course. Not sure about the "forever flagged since", that part is probably sourced in your imagination. |
What does it mean that stocks are “memoryless”? | This is an interesting question that may actually be better suited to Quant.SE. First of all, stock prices are random variables, or, to be more precise, stochastic processes (a time-ordered string of random variables). The alternative to being stochastic is being deterministic, and I doubt you believe that stock prices are deterministic (meaning, they are fully knowable in advance). The fact that real world events drive the randomness has no bearing on whether or not it is random. So, to start, I think you have confused the technical definition of random with a colloquial concept. Now, the heart of the question is whether stock prices are memoryless. Ultimately, this is an empirical question that has been addressed in many academic studies. The conclusion of most of this research is that stock prices are "almost" memoryless, in the sense that the distribution of future stock prices displays very little dependence upon past realizations, although a few persistent anomalies remain. One of the most robust deviations from memorylessness is the increase in the volatility of a stock following large declines. Another is persistence in volatility. In general, in fact, the volatility is far more predictable than the mean of stock price changes. Hence "memorylessness" is a far stronger assumption than the efficient markets hypothesis. The bottom line, however, is that the deviations from memorylessness are relatively small. As such, despite its limitations, it is a decent working assumption in some contexts. |
Who could afford a higher annual deductible who couldn't afford a higher monthly payment? | Your title question, Who could afford a higher premium who couldn't afford a higher monthly payment?, contrasts premium with monthly payment, but those are the same thing. In the body of your question, you list monthly payment and deductible, which is entirely different. The deductible is paid only if you need that much medical care in any one year. Most years a person in good health pays little because of the deductible. Thus, the higher deductible options offer catastrophic health insurance without giving much in the way of reimbursement for regular medical expenses. Note - the original question has been edited since. |
What questions should I ask a mortgage broker when refinancing a condo in Wisconsin? | Its a huuuuuuuuuuuge topic, and to answer your question in full will require a book, with a small booklet of legal advice attached to it. I'm not going to write it here, but I'll give you some very specific points to start your research with: ARM/Baloon - big NO NO. Don't touch that. Get rid of those you have any way you can, and then never ever do it again. That's the kind of crap that got us into the housing bubble mess to begin with. Especially with the rates as low as now, the only future with ARM/Baloon is that you're going to pay more, way more, than your initial period payments. Rates - the rates now are very low. They were even lower 12-24 months ago, but are still extremely low. Make sure you get a fixed rate loan, in order to lock these rates in for the remainder of the loan. Any ARM loan will have higher rates in the future. So go with FIXED RATE. Period - fixed rate loans are given for periods up to 30 years. The shorter the period, the lower the rate. However, at the level they're now, you're practically getting money for free (the APR is comparable to the inflation) even for 30 yr/fixed loans. PMI - private mortgage insurance - since you don't have much equity, the lender is likely to require you paying PMI. This is a significant amount of money you pay until you have at least 20% equity. It changes from lender to lender, so shop around and compare. Government assistance - that's what the broker was referring to. There were programs allowing people refinance even under-water mortgages. Check what programs are still available in your area. Some banks will not refinance with less than 20% equity, but some government assistance programs may help you get a loan even if you don't have enough equity. Closing fees and points - that's the money out of your pocket. Shop around, these vary wildly. Generally, Credit Unions, being non-profits, are cheaper on this item specifically, while comparable to big banks on everything else. |
How does a public company issue new shares without diluting the value held by existing shareholders? | As others have posted, the company gains capital in return for its new shares. However, the share price can still fall. The problem is that the share marked is affected by supply and demand like any other marked. If the company just issues the new shares at marked price, they will have problems finding buyers. The people who are willing to pay that price has already bought as many shares as they want. The company does this to raise capital, and depends on the shares actually selling for this to work. So, they issue shares at below marked price to attract buyers and the shares get diluted. In the end the share will usually end up somewhere between the old marked price and the issue price. The old share owners are probably not too happy about this and will not accept this plan. (At least here in Norway, share issue has to be accepted at a shareholder meeting) So, what is often done instead is to issue buy options for the required number of shares at the below-marked price. These options are given (for free) to the current share holders proportional to their current holding. If everybody exercises their options they get new cheap shares that compensates for the loss of share value. If they don't have the capital themselves, they can sell the options and get compensation that way instead. |
What is the process of getting your first share? | Let's handle this as a "proof of concept" (POC); OP wants to buy 1 share of anything just to prove that they can do it before doing the months of painstaking analysis that is required before buying shares as an investment. I will also assume that the risks and costs of ownership and taxes would be included in OP's future analyses. To trade a stock you need a financed broker account and a way to place orders. Open a dealing account, NOT an options or CFD etc. account, with a broker. I chose a broker who I was confident that I could trust, others will tell you to look for brokers based on cost or other metrics. In the end you need to be happy that you can get what you want out of your broker, that is likely to include some modicum of trust since you will be keeping money with them. When you create this account they will ask for your bank account details (plus a few other details to prevent fraud, insider trading, money laundering etc.) and may also ask for a minimum deposit. Either deposit enough to cover the price of your share plus taxes and the broker's commission, plus a little extra to be on the safe side as prices move for every trade, including yours, or the minimum if it is higher. Once you have an account the broker will provide an interface through which to buy the share. This will usually either be a web interface, a phone number, or a fax number. They will also provide you with details of how their orders are structured. The simplest type of order is a "market order". This tells the broker that you want to buy your shares at the market price rather than specifying only to buy at a given price. After you have sent that order the broker will buy the share from the market, deduct the price plus tax and her commission from your account and credit your account with your share. |
Can a company block a specific person from buying its stock? | The answer to this question is given by the fact that many public companies have people who are opposed to the company's aims or practices and who own their stock, often a single share, for the purposes of turning up to shareholder meetings and haranguing directors/asking awkward questions/disrupting proceedings, etc. If public companies could stop these campaigning shareholders from owning stock they would. |
