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Asset classes: Is a Guaranteed Investment Certificate (GIC) considered a bond? | Instead of "stocks" I would refer to that asset class as "equity." Instead of bonds, I would refer to that asset class as "fixed income." Given that more general terminology, GICs would fit into fixed income. |
Is it true that more than 99% of active traders cannot beat the index? | What decision are you trying to make? Are you interested day trading stocks to make it rich? Or are you looking at your investment options and trying to decide between an actively managed mutual fund and an ETF? If the former, then precise statistics are hard to come by, but I believe that 99% of day traders would do better investing in an ETF. If the latter, then there are lots of studies that show that most actively managed funds do worse than index funds, so with most actively managed funds you are paying higher fees for worse performance. Here is a quote from the Bogleheads Guide to Investing: Index funds outperform approximately 80 percent of all actively managed funds over long periods of time. They do so for one simple reason: rock-bottom costs. In a random market, we don't know what future returns will be. However, we do know that an investor who keeps his or her costs low will earn a higher return than one who does not. That's the indexer's edge. Many people believe that your best option for investing is a diverse portfolio of ETFs, like this. This is what I do. |
Understanding differences between S&P500 index-tracking ETFs | Back in the olden days, if you wanted to buy the S&P, you had to have a lot of money so you can buy the shares. Then somebody had the bright idea of making a fund that just buys the S&P, and then sells small pieces of it to investor without huge mountains of capital. Enter the ETFs. The guy running the ETF, of course, doesn't do it for free. He skims a little bit of money off the top. This is the "fee". The major S&P ETFs all have tiny fees, in the percents of a percent. If you're buying the index, you're probably looking at gains (or losses) to the tune of 5, 10, 20% - unless you're doing something really silly, you wouldn't even notice the fee. As often happens, when one guy starts doing something and making money, there will immediately be copycats. So now we have competing ETFs all providing the same service. You are technically a competitor as well, since you could compete with all these funds by just buying a basket of shares yourself, thereby running your own private fund for yourself. The reason this stuff even started was that people said, "well why bother with mutual funds when they charge such huge fees and still don't beat the index anyway", so the index ETFs are supposed to be a low cost alternative to mutual funds. Thus one thing ETFs compete on is fees: You can see how VOO has lower fees than SPY and IVV, in keeping with Vanguard's philosophy of minimal management (and management fees). Incidentally, if you buy the shares directly, you wouldn't charge yourself fees, but you would have to pay commissions on each stock and it would destroy you - another benefit of the ETFs. Moreover, these ETFs claim they track the index, but of course there is no real way to peg an asset to another. So they ensure tracking by keeping a carefully curated portfolio. Of course nobody is perfect, and there's tracking error. You can in theory compare the ETFs in this respect and buy the one with the least tracking error. However they all basically track very closely, again the error is fractions of the percent, if it is a legitimate concern in your books then you're not doing index investing right. The actual prices of each fund may vary, but the price hardly matters - the key metric is does it go up 20% when the index goes up 20%? And they all do. So what do you compare them on? Well, typically companies offer people perks to attract them to their own product. If you are a Fidelity customer, and you buy IVV, they will waive your commission if you hold it for a month. I believe Vanguard will also sell VOO for free. But for instance Fidelity will take commission from VOO trades and vice versa. So, this would be your main factor. Though, then again, you can just make an account on Robinhood and they're all commission free. A second factor is reliability of the operator. Frankly, I doubt any of these operators are at all untrustworthy, and you'd be buying your own broker's ETF anyway, and presumably you already went with the most trustworthy broker. Besides that, like I said, there's trivial matters like fees and tracking error, but you might as well just flip a coin. It doesn't really matter. |
Is there a time limit to cover an open short position? [duplicate] | There are situations where you can be forced to cover a position, particular when "Reg SHO" ("regulation sho") is activated. Reg SHO is intended to make naked short sellers cover their position, it is to prevent abusive failure to delivers, where someone goes short without borrowing someone else's shares. Naked shorting isn't a violation of federal securities laws but it becomes an accounting problem when multiple people have claims to the same underlying assets. (I've seen companies that had 120% of their shares sold short, too funny, FWIW the market was correct as the company was worth nothing.) You can be naked short without knowing it. So there can be times when you will be forced to cover. Other people being forced to cover can result in a short squeeze. A risk. The other downside is that you have to pay interest on your borrowings. You also have to pay the dividends to the owner of the shares, if applicable. In shorter time frames these are negligible, but in longer time frames, such as closer to a year or longer, these really add up. Let alone the costs of the market going in the opposite direction, and the commissions. |
Basic Info On Construction Loans | Construction loans have an entirely set of rules and factors than mortgages and that's hard to reconcile into one instrument. Also, I'm guessing the bank would be a bit shy about giving a commitment to a home loan before they have any information about how the construction process is going. There would have to be a ton of contingencies put into mortgage and they probably can't account for everything. |
Did basically all mutual funds have a significant crash in 2008? | The literal answer to your question is that a number of different types of mutual funds did not have significant downturns in 2008. Money Market Funds are intended to always preserve capital. VMMXX made 2.77% in 2008. It was a major scandal broke the buck, that its holders took a 3% loss. Inverse funds, which go up when the market goes down, obviously did well that year (RYARX), but if you have a low risk tolerance, that's obviously not what you're looking for. (and they have other problems as well when held long-term) But you're a 24-year-old talking about your retirement funds, you should have a much longer time horizon, at least 30 years. Over a period that long, stocks have never had negative real (inflation-adjusted) returns, dating back at least to the civil war. If you look at the charts here or here, you can see that despite the risk in any individual year, as the period grows longer, the average return for the period gets tighter and tighter. If you look at the second graph here, you see that 2011 was the first time since the civil war that the trailing 30-year return on t-bills exceeded that for stocks, and 1981-2011 was period that saw bond yields drop almost continuously, leading to steady rise in bond prices. Although past performance is no guarantee of future results, everything we've seen historically suggests that the risk of a broad stock-market portfolio held for 30 years is not that large, and it should make up the bulk of your holdings. For example, Vanguard's Target retirement 2055 fund is 90% in stocks (US + international), and only 10% in bonds. |
Are real estate prices memory-less? | I would argue no. It's easy to correlate home prices based on size, neighborhood, school district, condition and other factors, such as property taxes. In fact, real estate people and government assessors use those characteristics to assess property value. The demographics of a home will drive desirability/demand for the property. Combine that with the cost and availability of capital, and house prices are relatively predictable. |
What would I miss out on by self insuring my car? | Here's what you do without, on the negative side, just for balance: A bill: When I last had comprehensive insurance, it cost something like 3-4% of the value of the car per annum. (Obviously ymmv enormously but I think that's somewhere near the middle of the range and I'm not especially risky.) So, compared to the total depreciation and running costs of the car, it's actually fairly substantial. Over the say 10 years I might keep that car, it adds up to a fair slice of what it will take to buy a replacement. Financial crisis costs: I don't know about you, but my insurance went up something like 30% in recent years, despite the value-insured and the risk going down, said by the insurer to be due to market turmoil. So, at least hundreds of dollars is just kind of frictional loss, and I'd rather not pay it. Wrangling with the insurer: if you have insurance and a loss, you have to persuade them to pay out, perhaps document the original conditions or the fault, perhaps argue about whether their payment is fair. I've done this for small (non-automotive) claims, and it added up to more hassle than the incident itself. Obviously all insurers will claim they're friendly to deal with but until you actually have a big claim you never know. Moral hazard: I know I'm solely responsible for not having my car crashed or stolen. Somehow that just feels better. Free riders: I've seen people "fudge" their insurance claims so that things that shouldn't have been covered were claimed to be. You might have too. Buy insurance and you're paying for them. Choice: Insurers are typically going to make the decision for you about whether a claim is repairable or not, and in my experience are reluctant or refuse to just give you the cash amount of the claim. (See also, moral hazard.) Do it yourself and you can choose whether to live with it, make a smaller or larger repair, or replace the whole vehicle with a second hand one or a brand new one, or indeed perhaps do without a vehicle. A distraction: Hopefully by the time you've been working for a while, a vehicle is not a really large fraction of your net worth. If you lose 10% of your net worth it's not really nice but - well, you could easily have lost that off the value of your house or your retirement portfolio in recent years. What you actually need to insure is genuinely serious risks that would seriously change your life if they were lost, such as your ability to work. For about the same cost as insuring a $x car, you can insure against $x income every year for the rest of your life, and I think it's far more important. If I have a write-off accident but walk away I'll be perfectly happy. And, obviously, liability insurance is important, because being hit for $millions of liabilities could also have a serious impact. Coverage for mechanical failures: If your 8yo car needs a new transmission, insurance isn't going to help, yet it may cost more than the typical minor collision. Save the money yourself and you can manage those costs out of the same bucket. Flexibility: If you save up to replace your car, but some other crisis occurs, you can choose to put the money towards that. If you have car insurance but you have a family medical thing it's no help. I think the bottom line is: insure against costs you couldn't cope with by yourself. There are people who need a car but can just barely afford it, but if you're fortunate enough not to be in that case you don't really need comprehensive insurance. |
How to hedge a long stock position that does not have options | You could always maintain a limit order to sell at a price you're comfortable with. |
When are equal-weighted index funds / ETFs preferable to market-cap-weighted funds? | As Dheer pointed out, the top ten mega-cap corporations account for a huge part (20%) of your "S&P 500" portfolio when weighted proportionally. This is one of the reasons why I have personally avoided the index-fund/etf craze -- I don't really need another mechanism to buy ExxonMobil, IBM and Wal-Mart on my behalf. I like the equal-weight concept -- if I'm investing in a broad sector (Large Cap companies), I want diversification across the entire sector and avoid concentration. The downside to this approach is that there will be more portfolio turnover (and expense), since you're holding more shares of the lower tranches of the index where companies are more apt to churn. (ie. #500 on the index gets replaced by an up and comer). So you're likely to have a higher expense ratio, which matters to many folks. |
