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Why would a company care about the price of its own shares in the stock market? | Originally, stocks were ownership in a company just like any other business- you expected to make a profit from your investment, which is what we call dividends to stock holders. Since these dividends had real value, the stock price was based on what this return rate was, factoring in what it might be expected to be in the future, etc. Nowdays many companies never issue any dividends, so you have to consider the full value of the company and what benefit could be gained by another company if it were to acquire it. the market will likely adjust the share price to factor in what the value of the company might be to an acquirer. But otherwise, some companies today trading at an astronimical price, and which nevers pays a dividend- chalk it up to market stupidity. In this investor'd mind, there is no logical reason for these prices, except based on the idea that someone else might pay you more for it later... for what reason? I can't figure it out. Take it back to it's roots and imagine pitching a new business idea to you uncle to invest in- it will make almost nothing compared to it's share price, and even what it does make it won't pay anything to him for his investment. Why wouldn't he just laugh at you? |
Possible replacement for Quicken | I would investigate mint.com further. Plenty of people have written off using them because Intuit purchased them, but that seems like cutting of your nose to spite your face. I think mint.com is worth it for its Trends functionality alone, not to mention its automatic categorization of your purchases, reminders when bills are due, notifications of increased credit card interest rates, and overdraft notices. I don't think mint.com schedules bills & deposits, but it tracks stocks & mutual fund investments and compares your portfolio returns against Dow Jones, S&P 500, or NASDAQ if you wish. I'm not sure I see the advantage of manual transaction entry, but you can add cash or check transactions manually. As I mentioned earlier, automated categorization is a great feature. In addition, you can tag certain transactions as reimbursable or tax-related. If the primary feature you're interested in is stock quotes, maybe something like Yahoo Finance or Google Finance will be enough. |
No-line-of-credit debit card? | We have a pre-paid mastercard. This will only allow the spending up to the amount already paid into the card account. Visa Electron is a bank account linked debit card that will not allow the account to go overdrawn but this card type is getting quite rare. |
Should I Use an Investment Professional? | Ask yourself the same question for furniture making. Would you feel more comfortable sitting in a chair that you made yourself versus one that you bought from a furniture store? How about one that you bought from IKEA and assembled? For an experienced, competent furniture maker, you might be able to make an equivalent chair for less money and be highly confident. For a "DIY" builder, you might be less confident but be willing to take more of a risk with the possibility of making a good chair for less money (and gain experience on what not to do next time). The same applies to investing - if you are highly confident in your own abilities, DIY investing may work better for you. For the "general population", however, relying on experts to do the hard work (and paying a little more for their services) is probably a better option and gives you more confidence. As for the second quote, I'm note sure there's a causality there. If anything, I think it's the other way around - people who have more money saved for retirement are more likely to use investment advisors. |
After consulting HR Block, are you actually obligated to file your taxes with them, if they've found ways to save you money? | The obligation is contractual, so you need to read the contract to answer your question. However, since you paid for the service provided, I see no way they can force you buy any other service from them. They cannot file your tax returns without your explicit consent (on a form dedicated to that, dated and having the numbers matching the return filed - not something you can sign before the actual return is ready). Worst case they can claim you owe them more money, but since you paid for the services provided, I can't see how they can have that stand in court as well. Bottom line - even if the contract has such an obligation, I cannot see how it can be enforced. As to the mistake they noted... I wouldn't rely on H&R Block advice in any matter. Very likely, the person you were talking to was not even licensed to provide tax advice. You're lucky if the person has passed CRTP exams (in California they're legally required), but I seriously doubt their clerks are EAs or CPAs (the only designations other than a lawyer legally allowed to provide tax advice). Tax preparers (CRTPs included) are only allowed to provide advice pertaining to the preparation of the tax return they're currently engaged to prepare. Claiming income is sourced or not sourced in NY is borderline, IMHO. If they got it wrong (and to me it sounds as they did) you can sue them for damages. If your situation is tricky and it is too late to get an appointment with a proper adviser - file an extension (form 4868) and deal with it after the April busy season. |
How to protect a Stock you still want to own from a downturn? | Of the two, an option is a more reliable but more expensive means to get rid of a stock. As sdg said, a put option is basically an insurance policy on the stock; you pay a certain price for the contract itself, which locks in a sale price up to a particular future date. If the stock depreciates significantly, you exercise the option and get the contract price; otherwise you let the contract expire and keep the stock. Long-term, these are bad bets as each expired contract will offset earnings, but if you foresee a near-term steep drop in the stock price but aren't quite sure, a put option is good peace of mind. A sell stop order is generally cheaper, but less reliable. You set a trigger price, say a loss of 10% of the stock's current value. If that threshold is reached, the stop order becomes a sell order and the broker will sell the stock on the market, take his commission (or a fixed price depending on your broker) and you get the rest. However, there has to be a buyer willing to buy at that price at the moment the trigger fires; if a stock has lost 10% rapidly, it's probably on the way down hard, and the order might not complete until you realize a 12% loss, or a 15%, or even 20%. A sell stop limit (a combination stop order and limit order) allows you to say that you want to sell if the stock drops to $X, but not sell if it drops below $X-Y. This allows you to limit realized losses by determining a band within which it should be sold, and not to sell above or below that price. These are cheaper because you only pay for the order if it is executed successfully; if you never need it, it's free (or very cheap; some brokers will charge a token service fee to maintain a stop or stop limit). However, if the price drops very quickly or you specify too narrow a band, the stock can drop through that band too quickly to execute the sell order and you end up with a severely depreciated stock and an unexercised order. This can happen if the company whose stock you own buys another company; VERY quickly, both stocks will adjust, the buying company will often plummet inside a few seconds after news of the merger is announced, based on the steep drop in working capital and/or the infusion of a large amount of new stock in the buying company to cover the equity of the purchased company. You end up with devalued stock and a worthless option (but one company buying another is not usually reason to sell; if the purchase is a good idea, their stock will recover). Another option which may be useful to you is a swaption; this basically amounts to buying a put option on one financial instrument and a call on another, rolled into one option contract specifying a swap. This allows you to pick something you think would rise if your stock fell and exchange your stock for it at your option. For example, say the stock on which you buy this swaption is an airline stock, and you contract the option to swap for oil. If oil surges, the airline's stock will tank sharply, and you win both ways (avoiding loss and realizing a gain). You'd also win if either half of this option realized a gain over the option price; oil could surge or the airline could tank and you could win. You could even do this "naked" since its your option; if the airline's stock tanks, you buy it at the crashed price to exercise the option and then do so. The downside is a higher option cost; the seller will be no fool, so if your position appears to be likely, anyone who'd bet against you by selling you this option will want a pretty high return. |
How do you get out of a Mutual Fund in your 401(k)? | One of the strengths of 401K accounts is that you can move from investment X in the program to investment Y in the program without tax consequences. As you move through your lifetime you will tend to want to lower risk by investing in funds that are less aggressive. The only way this works is if there is an ability to move funds. If there were only one or two funds to pick from or that you were locked in to your initial choices that would be a very poor 401K to be enrolled in. On your benefits/401K website you should be able to adjust three sets of numbers: Some have you enter the current money as a percentage others allow you to enter it in dollars. They might limit the number of changes you can do in a month to the current money balances to avoid the temptation to try and time the market. These changes usually happen within 1 business day. Regarding new and match money they could limit the lowest non zero percent to 5% or 10%, but they might allow numbers as low as 1%. These changes take place generally with the next paycheck. |
How can I live outside of the rat race of American life with 300k? | the short answer: yes. The long answer depends on what you mean by modest living. As others have noted, living off a $300k principle involves risks, but the entire future has risk. By "getting out of the rat race" I hope you don't mean become a slug on the couch. Peruse mr. Money Mustache at https://www.mrmoneymustache.com/. One can live very frugally yet very well in some parts of the US. |
While working overseas my retirement has not gone into a retirement account. Is it going to kill me on the FAFSA? | According to the FAFSA info here, they will count your nonretirement assets when figuring the EFC. The old Motley Fool forum question I mentioned in my comment suggests asking the school for a "special circumstances adjustment to your FAFSA". I don't know much about it, but googling finds many pages about it at different colleges. This would seem to be something you need to do individually with whatever school(s) your son winds up considering. Also, it is up to the school whether to have mercy on you and accept your request. Other than that, you should establish whatever retirement accounts you can and immediately begin contributing as much as possible. Given that the decision is likely to be complicated by your foreign income, you should seek professional advice from an accountant versed in such matters. |
How to choose a good 401(k) investment option? | The vanguard funds are all low fee your employer has done a good job selecting their provider for 401(k). I would do a roth if you can afford it as taxes are at a historical low. Just pick the year you want to get your money if you will need your money in 2040 pick Vanguard Target Retirement 2040 Fund. Its that simple. This is not a "thing" ( low-risk, and a decent return ). Risk and reward are correlated. Get the vanguard and every year it rebalances so that you take less risk every year. Lastly listen to the Clark Howard podcast if you are having trouble making decisions or contact their 45 hour a week free advice email/phone help. |
What is a good price to “Roll” a Covered Call? | If the call is in the money and you believe the reason for the price jump was an overreaction with a pullback on the horizon or you anticipate downward movement for other reasons, I will roll (sometimes for a strike closer to at the money) as long as the trade results in a net credit! You already have the statistical edge trading covered calls over everyone who purchased stock at the same point in time. This is because covered calls reduce your cost basis and increase your probability of profit. For people reading this who are not interested in the math behind probability of profit(POP) for covered calls, you should be aware of why POP is higher for covered calls (CC). With CCs you win when the stock price stays the same, you win when it goes down slightly, you win when the stock goes up. You have two more ways to win than someone who just buys stock, therefore a higher probability of making a buck! Another option: If your stock is going to be called at a loss, or the strike you want to roll to results in a net debit, or your cash funds are short of owning 100x shares and you are familiar with the stock, try writing a naked put for the price you want to buy at. At experation, if the naked put is exercised, your basis is reduced by the premium of the put you sold, and you can write a covered call against the stock you now own. If it expires worthless you keep the premium. This is also another way to increase your POP. |
Why invest for the long-term rather than buy and sell for quick, big gains? | Every time you buy or sell a share for some price, somebody must have thought that that was exactly the right moment to sell or buy that share at that price (and to trade with you). Every time a trade is made, both sides think they are doing the smart thing. Most of the time, one will turn out to be wrong, the other right. Nothing in your proposed method of trading explains why you would be the side that was right more often. So they'll probably even out. Or maybe there are people in the market who actually do have a slightly better than average method, and you'll be wrong somewhat more often than right. Each trade has transaction costs. If you simply hang on to your shares, that's more or less the same as evening out good trades and bad trades, but without the transaction costs. |
What is a good service that will allow me to practice options trading with a pretend-money account? | Try ThinkOrSwim by TDAmeritrade. It allows you to paper trade with a powerful trading platform. There's also a mobile app so you can trade on the go. Good luck! |
Using pivot points to trade in the short term | What are Pivot Points? Pivot Points indicate price levels that are of significance in technical analysis of securities. Pivot Points are used to provide clarity for a trader as they are a predictive indicator of where a security might go. There are at least 6 different types of Pivot Points (Woodie Pivot Point, Fibonacci Pivot, Demark etc..) and they are different based on their formulas but generally serve the same concept. I will be answering your question using the Camarilla Pivot Point formula. Camarilla Pivot Point Formula Generally any Pivot Point formula uses a combination of the Open, High, Low and Close of the previous timeframe. Since you are technically a swing trader indicated by say between a couple of days to a couple of weeks, as I don't want to do day trading you should use a weekly 5 to 30 minute chart but you can also use a daily chart as well. So for example if you use a daily chart, you would use the Open, High, Low and Close of the previous day. Example of fictitious stock: MOSEX (Money Stack Exchange) 01/14/16: Open: 10.25, High: 12.55, Low: 9.65, Close: 11.50 On 01/15/16: R4 Level: 13.10, R3 Level: 12.30, R2 Level: 12.03, R1 Level: 11.77, Pivot Point: 11.23, S1 Level: 11.23, S2 Level: 10.97, S3 Level: 10.70, S4 Level: 9.91 R = Resistance, S = Support How to identify these Pivot Points? Most charting software already have built in overlays that will identify the pivot points for you but you can always find and draw them yourself with an annotation tool. Since we are using the Camarilla Pivot Point formula, the important Pivot Point levels are the R4 which is considered as the Breakout Pivot, the S4 which is considered as the Breakdown Pivot. R3 and S3 are Reversal Pivot Points. Once identify the Pivot Points how should you proceed in a trade? This is the million dollar question and without spoon feeding you requires you to come up with your own strategy. To distinguish yourself from being a novice and pro trader is to have a strategy in a trade. Now I don't really have the time to look for actual charts to provide examples with but generally this is what you should look for to proceed in a trade: Potential Buy/Short Signals: Potential Sell Signals: If a stock moves above the R3 Level but then crosses below it, this would be a sell signal. This is confirmed when their is a lower lower then the candle that first crosses below it. Sell a stock when S4 Level is confirmed. See above for the confirmation. Other Useful Tips: Use the Pivot Point as your support or resistance. The Pivot Point levels can be used for your stop loss. For example, with an S3 reversal buy signal, the S4 should be used as a stop loss. Conversely, the Pivot Point levels can also be used for your target prices. For example, with an S3 reversal buy signal, you should take some profits at R3 level. You should also use a combination of other indicators to give you more information to confirm if a signal is correct. Examples of a good combination is the RSI, MACD and Moving Averages. Read that book in my comment above!! |