Is there a term that better describes a compound annual growth rate (CAGR) when it is negative? | My experience is in economics, so it may differ from an accounting or personal finance perspective somewhat; that being said, I find it perfectly acceptable to use a term like CAGR when the rate is positive or negative. Economists talk about negative growth rates all the time, and it's universally assumed that growth rates can be positive or negative.1 Ideally, the actual magnitude and sign of the value should be specified by the value itself. The term, whether it's "growth rate", some modified version of it like CAGR, or any label in a table or on a graph, should describe the calculation or source used obtain the value. I shouldn't need the name to indicate the sign of the number if the number is present; the name is only there to help me understand the value. Unfortunately, I don't know of any specific term that represents the geometric averaging nature of CAGR and also eliminates the minor potential for semantic confusion. However, I think the minor problem of semantics needs to be balanced against the tradeoff of using a different term that isn't as common, if one were to exist. CAGR is a standard, well-known term that a) allows someone who is familiar with the term to instantly understand the procedure you're using, and b) allow someone who isn't familiar with it to quickly search and find an explanation, since searching for CAGR will numerous simple explanations of how it's calculated. 1. This is different from the concept of economic growth, which is usually assumed to be positive in informal discussions. In economic modeling, many of the first steps in creating a model are symbolic anyway, so "growth rate,", "change in output", and "economic growth" are used interchangeably to describe changes in GDP because the values either aren't known, irrelevant until later in the project, or pulled from data that describes it using one or several of the previously stated terms. |
What is the farthest someone would likely be stopped out from their stop loss without setting a stop limit? | It depends on how you place your stop order and the type of stop orders available from your broker. If you place a stop market order and the following day the stock opens below your stop your stock will be stopped out at or around the opening price, meaning you can potentially end up with quite a large gap. If you place a stop limit order, say you place your stop at $10.00 with a limit price of $9.90, and if the price opens below $9.90, say at $9.50, your limit sell order of $9.90 will be placed onto the market but it will not be executed until the price goes back up to $9.90 or above. The third option is to place a Guaranteed Stop Loss, and as specified you are guaranteed your stop price even if the price gaps down below your stop price. You will be paying an extra fee for the Guaranteed Stop Loss Order, and they are usually mainly available with CFD Brokers (so if you are in the USA you might be out of luck). |
What is the point of owning a stock without dividends if it cannot be resold? | Shares often come associated with a set of rights, such as ability to vote in the outcome of the company. Some shares do not have this right, however. With your ability to vote in the outcome of the company, you could help dictate that the company paid dividends at a point in time. Or many other varieties of outcomes. Also, if there were any liquidity events due to demand of the shares, this is typically at a much higher price than the shares are now when the company is private/closely held. |
What does it mean for a company to have its market cap larger than the market size? | If you are calculating: keep in mind that company A probably also sells washers, dryers, stoves, dish washers.... Each of which has their own market size. Also remember that people pay X times the value of earnings per share, so the value depends not on sales but on earnings, and expected growth. |
Why are the administrative fees for the three biggest donor-advised funds identical? | The commenters who referred you to the prisoner's dilemma are exactly correct, but I wanted to give a more detailed explanation because I find game theory quite interesting. The prisoner's dilemma is a classic scenario in game theory where even though it's in the best interests of two or more players to cooperate, they fail to do so. Wikipedia has a simple example using prisoners, but I'll use a simple example using Fidel and Charles, who are fund managers at Fidelity and Charles Schwab, respectively. To make the table shorter, I abbreviated a bit: INC = increase fees, KEEP=keep fees the same, DEC=decrease fees. Here is the dilemma itself, in the table that shows the resulting market shares if each fund manager follows the course of action in question. While this example isn't mathematically rigorous because I completely fabricated the numbers, it makes a good example. The most profitable course of action would be both fund managers agreeing to increase their fees, which would keep their market shares the same but increase their profits as they earn more fees. However, this won't happen for several reasons. Because economies of scale exist in the market for investment funds, it's reasonable to assume in a simple example that as funds grow larger, their costs decrease, so even though a fund manager decreases his fees (betraying the other players), this decrease won't be enough to reduce their profits. In fact, the increased market share resulting from such a decrease may well dominate the decreased fees and lead to higher profits. The prisoner's dilemma is highly applicable to markets such as these because they exist as oligopolies, i.e. markets where a relatively small number of established sellers possess considerable market power. If you actually wanted to model the market for donor-advised funds using game theory, you need to take a few more things into account. Obviously there are more than two firms. It's probably a valid assumption that the market is an oligopoly with significant economies of scale, but I haven't researched this extensively. There is more than one time period, so some form of the iterated prisoner's dilemma is needed. The market for donor-advised funds is also complicated by the fact that these are philanthropic funds. This may introduce tax implications or the problem of goodwill and institutional opinion of these funds. Although both funds increasing their fees may increase their profits in theory, institutional investors may look on this as a pure profit-seeking and take their funds elsewhere. For example, they may choose to invest in smaller funds with higher fees but better reputations. While reputation is important for any company, it might make more of a difference when the fund/investment vehicle is philanthropic in nature. I am by no means an expert on game theory, so I'm sure there are other nuances to the situation that I'm unaware of. |
Changing Bank Account Number regularly to reduce fraud | We change it every so often to reduce fraud. This is idiocy. They receive regular payments. They are asking the people who pay them to regularly change where their money is being sent. This increases their exposure to fraud dramatically as each time the account is changed, there is a risk it will be changed to an account they do not control. This is a huge red flag. Confirm that this is authentic and, if so, insist that they sign an agreement accepting all liability for the risks this crazy policy causes, otherwise, you should refuse to go through the effort of confirming new accounts and risking typing or communication errors on a regular basis. This is definitely a "what were they thinking?!" kind of thing. If it's not fake entirely. (This answer assumes that you were given a correct explanation, that they change it regularly believing that will reduce fraud.) |