Is it easier for brokers to find shares to short in premarket? | The shares available to short are a portion of those shares held by the longs. This number is actually much easier to determine outside of active trading hours, but either way doesn't really impact the matter at hand since computers are pretty good at counting things. If your broker is putting up obstacles to your issuing sell short limit orders in the pre-market then there is likely some other reason (maybe they reserve that function to "premium" account holders?) |
How much more than my mortgage should I charge for rent? | first, let me reiterate what everyone else is saying about rental rates having nothing to do with your expenses. you should charge market rates. slightly higher if you want better tenants and slightly lower if you want to avoid prolonged vacancy. you can determine market rates by finding similar properties in your area and seeing what they are asking for rent. you will need to adjust for location, square footage, number of bathrooms, etc. now that that is out of the way, here is a quick checklist of expenses that you will need to calculate and/or estimate for your specific property in order to decide if you should rent or sell: if you add up all of the above expenses and it's more than the market rates for rent, you should sell. if the above expenses are below the market rates, then you need to consider if the profit margin is enough to justify the hassle and the risk. |
Best way to start investing, for a young person just starting their career? | First I'd like to echo msemack's answer. Start by maxing out your 401K and IRA contributions. Not a lot of people just starting their career have the luxury of doing much more outside of that. Here are some additional tips that I learned when I was just getting started: |
What are some pre-tax programs similar to FSA that I can take advantage of? | There is a dependent care spending account for child care related expenses. Also Medical and Dental expenses over a certain % of your income maybe deductible on your tax return. |
Risk and reward of a synthetic option position | But if underlying goes to 103 at expiration, both the call and the put expire worthless If the stock closes at 103 on expiration, the 105 put is worth $2, not worthless. |
A guy scammed me, but he gave me a bank account number & routing number. Can I use that to take out what he owes me? | As long as there is nothing more to this story you aren't sharing, you can expect those bills you paid to come back (you will have to pay them again later). You can be pretty certain that the name he gave you was fake, and that the bank account you paid your bills with was not his. I would not try to do anything at all with the information he gave you because first it is not his, and second your name is already tied to this bank account via your utility bills. In other words that would be illegal and you are already on the list of suspects. I would say that if you don't call the police they probably won't call you. The police often times do not even waste their time when somebody's light bill was paid with fraudulent financial information or whatever. I have actually seen similar situations play out a number of times and the police have never gotten involved. Disclaimer: I probably don't live where you live, and I'm not an attorney. But I do know what I am talking about so here's my advice (I know you didn't ask for advice but you probably might benefit from it). Let that money go, sometimes people get you. Take it as a lesson and move on. If you do end up having to have contact with the police and you don't already know, they will lie to you and try to trick you into acting in a way that is not in your self interest. But then you kind of look guilty if you won't even talk to them, and in this case you did not do anything illegal. So if I was you I would probably just think of where I might be incriminating myself by telling the truth, if there were any parts of my story that would raise any flags, and think of how I would smooth those out ahead of time. Also for your personal information you do not need to have a sophisticated understanding of computers to do anything you described, if you are familiar with operating a web browser you can do all types of stuff with Paypal. Most people that give off the vibe "criminal" are not going to be able to make any money conning people and would probably have given it up before they got to you. The information you have is not like the most valuable stuff ever but somebody that knew what they were doing could use it to take money out of your account, and if they had that and then could get a few other pieces they could really mess up your life. So that's part of why they say to be careful, any one piece is maybe not so valuable but if you are loose with everything you will probably have a shitty few weeks at some points in the future. "no aa" lol |
How does start-up equity end up paying off? | The details of how you can convert your 5% equity share to cash or stocks will be detailed in writing in the legal agreement you have already signed. If you do not have any signed written agreement, there is no 5%. Since 0% of anything is zero, you can expect to get $0 some time within the next few years. Lastly, if the person running the business, tells you that there is 5% equity for you, even though it is not in writing, that is extremely unlikely to be the case. This is because the Seller of the equity has no obligation whatsoever to pay you. In fact, they are obligated by their other agreements with actual shareholders not to dilute their equity without good cause. So, odds are, if your agreement is not in writing, not only will it not be honored, but it probably can't be honored. |
Is it a good investment for a foreigner to purchase a flat/apartment in China? | I think a greater problem would be the protection of your property right. China hasn't shown much respect for the property rights of its own citizens - moving people off subsistence farms in order to build high-rise apartments - so I'm not certain that a foreigner could expect much protection. A first consideration in any asset purchase should always be consideration of the strength of local property law. By all accounts, China fails. |
How much time would I have to spend trading to turn a profit? | I suppose it depends on your goals and expectations, but I'd argue its not easy. Regardless of the chosen sub discipline of trading or investing you pursue there will be some theoretical and research work to do, some learning of the mechanics of the market, and some 'ropes' to learn upfront. After that the time frame you are working in, the complexity and time requirements of your methodology dictate how much time you need. I personally spend enough time on it to be considered equivalent to a part time job, but I enjoy continually learning and researching. If I weren't constantly trying to improve and research I would say the mechanics might take a half hour a day. However, I would gladly do it full time if I were able. I believe that is important, if you simply want to make lots of money but hate the process you will likely fail. As mentioned earlier if you are new to this the majority of your time will be spent initially learning whats out there, trying various things out, and finding what works for you. There are a lot of different ways to approach the market and a number of markets to approach. For me it took two years to find my niche and become profitable. Learn to loose small and keep your itchy fingers in check during that learning curve. |
How do I adjust to a new social class? | And specifically regarding prices of housing, what factors drive prices in that regard? I mean, the houses are roughly the same... but almost 3 times as expensive. Rent, like so many things, is tied to supply and demand. On the demand side, rent is tied to income. People tend to buy as much house as they can afford, given that mortgage interest is deductible and public schools, financed through property tax, performs better in valuable neighborhoods. Raise the minimum wage and economists expect rents to go up accordingly. When employers and pensions offer COLA adjustments, it feeds into a price loop. During the past ten years, there was also some "animal spirits" / irrational behavior present; people feared that if they didn't buy now, home prices would outpace their growth in income. So even though it didn't make sense at the time, they bought because it would make even less sense later (if you assume prices only go up). There's also the whole California has nicer weather angle to explain why people move to SF or LA. On the supply side, it's all about housing stock. In your old town, you could find vacant lots or farmland in less than 5 minute's drive from anywhere. There's far less room for growth in say, the SF Bay area or NYC. There's also building codes that restrict the growth in housing stock. I'm told Boulder, CO is one such place. You would think that high prices would discourage people from moving or working there, but between the university and the defense contractors triangle, they seem to have an iron grip on the market. (Have you ever seen a cartoon where a character gets a huge bill at a restaurant, and their eyes shoot out of their eye sockets and they faint? Yeah... that's how I felt looking at some of the places around here...) Remember, restaurants have to cover the same rent problem you do. And they have higher minimum wages, and taxes, etc. Moreover, food has to be imported from miles away to feed the city, likely even from out of state. In California, there's also food regulations that in effect raise the prices. If people are footing those higher bills, I wouldn't be surprised if they're racking up debt in the process, and dodging the collectors calling about their Lexus, or taking out home equity loans to cover their lifestyle. |
Should we prepay our private student loans, given our particular profile? | Don't frett to much about your retirement savings just put something towards it each year. You could be dead in ten years. You should always try to clear out debt when you can. But don't wipe yourself out! Expedite the repayment process. |
What are the risks & rewards of being a self-employed independent contractor / consultant vs. being a permanent employee? | In the current economy there is no upside to working for yourself. Get in a salaried position as soon as you can, and sacrifice to whatever gods you worship that you don't get made redundant. If you're already working for yourself, and wouldn't give it up for anything, hire someone, and get them off the street. |
After Market Price change, how can I get it at that price? | Buying stocks is like an auction. Put in the price you want to pay and see if someone is willing to sell at that price. Thing to remember about after hours trading; There is a lot less supply so there's always a larger bid/ask price spread. That's the price brokers charge to handle the stocks they broker over and above the fee. That means you will always pay more after the market closes. Unless it is bad news, but I don't think you want to buy when that happens. I think a lot of the after market trading is to manipulate the market. Traders drive up the price overnight with small purchases then sell their large holdings when the market opens. |
Is 6% too high to trade stocks on margin? | Yes, 6% is a waste of money, because some other brokers such as IB offer margin rates below 2%. Also, to borrow money for even less than any broker's margin interest rate, one can do an EFP transaction. This involves simultaneously shorting a stock and buying the SSF for the same stock. When the futures contract expires, you take delivery of the underlying stock to automatically close out your short position. Until then, you've effectively borrowed cash for the cost of borrowing the stock, which is typically less than 0.5% interest for widely traded ones. You also pay for the slight difference in price between the stock and the future, which is typically equivalent to another 0.5% interest or less. The total often comes to less than 1% interest. The only risk with this transaction is that the stock could become hard to borrow at some point, so then you would have to pay higher interest on it temporarily or maybe even have to close out your short early. But it is extremely rare for large, high-volume stocks to become hard-to-borrow. The borrowing cost of SPY has spiked above 5% on only a handful of days in the last decade. |