Calculate how much interest I will pay given a creditcard balance and a monthly payment? | At the end of each period, add the interest, in this case an easy 1%, and then subtract the payment. With less than 4 months to payoff, the interest here is about $21. Instead of trying to find credit card calculators, just use the more common mortgage calculator. The math is the same until the final month, when the credit card may handle accrued interest slightly differently. Edit - A finance calculator indicates 3.407 payments, or total payment of $1022.12, $22.12 is interest. (from my initial guess of $21 above) |
Why I can't view my debit card pre-authorized amounts? | The simplest answer to why you can't see it in your online statement is a design/business decision that was made, most probably originally to make online statements differ as little as possible from old fashioned monthly printed statements; the old printed statements never showed holds either. Some banks and card services actually do show these transactions online, but in my experience these are the rare exceptions - though with business/commercial accounts I saw this more, but it was still rare. This is also partly due to banks fearing lots of annoying phone calls from customers and problems with merchants, as people react to "hey, renting that car didn't cost $500!" and don't realize that the hold is often higher than the transaction amount and will be justified in a few days (or weeks...), etc - so please don't dispute the charges just yet. Behind the scenes, I've had bankers explain it to me thusly (the practice has bitten me before and it bothered me a lot, so I've talked to quite a few bankers about this): There are two kinds of holds: "soft holds" and "hard holds". In a soft hold, a merchant basically asks the bank, "Hey, is there at least $75 in this account?" The bank responds, and then has it's own individually set policy per account type as to how to treat that hold. Sometimes they reserve no money whatsoever - you are free to spend that money right out and rack up NSF fees to your heart's content. Yet some policies are to treat this identically to a hard hold and keep the money locked down until released. The hard hold is treated very much like an actual expenditure transaction, in that the money is locked and shown as no longer available to you. This varies by bank - some banks use an "Account Balance" and an "Available Balance", and some have done away with these dual terms and leave it up to you to determine what your balance is and what's "available" (or you have to call them). The key difference in the hard hold and a real expenditure is, technically, the money is still in your bank account; your bank has merely "reserved" it, earmarking it for a specific purchase (and gently promising the merchant they can have their money later), but the biggest difference is there is a time-limit. If a merchant does not process a completion to the transaction to claim the money, your bank will lift the hold after a period of time (I've seen 7-30 days as typical in the US, again varying by institution) returning your money to your balance that is available for purchasing and withdrawal. In every case, any vaguely decent banking institution allows you to call them, speak to some bank employee, and they can look up your account and inform you about the different sort of holds that are on your account that are not pending/completed purchase transactions. From a strictly cynical (perhaps rightly jaded) point of view, yes this is also used as a method to extort absurdly high fees especially from customers who keep a low balance in their account. I have had more than one bank charge NSF fees based on available balances that were due to holds made by gas pumps, for instance, even though my actual "money in my account" never went below $0 (the holds were for amounts larger than the actual transaction). And yes, the banks usually would waive those fees if you bothered to get someone on the phone or in person and made yourself a nuisance to the right person for long enough, but they made you work for it. But I digress.... The reality is that there are lots of back and forth and middle-men in transactions like this, and most banks try to hide as much of this from you the client as possible, partly because its a huge confusing hassle and its part of why you are paying a bank to handle this nonsense for you to start with. And, as with all institutions, rules and policies become easily adjusted to maximize revenues, and if you don't keep sizable liquid minimum balances (100% of the time, all year long) they target you for fees. To avoid this without having fat wads of extra cash in those accounts, is use an entirely disconnected credit card for reservations ONLY - especially when you are traveling and will be making rentals and booking hotels. Just tell them you wish to pay with a different card when you are done, and most merchants can do this without hassle. Since it's a credit card with monthly billing you can often end up with no balance, no waiting around for a month for payments to clear, and no bank fees! It isn't 100%, but now I never - if I can possibly avoid it - use my debit/bank card to "reserve" or "rent" anything, ever. |
What do the points in a stock market index epresent? | The All Ords Index consists of the 500 largest companies by market capitalisation listed on the Australia Stock Exchange. Each stock in the All Ords. Index is given a weighting based on its market capitalisation. As the price of the stocks within the All Ords. Index change, so does the points on the index itself. The Index is more sensitive to changes in the larger capitalised stocks due to their larger weighting in the Index. Example: If a company has a weighting of 10% and its price goes up by 10%, and all other stocks in the Index don't go up or down, then this will cause the All Ords Index to go up by 1% (10% of 10%). |
What does PMI mean? | Yes, PMI is what the lender requires to loan you more than 8O% of the home's value. I could easily present scenarios where it's exactly the right decision to use PMI and get the purchase done. A 100K mortgage at 90% LTV will cost you $521/year in PMI. If you are renting and struggling to get a higher downpayment, it can take quite a long time to save the additional $11K to put down. Only the buyer can know if the house is such s bargain, or if rates have bottomed, but the decision isn't so clear cut. |
How can I check my credit score? | Since no one else answered this part of your question yet: Checking your own credit score or report will not affect it in any way. It only hurts you when someone looks it up to run a credit check at your request for the purpose of possibly getting a loan, for example a car dealership. This only hurts it a tiny bit, and is not worth worrying about unless you are going to 20 different car dealerships who each do a check. However, it is a good idea not to let them run your credit until you are seriously ready to buy a car. In fact, it is better to just get financing somewhere else and not let them run it at all. |
Are investor's preference for dividends justified? | This question is predicated on the assumption that investors prefer dividends, as this depends on who you're speaking to. Some investors prefer growth stocks (some which don't pay dividends), so in this case, we're covering the percent of investors who like dividend paying stocks. It depends on who you ask and it also depends on how self-aware they are because some people may give reasons that make little financial sense. The two major benefits that I hear are fundamentally psychological: Dividends are like mini-paychecks. Since people get a dopamine jolt from receiving a paycheck, I would predict the same holds true for receiving dividends. More than likely, the brain feels a reward when getting dividends; even if the dividend stock performs lower than a growth stock for a decade, the experience of receiving dividends may feel more rewarding (plus, depending on the institution, they may get a report or see the tax information for the year, and that also feels good). Some value investors don't reinvest dividends, as they believe the price of the stock matters (stocks are either cheap or expensive and automatic reinvestment to these investors implies that the price of a stock doesn't matter), so dividends allow them to rebuild their cash after a buy. They can either buy more shares, if the stock is cheap, or keep the cash if the stock is expensive. Think about Warren Buffett here: he purchased $3 billion worth of shares of Wells Fargo at approximately $8-12 a share in 2009 (from my memory, as people were shocked that be bought into a bank when no one liked banks). Consider how much money he makes from dividends off that purchase alone and if he were to currently believe Wells Fargo was overpriced, he could keep the cash and buy something else he believes is cheaper. In these cases, dividends automatically build cash cushions post buying and many value investors believe that one should always have cash on hand. This second point is a little tricky because it can involve risk assessment: some investors believe that high dividend paying stocks, like MO, won't experience the huge declines of indexes like the SPY. MO routed the SPY in 2009 (29% vs. 19%) and these investors believe that's because it's yield was too desired (it feels safer to them - the index side would argue "but what happens in the long run?"). The problem I have with this argument (which is frequent) is that it doesn't hold true for every high yield stock, though some high yield stocks do show strong resistance levels during bear markets. |
What is the options industry changing about option symbols in February, 2010? | Here is what I could find on the net: http://education.wallstreetsurvivor.com/options-symbol-changes-coming-february-12th-2010 So it sounds like it does not affect how you invest in options but only how you look them up. I remember using a Bloomberg terminal and it wasn't clear what the expiry date of the option you were looking at was. It looks like the new quote system addresses this. HTH. |
In USA, what circumstances (if any) make it illegal for a homeless person to “rent” an address? | It depends on the rules in the specific places you stay. Specific places being countries or states. Some states may consider pension payments to be taxable income, others may not. Some may consider presence for X days to constitute residency, X days may be 60 days in a calendar year whether or not those days are continuous. It doesn't matter so much where your mailbox or mail handling service is located, it matters: You may owe taxes in more than one place. Some states will allow you to offset other states' taxes against theirs. Some states in the US are really harsh on income taxes. It's my understanding that if you own real estate in New York, all of your income, no matter the source, is taxable income in New York whether or not you were ever in the state that year. Ultimately, you can't just put up your hand and say, "that's my tax domicile so I'm exempt from all your taxes." There is no umbrella US regulation on this topic, the states determine who they consider to be residents and how those residents are to be taxed. While it's possible you may be considered a resident of multiple states and owe income taxes in multiple states, it's equally possible that you won't meet the residency criteria for any state regardless of whether or not that state has an income tax. The issue you face, as addressed in @Jay's answer, Oklahoma will consider you a resident of OK until you have established residency somewhere else. |
Is the Net Profit the 'final word' on a company's health? | To answer your question briefly: net income is affected by many things inside and outside of management control, and must be supplemented by other elements to gain a clear picture of a company's health. To answer your question in-depth, we must look at the history of financial reporting: Initially, accounting was primarily cash-based. That is, a business records a sale when a customer pays them cash, and records expenses when cash goes out the door. This was not a perfectly accurate system, as cashflow might be quite erratic even if sales are stable (collection times may differ, etc.). To combat problems with cash-based accounting, financial reporting moved to an accrual-based system. An accrual is the recording of an item before it has fully completed in a cash transaction. For example, when you ship goods to a customer and they owe you money, you record the revenue - then you record the future collection of cash as a balance sheet item, rather than an income statement item. Another example: if your landlord charges you rent on December 31st for the past year, then in each month leading up to December, you accrue the expense on the income statement, even though you haven't paid the landlord yet. Accrual-based accounting leaves room for accounting manipulation. Enron is a prime example; among other things, they were accruing revenue for sales that had not occurred. This 'accelerated' their income, by having it recorded years before cash was ever collectible. There are specific guidelines that restrict doing things like this, but management will still attempt to accelerate net income as much as possible under accounting guidelines. Public companies have their financial statements audited by unrelated accounting firms - theoretically, they exist to catch material misstatements in the financial statements. Finally, some items impacting profit do not show up in net income - they show up in "Other Comprehensive Income" (OCI). OCI is meant to show items that occurred in the year, but were outside of management control. For example, changes in the value of foreign subsidiaries, due to fluctuations in currency exchange rates. Or changes in the value of company pension plan, which are impacted by the stock market. However, while OCI is meant to pick up all non-management-caused items, it is a grey area and may not be 100% representative of this idea. So in theory, net income is meant to represent items within management control. However, given the grey area in accounting interpretation, net income may be 'accelerated', and it also may include some items that occurred by some 'random business fluke' outside of company control. Finally, consider that financial statements are prepared months after the last year-end. So a company may show great profit for 2015 when statements come out in March, but perhaps Jan-March results are terrible. In conclusion, net income is an attempt at giving what you want: an accurate representation of the health of a company in terms of what is under management control. However it may be inaccurate due to various factors, from malfeasance to incompetence. That's why other financial measures exist - as another way to answer the same question about a company's health, to see if those answers agree. ex: Say net income is $10M this year, but was only $6M last year - great, it went up by $4M! But now assume that Accounts Receivable shows $7M owed to the company at Dec 31, when last year there was only $1M owed to the company. That might imply that there are problems collecting on that additional revenue (perhaps revenue was recorded prematurely, or perhaps they sold to customers who went bankrupt). Unfortunately there is no single number that you can use to see the whole company - different metrics must be used in conjunction to get a clear picture. |
Why do banks finance shared construction as mortgages instead of financing it directly and selling the apartments in a building? | The core competency of banks is to lend money from depositors and re-lend that money to borrowers. They do not have the expertise to develop real estate. They have trouble evening managing foreclosed real estate, such that they have to sell them at a discount. |
FX losses on non-UK mortgage for UK property - tax deductable? | I spoke to HMRC and they said #1 is not allowable but #2 is. They suggested using either their published exchange rates or I could use another source. I suggested the Bank of England spot rates and that was deemed reasonable and allowable. |