Should withheld income tax be included as income? | This very topic was the subject of a question on workplace SE https://workplace.stackexchange.com/questions/8996/what-can-relocation-assistance-entail TL/DR; From tax publication 521 - Moving expenses table regarding how to report IF your Form W-2 shows... your entire reimbursement reported as wages in box 1 AND you have... moving expenses THEN... file Form 3903 showing all allowable expenses,* but do not show any reimbursements. There are tax implications Covered in tax publication 521 - Moving expenses and Employers tax guide to Fringe Benefits related to moving expenses. From the Employers View: Moving Expense Reimbursements This exclusion applies to any amount you directly or indirectly give to an employee, (including services furnished in kind) as payment for, or reimbursement of, moving expenses. You must make the reimbursement under rules similar to those described in chapter 11 of Publication 535 for reimbursement of expenses for travel, meals, and entertainment under accountable plans. The exclusion applies only to reimbursement of moving expenses that the employee could deduct if he or she had paid or incurred them without reimbursement. However, it does not apply if the employee actually deducted the expenses in a previous year. Deductible moving expenses. Deductible moving expenses include only the reasonable expenses of: Moving household goods and personal effects from the former home to the new home, and Traveling (including lodging) from the former home to the new home. Deductible moving expenses do not include any expenses for meals and must meet both the distance test and the time test. The distance test is met if the new job location is at least 50 miles farther from the employee's old home than the old job location was. The time test is met if the employee works at least 39 weeks during the first 12 months after arriving in the general area of the new job location. For more information on deductible moving expenses, see Publication 521, Moving Expenses. Employee. For this exclusion, treat the following individuals as employees. A current employee. A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Exception for S corporation shareholders. Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Exclusion from wages. Generally, you can exclude qualifying moving expense reimbursement you provide to an employee from the employee's wages. If you paid the reimbursement directly to the employee, report the amount in box 12 of Form W-2 with the code “P.” Do not report payments to a third party for the employee's moving expenses or the value of moving services you provided in kind. From the employees view: The not be included as income the expenses must be from an accountable plan: Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home. You must adequately account to your employer for these expenses within a reasonable period of time. You must return any excess reimbursement or allowance within a reasonable period of time. Also what is interesting is the table regarding how to report IF your Form W-2 shows... your entire reimbursement reported as wages in box 1 AND you have... moving expenses THEN... file Form 3903 showing all allowable expenses,* but do not show any reimbursements. |
Is compounding interest on investments a myth? | The S&P 500 index from 1974 to present certainly looks exponential to me (1974 is the earliest data Google has). If you read Jeremy Siegel's book there are 200 year stock graphs and the exponential nature of returns on stocks is even more evident. This graph only shows the index value and does not include the dividends that the index has been paying all these years. There is no doubt stocks have grown exponentially (aka have grown with compound interest) for the past several decades and compounded returns is definitely not a "myth". The CAGR on the S&P 500 index from 1974 to present has been 7.54%: (1,783 / 97.27) ^ (1 / 40) - 1 Here is another way to think about compounded investment growth: when you use cash flow from investments (dividends, capital gains) to purchase more investments with a positive growth rate, the investment portfolio will grow exponentially. If you own a $100 stock that pays 10% dividends per year and spend the dividends every year without reinvesting them, then the investment portfolio will still be worth $100 after 40 years. If the dividends are reinvested, the investment portfolio will be worth $4,525 after 40 years from the many years of exponential growth: 100*(1 + 10%)^40 |
For net worth, should I value physical property at my cost to replace it, or the amount I could get for selling it? | You are not asking for insurance purposes. So I'll go with this - I have two asset numbers I track. All investments, retirement accounts, etc, the kind that are valued at day's end by the market, etc. From that number I subtract the mortgage. This produces the number that I can say is my net worth with a paid in full house. The second number simply adds back the house's value, give or take. Unless I owned art that was valued in the six figures, it seems pointless to me to add it up, except for insurance. If my wife and I died tomorrow, the kid can certainly auction our stuff off, but knowing that number holds no interest for us. When most people talk 'net worth', I don't see them adding these things up. Cars, maybe, but not even that. |
Should retirement fund be equal to amount of money needed for financial independence? | I want to know ideally how much should a person save for retirement funds? A person should save enough such that your total retirement resources will equal the amount you personally need for a comfortable retirement at the point in time when the person desires to retire. If you want to retire at 40, you may need to save quite a lot each year. If you want to retire at 70, you may need to save less each year. If you will have a pension, you may wish to save somewhat less than someone who won't have a pension. The same is true for Social Security (or your local equivalent). I am getting a feeling retirement funds is equal to financial independence because one can live without needing to borrow money from anyone. Sort of, but it depends on your goals. Some who are financially independent never choose to retire, but choose jobs without regard to financial need. |
Offered a job: Should I go as consultant / independent contractor, or employee? | Your comment to James is telling and can help us lead you in the right direction: My work and lifestyle will be the same either way, as I said. This is all about how it goes "on the books." [emphasis mine] As an independent consultant myself, when I hear something like "the work will be the same either way", I think: "Here thar be dragons!". Let me explain: If you go the independent contractor route, then you better act like one. The IRS (and the CRA, for Canadians) doesn't take lightly to people claiming to be independent contractors when they operate in fact like employees. Since you're not going to be behaving any different whether you are an employee or a contractor, (and assuming you'll be acting more like an employee, i.e. exclusive, etc.), then the IRS may later make a determination that you are in fact an employee, even if you choose to go "on the books" as an independent contractor. If that happens, then you may find yourself retroactively denied many tax benefits you'd have claimed; and owe penalties and interest too. Furthermore, your employer may be liable for additional withholding taxes, benefits, etc. after such a finding. So for those reasons, you should consider being an employee. You will avoid the potential headache I outlined above, as well as the additional paperwork etc. of being a contractor. If on the other hand you had said you wanted to maintain some flexibility to moonlight with other clients, build your own product on the side, choose what projects you work on (or don't), maybe hire subcontractors, etc. then I'd have supported the independent contractor idea. But, just on the basis of the tax characteristics only I'd say forget about it. On the financial side, I can tell you that I wouldn't have become a consultant if not for the ability to make more money in gross terms (i.e. before tax and expenses.) That is: your top line revenues ought to be higher in order to be able to offset many of the additional expenses you'd incur as an independent. IMHO, the tax benefits alone wouldn't make up for the difference. One final thing to look at is Form SS-8 mentioned at the IRS link below. If you're not sure what status to choose, the IRS can actually help you. But be prepared to wait... and wait... :-/ Additional Resources: |