Overpaid Rent Owed By Real Estate | Have you tried complaining to the Real Estate Institute in your state, and if that doesn't work try taking them to Fair Trading. I know from doing some work for real estates that getting money from them is like getting blood from a stone, but you just need to keep bugging them, talk to the manager or director, and tell them you have been waiting too long for your money, give them a deadline (not more than 3 business days) and tell them if you have not received the money by then you will make a complaint to the Real Estate Institute and take them to Fair Trading. Sometimes you have to go to the person who owns/ runs the business as the workers usually don't care, especially when it is extra work for them and they get no reward for doing it (plus the longer the Real Estate don't pay you the longer they earn interest on your money). |
Do financial advisors get better deals on mortgages? | Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search for a good advisor rather than a cheap one. And regarding the mortgage you are talking about, the mortgage provider and the mortgage taker don't deal directly, but use their solicitors. Every party wants the least of legal hassles for their transactions and get the best legal help. The financial advisor maybe both rolled into one or he has legal practitioners in his firm who would do the legal job after he takes care of the financial matters. Seems a cost effective workshop. |
Is there data and proof that a diversified portfolio can generate higher returns than the S&P 500 Index? | While it's definitely possible (and likely?) that a diversified portfolio generates higher returns than the S&P 500, that's not the main reason why you diversify. Diversification reduces risk. Modern portfolio theory suggests that you should maximize return while reducing risk, instead of blindly chasing the highest returns. Think about it this way--say the average return is 11% for large cap US stocks (the S&P 500), and it's 10% for a diversified portfolio (say, 6-8 asset classes). The large cap only portfolio has a 10% chance of losing 30% in a given year, while the diversified portfolio has a 1% chance of losing 30% in a year. For the vast majority of investors, it's worth the 1% annual gap in expected return to greatly reduce their risk exposure. Of course, I just made those numbers up. Read what finance professors have written for the "data and proof". But modern portfolio theory is believed by a lot of investors and other finance experts. There are a ton of studies (and therefore data) on MPT--including many that contradict it. |
Why do consultants or contractors make more money than employees? | The "more money" aspect is only true if you ignore the lack of symmetry between employment and contracting. Consulting is another story altogether. Companies are willing to pay consultants for a number of reasons but the most important is deniability. If a decision is recommended and goes wrong then the consultants can be sued. Liability cover is expensive. Cynicism aside, it often isn't cost-effective to keep specialists permanently on the payroll for tasks that are performed once a year. Recently I've noticed that the nature of consulting is changing. Companies are starting to assemble brains-trusts of internal consultants who can create and manage projects while outsourcing only the labour-intensive data-collection roles. Expect this to have a big impact on the management consulting industry. |
Investing for Dummys | Books are a great place to start, Jason Kelly's The Neatest Little Guide to Stock Market Investing will give you a broad foundation of the stock & bond market. |
Homeowners: How can you protect yourself from a financial worst-case scenario? | Think about your priorities in life. Everybody is a little different. In my case I have a wife and child, so these are priorities for me, and you might have your own depending on your story. So if I lost my job, and I have no more money coming in (unemployment insurance runs out, savings depleted) then the bank can have the house. I personally would probably drop the house long before it came to that point. The first thing you do is talk to your creditors and work out a deal. At the same time I would stop paying for ALL unnecessary things (cable TV, extra cell phones, automobiles, leaving light bulbs on and turning the heat up over putting on a sweater). If I can't get a good deal from the creditors, I would stop paying the mortgage, find a place to live (family, friends, cheap apartment) while the credit is still good. My advice is to get yourself setup while your credit is good and you have SOME money in the bank. Waiting until the bank decides to foreclose is probably going to make your harder. |
What are some time tested passive income streams? | Last year was a great opportunity for dividend stocks and MLPs. I have a few which are earning 6-9% of my investment basis cost. Municipal bonds are a good value now. If you have the connections, passive investments in convenience franchises or other commercial property are a good income stream. A Dunkin Donuts used to be an amazing money printing machine. |
Any Loop Holes for Owner Occupancy? | There are 2 and 3 family houses that have an "owner occupied" clause for certain financing. Of course, one would rent out the extra apartments without question. The key thing is that owner-occupied means just that, occupancy for tax purposes. Just using a small area like an office won't satisfy the requirement, so no, this isn't legal. |
Cannot get a mortgage because I work through a recruiter | They are looking at your work history to see that you have maintained a similar level of income for a period of time, and that you have a reasonable expectation to continue that for the foreseeable future. They are looking to make a commitment for 15-30 years. They see the short term contract, and have no confidence in making a guess to your ability to pay. Before the real estate bubble burst, you would have had a chance with a no documentation loan. These were setup for people who earned fluctuating incomes, mostly due to being commissioned based. They were easily abused, and lenders have gotten away from them becasue they were burned too often. Just like building your credit rating over time, and your down payment over time, you might have to wait to build a work history. |
Explain: “3% annual cost of renting is less than the 9% annual cost of owning” | The 3% and 9% figures are based on the cost of borrowing money and all the other ownership costs associated with real estate. From the same article: http://patrick.net/housing/crash1.html Because it's usually still much cheaper to rent than to own the same size and quality house, in the same school district. In rich neighborhoods, annual rents are typically only 3% of purchase price while mortgage rates are 4% with fees, so it costs more to borrow the money as it does to borrow the house. Renters win and owners lose! Worse, total owner costs including taxes, maintenance, and insurance come to about 8% of purchase price, which is more than twice the cost of renting and wipes out any income tax benefit. Imagine you are renting a house. If the cost of your annual rent is lower than X then renting is obviously the best idea from a monetary calculation. If rent is greater than Y being a landlord makes more sense. In the middle it is debatable, and the non-monetary reasons need to be considered. |
Formula that predicts whether one is better off investing or paying down debt | Although I don't think you need to factor in risk tolerance to get the probabilities, I agree with JoeTaxpayer that you will need to factor in risk tolerance in order to make a practical decision about what to do. In fact, I think that to make a practical decision you will need more than the specific probability you ask for you in the question; rather, you would like to see the complete probability distribution of possible outcomes. In other words, it's not enough to know that there is a 51% chance that investing will outperform paying down debt. You actually need to know much it outperforms when it does outperform, and how much it underperforms when it underperforms. As JoeTaxpayer's comment suggests, you might not choose to make an investment that had a 99% chance of outperforming debt payment by 1%, and a 1% chance of underperforming by 99%. I think it possible to address these questions by doing simulations. This can be done even with a spreadsheet, but more flexibly with simple programming. Essentially you can create some kind of probabilistic model of the various factors (e.g., chance that your investment will go up or down) and see what actually happens: how often you lose a lot of money, lose a little money, gain a little money, or gain a lot of money. Then based on that you can consult your inner spirit animal to decide whether the probability distribution of possible gains outweighs that of possible losses. |
What is S/P in “Tax Deduction S/P”? | From reading the manual, SP means summary punching. Summary punching is the automatic preparation of one total card to replace a group of detail cards. |
Some stock's prices don't fluctuate widely - Is it an advantages? | What is your investment goal? Many investors buy for the long haul, not short-term gain. If you're looking for long-term gain then daily fluctuations should be of no concern to you. If you want to day-trade and time the market (buy low and sell high with a short holding period) then yes less volatile stock can be less profitable, but they also carry less risk. In that case, though, transaction fees have more of an impact, and you usually have to trade in larger quantities to reduce the impact of transaction fees. |
Why would anyone want to pay off their debts in a way other than “highest interest” first? | I recently paid off a line of credit on an investment property that I own. I had some surplus cash and decided to pay off the line of credit rather than to make a principal payment on the primary mortgage with a higher interest rate. The interest rate on the line of credit was tiny and the balance was also pretty low. My reasoning was that by paying off the line of credit I would be done with that account and would have one less bill to pay each month, one less risk of something going wrong and a late payment hurting my credit, one less statement to reconcile each month, and one less bookkeeping core to manage. I could have grown my net worth by few couple of dollars each month had I kept the line of credit and made a principal payment on the primary loan. I judged that it wasn't worth the hassle and risks. |
What are the consequences of not respecting a notice period when leaving a job? | It depends on your employer. They may not care to pursue matters if you don't give enough notice. They might be happy to see you go. Or they might be really sad to see you go, but not feel like they need to punish you. Or they might be really angry to see you go, and decide that they want to punish you to the full extent of the law just out of spite. Essentially, we can't tell you that, because different employers will behave differently. My advice? Be a mensch. Give the old employer as much notice as humanly possible so that they can find, hire, and train your replacement. Leave on as good terms as possible. Don't burn bridges. Chances are your new job can wait for another week or two. |
Currently sole owner of a property. My girlfriend is looking to move in with me and is offering to pay 'rent'. Am I at risk here? | If you are living together 'casually' (no formal partnership agreement) then my option would be to ask her politely to as she has offered make a contribution by buying the groceries or some such which you share. A 'voluntary contribution' not an enforceable one. Just as between flat mates where only one is the actual tenant of the flat but the tenancy allows 'sharing' . Check your tenancy allows you to share lodgings. PS An old Scots saying is "never do business with close family". I.e do not charge your wife or living in partner rent. It mixes emotional domestic life with a formal business life which can set feuds going in case of a break up or dispute. If you enter into child bearing relationship or parent hood or formal partnership or marriage then all this changes at some time in the future. |
Why do grocery stores in the U.S. offer cash back so eagerly? | Cash-back also lets the store turn hard currency into an electronic transfer or check, which reduces the hassle/risk of hauling bagfulls of cash to the bank. (The smaller stores I've spoken to have called this out as a major advantage of plastic over either cash or checks. I'm assuming that the problem scales with number and size of transactions.) |
Investment Options for 14-year old? | A fourteen-year-old can invest a few thousand into commuting to a part-time job or an education. If you can wait five years for a couple hundred you can wait two to four years for a car (or gas money) or a class (or some textbooks.) |