Investment for young expatriate professionals | That's a broad question, but I can throw some thoughts at you from personal experience. I'm actually an Australian who has worked in a couple of companies but across multiple countries and I've found out first hand that you have a wealth of opportunities that other people don't have, but you also have a lot of problems that other people won't have. First up, asset classes. Real estate is a popular asset class, but unless you plan on being in each of these countries for a minimum of one to two years, it would be seriously risky to invest in rental residential or commercial real estate. This is because it takes a long time to figure out each country's particular set of laws around real estate, plus it will take a long time to get credit from the local bank institutions and to understand the local markets well enough to select a good location. This leaves you with the classics of stocks and bonds. You can buy stocks and bonds in any country typically. So you could have some stocks in a German company, a bond fund in France and maybe a mutual fund in Japan. This makes for interesting diversification, so if one country tanks, you can potentially be hedged in another. You also get to both benefit and be punished by foreign exchange movements. You might have made a killing on that stock you bought in Tokyo, but it turns out the Yen just fell by 15%. Doh. And to top this off, you are almost certainly going to end up filling out tax returns in each country you have made money in. This can get horribly complicated, very quickly. As a person who has been dealing with the US tax system, I can tell you that this is painful and the US in particular tries to get a cut of your worldwide income. That said, keep in mind each country has different tax rates, so you could potentially benefit from that as well. My advice? Choose one country you suspect you'll spend most of your life in and keep most of your assets there. Make a few purchases in other places, but minimize it. Ultimately most ex-pats move back to their country of origin as friends, family and shared culture bring them home. |
Is there any emprical research done on 'adding to a loser' | It works if after the price has halved and you buy more the price then rises, however if you are attempting to do this you are basing you "doubling down" on hope, and if you are basing a purchase on hope you are gambling. In many cases if the price has halved it could be because there is something very wrong with the company, so the price could easly half again. In that case it hasn't worked. You are better off waiting to see if the company makes a turn around and starts improving. Wait for confirmation that the stock price is heading back up before buying. |
Multi-Account Budgeting Tools/Accounts/Services | I know of websites that do this, but I don't know of banks that do. Is there any reason you want to do this at a bank rather than use a service? My main concern with using a bank for this would be the risk of overdraft fees |
I'm currently unemployed and have been offered a contract position. Do I need to incorporate myself? How do I do it? | I am co-owner of a business, and we incorporated federally. (Mostly to limit liability.) There is some excellent information above, and most of my wisdom I got from a trusted lawyer and accountant (find experts you trust in these two areas, they will prove invaluable in so many areas.) The one point I would add is that if you decide to incorporate, you can do so federally or provincially. We were all set to go provincially, when our lawyer asked "Is there any chance you might move the business? Any chance you might want to do work in other provinces? What about next year? Five years?" If you are going through the expenses to set up a corporation, consider doing so federally, the extra costs were insignificant, but someday you might be glad you don't have to start from scratch. In this day and age, many people end up moving out of province for work, family concerns, etc. |
How does refinancing work? | Since there was no sale, where does the money actually come from? From the refinancing bank. It's a new loan. How does a bank profit from this, i.e. why would they willingly help someone lower their mortgage payments? Because they sell a new loan. Big banks usually sell the mortgage loans to the institutional investors and only service them. So by creating a new loan - they create another product they can sell. The one they previously sold already brought them profits, and they don't care about it. The investors won't get the interest they could have gotten had the loan been held the whole term, but they spread the investments so that each refi doesn't affect them significantly. Credit unions usually don't sell their mortgages, but they actually do have the interest to help you reduce your payments - you're their shareholder. In any case, the bank that doesn't sell the mortgages can continue making profits, because with the money released (the paid-off loan) they can service another borrower. |
What happened when the dot com bubble burst? | It's tough to share exactly what happened. Go to yahoo and look at the chart for Cisco from 1990 to 2003 or so. From a split adjusted 8 cents a share, it peaked at just under $80 in March 2000, up by a factor of 1000. People were buying in thinking this stock would continue to rise at this pace, but logic says that's preposterous. By April of 2001, it was down to $14, 80% off its high, and later to drop below $10. This was a classic bubble and should be studied so you don't get caught in them. A book titled Extraordinary Popular Delusions & the Madness of Crowds was published in 1841, yes is still an interesting read. Bubbles in markets are not new, but can be recognized and avoided. Cisco at $80 had a market cap of $438B. Had it risen 1000 fold over another decade, it would have been worth $438T, but all the wealth in the US isn't even $75T, so something was wrong, very wrong. This is one story, one stock. A remarkable time. Yes, many companies went under, and the employees lost their jobs. And those who were heavy into the "dotcom" stocks lost as much as 80% (or more) of their wealth. Entire 401(k) accounts dropping this amount due to bad decisions. Those who bailed out in time survived, some doing better than others. |
Are personal finance / money management classes taught in high school, anywhere? | It's not a full credit course but part time comic James Cunningham has speaking tour that promotes personal finance in high schools. |
ETFs are a type of mutual fund, correct? | For a non-ETF mutual fund, you can only buy shares of the mutual fund from the mutual fund itself (at a price that the mutual fund will reveal only at the end of the day) and can only shares back to the mutual fund (again at a price that the mutual fund will reveal only at the end of the day). There is no open market in the sense that you cannot put in a bid to buy, say, 100 shares of VFINX at $217 per share through a brokerage, and if there is a seller willing to sell 100 shares of VFINX to you at $217, then the sale is consummated and you are now the proud owner of 100 shares of VFINX. The only buyer or seller of VFINX is the mutual find itself, and you tell it that you "want to buy 100 shares of VFINX and please take the money out of my checking account". If this order is entered before the markets close at 4 pm, the mutual fund determines its share price as of the end of the day, opens a new account for you and puts 100 shares of VFINX in it (or adds 100 shares of VFINX to your already existing pile of shares) and takes the purchase price out of your checking account via an ACH transfer. Similarly for redeeming/selling shares of VFINX that you own (and these are held in an account at the mutual fund itself, not by your brokerage): you tell the mutual fund to that you "wish to redeem 100 shares and please send the proceeds to my bank account" and the mutual fund does this at the end of the day, and the money appears in your bank account via ACH transfer two or three days later. Generally, these transactions do not need to be for round lots of multiples of 100 shares for efficiency; most mutual fund will gladly sell you fractional shares down to a thousandth of a share. In contrast, shares of an exchange-traded fund (ETF) are just like stock shares in that they can be bought and sold on the open market and your broker will charge you fees for buying and selling them. Selling fractional shares on the open market is generally not possible, and trading in round lots is less expensive. Also, trades occur at all times of the stock exchange day, not just at the end of the day as with non-ETF funds, and the price can fluctuate during the day too. Many non-ETF mutual funds have an ETF equivalent: VOO is the symbol for Vanguard's S&P 500 Index ETF while VFINX is the non-ETF version of the same index fund. Read more about the differences between ETFs and mutual funds, for example, here. |
Forex independent investments | Unless you are buying a significant value of your goods in USD then the relative strength of USD versus your local currency will have little to no effect on what the value of your investments is worth to you. In fact only (de|in)flation will effect your purchasing power. If your investments are in your local currency and your future expenses (usage of the returns on the investments) will be in your local currency FX has no effect. To answer your question, however, since all investments involve flows of money there can be no investment (other than perhaps gold which is really a form of currency) that isn't bound to at least one currency. In general investments are expected to be valued against the investor's home currency (I tend to call it "fund currency" as I work with hedge funds) as the return on the investment will be paid out in the fund currency and returns will be compared on the same basis. If investments are to be made internationally then it is necessary to reduce, or "hedge" the exchange rate risk. This is normally done using FX swaps or futures that allow an exchange rate in the future to be locked in today. Far from being unbound from FX moves these derivatives are closely bound to any moves but crucially are bound in the opposite direction to the hoped for FX move. an example of this would be if I'm investing 100GBP (my local currency) in a US company XYZ corp which I expect to do well. Suppose I get 200USD for my 100GBP and so buy 1 * 200USD shares in XYZ. No matter what happens to XYZ stock any move in GBP/USD will affect my P&L so I buy a future that allows me to exchange 200USD for 100GBP in 6 month's time. If GBP rises I can sell the future and make money on both the higher exchange rate and the increase in XYZ corp. If GBP falls I can keep the future until maturity and exchange the 200USD from XYZ corp for 100GBP so I only take the foreign exchange hit on any profits. If I expect my profits to be 10USD I can even buy futures such that I can lock in the exchange rate for 110USD in 6 months so that I will lose even less of my profit from the exchange rate move. |
What options do I have at 26 years old, with 1.2 million USD? | Until you get some financial education, you will be vulnerable to people wanting your money. Once you are educated, you will be able to live a tidy life off this-- which is exactly why this amount was awarded to you, rather than some other amount. They gave you enough money. This is not a lottery win. I mean "financial counselors" who will want to help you with strategies to invest your money. Every one will promise your money will grow. The latter case describes every full-service broker, e.g. what will happen if you walk into EdwardJones. This industry has a long tradition of charmingly selling investments which significantly underperform the market, and making their money by kickbacks (sales commissions) from those investments (which is why they significantly underperform.) They also offer products which are unnecessarily complex meant to confuse customers and hide fees. One mark of trouble is "early exit" fees, which they need to recoup the sales commission they already paid out. Unfortunately, one of those people is you. You are treating this like a windfall, falling into old, often-repeated cliché of "lottery-win thinking". "Gosh, there's so much money there, what could go wrong?" This always ends in disaster and destitution, on top of your other woes. It's not a windfall. They gave you just enough money to live on - barely. Because these lawyers and judges do this all day every day, and they know exactly how much capital will replace a lifelong salary, and if anything you got cheated a bit. Read on. You don't want to feel like greedy Scrooge, hoarding every penny. I get that. But generous spending won't fix that. What will is financial education, and once you have real understanding and certainty about your financial situation, you will be able to both provide for yourself and be giving in a sensible manner. This stuff isn't taught in school. If it was, there'd be a lot more millionaires, because wealth isn't about luck, it's about intelligent management of money. Good advisers do exist. They're hard to find. Good advisors work only one way: for a flat rate or hourly fee. This is called a "Fee-only advisor". S/he never takes commissions. Beware of brokers who normally work on commission but will happily take an upfront fee. Even if they promise to hand you their commission check, they're still recommending you into the same sub-par investments because that's their training! I get the world of finance is extremely confusing and it's hard to know where to start. Just make one leap of faith with me: You can learn this. One place it's not confusing: University endowments. They get windfalls just like you, and they need to manage it to support them for a very long time, just like you. Endowments are very closely watched by the smartest people in finance -- no lottery fever here. It's agreed by all that there is one best way to invest an endowment. And it's mandatory by law. An endowment is a chunk of money (say, $1.2 million) that must fund a purpose (say, a math professorship or "chair") in perpetuity. You're not planning to live quite that long, but when you're in your 20's, the investment strategy is the same. The endowment is designed to generate income of some amount, on average, over the long term. You can draw from the endowment even in "down years". The rule of thumb is 4-6% is a sustainable rate that won't overtax the endowment (usually, but you have to keep an eye on it). On $1.2M, that's $48,000 to $72,000 per year. Not half bad. See, I told you it could work. Read Jane Austen? Mister Darcy, referred to as a gentleman of 10,000 pounds -- meaning his assets were many times that, but they yield income of £10,000 a year. Same idea. Keep in mind that you need to pay taxes. But if you plan your investments so you're holding them more than a year, you're in the much lower 0-10-15% capital gains tax bracket. So, here's where I'd like you to go. I would say more, but this will give you quite an education by itself. Say you gave all your money to me. And said "Your nonprofit needs an executive director. Fund it. In perpetuity." I'd say "Thank you", "you're right", and I'd create an endowment and invest it about like this. That is fairly close to the standard mix you'll find in most endowments, because that is what's considered "prudent" under endowment law (UPMIFA). I'd carry all that in a Vanguard or Fidelity account and follow Bogle's advice on limiting fees. That said, dollar-cost-averaging is not a suicide pact, and bonds are ugly right now (for reason Suze Orman describes) and real estate seems really bubbly right now... so I'd back out of those for now. I'd aim to draw about $60k/year out of it or 5%, and on average, in the very long term, the capital should grow. I would adjust it downward somewhat if the next few years are a hard recession, to avoid taking too much out of the capital... and resist the urge to take more out in boom years, because that is your hedge against the next recession. Over 7% is not prudent per the law (absent very reasonable reasons). UPMIFA doesn't apply to you, but I'd act as if it did. A very reasonable reason to take more than 7% would be to shift investment into a house for living in. I would aim for a duplex/triplex to also have income from the property, if the numbers made sense, which they often don't in California, but that's another question. At your financial level -- never, never, never give cash to a charity. You will get marked as a "soft target" and every commercial fundraiser on earth will stalk you for the rest of your life. At your level, you open a Donor Advised Fund, and let the Fund do your giving for you. Once you've funded it (which is tax deductible) you later tell them which charities to fund when. They screen out fake charities and protect your identity. I discuss DAFs at length here. Now when "charities" harass you for an immediate handout, just tell them that's not how you support charities. |