What options do I have at 26 years old, with 1.2 million USD? | Lots of good advice so far. Here's some meta-advice. Read through everything here twice, and distill out what the big picture ideas are. Learn about what you need to know about them. Pick a strategy and/or long term goals. Work toward them. Get advice from many many places and distill it. This is currently known as crowd-sourcing but I've been doing it all my life. It's very effective. No one will ever care as much about your money as you. Some specific things I haven't seen mentioned (or not mentioned much): |
If a stock doesn't pay dividends, then why is the stock worth anything? | Not sure how this has got this far with no obvious discussion about the huge tax advantages of share buy backs vs dividend paying. Companies face a very simple choice with excess capital - pay to shareholders in the form of a taxable dividend, invest in future growth where they expect to make more than $1 for every $1 invested, or buy back the equivalent amount of stock on the market, thus concentrating the value of each share the equivalent amount with no tax issues. Of these, dividends are often by far the worst choice. Virtually all sane shareholders would just rather the company put the capital to work or concentrate the value of their shares by taking many off the market rather than paying a taxable dividend. |
How do I research if my student loan company is doing something illegal? | The thing to recall here is that auto-pay is a convenience, not a guarantee. Auto-pay withdrawals, notices that a bill is due, all of these are niceties that the lender uses to try to make sure you consistently pay your bill on time, as all businesses enjoy steady cash flows. Now, what all of these "quality of life" features don't do is mitigate your responsibility, as outlined when you first took out the loan, to pay it back in a timely manner and according to the terms and conditions of the loan. If your original contract for the loan states you shall make "a payment of $X.XX each calendar month", then you are required to make that payment one way or another. If auto-pay fails, you are still obligated to monitor that and correct the payment to ensure you meet your contractual obligation. It's less than pleasant that they didn't notify you, but you were already aware you had an obligation to pay back the loan, and knew what the terms of the loan were. Any forgiveness of interest or penalties for late fees is entirely up to the CSR and the company's internal policies, not the law. |
Saving $1,000+ per month…what should I do with it? | Daniel, first of all, I'm jealous of your predicament. That said, I think you've gotten some good advice already, so I won't repeat what's been said. But I will throw out a few ideas that haven't come up. My first thought is that you may be underestimating upcoming expenses. It sounds like your current expenses are low, and that's great! I'm impressed that you're living below your means, and looking for the best way to use your extra cash. But you may not be thinking of a few things. You have a girlfriend, and maybe your relationship isn't such that you are planning a wedding quite yet. But, regardless of whether your current girlfriend is your future life partner or not, if you think marriage may be in your future at all, you'll save yourself a lot of stress if you've got some savings for a wedding in place before you're ready to commit. Next, what are you driving? If it's a good car that you expect to last you another 10 years, you're probably ok right now. But if you may need to replace your vehicle in the next few years, start saving now and you may be able to buy it outright. (I expect your interest rate on financing a car would be higher than your current student loan rates, so I would save for a car before paying down loans with such beautiful rates.) A house has already been discussed, and there was also mention of additional education, and both of those require a solid financial plan that begins far in advance. In summary, I think you need a lot more than $5K in savings. Sure, have some fun, and take advantage of opportunities to travel, etc, as they come along, but if you're able to bump your savings by $500 to $1000/month, I think you'll really be glad you did. When it comes time for a new car, or you find you're ready to settle down, it will be nice to have somewhere to draw from, and if there's only $5K in your savings, you may come to regret choices you made when you were 22. |
What does inflation mean to me? | Everyone buys different kinds of goods. For example I don't smoke tobacco so I'm not affected by increased tobacco prices. I also don't have a car so I'm not affected by the reduced oil prices either. But my landlord increased the monthly fee of the apartment so my cost of living per month suddenly increased more than 10% relative to the same month a year before. This is well known, also by the statistical offices. As you say, the niveau of the rent is not only time- but also location specific, so there are separate rent indices (German: Mietspiegel). But also for the general consumer price indices at least in my country (Germany) statistics are kept for different categories of things as well. So, the German Federal Statistical Office (Statistisches Bundesamt) not only publishes "the" consumer price index for the standard consumer basket, but also consumer price indices for oil, gas, rents, food, public transport, ... Nowadays, they even have a web site where you can put in your personal weighting for these topics and look at "your" inflation: https://www.destatis.de/DE/Service/InteraktiveAnwendungen/InflationsrechnerSVG.svg Maybe something similar is available for your country? |
Td Ameritrade Roth IRA question | Since you're 20-30 years out of retirement, you should be 90% to 100% in stocks, and in one or two broad stock market funds likely. I'm not sure about the minimums at TD Ameritrade, but at Vanguard even $3k will get you into the basic funds. One option is the Targeted Retirement Year funds, which automatically rebalance as you get closer to retirement. They're a bit higher expense usually than a basic stock market fund, but they're often not too bad. (Look for expenses under 0.5% annually, and preferably much lower - I pay 0.05% on mine for example.) Otherwise, I'd just put everything into something simple - an S&P500 tracker for example (SPY or VOO are two examples) that has very low management fees. Then when your 401(k) gets up and running, that may have fewer options and thus you may end up in something more conservative - don't feel like you have to balance each account separately when they're just starting, think of them as one whole balancing act for the first year or two. Once they're each over $10k or so, then you can balance them individually (which you do want to do, to allow you to get better returns). |