Oversimplify it for me: the correct order of investing | I am a firm believer in the idea of limiting debt as much as possible. I would not recommend borrowing money for anything other than a reasonably sized mortgage. As a result, my recommendations are going to be geared toward that goal. The top priorities for me, then, would be to make sure, first, that we don't have to go further into debt, and second, that we eliminate the debt that we already have as soon as possible. Here is how I would rate your list: A small emergency fund, perhaps $1000 USD, is going to ensure that, while you are funding other things, you don't end up so cash poor that, if something unexpected and urgent comes up, you are forced to add to your credit card debt. Make this small fund your top priority, and it shouldn't take much more than a month or two to do it. Getting out of debt is important, but if your employer hands out free money, you have to take it. It is just too good of a deal. Get rid of this debt as fast as possible. When you are done, you'll have more income available to you than you've ever had before. Now that you have just gotten done eliminating your debt as fast as possible, don't stop there. Take the income you had been throwing at your debt, and build up your emergency fund to a few months' worth of your expenses. Finishing this fund up will enable you to withstand a small crisis without borrowing anything. You are now in a very strong position financially, and can confidently invest. Deciding which type of retirement account is best for you depends on the details of your situation. Once you are contributing a healthy amount to your retirement funds, you may want to consider paying off your mortgage early. As I said before, I recommend getting down to the last step as quickly as possible. Depending on how much debt you actually have, if you sacrifice for a year or two you could be debt free and in a position to keep all of your investment gains. If you take your time paying off debt, like many people do, you could find yourself 10 years from now still making payments on your loans, still making car payments, and still needlessly sending interest to the banks, eating away at the gains you are making in your investments. If you aren't committed to eliminating your debt quickly, and plan on having payments for a long time, then skip this advice and put retirement savings at the top. |
If I were to get into a life situation where I would not be able to make regular payments, do lenders typically provide options other than default? | Some lenders will work with you if you contact them early and openly discuss your situation. They are not required to do so. The larger and more corporate the lender, the less likely you'll find one that will work with you. My experience is that your success in working out repayment plan for missed payments depends on the duration of your reduced income. If this is a period of unemployment and you will be able to pay again in a number of months, you may be able to work out a plan on some debts. If you're permanently unable to pay in full, or the duration is too long, you may have to file bankruptcy to save your domicile and transportation. The ethics of this go beyond this forum, as do the specifics of when it is advisable to file bankruptcy. Research your area, find debt counselling. They can really help with specifics. Speak with your lenders, they may be able to refer you to local non-profit services. Be sure that you find one of those, not one of the predatory lenders posing as credit counselling services. There's even some that take the money you can afford to pay, divide it up over your creditors, allowing you to keep accruing late/partial payment fees, and charge you a fee on top of it. To me this is fraudulent and should be cause for criminal charges. The key is open communication with your lenders with disclosure to the level that they need to know. If you're disabled, long term, they need to know that. They do not need to know the specific symptoms or causes or discomforts. They need to know whether the Social Security Administration has declared you disabled and are paying you a disability check. (If this is the case, you probably have a case worker who can find you resources to help negotiate with your creditors). |
First Job, should I save or invest? | Congrats on your first real job! Save as much as your can while keeping yourself (relatively) comfortable. As to where to put your hard earned money, first establish why you want to save the money in the first place. Money is a mean to acquire the things we want or need in your life or the lives of others. Once your goals are set, then follow this order: |
The Benefits/Disadvantages of using a credit card | If you can use and pay off your credit card in full every month, there are plenty of benefits including improved credit, reward points and more. Many fall into the trap of just making the minimum payments and facing high interest charges or missing payments and getting a hit on their credit reports. To start off, put something small that you know you can pay off every month. It could be your Netflix or your gas. Make sure you pay it off before any interest is accrued. Over time, you can ask for higher limits to boost your utilization rate. |
Why don't boards of directors try to produce results in line with estimates? | First off, some companies do something like this. Microsoft for example was well-known for consistently hitting earnings estimates every quarter - nearly never missed them, and most of the time didn't exceed by much either. In order to do this and not be prosecuted for accounting fraud, you typically have to be a service or nontangible good company (like Microsoft used to be) where you can manipulate the amount of product on hand and move costs fairly easily from one quarter to the next. A company like, say, Home Depot or Caterpillar - both of which have tangible goods they're either retailing or producing - has less flexibility there, although they will still try to move profits around to match earnings estimates more closely. However, you have to be consistently doing well to be able to do this. You can't manufacture additional total revenue; so if you have one 'down' quarter, you have to either have moved some revenue into it from the previous quarter, or you have to be able to move some into it from the next quarter. That obviously doesn't work consistently unless you're a fast-growing company, or have an extremely stable base. It's also hard to do this in a legal-seeming fashion - technically this sort of manipulation is illegal, so decisions have to be justifiable. Companies (like Microsoft) that are expanding can also do things to encourage slightly lower expectations. A company in need of a stock price bump issues press releases touting its inventions and products as amazing things that will drive profits through the roof and an aggressive profit forecast - just as easy to issue a press release with a conservative forecast, meaning the bar will be lower to hit. It's also not really necessary to manipulate earnings to have a consistently well-performing stock. This article for example shows that companies who miss earnings estimates don't really suffer much (when controlling for their actual earnings changes, of course) in the long run. Your price might drop a bit, but if your company is otherwise sound, it will recover. Finally, companies do sometimes come out with information ahead of earnings that cause expectations to be lowered. 7-Eleven for example just lowered its earnings expectations due to various reasons. Some companies choose to do this in order to dilute the effect on the market. I'm not sure if this is ever required, but it seems to me that some companies are much quicker to restate earnings expectations than others. |
Tax deductions on car and/or home? | If you itemize your deductions then the interest that you pay on your primary residence is tax deductible. Also realestate tax is also deductible. Both go on Schedule A. The car payment is not tax deductible. You will want to be careful about claiming business deduction for home or car. The IRS has very strict rules and if you have any personal use you can disqualify the deduction. For the car you often need to use the mileage reimbursement rates. If you use the car exclusively for work, then a lease may make more sense as you can expense the lease payment whereas with the car you need to follow the depreciation schedule. If you are looking to claim business expense of car or home, it would be a very good idea to get professional tax advice to ensure that you do not run afoul of the IRS. |
Working out if I should be registered as self-employed in the UK | Being self employed just means you fill out some more forms in your annual self assessment for your "profit" from being self employed. Profit = all the money you receive, minus any tax deductible cost that you spent for making that money (and all the cost must be documented, which means you have a folder with all the receipts and keep it safe). You pay normal income tax on all the profit, which means it is just added to your taxable income. What you do with the profit is up to you; you don't pay yourself a salary, just take the money (make sure you leave enough to pay your taxes). |
Credit History and Outstanding Debts in Hungary | It appears all you have to do is submit a form. It might be better if she submitted it herself instead of you doing it on her behalf. All natural persons (individuals) and non-natural persons (businesses) are entitled to access and inspect the data held on record about them in the Central Credit Information System (KHR). |
In a competitive market, why is movie theater popcorn expensive? | In the theater, it's a person who can afford to buy expensive pop corn, cause he can buy the expensive movie ticket too... Also sitting at one place will make him feel hungry and buy something to eat... So maximum chances are that in the theater, that guy is your potential customer... Otherwise if the popcorn seller is somewhere outside the theater, they may charge you less. That's because of a different target audience... They would be targeting anyone who comes near the theater, who would not be willing to pay for expensive snacks or movie tickets... So very few customers around will be actually potential customers... To maximize their profits, they will keep the prices low and supply as much as they can... I know this is going against the normal Price Elasticity of Demand and Supply graph, but if the prices are low there will be high demand, so if the PED is more than 1, the supplier should supply as much as they can, to maximize profits... Its all based on the target audience... That's what I think should be the case of expensive popcorn in movie theaters... |
How to bet against the London housing market? | While I am not an advocate of shorting anything (unlimited downside, capped upside), you can: |
Most common types of financial scams an individual investor should beware of? | If an offer "is only valid right now" and "if you don't act immediately, it will expire" that is almost always a scam. |
I'm thinking about selling some original artwork: when does the government start caring about sales tax and income tax and such? | First - get a professional tax consultation with a NY-licensed CPA or EA. At what point do I need to worry about collecting sales taxes for the city and state of New York? Generally, from the beginning. See here for more information on NYS sales tax. At what point do I need to worry about record-keeping to report the income on my own taxes? From the beginning. Even before that, since you need the records to calculate the costs of production and expenses. I suggest starting recording everything, as soon as possible. What sort of business structures should I research if I want to formalize this as less of a hobby and more of a business? You don't have to have a business structure, you can do it as a sole proprietor. If you're doing it for-profit - I suggest treating it as a business, and reporting it on your taxes as a business (Schedule C), so that you could deduct the initial losses. But the tax authorities don't like business that keep losing money, so if you're not expecting any profit in the next 3-4 years - keep it reported as a hobby (Misc income). Talk to a licensed tax professional about the differences in tax treatment and reporting. You will still be taxed on your income, and will still be liable for sales tax, whether you treat it as a hobby or as a business. Official business (for-profit activity) will require additional licenses and fees, hobby (not-for-profit activity) might not. Check with the local authorities (city/county/State). |