How do banks lose money on foreclosures? | Someone has to hand out cash to the seller. Even if no physical money changes hands (and I've bought a house; I can tell you a LOT of money changes hands at closing in at least the form of a personal check), and regardless of exactly how the bank accounts for the actual disbursement of the loan, the net result is that the buyer has cash that they give the seller, and are now in debt to the bank for least that amount (but, they now have a house). Now, the bank probably didn't have that money just sitting in its vault. Money sitting in a vault is money that is not making more money for the bank; therefore most banks keep only fractionally more than the percentage of deposit balances that they are required to keep by the Feds. There are also restrictions on what depositors' money can be spent on, and loans are not one of them; the model of taking in money in savings accounts and then loaning it out is what caused the savings and loan collapse in the 80s. So, to get the money, it turns to investors; the bank sells bonds, putting itself in debt to bond holders, then takes that money and loans it out at a higher rate, covering the interest on the bond and making itself a tidy profit for its own shareholders. Banks lose money on defaults in two ways. First, they lose all future interest payments that would have been made on the loan. Technically, this isn't "revenue" until the interest is calculated for each month and "accrues" on the loan; therefore, it doesn't show on the balance sheet one way or the other. However, the holders of those bonds will expect a return, and the banks no longer have the mortgage payment to cover the coupon payments that they themselves have to pay bondholders, creating cash flow problems. The second, and far more real and damaging, way that banks lose money on a foreclosure is the loss of collateral value. A bank virtually never offers an unsecured "signature loan" for a house (certainly not at the advertised 3-4% interest rates). They want something to back up the loan, so if you disappear off the face of the earth they have a clear claim to something that can help them recover their money. Usually, that's the house itself; if you default, they get the house from you and sell it to recover their money. Now, a major cause of foreclosure is economic downturn, like the one we had in 2009 and are still recovering from. When the economy goes in the crapper, a lot of things we generally consider "stores of value" lose that value, because the value of the whatzit (any whatzit, really) is based on what someone else would pay to have it. When fewer people are looking to buy that whatzit, demand drops, bringing prices with it. Homes and real estate are one of the real big-ticket items subject to this loss of value; when the average Joe doesn't know whether he'll have a job tomorrow, he doesn't go house-hunting. This average Joe may even be looking to sell an extra parcel of land or an income property for cash, increasing supply, further decreasing prices. Economic downturn can often increase crime and decrease local government spending on upkeep of public lands (as well as homeowners' upkeep of their own property). By the "broken window" effect, this makes the neighborhood even less desirable in a vicious cycle. What made this current recession a double-whammy for mortgage lenders is that it was caused, in large part, by a housing bubble; cheap money for houses made housing prices balloon rapidly, and then when the money became more expensive (such as in sub-prime ARMs), a lot of those loans, which should never have been signed off on by either side, went belly-up. Between the loss of home value (a lot of which will likely turn out to be permanent; that's the problem with a bubble, things never recover to their peak) and the adjustment of interest rates on mortgages to terms that will actually pay off the loan, many homeowners found themselves so far underwater (and sinking fast) that the best financial move for them was to walk away from the whole thing and try again in seven years. Now the bank's in a quandary. They have this loan they'll never see repaid in cash, and they have this home that's worth maybe 75% of the mortgage's outstanding balance (if they're lucky; some homes in extremely "distressed" areas like Detroit are currently trading for 30-40% of what they sold for just before the bubble burst). Multiply that by, say, 100,000 distressed homes with similar declines in value, and you're talking about tens of billions of dollars in losses. On top of that, the guarantor (basically the bank's insurance company against these types of losses) is now in financial trouble themselves, because they took on so many contracts for debt that turned out to be bad (AIG, Fannie/Freddie); they may very well declare bankruptcy and leave the bank holding the bag. Even if the guarantor remains solvent (as they did thanks to generous taxpayer bailouts), the bank's swap contract with the guarantor usually requires them to sell the house, thus realizing the loss between what they paid and what they finally got back, before the guarantor will pay out. But nobody's buying houses anymore, because prices are on their way down; the only people who'd buy a house now versus a year from now (or two or three years) are the people who have no choice, and if you have no choice you're probably in a financial situation that would mean you'd never be approved for the loan anyway. In order to get rid of them, the bank has to sell them at auction for pennies on the dollar. That further increases the supply of cheap homes and further drives down prices, making even the nicer homes the bank's willing to keep on the books worth less (there's a reason these distresed homes were called "toxic assets"; they're poisonous to the banks whether they keep or sell them). Meanwhile, all this price depression is now affecting the people who did everything right; even people who bought their homes years before the bubble even formed are watching years of equity-building go down the crapper. That's to say nothing of the people with prime credit who bought at just the wrong time, when the bubble was at its peak. Even without an adjusting ARM to contend with, these guys are still facing the fact that they paid top dollar for a house that likely will not be worth its purchase price again in their lifetime. Even with a fixed mortgage rate, they'll be underwater, effectively losing their entire payment to the bank as if it were rent, for much longer than it would take to have this entire mess completely behind them if they just walked away from the whole thing, moved back into an apartment and waited it out. So, these guys decide on a "strategic default"; give the bank the house (which doesn't cover the outstanding balance of course) and if they sue, file bankruptcy. That really makes the banks nervous; if people who did everything right are considering the hell of foreclosure and bankruptcy to be preferable to their current state of affairs, the bank's main threat keeping people in their homes is hollow. That makes them very reluctant to sign new mortgages, because the risk of default is now much less certain. Now people who do want houses in this market can't buy them, further reducing demand, further decreasing prices... You get the idea. That's the housing collapse in a nutshell, and what banks and our free market have been working through for the past five years, with only the glimmer of a turnaround picking up home sales. |
How to calculate money needed for bills, by day | If I understand you right, what you need is the minimum amount in the account until your next deposit. So for example, if today is the 10th and you get paid on the 15th, how much do I need to have in the account, so I know how much I can spend? That amount should be all of the bills that will be paid between today and the 15th. An alternative would just to keep a running balance and see what the minimum value is. My personal finance software does that for me, but it's possible, although a little more complicated, in Excel. You'd have to find the date of the next deposit, and do a SUMIF looking for dates between today and that date. That's about as far as I can get without getting off-topic. |
When to register for a bank account for a C-Corp with no official money | Technically, it's only when you need to pass money through. However consider that the length the account has been open builds history with the financial institution, so I'd open ASAP. Longer history with the bank can help with getting approved for things like business credit lines, business cards, and other perks, though if you're not making money with that business, seek out a bank that does not charge money to have a business account open with them. |
Negative Balance from Automatic Options Exercise. What to do? | Automatic exercisions can be extremely risky, and the closer to the money the options are, the riskier their exercisions are. It is unlikely that the entire account has negative equity since a responsible broker would forcibly close all positions and pursue the holder for the balance of the debt to reduce solvency risk. Since the broker has automatically exercised a near the money option, it's solvency policy is already risky. Regardless of whether there is negative equity or simply a liability, the least risky course of action is to sell enough of the underlying to satisfy the loan by closing all other positions if necessary as soon as possible. If there is a negative equity after trying to satisfy the loan, the account will need to be funded for the balance of the loan to pay for purchases of the underlying to fully satisfy the loan. Since the underlying can move in such a way to cause this loan to increase, the account should also be funded as soon as possible if necessary. Accounts after exercise For deep in the money exercised options, a call turns into a long underlying on margin while a put turns into a short underlying. The next decision should be based upon risk and position selection. First, if the position is no longer attractive, it should be closed. Since it's deep in the money, simply closing out the exposure to the underlying should extinguish the liability as cash is not marginable, so the cash received from the closing out of the position will repay any margin debt. If the position in the underlying is still attractive then the liability should be managed according to one's liability policy and of course to margin limits. In a margin account, closing the underlying positions on the same day as the exercise will only be considered a day trade. If the positions are closed on any business day after the exercision, there will be no penalty or restriction. Cash option accounts While this is possible, many brokers force an upgrade to a margin account, and the ShareBuilder Options Account Agreement seems ambiguous, but their options trading page implies the upgrade. In a cash account, equities are not marginable, so any margin will trigger a margin call. If the margin debt did not trigger a margin call then it is unlikely that it is a cash account as margin for any security in a cash account except for certain options trades is 100%. Equities are convertible to cash presumably at the bid, so during a call exercise, the exercisor or exercisor's broker pays cash for the underlying at the exercise price, and any deficit is financed with debt, thus underlying can be sold to satisfy that debt or be sold for cash as one normally would. To preempt a forced exercise as a call holder, one could short the underlying, but this will be more expensive, and since probably no broker allows shorting against the box because of its intended use to circumvent capital gains taxes by fraud. The least expensive way to trade out of options positions is to close them themselves rather than take delivery. |
If early exercise is a bad idea, why American option is more expensive than European [duplicate] | There are a few situations in which it may be advantageous to exercise early. Wikipedia actually has a good explanation: Option Style, Difference in value To account for the American's higher value there must be some situations in which it is optimal to exercise the American option before the expiration date. This can arise in several ways, such as: An in the money (ITM) call option on a stock is often exercised just before the stock pays a dividend that would lower its value by more than the option's remaining time value. A put option will usually be exercised early if the underlying asset files for bankruptcy.[3] A deep ITM currency option (FX option) where the strike currency has a lower interest rate than the currency to be received will often be exercised early because the time value sacrificed is less valuable than the expected depreciation of the received currency against the strike. An American bond option on the dirty price of a bond (such as some convertible bonds) may be exercised immediately if ITM and a coupon is due. A put option on gold will be exercised early when deep ITM, because gold tends to hold its value whereas the currency used as the strike is often expected to lose value through inflation if the holder waits until final maturity to exercise the option (they will almost certainly exercise a contract deep ITM, minimizing its time value).[citation needed] |
Indie Software Developers - How do I handle taxes? | Congratulations! I would start with an attorney. As a 17 year old, you legally cannot sign contracts, so you're going to have to setup some sort of structure with your parents first. Get attorney references -- your parents can ask around at work, if you're friendly with any business owners, ask them, etc. Talk to a few and pick someone who you are comfortable with. Ask your attorney for advice re: sole proprietor/S-Corp/LLC. You have assets, and your parents presumably have some assets, so you need advice about isolating your business from the rest of your life. Do the same thing for accountant references, but ask your attorney for a reference as well. |
I have a million dollars of disposable income. What should I do to best benefit the economy? | At first, I thought this might be too broad. There are of course thousands of things that you can do with your money to "help the economy". But I think that there is room to discuss some broad strokes without trying to list a thousand details. Regular investing (as you are now) helps the economy in that companies obtain money by selling their stock. They can then use that money to fund expansion, etc. These things can help the economy permanently. Of course, they can also use the money to pay executive bonuses, which don't help the economy so much. Similarly, just spending money does not normally help the economy. Unless we are in a recession, it is mildly harmful to spend wastefully. Money that could be going to support long term improvements in production instead is used to buy a luxury that doesn't terribly interest you. I.e. if you don't want a bigger house or a more luxurious car don't buy it to "stimulate" the economy. Many charitable donations have the same problem. They help short term consumption somewhere. And of course the charity starts asking you for more money. Many charities waste most of a donation trying to get another one from the same person or family. Sir John Maynard Keynes proposed that the best thing that people could do to help the economy is to invest in things that cause economic activity in turn. He was mostly talking about things like roads, bridges, and dams that are out of the investing range of most people, so he wanted governments to do it, particularly during a recession. So we are looking for ways to invest in durable improvements that will support economic activity in the future. A million dollars is a small amount for many things, but there are some activities that work. I'm going to list a few examples, but there are certainly others: Fund microfinance. Basically loan your million dollars to people who need a small amount of money. These programs often allow you to determine the initial recipient and then that person determines the next recipient. A million dollars can finance hundreds if not thousands of these loans. They may be in the United States or in a developing country. Set up a scholarship. My recommendation would be to find an existing scholarship with a few recipients and ask them to add one a year for the million dollars. A million dollars should typically produce about a scholarship a year in returns after inflation. Of course, that's just regular inflation. Education inflation is higher. Solar prize. Fund a program that gives out one solar installation every year or five to a family that owns a house, is struggling to pay utilities, and makes a compelling case. Basically, whenever the investment grows enough to support it, make a new prize. Buy something that will help other people make money. This is just six ideas off the top of my head. The goal here is to create something lasting that will promote economic activity. So a program that loans money forward. Or a scholarship or free textbook, particularly in a STEM field. A small piece of infrastructure that helps people move around to work or spend their money. Solar is a bit of a stretch here, but it can be justified if you believe that an investment now is an investment in moving towards the future. The key thing here is to make your money do double duty. By spending your money during a recession or investing during the rest of the business cycle, you can get some value for your money. But even better is if that spending has a societal return as well. Microfinance, scholarships, and infrastructure do that. There is the immediate spending, plus there is the effect of the spending. A business is established. A mind is trained and working at a high income job. People can move, work, and spend their own money. |