Could someone place an independent film on the stock market? | When we say "stock market," we are usually thinking of the publicly traded stocks, such as the New York Stock Exchange or the NASDAQ. Shares of individual products do not go on these exchanges, only large corporations. You won't see a stock ticker symbol for The Force Awakens or for the iPhone 6s Plus. The reason for this is that when investors buy a stock, they are looking for something that will grow in value theoretically forever. Individual products usually have a limited lifespan. Your movie will (hopefully) generate revenue when it comes out, but after a while sales will slow down after people have seen it. If someone bought a share of stock in a movie on the stock market, they have to realize that eventually the movie will stop making money, and their share of stock won't be worth anything anymore. Instead, people invest in companies that have the potential to make new products, such as Disney or Apple. So if you were envisioning seeing the ticker symbol of your movie going across the screen on CNBC, sorry, that's not going to happen. However, you could theoretically sell shares to individual investors for a percentage of the profit. You figure out how much money you need to create the movie, and estimate how much profit you think the movie will earn. Then you find an investor (or group of investors) that is willing to give you the money you need in exchange for a percentage of the profit. Unlike a stock market investor, these investors won't be looking for the long-term growth potential of the resale value of the stock, but simply a share of the profit. |
Switch from DINK to SIWK: How do people afford kids? | With your wife's income, you're not doing to see a net difference if she stops working that job. You may actually yield a little more. At the end of the day, it's doable, but you're going to have to rationalize your spending and one or both of you should pick up a part-time job. Do you remember the last time you bought lunch or went out to dinner? You're wasting money. Even a 50% gig at a quality employer like Starbucks or Home Depot will let you make $15-20k. I respect your religious beliefs, but 17% of your income is steep, and you may want to revisit that. |
Why do people buy stocks that pay no dividend? | Shares in a company represent a portion of a company. If that company takes in money and doesn't pay it out as a dividend (e.g. Apple), the company is still more valuable because it has cold hard cash as an asset. Theoretically, it's all the same whether your share of the money is inside the company or outside the company; the only immediate difference is tax treatment. Of course, for large bank accounts that means that an investment in the company is a mix of investment in the bank account and investment in the business-value of the company, which may stymie investors who aren't particularly interested in buying larve amounts of bank accounts (known for low returns) and would prefer to receive their share of the cash to invest elsewhere (or in the business portion of the company.) Companies like Apple have in fact taken criticism for this. Your company could also use that cash to invest in itself (growing the value of its profits) or buy other companies that are worth money, essentially doing the job for you. Of course, they can do the job well or they can do it poorly... A company could also be acquired by a larger company, or taken private, in exchange for cash or the stock of another company. This is another way that the company's value could be returned to its shareholders. |
Is there an online cost-basis calculator that automatically accounts for dividend re-investments and splits? | Reinvestment creates a nightmare when it comes time to do taxes, sadly. Tons of annoying little transactions that happened automatically... Here's one article trying to answer your question: http://www.smartmoney.com/personal-finance/taxes/figuring-out-your-cost-basis-when-youve-lost-the-statements-9529/ You could also try this thing: http://www.gainskeeper.com/us/BasisProIndividual.aspx But I couldn't tell you if it would help. If it makes you feel better, brokerages are now required by the IRS to track your basis for you, so for new transactions and assets you shouldn't end up in this situation. Doesn't help with the old stuff ;-) |
Borrowing money and then investing it — smart or nart? | Theory of Levered Investing Borrowing in order to increase investment exposure is a time-honored and legitimate activity. It's the optimal way to increase your exposure, according to finance theory (which assumes you get a good interest rate...more on this later). In your case it may or may not be a good idea. Based on the information in your post, I believe that in your case it is not a good idea. Consider the following concerns. Risk In finance, reward comes with risk and in no other way. Investing borrowed money means there is a good (not small) chance that you will lose enough money that you will need to pull significant wealth from your own savings in order to make up the difference. If you are in a position to do this and OK with that possibility, then proceed to to the next concern. If losing a lot of money means financial calamity for you, then this is a bad idea. You haven't described your financial situation so I don't know in which camp you fall. If the idea of losing, say, $100K means complete financial failure for you, then the strategy you have described simply has too much risk. Make no mistake, just because the market makes money on average does not mean it will make money, or as much money as you expect, over your horizon. It may lose money, perhaps a lot of money. Make sure this idea is very clear in your mind before taking action. Rewards Your post implies that you think you can reliably get 10%-12% on an investment. This is not the case. There are many years in which a reasonable portfolio makes this much or more, but on average you will earn less. No ones knows the true long-term market risk premium, but it is definitely less than 10%. A better guess would be 6.5% plus whatever the risk-free rate is (currently about 0%). Buying "riskier" investments means deviating from the optimal portfolio, meaning you took on more risk than is justified by how much extra money you expect to make. I never encourage people to invest based on optimistic or unrealistic goals. If anything, you should be conservative about how you expect things to go. And remember, these are averages. Any portfolio that earns 10%-12% also has a very good chance of losing 25% or more. People who sell or give advice on investments frequently get you charged up by pointing at times and investments that have done very well. Unfortunately, we never know whether the investments and time period in which we are investing will be a good one, a bad one, or an unexciting one. The reality of investing is...well, more realistic than what you have described. Costs I can't imagine how you could borrow that much money and only have an annual payment of $2000 as you imply--that must be a mistake. No individual borrows at a rate significantly below 1%. It sounds like it's not a collateralized loan of any kind, so unless you are some kind of prime-loan customer, your interest rate will be significant. Subtract whatever rate you actually pay from 6.5% to get a rough idea of how much you will make if things go as well as they do on average. You will pay the interest whether times are good or bad. If your rate is typical of noncollateralized personal loans, there's a good chance you will lose money on average using the strategy you have described. If you are OK with taking risk with a negative expected return, consider a trip to Las Vegas. It's more exciting. Ethics I'm not one to make people feel guilty for doing things that are legal but of questionable morality. If that's the case and you are OK with it, more power to you. I'm not sure under what pretense