Formula that predicts whether one is better off investing or paying down debt | you should always invest if your investment rate of return is higher than your interest rate Your next line, about standard deviation is dead on. There are too many variables to give an exact answer here, in my opinion. The main reason is that one variable isn't easy to quantify - One's risk tolerance. Clearly, there's one extreme, the 18% credit card. Unless you are funding loanshark type rates of 2%/week, it's safe to say that 18% debt should take priority over any investments, except for the matched 401(k) deposits. What I think you're talking about is something we've addressed here in multiple threads. Do I prepay my sub 4% mortgage or invest? In this case, (and to Noah's comment) the question is whether you can expect a post-tax return of over 3% during your time horizon. I look at the return for 15 years from 1998-2013 and see a 6% CAGR for the S&P. I chose 15 years, as the choice is often one of paying a 30 year mortgage faster, as fast as 15. The last 15 years offer a pretty bad scenario, 2 crashes and a mortgage crisis. 6% after long term gains would get you 5.1% net. You can pull the data back to 1871 and run CAGR numbers for the timeframe of your choosing. I haven't done it yet, but I imagine there's no 15 year span that lags the 3% target I cite. What makes it more complex is that the investment isn't lump sum. It may not be obvious, but CAGR is a dollar invested at T=0, and returns calculated to T=final year. It would take a bit of spreadsheeting to invest the extra funds every month/year over your period of analysis. In the end, there are still those who will choose to pay off their 4% mortgage regardless of what the numbers show. Even if the 15 year result showed worst case 3.5% (almost no profit) and an average 10%, the feeling of risk is more than many will want. |
Reporting financial gains from my online store | As a new (very!) small business, the IRS has lots of advice and information for you. Start at https://www.irs.gov/businesses/small-businesses-self-employed and be sure you have several pots of coffee or other appropriate aid against somnolence. By default a single-member LLC is 'disregarded' for tax purposes (at least for Federal, and generally states follow Federal although I don't know Mass. specifically), although it does have other effects. If you go this route you simply include the business income and expenses on Schedule C as part of your individual return on 1040, and the net SE income is included along with your other income (if any) in computing your tax. TurboTax or similar software should handle this for you, although you may need a premium version that costs a little more. You can 'elect' to have the LLC taxed as a corporation by filing form 8832, see https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc . In principle you are supposed to do this when the entity is 'formed', but in practice AIUI if you do it by the end of the year they won't care at all, and if you do it after the end of the year but before or with your first affected return you qualify for automatic 'relief'. However, deciding how to divide the business income/profits into 'reasonable pay' to yourself versus 'dividends' is more complicated, and filling out corporation tax returns in addition to your individual return (which is still required) is more work, in addition to the work and cost of filing and reporting the LLC itself to your state of choice. Unless/until you make something like $50k-100k a year this probably isn't worth it. 1099 Reporting. Stripe qualifies as a 'payment network' and under a recent law payment networks must annually report to IRS (and copy to you) on form 1099-K if your account exceeds certain thresholds; see https://support.stripe.com/questions/will-i-receive-a-1099-k-and-what-do-i-do-with-it . Note you are still legally required to report and pay tax on your SE income even if you aren't covered by 1099-K (or other) reporting. Self-employment tax. As a self-employed person (if the LLC is disregarded) you have to pay 'SE' tax that is effectively equivalent to the 'FICA' taxes that would be paid by your employer and you as an employee combined. This is 12.4% for Social Security unless/until your total earned income exceeds a cap (for 2017 $127,200, adjusted yearly for inflation), and 2.9% for Medicare with no limit (plus 'Additional Medicare' tax if you exceed a higher threshold and it isn't 'repealed and replaced'). If the LLC elects corporation status it has to pay you reasonable wages for your services, and withhold+pay FICA on those wages like any other employer. Estimated payments. You are required to pay most of your individual income tax, and SE tax if applicable, during the year (generally 90% of your tax or your tax minus $1,000 whichever is less). Most wage-earners don't notice this because it happens automatically through payroll withholding, but as self-employed you are responsible for making sufficient and timely estimated payments, and will owe a penalty if you don't. However, since this is your first year you may have a 'safe harbor'; if you also have income from an employer (reported on W-2, with withholding) and that withholding is sufficent to pay last year's tax, then you are exempt from the 'underpayment' penalty for this year. If you elect corporation status then the corporation (which is really just you) must always make timely payments of withheld amounts, according to one of several different schedules that may apply depending on the amounts; I believe it also must make estimated payments for its own liability, if any, but I'm not familiar with that part. |
If I have no exemptions or deductions, just a simple paycheck, do I HAVE to file taxes? | If you took advantage of options like a home buyers plan (HBP) you definitely need to file since you must designate how much of the plan to repay. Your employer does not know about what you do with your money so cannot take this into account for the withheld taxes. If you do not report repayment of the HBP it will be treated as a withdrawal from your RRSP i.e. additional income for that tax year. |
What exactly do fund managers of index trackers do? | From How are indexes weighted?: Market-capitalization weighted indexes (or market cap- or cap-weighted indexes) weight their securities by market value as measured by capitalization: that is, current security price * outstanding shares. The vast majority of equity indexes today are cap-weighted, including the S&P 500 and the FTSE 100. In a cap-weighted index, changes in the market value of larger securities move the index’s overall trajectory more than those of smaller ones. If the fund you are referencing is an ETF then there may be some work to do to figure out what underlying securities to use when handling Creation and Redemption units as an ETF will generally have shares created in 50,000 shares at a time through Authorized Participants. If the fund you are referencing is an open-end fund then there is still cash flows to manage in the fund as the fund has create and redeem shares in on a daily basis. Note in both cases that there can be updates to an index such as quarterly rebalancing of outstanding share counts, changes in members because of mergers, acquisitions or spin-offs and possibly a few other factors. How to Beat the Benchmark has a piece that may also be useful here for those indices with many members from 1998: As you can see, its TE is also persistently positive, but if anything seems to be declining over time. In fact, the average net TE for the whole period is +0.155% per month, or an astounding +1.88% pa net after expenses. The fund expense ratio is 0.61% annually, for a whopping before expense TE of +2.5% annually. This is once again highly statistically significant, with p values of 0.015 after expenses and 0.0022 before expenses. (The SD of the TE is higher for DFSCX than for NAESX, lowering its degree of statistical significance.) It is remarkable enough for any fund to beat its benchmark by 2.5% annually over 17 years, but it is downright eerie to see this done by an index fund. To complete the picture, since 1992 the Vanguard Extended Index Fund has beaten its benchmark (the Wilshire 4500) by 0.56% per year after expenses (0.81% net of expenses), and even the Vanguard Index Trust 500 has beaten its benchmark by a razor thin 0.08% annually before (but not after) expenses in the same period. So what is going on here? A hint is found in DFA's 1996 Reference Guide: The 9-10 Portfolio captures the return behavior of U.S. small company stocks as identified by Rolf Banz and other academic researchers. Dimensional employs a "patient buyer" discount block trading strategy which has resulted in negative total trading costs, despite the poor liquidity of small company stocks. Beginning in 1982, Ibbotson Associates of Chicago has used the 9-10 Portfolio results to calculate the performance of small company stocks for their Stocks, Bonds, Bills, and Inflation yearbook. A small cap index fund cannot possibly own all of the thousands of stocks in its benchmark; instead it owns a "representative sample." Further, these stocks are usually thinly traded, with wide bid/ask spreads. In essence what the folks at DFA learned was that they could tell the market makers in these stocks, "Look old chaps, we don't have to own your stock, and unless you let us inside your spread, we'll pitch our tents elsewhere. Further, we're prepared to wait until a motivated seller wishes to unload a large block." In a sense, this gives the fund the luxury of picking and choosing stocks at prices more favorable than generally available. Hence, higher long term returns. It appears that Vanguard did not tumble onto this until a decade later, but tumble they did. To complete the picture, this strategy works best in the thinnest markets, so the excess returns are greatest in the smallest stocks, which is why the positive TE is greatest for the DFA 9-10 Fund, less in the Vanguard Small Cap Fund, less still in the Vanguard Index Extended Fund, and minuscule with the S&P500. There are some who say the biggest joke in the world of finance is the idea of value added active management. If so, then the punch line seems to be this: If you really want to beat the indexes, then you gotta buy an index fund. |
I'm 20 and starting to build up for my mortgage downpayment, where should I put my money for optimal growth? | The highest growth for an investment has historically been in stocks. Investing in mature companies that offer dividends is great for you since it is compound growth. Many oil and gas companies provide dividends. |
Upward Spike in US Treasuries despite S&P Downgrade in August 2011 | US government bonds are where money goes when the markets are turbulent and investors are fleeing from risk, and that applies even if the risk is a downgrade of the US credit rating, because there's simply nowhere else to put your money if you're in search of safety. Most AAA-rated governments have good credit ratings because they don't borrow much money (and most of them also have fairly small economies compared with the US), meaning that there's poor liquidity in their scarce bonds. |
Why would you ever turn down a raise in salary? | At least with US tax law where you only pay taxes at the higher rate for the income above the minimum for that tax bracket, you will always wind up ahead taking the raise if you are simply concerned with after tax (FICA) income. For example, assume you were making $8,350 (the top end of the 10% bracket in the US), and got a $100 raise, you would be taxed roughly as follows: After Tax Income Before Raise: $8,350 x (100% - 10%) After Tax Income After Raise: $8,350 x (100%-10%) + $100 x (100%-15%) You can easily see that the second number is always higher than the first as long as the raise is a positive amount (obviously). |
Free service for automatic email stock alert when target price is met? | Sure, Yahoo Finance does this for FREE. |