How to help a financially self destructive person? | Wow. Just ... wow. We all must start where we are, I guess. The past is the past. There almost certainly isn't a cheap way to fix this. You're already on the hook for $4k per month. Your money is enabling her behavior. You'd rather not enable her behavior, but the money is part of the consequences of your divorce, so into her bank account it goes. Those who control how much alimony your ex-wife receives might reach the conclusion she needs more. That's not a hard conclusion for them to make. It's not their money. The living conditions are hurting your kids, and that's unfortunate, but that's also part of the consequences of your divorce. If it's deemed that your kids are better off not visiting her, then you might be relieved of paying child support (since you're supporting them at that point) but you might still be supporting her until some trigger is met, which might be never. (You know those details better than I do, of course.) If she's already lost her house, filed for bankruptcy, borrowed money from people that she hasn't paid back, and gets a check from you each month and still has utilities shut off, she'll continue to deteriorate financially until she hits rock bottom. Then, and only then, will she see the need to fix her behavior. Now, the (possibly) million dollar question for you is, "Where is rock bottom?" Do what you can to make that happen sooner rather than later, because you'll likely be subsidizing her all the way down, and part of the way back up. You've lost most of the leverage you once had to change her behavior, but try every way you can. You might hit the jackpot. |
Should I finance a new home theater at 0% even though I have the cash for it? | I won't repeat what's already been said, but I agree that it's a good move to take advantage of the free financing so long as you read the fine print carefully, keep the money designated to pay off this debt and not use it for anything else, and make sure to pay it off before you get smacked with some bad interest. One thing that hasn't been mentioned is that this kind of offer can help build credit. You mentioned that you already have excellent credit, but for someone who has good credit, this could be an account that, if used carefully, could give their credit a boost by adding to their history of on-time payments. |
Do individual investors use Google to obtain stock quotes? | I won't be able to model stock prices using this information. The pros aren't likely to use Google as much. Even the casual investor is likely to have his own habits. For example, I've come to like how Yahoo permits me to set up a portfolio and follow the stocks I want. And the information that interests me is there, laid out nicely, price, history, insider trades, news etc. But your effort probably still has some discovery value, as it will help you understand when interest in a company suddenly swells above normal. Nothing wrong with a good project like that. Just don't expect to extract too much market-beating success from it. The pros will eat your lunch, take your money, and not even say thanks. Welcome to Money.SE. |
Do capital gains get factored into AGI? | I believe that capital gains do affect AGI, but if she sells $40k of stock, then the AGI doesn't go up by $40k, it only goes up by the gains (gross proceeds of the sale minus cost basis). So if she paid $30k for that stock, then the AGI goes up by $10k not $40k. |
Should I be filling out form W-9 for somebody I sold used equipment to? | They are a business. You're not a corporation. They paid you more than $600 during the year, so they're supposed to send 1099 to you and the IRS about it. They need your taxpayer certification (W9) for that. They were supposed to ask for it before they paid you, but yes - they're supposed to ask for it. |
US: Basics of taxation of stocks | E.g. I buy 1 stock unit for $100.00 and sell it later for $150.00 => income taxes arise. Correct. You pay tax on your gains, i.e.: the different between net proceeds and gross costs (proceeds sans fees, acquisition costs including fees). I buy 1 stock unit for $150.00 and sell it later for $100.00 => no income taxes here. Not correct. The loss is deductible from other capital gains, and if no other capital gains - from your income (up to $3000 a year, until exhausted). Also, there are two different tax rate sets for capital gains: short term (holding up to 1 year) and long term (more than that). Short term capital gains tax matches ordinary income brackets, whereas long term capital gains tax brackets are much lower. |
Income tax on my online drop-shipping business (India) | Please consult a tax advisor. You may be voilating the FEMA [Foreign Exchange Management Act] and can land into trouble. Further what you are doing can land up into various other acts as illegal including AML. Further if there is income generated by Indian citizen in India, he is still liable to pay tax, irrespective of whether you get the funds back into India. Edit: AML is Anti Money Laundering. Your transaction is sure to raise AML triggers as it looks like converting Black Money to White in round about way. Once the triggers are raised, RBI division will investigate further to verify what you are doing. If you are able to prove that this is a valid transaction, you would be OK on AML front. How will Income Tax Know? - If they don't know does not mean you are not liable for tax. - Any suspicious transactions would get investigated and sooner or later Income Tax would know about it and can cause a serious problem. - It is irrelevant where you have kept the money, if you have earned something, its taxable. For it not to be taxable you need to conduct this business differently. Please consult a tax adviser who will advice you on the tax-ability of this type of transaction. |
Can zero-coupon bonds go down in price? | Certainly, yes, a zero coupon bond can go down in price. If interest rates rise before your bond matures, the price of the bond will go down – and the longer to maturity, the more it will tend to drop. Depending on when you bought and how much interest rates rise, you can incur a capital loss. The bond is guaranteed to be worth a certain amount at maturity as long as the issuer hasn't defaulted, but before maturity the market price of the bond will fluctuate, primarily based on interest rate movements. In fact, zero coupon bonds are even more interest-rate-sensitive than regular bonds (which have periodic coupon interest payments.) |
How to protect a Stock you still want to own from a downturn? | If you really believe in the particular stocks, then don't worry about their daily price. Overall if the company is sound, and presumably paying a dividend, then you're in it for the long haul. Notwithstanding that, it is reasonable to look for a way out. The two you describe are quite different in their specifics. Selling sounds like the simpler of the two, but the trigger event, and if it is automatic or "manual" matters. If you are happy to put in a sell order at some time in the future, then just go ahead with that. Many brokers can place a STOP order, that will trigger on a certain price threshold being hit. Do note, however, that by default this would place a market order, and depending on the price that breaks through, in the event of a flash crash, depending on how fast the brokers systems were, you could find yourself selling quite cheaply. A STOP LIMIT order will place a limit order at a triggered price. This would limit your overall downside loss, but you might not sell at all if the market is really running away. Options are another reasonable way to deal with the situation, sort of like insurance. In this case you would likely buy a PUT, which would give you the right, but not the obligation to sell the stock at the price the that was specified in the option. In this case, no matter what, you are out the price of the option itself (hence my allusion to insurance), but if the event never happens then that was the price you paid to have that peace of mind. I cannot recommend a specific course of action, but hopefully that fleshed out the options you have. |
For young (lower-mid class) investors what percentage should be in individual stocks? | You should only invest in individual stocks if you truly understand the company's business model and follow its financial reports closely. Even then, individual stocks should represent only the tiniest, most "adventurous" part of your portfolio, as they are a huge risk. A basic investing principle is diversification. If you invest in a variety of financial instruments, then: (a) when some components of your portfolio are doing poorly, others will be doing well. Even in the case of significant economic downturns, when it seems like everything is doing poorly, there will be some investment sectors that are doing relatively better (such as bonds, physical real estate, precious metals). (b) over time, some components of your portfolio will gain more money than others, so every 6 or 12 months you can "rebalance" such that all components once again have the same % of money invested in them as when you began. You can do this either by selling off some of your well-performing assets to purchase more of your poorly-performing assets or (if you don't want to incur a taxable event) by introducing additional money from outside your portfolio. This essentially forces you to "buy (relatively) low, sell (relatively) high". Now, if you accept the above argument for diversification, then you should recognize that owning a handful (or even several handfuls) of individual stocks will not help you achieve diversification. Even if you buy one stock in the energy sector, one in consumer discretionary, one in financials, etc., then you're still massively exposed to the day-to-day fates of those individual companies. And if you invest solely in the US stock market, then when the US has a decline, your whole portfolio will decline. And if you don't buy any bonds, then again when the world has a downturn, your portfolio will decline. And so on ... That's why index mutual funds are so helpful. Someone else has already gone to the trouble of grouping together all the stocks or bonds of a certain "type" (small-cap/large-cap, domestic/foreign, value/growth) so all you have to do is pick the types you want until you feel you have the diversity you need. No more worrying about whether you've picked the "right" company to represent a particular sector. The fewer knobs there are to turn in your portfolio, the less chance there is for mistakes! |
What's the catch with biweekly mortgage payments? | Making extra principal payments will reduce the term of your loan. I wouldn't sign up for a biweekly schedule, just do it yourself so you have more flexibility. A simple spreadsheet will allow you to play "What if?" and make it clear that extra principal payments are most effective early in the term of the loan. My wife and I paid off our home in less than 10 years with this approach. Some will say that the opportunity costs of not using that money for something else outweighs the gains. I would say that not having a mortgage has a positive impact on your cash flow and your assets (you own the home), which combine to create more opportunity, not less. That being said, It should be obvious that paying off higher interest debt first is the priority, (Paying off a zero percent interest car loan early is just foolish) |
How to prevent myself from buying things I don't want | My approach won't work for everyone, but I keep a longer list of things I want in my head, preferably including higher value items. I then look at the cost of an item vs the amount of benefit it gets me (either enjoyment or ability to make more money or both). If I only had a few things I wanted, it would be easy to buy them even if the payback wasn't that great, but because I have a large list of things I'd like to be able to do, it's easier to play the comparison game in my head. Do I want this $50 thing now that will only give me a little bit of enjoyment and no income, or would I rather be able to get that $3000 digital cinema camera that I would enjoy having and could work on projects with and actually make money off of? (This is a RL example that I actually just bought last week after making sure I had solid leads on enough projects to pay myself back over time.) For me, it is much easier to compare with an alternative thing I'd enjoy, particularly since I enjoy hobbies that can pay for themselves, which is really the situation this strategy works best in. It might not work for everyone, but hobbies that pay for themselves can take many different forms. Mine tends to be very direct (get A/V tool, do projects that pay money), but it can also be indirect (get sports stuff, save on gym membership over time). If you can get things onto your list that can save you money in the long run, then this strategy can work pretty well, if not, you'll still have the overall saving problem, just with a longer wish list. That said, if you are good about saving already and simply want to make better use of your disposable income, then having a longer list may also work to let you seek out better deals for you. If you have funds that you know you can healthily spend on enjoyment, it is going to be difficult to choose nothing over something that gives enjoyment, even if it isn't a great return on the money. If you have alternatives that would give you better value, then it's easier to avoid the low value option. |
Is Pension Benefit Information (aboutmyletter.com) legitimate? | I have no personal knowledge of this company; I've only looked over what I found on the web. Overall, my judgement is that Pension Benefit Information, Inc. of San Rafael, CA is likely legitimate and aboutmyletter.com is one of two sites run by them (the other being pbinfo.com). These two sites are registered to Pension Benefit Information, Inc. (aboutmyletter uses Network Solutions privacy service but gives the company name; pbinfo uses their name and San Rafael address.) They are in the BBB. The president (of the 8 employee Co.), Susan McDonald, has testified (PDF on .gov site) before Congress about business uses of SSNs. They made a (very schlocky) video, which has an interview with McDonald after several canned, generic, "impressive" introductions. I found the interview convincing of a person actually running a small, real business of this type. A short version is on their site, long version here. There are some queries about their legitimacy online (like this one), but I found nothing negative on them, and one somewhat positive. One article talks about the suspicions they run into when contacting participants, and has some advice. Also, scammers are unlikely to pay the U.S. Postal Service money to send paper letters. So what are the dangers? Money or identity. So don't pay them any fees (now or later), especially since it looks like their clients (retirement funds) pay on the other side. As for identity information: What's in the letter? Don't they show that they already know a bunch about you? Old employer? Maybe the last four digits of your SSN? Your address (if this is not the forwarded-by-IRS type of contact letter). Other things, maybe? What information would you be giving up if you did respond to them fully? You could try contacting your old company directly (mentioning PBI, Inc,), although on their website PBI says you'll have to go through them. (They probably get paid for each successful contact, and deserve it.) Still, responding through mail or telephone to PBI seems like the reasonable thing to do. |
How to manage 20 residential apartments | If he can't manage, best is he sells it off. Its easier to manage cash. Not sure what tax you are talking about. He should have already paid tax on fair market value of the 20 flats. If the intention of Mr X is to gift to son by way of death, then yes the tax will be less. Else whenever Mr X sells there will be tax. how to manage these 20 apartments? Hire a broker. He may front run quite a few things like showing the place etc. There is a risk if he is given a free hand, he may not get good quality tenant. There are quite a few shark brokers [its unregulated] who may arm twist seeing the opportunity of an old man with 20 flats. See if you can do long term lease with companies looking for guest house etc, or certain companies who run guest house. They would like the scale, generally 3-5 years contracts are done. The rent is good and overall less hassle. The risk is most would ask to invest more in furnishing and contracts can be terminated in months notice. If the property is in large metro [Delhi/Bangalore/Chennai/etc] These places have good property management companies. Ensure that you have independent lawyer; there are certain aspects of law that may need to be studied. |