you expect to obtain the money, but it sounds like you might be crossing legal lines and committing actual crimes (like fraud). Make sure to check on whether what you intend is a white lie or something that can get you thrown in prison. For example, if you are proposing obtaining a subsidized education loan and using it for speculation, I could easily see you spending serious time in prison and permanently ruining your life, even if your plan works out. A judge and 12 of your peers are not going to think welfare fraud is a harmless twist of the truth. Summary I've said a lot of negative things here. This is because I have to guess about your financial situation and it sounds like you may have unrealistic expectations of the safety and generosity of investing. Quite frankly, people for whom borrowing $250K is no big deal don't normally come and ask about it on StackExchange and they definitely don't tend to lie in order to get loans. Also $18K a year doesn't change their quality of life. However, I don't know. If $250K is small relative to your wealth and you need a good way to increase your exposure to the market risk premium, then borrowing and investing may well be a good idea. |
Why sometimes payable date is BEFORE the ex-dividend date? | Do you realise that the examples you have given are for stock splits not for dividends, that is why the date payable is before the ex-date for the split. The payments for the split occur on 30th June and the first day the stock trades with the new split is on the next trading day, being the ex-date, 1st July. |
What's an economic explanation for why greeting cards are so expensive? | We generally speak of the "elasticity of demand". Greeting cards are expensive because they can be. We buy them in a sentimentally weakened state, and we do not buy them by the tonne. There is also the concept of "Market Segmentation", but not so much. Essentially the price is determined by finding the "point of pain" and winding it back a little. So people will pay $5 for a card. They will not (generally) pay $5,000 unless there is a good reason (vanity ?). Why sell them for $2 ? The customers who baulk at $5 tend not to even have $2. (Market segmentation again). In short the price is always going to need to be set before the point where demand rolls off sharply, to maximise profit. |
Do people tend to spend less when using cash than credit cards? | Others have commented on the various studies. If, as JoeTaxpayer says, this one particular study he mentions does not really exist, there are plenty of others. (And in that case: Did someone blatantly lie to prove a bogus point? Or did someone just get the name of the organization that did the study wrong, like it was really somebody called "B&D", they read it as "D&B" because they'd heard of Dun & Bradstreet but not of whoever B&D is. Of course if they got the organization wrong maybe they got important details of the study wrong. Whatever.) But let me add one logical point that I think is irrefutable: If you always buy with cash, there is no way that you can spend more than you have. When you run out of cash, you have no choice but to stop spending. But when you buy with a credit card, you can easily spend more than you have money in the bank to pay. Even if it is true that most credit card users are responsible, there will always be some who are not, and credit cards make it easy to get in trouble. I speak from experience. I once learned that my wife had run up $20,000 in credit card debt without my knowledge. When she divorced me, I got stuck with the credit card debt. To this day I have no idea what she spent the money on. And I've known several people over the years who have gone bankrupt with credit card debt. Even if you're responsible, it's easy to lose track with credit cards. If you use cash, when you take out your wallet to buy something you can quickly see whether there's a lot of money left or not so much. With credit, you can forget that you made the big purchase. More likely, you can fail to add up the modest purchases. It's easy to say, "Oh, that's just $100, I can cover that." But then there's $100 here and $100 there and it can add up. (Or depending on your income level, maybe it's $10 here and $10 there and it's out of hand, or maybe it's $10,000.) It's easier today when you can go on-line and check the balance on your credit card. But even at that, well just this past month when I got one bill I was surprised at how big it was. I went through the items and they were all legitimate, they just ... added up. Don't cry for me, I could afford it. But I had failed to pay attention to what I was spending and I let things get a little out of hand. I'm a pretty responsible person and I don't do that often. I can easily imagine someone paying less attention and getting into serious trouble. |
My landlord is being foreclosed on. Should I confront him? | Verbal agreements are not legally binding. Unless you have signed a new lease agreement, you are not obligated to continue renting the property - you are free to go. On the other hand, if you really like the place and want to stay, you should sign another lease agreement. This agreement will be binding on whomever owns the home - whether it is your current landlord, a bank or a new purchaser. But, if you go this route, make sure that there is not a clause that says the lease agreement is void upon foreclosure (or something similar). This is a standard clause in lease agreements allowing the bank to cancel the lease. Another option, if you really like the house is to offer to buy the property. If the property is being foreclosed on, you could suggest buying on a short sale. Here is a link to an article I wrote entitled "Buy Instead of Rent: A Recovering Real Estate Market" that discusses the benefits of buying rather than renting. |
What traditionally happens to bonds when the stock market crashes? | It depends on why the stocks crashed. If this happened because interest rates shot up, bonds will suffer also. On the other hand, stocks could be crashing because economic growth (and hence earnings) are disappointing. This pulls down interest rates and lifts bonds. |
Should I buy a house because Mortgage rates are low | Reasons for no: In your first sentence you say something interesting: rates low - prices high. Actually those 2 are reversely correlated, imagine if rates would be 5% higher-very few people could buy at current prices so prices would drop. Also you need to keep in mind the rate of inflation that was much higher during some periods in the US history(for example over 10% in the 1980) so you can not make comparisons just based on the nominal interest rate. Putting all your eggs in one basket. If you think real estate is a good investment buy some REITs for 10k, do not spend 20% of your future income for 20 years. Maintenance - people who rent usually underestimate this or do not even count it when making rent vs mortgage comparisons. Reasons for yes: Lifestyle decision - you don't want to be kicked out of your house, you want to remodel... Speculation - I would recommend against this strongly, but housing prices go up and down, if they will go up you can make a lot of money. To answer one of questions directly: 1. My guess is that FED will try to keep rates well bellow 10% (even much lower, since government can not service debts if interest rates go much higher), but nobody can say if they will succeed. |