If I plan to buy a car in cash, should I let the dealer know? | Yes you tell them. I can say that I pay cash for all my cars and always get cars for lower than the TrueCar low-end. There are basically two steps: go test drive, negotiate fully, leave (unless you are given a mind-blowing offer). This may take you one to many dealerships. It depends on how well you know what car you want and how much a dealership will negotiate. you pick a night that another dealership that specifically has the car you want (or multiple - even better) is open and you go in 30-45 mins before they close. Paying cash is key for this to work. By the time you get to numbers they will be almost closed. Their finance guy might be gone so you will get your salesman and a manager. I will use my last car as an example. Toyota Highlander 2015 with MSRB 32,995. TrueCar at 29,795 with a good deal at 29,400. I simply talked to my sales guy said I would like to walk out with the car tonight. I have already talked to XYZ dealership and they offered me 28,500 - which is already below TrueCar low price. I asked for $27,900. Boom 10 minutes later car bought at 28,100. Cash is king. The sales guy and manager will bite the bullet on profit for ease of sale. Going in late is the key to using the cash. You don't have the finance guys jumping in and you have less people to move through. Also they know they have limited time to deal and if you walk off the lot there is less than 10% chance of you coming back - they want to close. They are making minimal profit but doing minimal work. With cash your sales guy is on your side because you are basically throwing him a couple hundred dollars at the end of a shift (where most would just be sitting around watching TV). Some other tips: be fair. If they would have said 28,300 is our lowest that we can go and that's it. I probably would have still got the car. Dealerships will tell you their lowest price if you are close and you are still below it. since they didn't show me their lowest price I didn't budge much but still budged a bit to show good sport. They brought their invoice number out to show that at 28,100 that they were going to lose $1500 on the car. I made the manager laugh because my response was to bring up KBB and show the used car price for the car, which was minus $2000. So I just said, "Well you lost $1500 but I lose $2000 driving this off the lot." I then went back to $27,850 to meet in the middle of "losing" money. This actually closed the deal. Anyway don't ever believe any piece of paper they show you with numbers. These dealerships get monthly bonuses on sales and that is a lot of their profit past selling your trade-in. If you actually value your money you would never be trading in a car to a dealer so if you are paying cash, sell your own car or at least take it to a place like CarMax which I don't endorse but better than dealer. |
What is the difference between a scrip dividend and a stock split? | Investopedia has a good definition. Stock dividends are similar to cash dividends; however, instead of cash, a company pays out stock. Stock splits occur when a company perceives that its stock price may be too high. Stock splits are usually done to increase the liquidity of the stock (more shares outstanding) and to make it more affordable for investors to buy regular lots (a regular lot = 100 shares). |
Should I pay off my 50K of student loans as quickly as possible, or steadily? Why? | Here's my thoughts on the subject: |
When is Cash Value Life Insurance a good or bad idea? | Buy term and invest the difference is certainly the standard recommendation, and for good reason. When you start looking at some sample numbers the "buy term and invest the difference" strategy starts to look very good. Here are the rates I found (27 yr old in Texas with good health, non-smoker, etc): $200k term life: $21/month $200k whole life: $177/month If you were to invest the difference in a retirement account for 40 years, assuming a 7% rate of return (many retirement planning estimates use 10%) you would have $411,859 at the end of that period. (If you use 10% that figure jumps to over $994k.) Needless to say, $400k in a retirement account is better than a $200k death benefit. Especially since you can't get the death benefit AND the cash value. Certainly one big difficulty is making sure you invest that difference. The best way to handle that is to set up a direct deposit that goes straight from your paycheck to the retirement account before it even touches your bank account. The next best thing would be an automatic transfer from your bank account. You may wonder 'What if I can no longer afford to invest that money?' First off, take a second and third look at your finances before you start eating into that. But if financial crisis comes and you truly can't afford to fund your own life insurance / retirement account then perhaps it will be a good thing you're not locked into a life insurance policy that forces you to pay those premiums. That extra freedom is another benefit of the "buy term and invest the difference" strategy. It is great that you are asking this question now while you are young. Because it is much easier to put this strategy into play now while you are young. As far as using a cash value policy to help diversify your portfolio: I am no expert in how to allocate long term investments after maxing out my IRA and 401k. (My IRA maxes out at $5k/year, another $5k for my wife's, another $16.5k for my 401k.) Before I maxed that out I would have my house paid for and kid's education saved for. And by then it would make sense to pay a financial adviser to help you manage all those investments. They would be the one to ask about using a cash value policy similar to @lux lux's description. I believe you should NEVER PUT YOUR MONEY INTO SOMETHING YOU DON'T UNDERSTAND. Cash value policies are complex and I don't fully understand them. I should add that of course my calculations are subject to the standard disclaimer that those investment returns aren't guaranteed. As with any financial decision you must be willing to accept some level of risk and the question is not whether to accept risk, but how much is acceptable. That's why I used 7% in my calculation instead of just 10%. I wanted to demonstrate that you could still beat out whole life if you wanted to reduce your risk and/or if the stock market performs poorly. |
What are some good, easy to use personal finance software? [UK] | Money Dashboard and Love Money look like two best options out there now that Kublax closed their doors. Mint were making noises last year about spreading to UK/Canada, but I've not heard anything new about that. |
What is the difference between equity and assets? | Equity does not represent production divisions in a company (i.e. chocolate, strawberry, and vanilla does not make sense). In Sole proprietorship, equity represents 1 owner. In Partnership, equity has at least two sub-accounts, namely Partner 1 and Partner 2. In Corporations, equity may have Common Stockholders and Preferred Stockholders, or even different class of shares for insiders and angel investors. As you can see, equity represents who owns the company. It is not what the company does or manufactures. First and foremost, define the boundary of the firm. Are your books titled "The books of the family of Doe", "The books of Mr & Mrs Doe", or "The books of Mr & Mrs Doe & Sons". Ask yourself, who "owns" this family. If you believe that a marriage is perpetual until further notice then it does not make any sense to constantly calculate which parent owns the family more. In partnership, firm profits are attributed to partner's accounts using previously agreed ratio. For example, (60%/40% because Partner 1 is more hard working and valuable to the firm. Does your child own this family? Does he/she have any rights to use the assets, to earn income from the assets, to transfer the assets to others, or to enforce private property rights? If they don't have a part of these rights, they are certainly NOT part of Equity. So what happens to the expenses of children if you follow the "partnership" model? There are two ways. The first way is to attribute the Loss to the parents/family since you do not expect the children to repay. It is an unrecoverable loss written off. The second way is to create a Debtor(Asset) account to aggregate all child expense, then create a separate book called "The books Children 1", and classify the expense in that separate book. I advise using "The family of Doe" as the firm's boundary, and having 1 Equity account to simplify everything. It is ultimately up to you to decide the boundaries. |
Can a CEO short his own company? | It seems also on some international markets this is allowed. http://www.businessinsider.com/li-hejun-shorting-hanergy-2015-5 |
Paying taxes on dividends even though your capital gains were $0? | In the US, and in most other countries, dividends are considered income when paid, and capital gains/losses are considered income/loss when realized. This is called, in accounting, "recognition". We recognize income when cash reaches our pocket, for tax purposes. So for dividends - it is when they're paid, and for gains - when you actually sell. Assuming the price of that fund never changes, you have this math do to when you sell: Of course, the capital loss/gain may change by the time you actually sell and realize it, but assuming the only price change is due to the dividends payout - it's a wash. |
How Technical Analysts react to non-market hours effects | You can't. Even as a technical trader you should know what events are coming up and be prepared. You can't prepare for everything but you should know when the earnings dates are. You should also pay attention to the market in general. Stocks also have personalities and you should get to know that personality. Most important thing in trading is deciding when to get out before buying and stick to it when it goes against you. It is also one of the hardest things to do. |
Is being a landlord a good idea? Is there a lot of risk? | Risk is the capital you have staked in pursuit of profit. The danger is that you lose what you have risked. For some bets (risks), you can get insurance to cover for losses. Now the "game" of Landlord and Tenant requires you to play fully by the rules set forth by your legislators. In your case, that is the legislators of the State of Texas. Without knowing those rules, you could be liable (open to civil prosecution) for violating those rules. Tenants could be savvy to those rules or savvy enough to hire someone, a lawyer, who knows those rules. As well, in the game of Landlord and Tenant, you must ascertain the creditworthiness of your would-be tenant. If the tenant fails to pay rent, that tenant can detain the residence. You will incur additional outlays to gain possession of your property (ownership in your rental). Now the game of Landlord vs Landlord is different. You can't pick up houses easily enough and even if you could, likely the expense of doing so could wipe out any would profits from having the house as a rental. So, in Landlord vs Landlord, you get constrained by where your rental sits. Thus you must forecast what will the neighborhood look like in five, ten, fifteen years. |
Is there a generally accepted term for fractions of Currency Units? | of course if you asked me to give you $24.4955 I can't. No, but if I asked you to give me $24.4955 and you gave me a piece of paper saying "I O U $24.4955", and then this happened repeatedly until I had collected 100 of these pieces of paper from you, then I could give them back to you in exchange for $2449.55 of currency. There's nothing magical about the fact that there doesn't happen to be a $0.001 coin in current circulation. This question has some further information. |
What happens to your ability to borrow money based on our joint finances? | Several factors are considered in loans as significant as a home mortgage. I believe the most major factors are 1) Credit report, 2) Income, and 3) Employment status If you borrow jointly, all joint factors are included, not just the favorable ones. Some wrinkles this can cause may include: Credit Report - The second person on the loan may have poor credit or no credit. This can/will hurt your rate or even prevent them from being listed on the loan at all, which will also mean you can't include their income. In addition, there are future consequences: that any late payments, default, foreclosure, etc. will be listed on all borrower's reports. If you both have solid work history, great credit, and want to jointly own the home, then there shouldn't be any negatives. If this is not the case, compare both cases (fully, not just rates, as some agents could sneakily say you can get the same rate either way but then not tell you closing costs in one scenario are higher), and pick the one that is best overall. This is just information from my recollection so make sure to verify and ask plenty of questions, don't go forward on assumptions. |
Which Benjamin Graham book should I read first: Security Analysis or Intelligent Investor? | If you're looking to learn more about investing for personal use (as opposed to academic interest), I'd recommend something like The Ages of the Investor instead. |
Mortgage refinancing | If you selected a mortgage that allows additional payments to be credited against the principal rather than as early payment of normal installments, them yes, doing so will reduce the actual cost of the loan. You may have to explicitly instruct the bank to use the money this way each time, if prepay is their default assumption. Check with your lender, and/or read the terms of your mortgage, to find out if this is allowed and how to do it. If your mortgage doesn't allow additional payments against the principal, you may want to consider refinancing into a mortgage which does, or into a mortgage with shorter term and higher monthly payments, to obtain the same lower cost (modulo closing costs on the new mortgage; run the numbers.) |