Mortgage or not? | If you do as you propose you are going to get burned. You need to sell, then start to rent. amongst other things. Since 2008, the economy never "recovered," but was sort of stabilized temporarily like a fighter on the ropes. The economy is beginning to collapse again, and that collapse will accelerate around the Fall. The dollar too will also begin its delayed downward fall come Autumn. Just one example of what I speak: https://research.stlouisfed.org/fred2/series/CIVPART I would be happy to tell you more if you like, but I am already going to get pilloried for what I have already said. I do not sell anything, or push anything, but since you asked, and I follow this day in and day out, I thought that I would give you my very well informed answer. Take it for what it's worth. So let me know if you want more. |
taxes, ordinary income, and adjusted cost basis for RSUs | What happened is that they do not track (and report) your original cost basis for 1099-B purposes. That is because it is an RSU. Instead, they just reported gross proceeds ($5200) and $0 for everything else. On your Schedule D you adjust the basis to the correct one, and as a comment you add that it was reported on W2 of the previous year. You then report the correct $1200 gain. You keep the documentation you have to back this up in case of questions (which shouldn't happen, since it will match what was indeed reported on your W2). |
Started new job. Rollover previous employer 401k to new 401k, IRA or Roth IRA? | I agree with harmanjd – best to roll it over to an IRA. Not only does that afford you better control of your money as pointed out already, but: If you choose your IRA provider wisely, you can get an account that provides you with a much wider array of investing choices, including funds and ETFs that charge much lower fees than what you would have had access to in an employer 401(k) plan. But here's one thing to consider first: Do you hold any of your previous employer's stock in your old 401(k)? There are special rules you might want to be aware of. See this article at Marketwatch: If your 401(k) includes your company's stock, a rollover may be a bad move. Additional Resource: |
Is there a benefit, long term, to life insurance for a youngish, debt, and dependent free person? | If there are no dependents, there is no need for life insurance. You mention getting insurance when it is not needed, to protect you against some future risk. If you have a policy and a disease crops up that would normally make you un-insurable, you can keep your insurance for the rest of the term. The cost for this would be very high. You would have to have a term that would last decades to cover you until some future child is out of college. If you never have somebody that depends on you for income, there never is a need for life insurance. |
Why would anyone want to pay off their debts in a way other than “highest interest” first? | This is a slightly different reason to any other answer I have seen here about irrationality and how being rationally aware of one's irrationality (in the future or in different circumstances) can lead you to make decisions which on the face of it seem wrong. First of all, why do people sometimes maintain balances on high-interest debt when they have savings? Standard advice on many money-management sites and forums is to withdraw the savings to pay down the debt. However, I think there is a problem with this. Suppose you have $5,000 in a savings account, and a $2,000 credit card balance. You are paying more interest on the credit card than you get from the savings account, and it seems that you should withdraw some money from the savings account, and pay off the cc. However, the difference between the two scenarios, other than the interest you lose by keeping the cc balance, is your motivation for saving. If you have a credit card balance of $2,000, you might be obliged to pay a minimum payment of $100 each month. If you have any extra money, you will be rewarded if you pay more in to the credit card, by seeing the balance go down and understanding that you will soon be free from receiving this awful bill each month. To maintain your savings goal, it's enough to agree with yourself that you won't do any new spending on the cc, or withdraw any savings. Now suppose that you decide to pay off the cc with the savings. There is now nothing 'forcing' you to save $100 each month. When you get to the end of the month, you have to motivate yourself that you will be adding spare cash to your $3,000 savings balance, rather than that you 'have to' pay down your cc. Yes, if you spend the spare cash instead of saving it, you get something in return for it. But it is possible that spending $140 on small-scale discretionary spending (things you don't need) actually gets you less for your money than paying the credit card company $40 interest and saving $100? You might even be tempted to start spending on your credit card again, knowing that you have a 0 balance, and that you 'can always pay it off out of savings'. It's easy to analogize this to a situation with two types of debt. Suppose that you have a $2,000 debt to your parents with no interest and a $2,000 loan at high interest, and you get a $2,000 windfall. Let's assume that your parents don't need the money in a hurry and aren't hassling you to pay them (otherwise you could consider the guilt or the hassle as a form of emotional interest rate). Might it not be better to pay your parents off? If you do, you are likely to keep paying off your loan out of necessity of making the regular payments. In 20 paychecks (or whatever) you might be debt free. If you pay off your loan, you lose the incentive to save. After 20 months you still owe your parents $2,000. I am not saying that this is always what makes sense. Just that it could make sense. Note that this is an opposite to the 'Debt Snowball' method. That method says that it's better to pay off small debts, because that way you have more free cash flow to pay off the larger debts. The above argues that this is a bad idea, because you might spend the increased cash flow on junk. It would be better to keep around as many things as possible which have minimum payments, because it restricts you to paying things rather than gives you the choice of whether to save or spend. |
Is there any site you can find out about the 'bonus features' of credit cards? | Billshrink offers some pretty neat analysis tools to help you pick a credit card. They focus more on rewards than the features you mention but it might be worth a look. If you use Mint, they offer a similar service, too. If you're not already using Mint, though, I'd look at Billshrink as Mint requires some extensive setup. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team |
Why not just invest in the market? | Let me start by giving you a snippet of a report that will floor you. Beat the market? Investors lag the market by so much that many call the industry a scam. This is the 2015 year end data from a report titled Quantitive Analysis of Investor Behavior by a firm, Dalbar. It boggles the mind that the disparity could be this bad. A mix of stocks and bonds over 30 years should average 8.5% or so. Take out fees, and even 7.5% would be the result I expect. The average investor return was less than half of this. Jack Bogle, founder of Vanguard, and considered the father of the index fund, was ridiculed. A pamphlet I got from Vanguard decades ago quoted fund managers as saying that "indexing is a path to mediocrity." Fortunately, I was a numbers guy, read all I could that Jack wrote and got most of that 10.35%, less .05, down to .02% over the years. To answer the question: psychology. People are easily scammed as they want to believe they can beat the market. Or that they'll somehow find a fund that does it for them. I'm tempted to say ignorance or some other hint at lack of intelligence, but that would be unfair to the professionals, all of which were scammed by Madoff. Individual funds may not be scams, but investors are partly to blame, buy high, sell low, and you get the results above, I dare say, an investor claiming to use index funds might not fare much better than the 3.66% 30 year return above, if they follow that path, buying high, selling low. Edit - I am adding this line to be clear - My conclusion, if any, is that the huge disparity cannot be attributed to management, a 6.7% lag from the S&P return to what the average investor sees likely comes from bad trading. To the comments by Dave, we have a manager that consistently beats the market over any 2-3 year period. You have been with him 30 years and are clearly smiling about your relationship and investing decision. Yet, he still has flows in and out. People buy at the top when reading how good he is, and selling right after a 30% drop even when he actually beat by dropping just 22%. By getting in and out, he has a set of clients with a 30 year record of 6% returns, while you have just over 11%. This paragraph speaks to the behavior of the investor, not managed vs indexed. |
Will I be able to purchase land? | Here are some important things to think about. Alan and Denise Fields discuss them in more detail in Your New House. Permanent work. Where do you want to live? Are there suitable jobs nearby? How much do they pay? Emergency fund. Banks care that you have "reserves" (and/or an unsecured line of credit) in case you have a run of bad luck. This also helps with float the large expenses when closing a loan. Personal line of credit. Who are you building for? If you are not married, then you should consider whether building a home makes that easier, or harder. If you hope to have kids, you should consider whether your home will make it easier to have kids, or harder. If you are married (or seriously considering it), make sure that your spouse helps with the shopping, and is in agreement on the priorities and choices. If you are not married, then what will you do if/when you get married? Will you sell? expand? build another house on the same lot? rent the home out? Total budget. How much can the lot, utilities, permits, taxes, financing charges, building costs, and contingency allowance come to? Talk with a banker about how much you can afford. Talk with a build-on-your-lot builder about how much house you can get for that budget. Consider a new mobile or manufactured home. But if you do choose one, ask your banker how that affects what you can borrow, and how it affects your rates and terms. Talk with a good real estate agent about how much the resale value might be. Finished lot budget. How much can you budget for the lot, utilities, permits required to get zoning approval, fees, interest, and taxes before you start construction? Down payment. It sounds like you have a plan for this. Loan underwriting. Talk with a good bank loan officer about what their expectations are. Ask about the "front-end" and "back-end" Debt-To-Income ratios. In Oregon, I recommend Washington Federal for lot loans and construction loans. They keep all of their loans, and service the loans themselves. They use appraisers who are specially trained in evaluating new home construction. Their appraisers tend to appraise a bit low, but not ridiculously low like the incompetent appraisers used by some other banks in the area. (I know two banks with lots of Oregon branches that use an appraiser who ignores 40% of the finished, heated area of some to-be-built homes.) Avoid any institution (including USAA and NavyFed) that outsources their lending to PHH. Lot loan. In Oregon, Washington Federal offers lot loans with 30% down payments, 20-year amortization, and one point, on approved credit. The interest rate can be a fixed rate, but is typically a few percentage points per year higher than for a mortgage secured by a permanent house. If you have the financial wherewithal to start building within two years, Washington Federal also offers short-term lot loans. Ask about the costs of appraisals, points, and recording fees. Rent. How much will it cost to rent a place to live, between when you move back to Oregon, and when your new home is ready to move into? Commute. How much time will it take to get from your new home to work? How much will it cost? (E.g., car ownership, depreciation, maintenance, insurance, taxes, fuel? If public transportation is an option, how much will it cost?) Lot availability. How many are there to choose from? Can you talk a farmer into selling off a chunk of land? Can you homestead government land? How much does a lot cost? Is it worth getting a double lot (or an extra large lot)? Utilities. Do you want to live off the grid? Are you willing to make the choices needed to do that? (E.g., well, generator, septic system, satellite TV and telephony, fuel storage) If not, how much will it cost to connect to such systems? (For practical purposes, subtract twice the value of these installation costs from the cost of a finished lot, when comparing lot deals.) Easements. These provide access to your property, access for others through your property, and affect your rights. Utility companies often ask for far more rights than they need. Until you sign on the dotted line, you can negotiate them down to just what they need. Talk to a good real estate attorney. Zoning. How much will you be allowed to build? (In terms of home square footage, garage square footage, roof area, and impermeable surfaces.) How can the home be used? (As a business, as a farm, how many unrelated people can live there, etc.) What setbacks are required? How tall can the building(s) be? Are there setbacks from streams, swamps, ponds, wetlands, or steep slopes? Choosing a builder. For construction loans, banks want builders who will build what is agreed upon, in a timely fashion. If you want to build your own house, talk to your loan officer about what the bank expects in a builder. Plansets and permits. The construction loan process. If you hire a general contractor, and if you have difficulties with the contractor, you might be forced to refuse to accept some work as being complete. A good bank will back you up. Ask about points, appraisal charges, and inspection fees. Insurance during construction. Some companies have good plans -- if the construction takes 12 months or less. Some (but not all) auto insurance companies also offer good homeowners' insurance for homes under construction. Choose your auto insurance company accordingly. Property taxes. Don't forget to include them in your post-construction budget. Homeowners' insurance. Avoid properties that need flood insurance. Apply a sanity check to flood maps -- some of them are unrealistic. Strongly consider earthquake insurance. Don't forget to include these costs in your post-construction budget. Energy costs. Some jurisdictions require you to calculate how large a heating system you need. Do not trust their design temperatures -- they may not allow for enough heating during a cold snap, especially if you have a heat pump. (Some heat pumps work at -10°F -- but most lose their effectiveness between 10°F and 25°F.) You can use these calculations, in combination with the number of "heating degree days" and "cooling degree days" at your site, to accurately estimate your energy bills. If you choose a mobile or manufactured home, calculate how much extra its energy bills will be. Home design. Here are some good sources of ideas: A Pattern Language, by Christopher Alexander. Alexander emphasizes building homes and neighborhoods that can grow, and that have niches within niches within niches. The Not-So-Big House, by Sarah Susanka. This book applies many Alexander's design patterns to medium and large new houses. Before the Architect. The late Ralph Pressel emphasized the importance of plywood sheathing, flashing, pocket doors, wide hallways, wide stairways, attic trusses, and open-truss or I-joist floor systems. Lots of outlets and incandescent lighting are good too. (It is possible to have too much detail in a house plan, and too much room in a house. For examples, see any of his plans.) Tim Garrison, "the builder's engineer". Since Oregon is in earthquake country -- and the building codes do not fully reflect that risk -- emphasize that you want a building that would meet San Jose, California's earthquake code. |
Can I deduct taxes for home office as a freelance computer software developer? | This answer is assuming you're in the US, which apparently you're not. I doubt that the rules in the EU are significantly different, but I don't know for sure. In case of an IRS control, is it ok to say that I regularly connect remotely to work from home although in the work contract it says I must work at client's office? No. Are there any other ways I can prove that this deduction is valid? No. You can't prove something is valid when its not. You can only deduct home office expense if it is used exclusively for your business, and your bedroom obviously is not. |