What considerations are there for making investments on behalf of a friend? | If you want to do #1, then you should form an "investment club." This is an entity that is recognized by the SEC and the IRS. From the SEC: An investment club is a group of people who pool their money to make investments. Usually, investment clubs are organized as partnerships and, after the members study different investments, the group decides to buy or sell based on a majority vote of the members. Club meetings may be educational and each member may actively participate in investment decisions. https://www.sec.gov/investor/pubs/invclub.htm You should do your own legal research on how to organize, but I believe that a common way is to form a formal partnership, which then provides the legal structure for distributing gains, tax liability, income, and other costs to the members. IRS publication 550 has a section on Investment Clubs from a tax perspective, but I'd definitely recommend get professional help on this in addition to whatever you can read yourself. As for #2, I believe that's illegal unless you're licensed. |
What are “trailing 12-month total returns”? | ( t2 / t1 ) - 1 Where t2 is the value today, t1 is the value 12 months ago. Be sure to include dividend payments, if there were any, to t2. That will give you total return over 12 months. |
What is the meaning of public stock price data from before the official first day of trading? [duplicate] | For the case of spinoffs it reflects the market as activities as the specific steps that have to be followed take place. For example the spinoff of Leidos from SAIC in 2013. (I picked this one becasue I knew some of the details) On September 9, 2013, the Board of Directors of SAIC, Inc.(Ticker Symbol (NYSE):SAI) approved the following: The separation of its technical, engineering and enterprise information technology services business through the distribution of shares of SAIC Gemini, Inc. to stockholders. Each stockholder of record of SAIC, Inc. as of September 19, 2013 (Record Date) will receive one (1) share of SAIC Gemini, Inc. common stock for every seven (7) shares of SAIC, Inc. common stock held by such stockholder as of the Record Date. This distribution will be effective after market close on September 27, 2013 (Distribution Date). After the Distribution Date, SAIC Gemini, Inc. will be renamed Science Applications International Corporation (New SAIC). A one (1) for four (4) reverse stock split of the SAIC, Inc. common stock effective as of Distribution Date. After the Distribution Date, SAIC, Inc. will be renamed Leidos Holdings, Inc. (Leidos). Q 11: What are the different trading markets that may occur between Record Date and Distribution Date? A: Beginning two days prior to the Record Date of September 19, 2013 through the Distribution Date on September 27, 2013, there may be three different trading markets available with respect to SAIC, Inc. and the separation. Stock Ticker – SAI (Regular Way Trading with Due Bills): Shares of SAI common stock that trade on the regular-way market will trade with an entitlement to shares of the New SAIC common stock distributed on the Distribution Date. Purchasers in this market are purchasing both the shares of Leidos and New SAIC common stock. Form of Stock Ticker –SAIC (When Issued Trading): Shares of New SAIC common stock may be traded on a “when-issued” basis. These transactions are made conditionally because the security has been authorized, but not yet issued. Purchasers in this market are only purchasing the shares of New SAIC common stock distributed on the Distribution Date. Form of Stock Ticker – LDOS (Ex-Distribution Trading): Shares that trade on the ex-distribution market will trade without an entitlement to shares of New SAIC common stock distributed on the Distribution Date. Purchasers in this market are only purchasing the shares of Leidos common stock. So the stock price for New SAIC starts a few days before the record date of 19 September 2013, while LDOS (new name for the old SAIC) goes back much earlier. But the company didn't split until after the close of business on 27 September 2013. http://investors.saic.com/sites/saic.investorhq.businesswire.com/files/doc_library/file/GeneralStockholder-QuestionsandAnswers.pdf |
Should I sell when my stocks are growing? | There is an approach which suggests that each weekend you should review your positions as if they were stocks to be considered for purchase on Monday. I can't offer advice on picking stocks, but it's fair to say that you need to determine if the criteria you used to buy it the first time is still valid. I own a stock trading at over $300, purchased for $5. Its P/E is still reasonable as the darn E just keeps rising. Unless your criteria is to simply grab small gains, which in my opinion is a losing strategy, an 8% move up would never be a reason to sell, in and of itself. Doing so strikes me as day trading, which I advise againgst. |
Everyone got a raise to them same amount, lost my higher pay than the newer employees | This question is largely opinion based but I wanted to balance out the people jumping on you. There are lots of factors that go into salary/pay, such as what you contribute to the company and whather you go above or beyond whats expected of you. I would say seniority is one factor, or at least there is a case to be made that it is important. If someone has worked 5 years for me, that is five years that I have not had to search, interview, and train a replacement. I am not a business owner but I do employ people and when someone quits its an extremely stressful process. Not having to go through that, again in my opinion, is worth a small bump in pay. I cant comment on if its fair or not. That is opinion. What is fact is that whenever a broad group of people are given a pay raise for arbitrary reasons and other employees arent, its creates discontent, it hurts morale, employees leave, and in severe cases the business becomes crippled. So Im not sure if its fair, but is it a bad idea? Generally. See here and I highly recommend going here for anyone who thinks dramatically raising pay 'because its the right thing to do' is a good idea |
Is a currency “hedged” ETF actually a more speculative instrument than an unhedged version? | Currency hedge means that you are somewhat protected from movements in currency as your investment is in gold not currency. So this then becomes less speculative and concentrates more on your intended investment. EDIT The purpose of the GBSE ETF is aimed for investors living in Europe wanting to invest in USD Gold and not be effected by movements in the EUR/USD. The GBSE ETF aims to hedge against the effects of the currency movements in the EUR/USD and more closely track the USD Gold price. The 3 charts below demonstrate this over the past 5 years. So as is demonstrated the performance of the GBSE ETF closely matches the performance of the USD Gold price rather than the EUR Gold price, meaning someone in Europe can invest in the fund and get the appropriate similar performance as investing directly into the USD Gold without being affected by currency exchange when changing back to EUR. This is by no way speculative as the OP suggests but is in fact serving the purpose as per the ETF details. |
GnuCash and ledger/hledger | Answering my own question, I figured it out: yes, there is a way, with a tool called gnucash2ledger.py. Versions used: GnuCash 2.6.1, Ledger 2.6.2, hledger 0.22 |