How does a bank make money on an interest free secured loan? | Generally speaking, an interest-free loan will be tied to a specific purchase, and the lender will be paid something by the vendor. The only other likely scenario is an introductory offer to try to win longer-term more profitable business, such as an initial interest-free period on a credit card. Banks couldn't make money if all their loans were interest-free, unless they were getting paid by the vendors of whatever was being purchased with the money that was lent. |
High credit utilization, some high interest - but credit score not overly bad. How to attack debt in this situation? | The bottom line is you have an income problem. Your car payment seems very high relative to your income and your income is very low relative to your debt. Can you work extra jobs or start a small business to get that income up? In the US it would be fairly easy to work some part time jobs to get that income up about 1000 per month. With that kind of difference you could have this all knocked out (except for the car) in about a year. Then, six months later you could be done with your car. Most of the credit repair places are ripoffs in the US and I suspect it is similar around the world. |
Return on asset (ROA) value for a stock is reported differently on Yahoo Finance and MarketWatch | Why there is this huge difference? I am not able to reconcile Yahoo's answer of 5.75%, even using their definition for ROA of: Return on Assets Formula: Earnings from Continuing Operations / Average Total Equity This ratio shows percentage of Returns to Total Assets of the company. This is a useful measure in analyzing how well a company uses its assets to produce earnings. I suspect the "Average Total Equity" in their formula is a typo, but using either measure I cannot come up with 5.75% for any 12-month period. I can, however, match MarketWatch's answer by looking at the 2016 fiscal year totals and using a "traditional" formula of Net Income / Average Total Assets: I'm NOT saying that MatketWatch is right and Yahoo is wrong - MW is using fiscal year totals while Yahoo is using trailing 12-month numbers, and Yahoo uses "Earnings from Continuing Operations", but even using that number (which Yahoo calculates) I am not able to reconcile the 5.75% they give. |
When the Reserve Bank determines the interest rates, do they take the house prices into account? | The Central Banks sets various rate for lending to Banks and Paying interest to Banks on excess funds. Apart from these the Central Banks also sets various other ratios that either create more liquidity or remove liquidity from Market. The CPI is just one input to the Central Bank to determine rate, is not the only deciding criteria. The CPI does not take into account the house price or the cost of renting in the basket of goods. One of the reasons could be that CPI contains basic essentials and also the fact that it should be easily mesurable over the period of time. For example Retail Price of a particular item is easily mesurable. The rent is not easily mesurable. |
Home sale: No right to terminate? | The most likely reason for this is that the relocation company wants to have a guaranteed sale so as to get a new mortgage in the new location. Understand that the relocation company generally works for a prospective employer. So they are trying to make the process as painless as possible for the homeowner (who is probably getting hired as a professional, either a manager or someone like an engineer or accountant). If the sale is guaranteed to go through regardless of any problems, then it is easy for them to arrange a new mortgage. In fact, they may bridge the gap by securing the initial financing and making the downpayment, then use the payout from the house you are buying to buy out their position. That puts them on the hook for a bunch of money (a downpayment on a house) while they're waiting on the house you're purchasing to close. This does not necessarily mean that there is anything wrong with the house. The relocation company would only know about something wrong if the owner had disclosed it. They don't really care about the house they're selling. Their job is to make the transition easy. With a relocation company, it is more likely that they are simply in a hurry and want to avoid a busted purchase. If this sale fails to go through for any reason, they have to start over. That could make the employment change fall through. This is a variation of a no contingencies sale. Sellers like no contingencies sales because they are easier. Buyers dislike them because their protections are weaker. But some buyers will offer them because they get better prices that way. In particular, house flippers will do this frequently so as to get the house for less money than they might otherwise pay. This is better than a pure no contingencies sale, as they are agreeing to the repairs. This is a reasonable excuse to not proceed with the transaction. If this makes you so uncomfortable that you'd rather continue looking, that's fine. However, it also gives you a bit of leverage, as it means that they are motivated to close this transaction quickly. You can consider any of the following: Or you can do some combination of those or something else entirely that makes you fell more secure. If you do decide to move forward with any version of this provision, get a real estate lawyer to draft the agreement. Also, insist on disclosure of any previous failed sales and the reason for the failure before signing the agreement. The lawyer can make that request in such a way as to get a truthful response. And again, in case you missed it when I said this earlier. You can say no and simply refuse to move forward with such a provision. You may not get the house, but you'll save a certain amount of worry. If you do move forward, you should be sure that you are getting a good deal. They're asking for special provisions; they should bear the cost of that. Either your current deal is already good (and it may be) or you should make them adjust until it is. |
I'm only spending roughly half of what I earn; should I spend more? | Your Money or Your Life is a great book on this topic. |
Which Roth IRA is the best for a 21 year old who has about $1500? | Your question seems like you don't understand what a Roth IRA is. A Roth IRA isn't an investment, per se. It is just a type of account that receives special tax treatment. Just like a checking and savings account are different at a bank, a ROTH IRA account is just flagged as such by a brokerage. It isn't an investment type, and there aren't really different ROTH IRA accounts. You can invest in just about anything inside that account so that is what you need to evaluate. One Roth IRA account is as good as any other.As to what to invest your money in inside a ROTH, that is a huge question and off-topic per the rules against specific investing advice. |
Why do stock prices of retailers not surge during the holidays? | That's a pretty good question for a six-year-old! In addition to the good answers which point out that expectations are priced in, let's deny the premises of the question: Sales do not increase the value of a company; a company could be, for example, losing money on every sale. Share prices are (at least in theory) correlated with profits. So let's suppose that company X is unprofitable 320 days a year and is relying upon sales in late November and December to be in the black for the year. (Hence "black Friday".) Carefully examine the supposition of this scenario: we have a company that is so unprofitable that it must gamble everything on successfully convincing bargain hunting consumers in a weak economy to buy stuff they don't actually need from them and not a competitor. Why would this inspire investor confidence? There are plenty of companies that fail to meet their sales targets at Christmas, for plenty of reasons. |
Which state do saving interests come from? | Most (if not all states) in the US are only interested in source income. If you worked in that state they want to tax it. Many states have reciprocity agreements with neighboring states to exempt income earned when a person works in lets say Virginia, but lives in a state that touches Virginia. Most states don't consider interest and dividends for individuals as source income. They don't care where the bank or mutual fund branch is located, or headquartered.If it is interest from a business they will allocate it to the state where the business is located. If you may ask you to allocate the funds between two states if you move during the year, but most people will just divide the interest and dividends based on the number of days in each state unless there is a way to directly allocate the funds to a particular state. Consider this: Where is the money when it is in a bank with multiple branches? The money is only electronic, and your actual "$'s" may be in a federal reserve branch. Pension funds are invested in projects all over the US. |
What are some signs that the stock market might crash? | Although it is impossible to predict the next stock market crash, what are some signs or measures that indicate the economy is unstable? These questions are really two sides of the same coin. As such, there's really no way to tell, at least not with any amount of accuracy that would allow you time the market. Instead, follow the advice of William Bernstein regarding long-term investments. I'm paraphrasing, but the gist is: Markets crash every so often. It's a fact of life. If you maintain financial and investment discipline, you can take advantage of the crashes by having sufficient funds to purchase when stocks are on sale. With a long-term investment horizon, crashes are actually a blessing since you're in prime position to profit from them. |
Complete Opposite Calculations and Opinions - Using Loan to Invest - Paying Monthly Installments with Monthly Income | Sorry in advance, but this will be long. Also, it sounds like your friend is a tool. I hope this "friend" is not also your financial advisor... they would be encouraging you to make a very poor investment decision. They also don't know how to do financial math. For what it's worth, I am not wrong. I have correctly answered a set of changing questions as you have asked them... Your friend is answering based on a third, completely different investment model, which you proposed in the edit to your last post. If that's what you meant all along, then you should have been more clear in the questions you were asking. Please let me layout the following: How the previous questions//investment proposals were built How to analyze this current proposal What your other option is Why the other option is best in a 'real world' market The First Question My understanding of the initial proposal was to take out a $10,000 loan, invest the proceeds, and expect to not have any money of your own tied up in this. Because that OP did not specify that this is an interest-only loan (you still haven't in any of your questions), the bank will require you to make payments back to them each month that include principal and interest. Your "friend" is talking about the total interest paid being the only cost of a loan. While that is (almost) true, regardless of what your friend says, significantly more cash is involved in making sure that all the payments are made on time---unless you set up an interest-only loan. But with the set up laid out in this post, and with the assumptions I specified there, the principal payments must be included because the borrower has to pay back the bank and isn't not tying up any of their own money. In that case, my initial analysis is correct--your breakeven is in the low teens for an annual required return. The Second Proposal Your second proposal... before any edits... refined things a little bit, to try to capture the any possible returns by not selling something. As I indicated there, (with what was an exaggerating assumption), the lack of clarity makes for an outlandish required return. The Second Proposal...with edits, or the one proposed above I will get to the one proposed above in a second, but first let me highlight a few problems with your friend's analysis. Simple interest: the only place (in the US at least) that will lend with simple interest is student loans. Any loan that you actually take out will be compound interest. Not an interest only loan: your "friend" is not calculating interest correctly. Since this isn't an interest-only loan, the principal balance will reduce every time you make a payment, by ~$320-$340 each month. This substantially reduces the total interest paid, to $272.79 over the total 24 months. "Returns": I don't know what country, or what business your friend works in, but "returns" are a very ambiguous concept. Investopedia defines returns as gains or losses. (I wish I could inhabit the lala land that your friend lives in when returns are always positive). TheFreeDictionary.com defines a return for finance as "The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period." When you have not made it clear that any other money is being used in this investment plan (as was the case in scheme #1 and scheme #2a,) the loan still has to be paid. So, clearly the principal must be included in the return calculations. How to evaluate this proposed investment scheme Key dimensions: Loan ($8,000 ... 