Do you avoid tax when taking a home equity loan? | Loans are not taxable events. The equity you took out is not income. It's a loan, and you pay it back with interest. You pay taxes on the capital gain of the home when you sell it. The tax does not take into account any mortgages, HELOCs, or other loans secured by the house. Instead the tax is calculated based on the price you sold it for, minus the price you bought it for, which is known as the capital gain. You can exclude $250k of that gain for a single person, $500k for a married couple. (There are a few other wrikles as well.) That would be true regardless of the loan balance at the time. |
2008-2009 Stock Market Crash — what caused the second drop? | The second drop was part of the same event. The short-term resurgence is often called a "dead cat bounce". Mongus Pong's answer is a great answer, I'm going to approach from a more anecdotal POV. Think about the fear that was in the air in Fall 2008. From my recollection, that short-term stabilization came from the Fed, President, Congress, etc standing up and saying that the government would do everything in its power to maintain liquidity in the marketplace. So the fear of a broader collapse of investment banks (beyond Lehman Brothers, Merrill Lynch, etc) due to the Fed behaving as it did in 1929 was abated. By the time you got to Q1 of 2009, it became clear that business vaporized -- nothing was happening. No cars were selling, Christmas was dismal, vacations were cancelled. (example: I went on vacation to a fancy resort in December 2008 and paid $60/night for a $450/night room! The place was half empty.) |
Are you preparing for a possible dollar (USD) collapse? (How?) | I've thought of the following ways to hedge against a collapsing dollar: |
Building financial independence | It's important to have both long term goals and milestones along the way. In an article I wrote about saving 15% of one's income, I offered the following table: This table shows savings starting at age 20 (young, I know, so shift 2 years out) and ending at 60 with 18-1/2 year's of income saved due to investment returns. The 18-1/2 results in 74% of one's income replaced at retirement if we follow the 4% rule. One can adjust this number, assuming Social Security will replace 30%, and that spending will go down in retirement, you might need to save less than this shows. What's important is that as a starting point, it shows 2X income saved by age 30. Perhaps 1X is more reasonable. You are at just over .5X and proposing to spend nearly half of that on a single purchase. Financial independence means to somehow create an income you can live on without the need to work. There are many ways to do it, but it usually starts with a high saving rate. Your numbers suggest a good income now, but maybe this is only recently, else you'd have over $200K in the bank. I suggest you read all you can about investments and the types of retirement accounts, including 401(k) (if you have that available to you), IRA, and Roth IRA. The details you offer don't allow me to get much more specific than this. |
Why do 10 year Treasury bond yields affect mortgage interest rates? | Different bonds (and securitized mortgages are bonds) that have similar average lives tend to have similar yields (or at least trade at predictable yield spreads from one another). So, why does a 30 year mortgage not trade in lock-step with 30-year Treasuries? First a little introduction: Mortgages are pooled together into bundles and securitized by the Federal Agencies: Fannie Mae, Freddie Mac, and Ginnie Mae. Investors make assumptions about the prepayments expected for the mortgages in those pools. As explained below: those assumptions show that mortgages tend to have an average life similar to 10-year Treasury Notes. 100% PSA, a so-called average rate of prepayment, means that the prepayment increases linearly from 0% to 6% over the first 30 months of the mortgage. After the first 30 months, mortgages are assumed to prepay at 6% per year. This assumption comes from the fact that people are relatively unlikely to prepay their mortgage in the first 2 1/2 years of the mortgage's life. See the graph below. The faster the repayments the shorter the average life of the mortgage. With 150% PSA a mortgage has an average life of nine years. On average your investment will be returned within 9 years. Some of it will be returned earlier, and some of it later. This return of interest and principal is shown in the graph below: The typical investor in a mortgage receives 100% of this investment back within approximately 10 years, therefore mortgages trade in step with 10 year Treasury Notes. Average life is defined here: The length of time the principal of a debt issue is expected to be outstanding. Average life is an average period before a debt is repaid through amortization or sinking fund payments. To calculate the average life, multiply the date of each payment (expressed as a fraction of years or months) by the percentage of total principal that has been paid by that date, summing the results and dividing by the total issue size. |
Funneling money from a Traditional IRA to a Roth IRA using Options: Is my method possible and tax legal? | I am not a lawyer, but I can't think of a reason this is illegal (something that would be illegal would be to "trade with yourself" across the accounts to try to manipulate stock or option prices). I don't think you're "funneling," you're doing "asset location" which is a standard tax planning strategy. http://news.morningstar.com/articlenet/article.aspx?id=154126&t1=1303874170 discusses asset location. I'd be more concerned about whether it makes sense. |
Dealing with event driven market volatility | If you're worried about volatility, and you're in mostly long positions, you should be looking to diversify your portfolio (meaning, buying some stocks that will do better in a bear market) if it's not already diverse, but you shouldn't be looking to abandon your positions, unless you anticipate a short-term need for cash. Other than that, you may want to hold off on the short-term positions for a while if you're concerned about volatility, though many traders see volatility as a great time to make money (as there is more movement, there's more opportunity to make money from mispriced stocks in both directions). Unless you think the market will be permanently down due to these reasons, anyway, but I don't see any reason to believe that yet. Even World War Two wasn't enough to permanently hurt the market, after all! Remember that everyone in the market knows what you do. If there were a sure thing that the market was going to crash, it already would have. Conservative positions tend to involve holding onto a well diversified portfolio rather than simply holding onto cash, unless the investor is very conservative (in which case the portfolio should be cash anyway). The fact that you say this is your rainy day fund does make me a little curious, though; typically rainy day funds are better in cash (and not invested) since you might hit that rainy day and need cash quickly (in which case you could take significant losses if the time isn't right). |
Are underlying assets supposed to be sold/bought immediately after being bought/sold in call/put option? | No, if you are trading options to profit solely off the option and not own the underlying, you should trade it away because it costs more to exercise: |
Protecting savings from exceptional taxes | Over the last few years I've read quite a bit about monetary history. I've developed two very important rules from this study: If you follow these two rules you will be able to weather almost any governmental or banking crisis. |
How do I claim HST compensation on my personal Ontario income taxes? | Your income and expenses for the business should be independent of HST. That is, if you charged somebody 100 + 13 HST, you have revenue of 100. You're going to send the 13 to the government later, it's not part of your revenue. If you go out and buy something for 10 + 1.30 HST, you record 10 as an expense. You're going to take the 1.3 off the 13 you would have sent the government, it's not part of your expenses. And so on. I am not sure what you mean by "HST compensation" but if it came from the government, and it needs to be declared as income, there will be information to that end in the letter that comes with the cheque. (For example, if they pay you interest on your refund, the letter reminds you to include that money in next year's income.) |
How to protect your parents if they never paid Social Security? | I'm not unsympathetic, but insurance of what kind? I don't know how he'd have owned a restaurant but failed to pay into the social security system. Was he paying taxes at all? As for the 'why,' there's not enough checks and balances to make sure that nothing is done under the table. I believe 40 quarters of work would have qualified her for a benefit of some kind, but you say she didn't pay in either. Both people didn't pay into the system, either on purpose or by not understanding the need to do so. This is a sad situation. |
Mortgage company withholding insurance proceeds | My question is, how do you rebuild a home, without the money to rebuild the home? I ignorantly thought that was why we paid for insurance. The reason that you have insurance is so as to keep the mortgage lender from losing money. That's why you buy the insurance through the mortgage lender and they get paid. Without the insurance, you'd have no home but still have a mortgage. You'd either have to pay off a mortgage with no house or have to declare bankruptcy to shed the mortgage. You essentially have two paths. If you (or the builder/suppliers) can afford to float the cost, you can rebuild the original house. You'll eventually get the $161,000 and can pay off the builder and suppliers. This may involve taking out a construction mortgage to refinance the original mortgage. Presumably the construction mortgage would be with a different lender. The other path is that you can sell the existing property as is, and use the insurance and proceeds to pay off the existing mortgage. Then you'd have no house and no mortgage. You start over and buy a house with a mortgage. It's possible that your insurance payoff isn't enough to pursue either path. Then your option is to get the insurer to make a bigger payoff. This may involve suing them. Note that you may be able to talk the government into suing the insurer for you. They do have regulators who can review things. If you can't get government action, there are lawyers who will do the suing and take their fees out of their winnings. |
How do you determine “excess cash” for Enterprise Value calculations from a balance sheet? | You're not missing anything. Excess cash is somewhat of a nebulous concept. To different people it means different things. The answer is that excess cash varies for each company depending on their business. For instance, some companies need very high amounts of working capital. A company may be increasing their inventories and therefore will require more cash on their balance sheet to fund growth. If a company always needs this extra cash, some investors prefer to leave that cash out of a valuation because the company cannot run profitably without it. Think about what happens to your calculation of Enterprise Value if you subtract excess cash as opposed to cash. Excess cash is always less than cash. Therefore by subtracting excess cash you increase EV. Since one common valuation metric is EV/EBITDA, a higher numerator will make the stock seem more expensive - that is the EV/EBITDA ratio will seem higher when using excess cash as opposed to cash. So using excess cash in your valuation methodology is basically a conservative concept. Depending on the business 20% of revenues seem way too high as a reserve for excess cash. 2% is a much better rule of thumb. |
I keep getting overcharged at the grocery store. Foul play? | Of course, there is no way for us to know whether or not the clerk is trying to rip you off $1.29 at a time, but I can't understand the possible motivation for doing so. I would imagine that most people would catch this at some point, so for a store to consistently overcharge for something like this is really bad for business. They would be risking upsetting a customer all for the potential gain of $1.29. I have to assume that it is not malice, but incompetence. We don't know what caused the clerk to be confused, but it is not really our concern. From what I can tell, you've gotten the right price in the end. You were ultimately charged for two drinks, and the extra $1.29 that you were charged was refunded. Since it happened three times, you have to decide how badly you want these drinks in the future. If you choose to return, you'll just have to expect the possibility that it will ring up incorrectly, and you'll have to get it fixed. If that seems like too much hassle, then don't return to this store. |
Should you always max out contributions to your 401k? | My observations is that this seems like hardly enough to kill inflation. Is he right? Or are there better ways to invest? The tax deferral part of the equation isn't what dominates regarding whether your 401k beats 30 years of inflation; it is the return on investment. If your 401k account tanks due to a prolonged market crash just as you retire, then you might have been better off stashing the money in the bank. Remember, 401k money at now + 30 years is not a guaranteed return (though many speak as though it were). There is also the question as to whether fees will eat up some of your return and whether the funds your 401k invests in are good ones. I'm uneasy with the autopilot nature of the typical 401k non-strategy; it's too much the standard thing to do in the U.S., it's too unconscious, and strikes me as Ponzi-like. It has been a winning strategy for some already, sure, and maybe it will work for the next 30-100 years or more. I just don't know. There are also changes in policy or other unknowns that 30 years will bring, so it takes faith I don't have to lock away a large chunk of my savings in something I can't touch without hassle and penalty until then. For that reason, I have contributed very little to my 403b previously, contribute nothing now (though employer does, automatically. I have no match.) and have built up a sizable cash savings, some of which may be used to start a business or buy a house with a small or no mortgage (thereby guaranteeing at least not paying mortgage interest). I am open to changing my mind about all this, but am glad I've been able to at least save a chunk to give me some options that I can exercise in the next 5-10 years if I want, instead of having to wait 25 or more. |
Does the “Free Ride” rule always apply to your entire collection of shares in a particular stock? | You should check with your broker for details, but you can generally specify which "lot" you are selling. where I've seen it, that's done by concurrently sending a "letter of instruction" documenting your choice of lot concurrent with the sale, but different brokers may handle this differently. I would think this should work for the case that you describe. (In addition, the default rule used by your broker is "probably" first-in-first-out, which will do what you want here.) Note that this may come into play even in a margin account to the extent that you might want to specify a lot in order to obtain (or set yourself up for later benefit of) favorable tax treatment under the long-term capital gains rules |
How to get rid of someone else's debt collector? | As a former debt collector myself, I can tell you that we did occasionally get someone claiming that they weren't who they really were. However, it was pretty obvious who was telling the truth after a while. Above all else, just be calm and polite. Technically, you can also say "do not call this number again" and they have to stop calling, but I wouldn't do this right off the bat. Its best if they are convinced that you aren't the guy they're looking for. Calmness and politeness are traits that debtors usually lack, sometimes because they are just normal people overwhelmed with their situation, and sometimes because they are irrational loser (sorry, but its true). Either way, if you are consistently calm and unconcerned about their threats, they will either give up or realize you aren't the guy. Eventually they will stop calling you (or at least I know I would have stopped calling you). |