~$75k in savings - Pay off house before new home? | As others have said, congratulations on saving up 75K in cash while seemingly not neglecting other areas of personal finance. Considering that only 15% of Americans have more than 10K saved this is quite a feat. source If you sell your old house, and buy the new one you will still be in really good financial shape. No need to comment further. Renting your current home and buying a new home introduces a great amount of risk into your life. The risk in this case is mitigated by cash. As others have pointed out, you will need to save a lot more to remove an acceptable amount of risk. Here is what I see: So without paying off your existing house I would see a minimum savings account balance of about double of what you have now. Once you purchase the new house, the amount would be reduced by the down payment, so you will only have about 50K sitting around. The rental emergency fund may be a little light depending on how friendly your state is to landlords. Water heaters break, renters don't pay, and properties can sit vacant. Also anytime you move into a new business there will be mistakes made that are solved by writing checks. Do you have experience running rentals? You might be better off to sell your existing home, and move into a more expensive home than what you are suggesting. You can continue to win at money without introducing a new factor into your life. Alternatively, if you are "bitten by the real estate bug" you could mitigate a lot risk by buying a property that is of similar value to your current home or even less expensive. You can then choose which home to live in that makes the most financial sense. For example some choose to live in the more dilapidated home so they can do repairs as time permits. To me upgrading the home you live in, and renting an expensivish home for a rental is too much to do in such a short time frame. It is assuming far too much risk far to quickly for a person with your discipline. You will get there. |
As a beginner investor, should I start investing with mutual funds through my bank, or with an online broker? | What is the best option to start with? and I am not sure about my goals right now but I do want to have a major retirement account without changing it for a long time That is a loaded question. Your goals should be set up first, else what is stopping you from playing the mega millions lottery to earn the retirement amount instantly. If you have the time and resources, you should try doing it yourself. It helps you learn and at a latter stage if you don't have the time to manage it yourself, you can find an adviser who does it for you. To find a good adviser or find a fund who/which can help you achieve your monetary goals you will need to understand the details, how it works and other stuff, behind it. When you are thrown terms at your face by somebody, you should be able to join the dots and get a picture for yourself. Many a rich men have lost their money to unscrupulous people i.e. Bernie Madoff. So knowing helps a lot and then you can ask questions or find for yourself to calm yourself i.e. ditch the fund or adviser, when you see red flags. It also makes you not to be too greedy, when somebody paints you a picture of great returns, because then your well oiled mind would start questioning the rationale behind such investments. Have a look at Warren Buffet. He is an investor and you can follow how he does his investing. It is simple but very difficult to follow. Investing through my bank I would prefer to stay away from them, because their main service is banking and not allowing people to trade. I would first compare the services provided by a bank to TD Ameritrade, or any firm providing trading services. The thing is, as you mentioned in the question, you have to go through a specific process of calling him to change your portfolio, which shouldn't be a condition. What might happen is, if he is getting some benefits out of the arrangement(get it clarified in the first place if you intend to go through them), from the side of the fund, he might try to dissuade you from doing so to protect his stream of income. And what if he is on a holiday or you cannot get hold of him. Secondly from your question, it seems you aren't that investing literate. So it is very easy to get you confused by jargon and making you do what he gets the maximum benefit out of it, rather than which benefits you more. I ain't saying he is doing so but that could be a possibility too, so you have consider that angle too. The pro is that setting up an account through them might be much easier than directly going to a provider. But the best point doing it yourself is, you will learn and there is nothing which tops that. You don't want somebody else managing your money, however knowledgeable they maybe i.e. Anthony Bolton. |
What do I need to consider when refinancing one home to pay the down-payment of another? | and I need to upgrade my current home to a larger, longer-term property Would selling your current home give you (at least) a 20% DP on the new home? Take additional cash out of the refinance of the first home to accelerate saving Dittoing D Stanley, that makes no sense. Purchase and move to a second property of greater cost and value to first You'll need to find the new house at the same time you're selling the existing home, and write the new-home purchase contract in such a way that you can back out in case the purchaser of your home backs out. |
Multiple accounts stagnant after quitting job. | What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else? If you don't know your options, I would suggest reading some material on it that might be a little more extensive than an answer here (for instance, http://www.getrichslowly.org/blog/ has some good and free information about a myriad of financial topics). With retirement accounts you can roll it over or leave it in the current account. Things to look at would be costs of the accounts, options you have in each account, and the flexibility of moving it if you need to. Depending on what type of retirement account it is (Roth 401K, Traditional 401K, etc, you may have some advantages with moving it to another type). The student loans.... pay them off in one shot? I have the extra money and it would not be a hardship to do so unless that money can be best used somewhere else? Unless I was making more money in a savings/investing/business opportunity, I would pay off the student loans in a lump sum. The reason is basic opportunity cost (economics) - if a better opportunity isn't on the horizon with your money, kill the interest you're paying because it's money you're losing every month. With the money just sitting in the bank I get a little sick feeling thinking that I can be doing something better with that. Outside of general savings you could look at investing in stocks, ETFs, mutual funds, currencies, lending club loans (vary by state), or something similar. Or you could try to start a business or invest in a start up directly (though, depending on the start up, they may not accept small investors). Otherwise, if you don't have a specific idea at this time, it's best to have money in savings while you ponder where else it would serve you. Keep in mind, having cash on hand, even if it's not earning anything, can bail you out in emergencies or open the door if an opportunity arises. So, you're really not "losing" anything by having it in cash if you're patiently waiting on opportunities. |
Is there a general guideline for what percentage of a portfolio should be in gold? | My personal gold/metals target is 5.0% of my retirement portfolio. Right now I'm underweight because of the run up in gold/metals prices. (I haven't been selling, but as I add to retirement accounts, I haven't been buying gold so it is going below the 5% mark.) I arrived at this number after reading a lot of different sample portfolio allocations, and some books. Some people recommend what I consider crazy allocations: 25-50% in gold. From what I could figure out in terms of modern portfolio theory, holding some metal reduces your overall risk because it generally has a low correlation to equity markets. The problem with gold is that it is a lousy investment. It doesn't produce any income, and only has costs (storage, insurance, commissions to buy/sell, management of ETF if that's what you're using, etc). The only thing going for it is that it can be a hedge during tough times. In this case, when you rebalance, your gold will be high, you'll sell it, and buy the stocks that are down. (In theory -- assuming you stick to disciplined rebalancing.) So for me, 5% seemed to be enough to shave off a little overall risk without wasting too much expense on a hedge. (I don't go over this, and like I said, now I'm underweighted.) |
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