24 months ... 0.27% monthly rate... monthly compounding... no loan origination fees) Monthly payment (PMT in Excel yields $344.70). Investment capital (starting = $8,000) Monthly Return (Investment yields... we hope it's positive!) Your monthly contribution from your salary Taxes = 10%. Transaction Fees = $20 Go and lookup how to build an amortization table for a loan in Excel. Your life will be infinitely better for it. Now, you get this loan set up and invested into something... (it costs $20 to buy the assets). So you've got $7980 chugging away earning interest. I calculate that your break even, with you paying in $344.70 of your own money each month is 1.81% annually, or 3.42% over the 24 month life of this scheme. That is using monthly compound interest for the payments, because that's what the real world would use, and using monthly compounding of the investments' returns. Your total interest expense would be $272.79. This seems feasible. But let's talk about what your other option is, given that you're ready to spend $344.70 each month on an investment. Your other option I understand the appeal of getting $8,000... right away... to invest in something. But the risk behind this is that if the market goes down (and markets do) you're stuck paying a fixed amount for your loan that is now worth less money. Your other option is to take your $344.70, and invest it step-by-step. (You would want to skip a month or two buying assets in the market, so that you can lessen transaction costs). This has two advantages: (1) you save yourself $272 in interest. (2) When the market goes down, you still win. With this strategy, you still win when the market goes down because of what is commonly called "dollar cost averaging". When the market is up, your investments are also up. When the market goes down, your previous investments decrease in value but you can invest new money at the lower rates. Why the step-by-step, invest your own money strategy is better At low rates (when you're looking for your break-even), the step-by-step model outperforms the loan. At higher rates of return (~4% + per year), you get the benefit of having the borrowed money earning more gains. In fact, for every continuous (meaning set... not changing month-to-month) interest rate that you can dream up that is greater than about 4% per year, the borrowed money earns more. At 10% per year, the borrowed money will earn about $500 more over the 2 years than your step by step investment would. BUT I recognize that you might feel like the market will always go up. That's what everyone thinks. And that's alright. But have one really bad month, or a couple of just-not-great-months, and your fixed 'loan' portfolio will underperform. Have a few really bad months, and your portfolio could be substantially reduced in value... but you would still be paying the same amount for it each month. And if that happened (say your assets declined -3% in 3 of the 24 months...) You'd be losing money relative to the step-by-step portfolio. |
UK: Personal finance book for a twenty-something | I would always recommend the intelligent investor by Benjamin Graham the mentor of warren buffet once you have a basic knowledge ie what is a share bond guilt etc In terms of pure investment the UK is fairly similar the major difference is the simpler tax structure, ISA allowance and the more generous CGT regime. |
Why are banks providing credit scores for free? | Why are banks all of a sudden providing people their credit scores for free? Because it is a really good idea. On an ABC Bank website, it has: "Check your credit score for free" button. You click it. Not only will it come up with a credit score, but it could also trigger a marketing workflow. If it is direct mail, email, or a phone call a banker could contact you for help with a debt product. This marketing could also be targeted, say a person with a high score could be targeted for a mortgage. A person with a low or medium score could be targeted for ways and products to improve their score. Now if you run XYZ bank and not do the same, you are losing a competitive advantage to banks that offer this. Not only will your customers be less happy, but you will lose a great marketing opportunities. Face it, the only people that worry about their credit score are people that are in the market to borrow. Which again, is more information. If you have someone that never checks their credit score, or has their credit frozen, then it is wise not to market to them debt products. |
Will there always be somebody selling/buying in every stock? | No, Mark is right, if you place a market order there will always be someone to buy or sell at the market price. Only if you place a limit order on the price can it not sell or be bought. Just research on your computer and you will find your answer. You must be specify about open order or limit order when asking. |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | The market doesn't know or care why you bought. What you are asking is effectively 'this share went down in price after I bought. Is there anything I can do?'. Consider what you are asking for - if there were anything you could do, then no one would ever make a loss. How do you suppose that would work? |
Hourly rate negotiation tips for paid internship | They likely have an intern (job title) pay-scale that maxes out somewhere below $30/hr in order to meet the FLSA (that exempt vs non-exempt stuff you were seeing). As a PhD student, you could probably negotiate up into the ~$25/hr range, but from a benefits standpoint, they might not be able to pay you $35/hr without making you an exempt, full-time employee. |
How to manage paying expenses when moving to a weekly pay schedule and with a pay increase? | Its really, really good of you to admit your short comings with a desire to improve them. It takes courage. Keep in mind that most of us that answer questions here are really "good at money" so we have a hard time relating. Would you want people that are bad with money answering questions on a personal finance site? While it is intimidating you will need a budget. A budget is simply a plan for how to spend your money. Your budget, based on your new pay frequency, will likely also need some cash flow planning as a single paycheck is unlikely to cover your largest expenses. For example your rent/mortgage might be less than a single paycheck so you will have to save money from the previous paycheck to have enough money to pay it. Your best bet is to have a friend or relative that is good with money help you setup a budget. Do you have one? If not you might inquire about a church or organization that offers Financial Peace University. The teachers of the class often help people setup a budget and might be willing to do so for you. You could also take the class which will improve your money management skills. For $100 you'll have a lifetime pass to the class. If it helps you avoid three late charges/bounce checks then the class is well worth it. Now as far as spending too much money. I would recommend cash, but you have to do it the right way. Here is the process that you have to follow to be successful with cash: Doing cash will give you a more concrete example of what spending means. It won't work if you continue to hit the ATM "for just $20 more". It will take you a bit to get used to it, but you will be surprised how quickly you improve at managing money. |
Investing in USD from the Eurozone (Jan 2015) | No, this is not solid advice. It's a prediction with very little factual basis, since US interest rates are kept just as low and debt levels are just as high as in the Eurozone. The USD may rise or fall against the EUR, stay the same or move back and forth. Nobody can say with any certainty. However, it is not nearly as risky as "normal forex speculation", since that is usually very short term and highly leveraged. You're unlikely to lose more than 20-30% of your capital by just buying and holding USD. Of course, the potential gains are also limited. |
Should I use a TSP loan? | I don't have experience with TSP in particular, but they look to be roughly the same as 401(k) loans. If the "G Fund rate" is equal to the yield of government bonds, then your main risk is the risk that yields increase, which means the interest you're paying is less than what you would have earned on the investments. Here are some other things to consider: For any car loan, I would borrow as little as possible with as short a term as possible. To me, the interest savings and additional risks from borrowing from your retirement isn't worth it. |
Is business the only way to become a millionaire? | That's actually a pretty good way to get bankrupt quick. You can get rich quick through lottery, gambling, mere saving or investing wisely, or marrying someone from the Kennedy or Bush clans. Starting a business is one of the ways to become a millionaire, but definitely not the only one. |
Legal documents required for managing an investment portfolio among friends? | Sounds like you are starting an investment club. What you need is an investment club partnership agreement. Have a look at this free document. EDIT Based on OP's comments, it appears that the OP will be acting as an adviser/manager of a private investment fund. If the fund is not open to the public, it may still be treated as a type of investment club, but different rules -- including possibly having to register with the SEC -- may apply (quoted from the first link): If the adviser is compensated for providing the advice regarding the club's investments, the adviser may need to register according to the Investment Advisers Act of 1940. Also, if one person selects investments for the club, that person may have to register as an investment adviser. In general, a person who has $25 million or more in assets under management is required to register with the SEC under the Investment Advisers Act of 1940. A person managing less than $25 million may be required to register under the securities laws of the state or states in which the adviser transacts business. |
How to reach an apt going against inflation | Inflation of the type currently experienced in Argentina is particularly hard to deal with. Also, real estate prices in global cities such as Buenos Aires and even secondary cities have grown significantly. There are no full solutions to this problem, but there are a few things that can really help. |
How might trading volume affect future share price? | You can't tell for sure. If there was such a technique then everyone would use it and the price would instantly change to reflect the future price value. However, trade volume does say something. If you have a lemonade stand and offer a large glass of ice cold lemonade for 1c on a hot summer day I'm pretty sure you'll have high trading volume. If you offer it for $5000 the trading volume is going to be around zero. Since the supply of lemonade is presumably limited at some point dropping the price further isn't going to increase the number of transactions. Trade volumes reflect to some degree the difference of valuations between buyers and sellers and the supply and demand. It's another piece of information that you can try looking at and interpreting. If you can be more successful at this than the majority of others on the market (not very likely) you may get a small edge. I'm willing to bet that high frequency trading algorithms factor volume into their trading decisions among multiple other factors. |
How can I determine if my portfolio's rate of return has been “good”, or not? | Historically, the market's average rate of return has been about 8%. (Serakfalcon's "6% to 10%" is essentially the same number.) You should be able to get into that range for long-term investments with minimal risk. "5 or 6 companies", unless you know a heck of a lot about those companies, is fairly high risk. If any one of those runs into trouble, a considerable amount of your net investment is riding on it. Of course if any of them invents the Next Big Thing you could hit it big; that's the tradeoff. Diversification isn't sexy, but it buffers you from single-company disasters, and if you diversify across kinds of investment that buffers you from single-sector disasters. Index funds aren't sexy, but they're a low-cost way to diversify, especially if you go with a mix of funds in different categories (large cap, small cap, bond, international, real estate) or a fund which has that mix built into it such as a target date fund. |
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