What is the effect of a cancelled stock order on a stock and the market? | That article, like almost any article written by a non-expert and quoting only "research" from lobbying groups, hugely misses the point. The vast majority of orders that end up being cancelled are cancelled as a standard part of exchanges' official market-maker programs. Each exchange wants you and me to know that it has liquidity -- that when we go to buy or sell some stock, there will be someone waiting on the other side of the trade. So the exchange pays (via lowered fees or even rebates) hundreds of registered market makers to constantly have orders resting in each product's order book within a few ticks of the current NBBO or the last trade price. That way, if everyone else should suddenly disappear from the market, you and I will still be able to trade our shares for a price somewhat close to the last trade price. But market makers who are simply acting in this "backstop" role don't actually want to have their orders filled, because those orders will almost always lose them money. So as prices rise and fall (as much as tens of times per second), the market makers need to cancel their resting orders (so they don't get filled) and add new ones at new prices (so they meet their obligations to the exchange). And because the number of orders resting in any given product's order book is vastly larger than the number of actual trades that take place in any given time period, naturally the number of cancellations is also going to hugely outweigh the number of actual trades. As much as 97% to 3% (or even more). But that's completely fine! You and I don't have to care about any of that. We almost never need the market makers to be there to trade with us. They're only there as a backstop. There's almost always plenty of organic liquidity for us to trade against. Only in the rare case where liquidity completely dries up do we really care that the registered market makers are there. And in those cases (ideally) the market makers can't cancel their orders (depending on how well the exchange has set up its market maker program). So, to answer your question, the effect of standard order cancellation on a stock is essentially none. If you were to visualize the resting orders in a product's book as prices moved up and down, you would essentially see a Gaussian distribution with mean at the last trade price, and it would move up and down with the price. That "movement" is accomplished by cancellations followed by new orders. P.S. As always, keep in mind that your and my orders almost never actually make it to a real stock exchange anymore. Nowadays they are almost always sent to brokers' and big banks' internal dark pools. And in there you and I have no idea what shenanigans are going on. As just one example, dark pools allow their operators and (for a fee) other institutional participants access to a feature called last look that allows them to cancel their resting order as late as after your order has been matched against it! :( Regarding the question in your comment ... If Alice is sending only bona fide orders (that is, only placing an order at time T if, given all the information she has at time T, she truly wants and intends for it to be filled) then her cancellation at a later time actually adds to the effectiveness of and public perception of the market as a tool for price discovery (which is its ultimate purpose). [In the following example imagine that there are no such things as trading fees or commissions or taxes.] Let's say Alice offers to buy AAPL at $99.99 when the rest of the market is trading it for $100.00. By doing so she is casting her vote that the "fair value" of a share of AAPL is between $99.99 and $100.00. After all, if she thought the fair value of a share of AAPL was higher -- say, between $100.00 and $100.01 -- then she should be willing to pay $100.00 (because that's below fair value) and she should expect that other people in the market will not soon decide to sell to her at $99.99. If some time later Alice does decide that the fair value of AAPL is between $100.00 and $100.01 then she should definitely cancel her order at $99.99, for exactly the reason discussed above. She probably won't get filled at $99.99, and by sitting there stubbornly she's missing out (potentially forever) on the possibility to make a profit. Through the simple act of cancelling her $99.99 order, Alice is once again casting a vote that she no longer thinks that's AAPL's fair value. She is (very slightly) altering the collective opinion of the entire market as to what a share of AAPL is worth. And if her cancellation then frees her up to place another order closer to her perceived fair value (say, at $100.00), then that's another vote for her honest optinion about AAPL's price. Since the whole goal of the market is to get a bunch of particpants to figure out the fair value of some financial instrument (or commodity, or smart phone, or advertising time, etc.), cancellations of honest votes from the past in order to replace them with new, better-informed honest votes in the present can only be a good thing for the market's effectiveness and perceived effectiveness. It's only when participants start sending non-honest votes (non bona fide orders) that things start to go off the rails. That's what @DumbCoder was referring to in his comment on your original question. |
Restricting a check from being deposited via cell phone | No, most check deposits are processed that way. Banks transmit the pictures of the checks between themselves, and allow business customers to deposit scans for quite some time now. I see no reason for you to be concerned of a check being in a dusty drawer, it's been deposited, cannot be deposited again. If you're concerned of forgery - well, nothing new there. |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | Here's a few. Is this what you're looking for? Also this should probably be a community wiki. |
What does APR mean I'm paying? | Welcome to the world of personal finance. IMO, you are heading for trouble. To answer your question, the APR is the annual percentage rate, or what you pay to borrow money from the CC issuer. For example, if you charge $100, and the bill comes, and you pay $100 on or before the due date you pay nothing. If you pay the minimum payment, which would be around $15, you would then borrow $85 (100-15) and pay interest on that amount. The next month's balance would be 85 + any new charges + interest. The interest in this case can be estimated as follows: 85*.199/12 = 1.41. For your information that is a very high interest rate especially given the current market for borrowed money. Many people become saddled with debilitating debt starting off just like you are planning. If we were friends, I would implore you not to get a CC, instead save up and pay for things with cash. |
how do I calculate rate of return on call options that are spread | You don't necessarily have to use a LEAP to do a spread. Since you are doing a covered call, I'm assuming that you would be comfortable with having that call exercised and you are bullish on the stock. So doing a spread trade with the short call option would essentially be capping your maximum profit without risking the obligation to sell the stock below market value. An example for the payoff from a bull call spread: long lower strike call, short higher (covered) strike call can be found here |
LLC in states with customers with and without employees in the state | If I hire someone in Utah to do sales for me over the phone, and he works out of his home, am I required to register an LLC or file my current one as a foreign entity in Utah? Yes, since you've established presence in Utah. You'll register your current LLC in Utah, no point creating another one. If my sales guy, or I, call businesses in, say, Florida, and sell a few businesses our services for online work like maybe a website design, etc. Are we required to file our LLC In Florida as either a new LLC or a foreign one? No, you need to register where you (your company, including your employees or physical offices) are physically present. You don't need to register in any state you ship products or provide services to. If no-one of your company's employees is present in Florida and you don't have an office/rent a storage there - then you have no presence in Florida. If you actually go there to provide the services - then you do. |
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. |
In NYC is there sales tax on services like computer / cell phone repair? | According to the New York State Department of Taxation and Finance, your service would appear to be exempt from taxes. However, if you are charging for tangible items, those would incur a sales tax. |
How can this stock have an intra-day range of more than 90% on 24Aug2015? | As you know, the market is in turmoil today. At this moment, 11:45 am, the S&P is down 2.3%, 45 points. But, premarket, it was down 100 points. Now, premarket, I heard Jim Cramer say, "today is not the day to use market orders." Yes, on Mad Money, he seems a bit eccentric, but he does offer some wise advice at times. In my opinion, your stock had some people that did just that. A market order. And, regardless of the fundamentals of this company, buyers had no orders to buy. Except a couple wise guys (in both senses) that put in buys at crazy prices. And they filled. With an Apple, trading around $100, the book probably has millions of shares on order with a buy at $80 or higher. Just an example. I'd bet there were a number of stocks that had the profile of yours, i.e. a chart reflecting trades similar to a flash crash. There are some traders smiling ear to ear, and some crying in their beer. (Note - I use the phrase "in my opinion." This is the only explanation I can imagine. Occam's Razor.) |
Is investing exlusively in a small-cap index fund a wise investment? | Stock portfolios have diversifiable risk and undiversifiable risk. The market rewards investors for taking undiversifiable risk (e.g. owning an index of oil producing companies) and does not reward investors for assuming diversifiable risk (e.g. owning a single oil producing company). The market will not provide investors with any extra return for owning a single oil company when they can buy an oil index fund at no additional cost. Similarly, the market will not reward you for owning a small-cap index fund when you can purchase a globally diversified / capitalization diversified index fund at no additional cost. This article provides a more detailed description. The Vanguard Total World Stock Index Fund is a much better staring point for an equity portfolio. You will need to make sure that the asset allocation of your overall portfolio (e.g. stocks, bonds, P2P lending, cash) is consistent with your time horizon (5-10 years). |
Why would someone want to sell call options? | You appear to be thinking of option writers as if they were individuals with small, nondiversified, holdings and a particular view on what the underlying is going to do. This is not the best way to think about them. Option writers are typically large institutions with large portfolios and that provide services in all sorts of different areas. At the same time as they are writing calls on a particular stock, they are writing puts on it and options on other stocks. They are buying and selling the underlying and all kinds of different derivatives. They are not necessarily writing the option because they are expecting or hoping to benefit from a price move. It's just small part of their business. They write the option if the option price is good enough that they think they are selling it for very slightly more than it's worth. Asking why an option writer creates a call is like asking why a grocery store keeps buying groceries from their distributors. Don't they know the price of food may not always rise? Sure, but their business is selling the food for slightly more than they pay for it, not speculating on what will happen to its price. Most option writers are doing the same thing, except what they are buying and selling is sets of cash flows and risk. As a general rule, the business model of option writers is to profit from the few cents of spread or mispricing, not from aggregate changes in the price of the underlying. They should and often do maintain balanced portfolios so their option writing activities don't expose them to a lot of risk. Also note that there could be lots of reasons for writing options, even if you do have a particular view. For example, perhaps the option writer thinks volatility of the underlying will decrease. Writing a call could be part of an overall strategy that profits from this view. |
Would it make sense to buy a rental property as an LLC and not in my own name? | IANAL, but if you're planning to sell shares in your LLC you may be disappointed in the protection granted. I looked into this corporate structure for the same purpose myself, and my attorney said something like, "If an owner of one of the shares of your company is driving to look at one of the properties, and gets into a wreck for which they were found negligent, the injured party can sue the corporation." |
Why would people sell a stock below the current price? | Why would people sell below the current price, and not within the range of the bid/ask? There are many scenarios where this is deliberate but all of them boil down to the fact that the top level's bid doesn't support the quantity you're trying to sell (or is otherwise bogus[1]). One scenario as an example: You're day-trading both sides but at the end of the day you accumulated a rather substantial long position in a stock. You don't want to (or aren't allowed to[2]) be exposed overnight, however. What do you do? You place an order that is highly likely to go through altogether. There's several ways to achieve that but a very simple one is to look at the minimum bid level for which the bid side is willing to take all of your shares, then place a limit order for the total quantity at that price. If your position doesn't fit into the top level bid that price will well be lower than the "current" bid. Footnotes: [1] Keyword: quote stuffing [2] Keyword: overnight margin (aka positional margin, as opposed to intraday margin), this is highly broker dependent, exchanges don't usually distinguish between intraday and overnight margins, instead they use the collective term maintenance margin |
When will Canada convert to the U.S. Dollar as an official currency? | Canada would most likely not convert any time in the near future. The challenge for Canada converting to the US Dollar or the fictional "Amero" mentioned by JohnFX is that : Some of the benefits would be: The challenge right now for any government would be to sell the pros over the cons and from that viewpoint the cons would appear to have more negative impact to voters. Considering that Canada currently has a minority government with no expected change to that status for some time the risk would be very high. For more details see Pros and Cons of Canadian Monetary Union and to see the Mexican impact see North American Currency Union It is interesting to note that currency union was first proposed in 1999 when the Canadian Dollar fluctuated between $0.64 to $0.69 US. The Canadian Dollar is closer to par with the US Dollar currently (in fact it rose to $1.10 US in Nov. 2007). Look-up historical rates at the Bank of Canada |
Is it possible to trade US stock from Europe ? | Yes, it's possible and even common but it depends on your bank or broker. One of the main differences is that you might assume FX risk if your account is in EUR and you trade stock denominated in USD. You might also encounter lower liquidity or price differences if you don't trade on the primary exchange where stocks are listed, i.e. NYSE, Nasdaq... |
Short term cutting losses in a long term investment | If you are investing for 10 years, then you just keep buying at whatever price the fund is at. This is called dollar-cost averaging. If the fund is declining in value from when you first bought it, then when you buy more, the AVERAGE price you bought in at is now lower. So therefore your losses are lower AND when it goes back up you will make more. Even if it continues to decline in value then you keep adding more money in periodically, eventually your position will be so large that on the first uptick you will have a huge percent gain. Anyway this is only suggested because you are in it for 10 years. Other people's investment goals vary. |
Tenant wants to pay rent with EFT | How can someone use the account number to withdraw money without my consent? They can use your account number to game your banks phone support and try to phish their way into your account. Banks have gotten very good at combating this, but theoretically with just the address he lives in, your name, and a bad bank phone rep, he could get into your business. The account number would just be one more piece of information to lead with. I have 1 savings and 3 checking accounts with the same bank. Would they be able to gain access to the other accounts? Dependent on how incompetent the bad bank rep I referenced above is, sure. But the odds are incredibly low, and if anything were to happen, the bank would be falling over itself to fix it and make reparations so that you don't sue for a whole crap ton more. Is there a more secure and still free option that I have overlooked? Opening up yet another checking account solely for accounts receivable and transfer to accounts payable would keep your financial records more transparent. Also, banks are doing "money transfer by email" now, so I don't know how great that is for business transactions, but in that instance you're just giving out an email linked to a money receiving account instead of an actual account number. Paypal is also a pretty good EFT middleman, but their business practices have become shady in the past 5 years. |
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. |
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