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How does the spread on an orderbook affect shorting? | It this a real situation or is it a made up example? Because for a stock that has a last traded priced of $5 or $6 and volume traded over $4M (i.e. it seems to be quite liquid), it is hardly likely that the difference from bid to ask would be as large as $1 (maybe for a stock that has volume of 4 to 5 thousand, but not for one having volume of 4 to 5 million). In regards to your question, if you were short selling the order would go in exactly the same as if you were selling a stock you owned. So your order would be on the ask side and would need to be matched up with a price on the bid side for there to be a trade. |
How to motivate young people to save money | Are you sure the question even makes sense? In the present-day world economy, it's unlikely that someone young who just started working has the means to put away any significant amount of money as savings, and attempting to do so might actually preclude making the financial choices that actually lead to stability - things like purchasing [the right types and amounts of] insurance, buying outright rather than using credit to compensate for the fact that you committed to keep some portion of your income as savings, spending money in ways that enrich your experience and expand your professional opportunities, etc. There's also the ethical question of how viable/sustainable saving is. The mechanism by which saving ensures financial stability is by everyone hoarding enough resources to deal with some level of worst-case scenario that might happen in their future. This worked for past generations in the US because we had massive amounts (relative to the population) of (stolen) natural resources, infrastructure built on enslaved labor, etc. It doesn't scale with modern changes the world is undergoing and it inherently only works for some people when it's not working for others. From my perspective, much more valuable financial skills for the next generation are: |
Do I make money in the stock market from other people losing money? | Because I feel the answers given do not wholely represent the answer you are expecting, I'd like to re-iterate but include more information. When you own stock in a company, you OWN some of that company. When that company makes profit, you usually receive a dividend of those profits. If you owned 1% of the company stock, you (should) recieve 1% of the profits. If your company is doing well, someone might ask to buy your stock. The price of that stock is (supposed) to be worth a value representative of the expected yield or how much of a dividend you'd be getting. The "worth" of that, is what you're betting on when you buy the stock, if you buy $100 worth of coca cola stock and they paid $10 as dividend, you'd be pretty happy with a 10% growth in your wealth. Especially if the banks are only playing 3%. So maybe some other guy sees your 10% increase and thinks, heck.. 10% is better than 3%, if I buy your stocks, even as much as 6% more than they are worth ($106) I'm still going to be better off by that extra 1% than I would be if I left it in the bank.. so he offers you $106.. and you think.. awesome.. I can sell my $100 of cola shares now, make a $6 profit and buy $100 worth of some other share I think will pay a good dividend. Then cola publicises their profits, and they only made 2% profit, that guy that bought your shares for $106, only got a dividend of $2 (since their 'worth' is still $100, and effectively he lost $4 as a result. He bet on a better than 10% profit, and lost out when it didn't hit that. Now, (IMHO) while the stock market was supposed to be about buying shares, and getting dividends, people (brokers) discovered that you could make far more money buying and selling shares for 'perceived value' rather than waiting for dividends to show actual value, especially if you were not the one doing the buying and selling (and risk), but instead making a 0.4% cut off the difference between each purchase (broker fees). So, TL;DR, Many people have lost money in the market to those who made money from them. But only the traders and gamblers. |
Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? | It depends on the selling price, but if we can assume the property will be sold at a profit, they are getting a pretty sweet deal at your expense. They are both getting about 5.2% interest on their money, plus the lion's share of any property appreciation. I would say that fair would be either of: |
What is a trade exchange and are they reputable or not? | I think this is off topic, but here is a stab: So these are cashless. It could be a way to smooth out the harsh reality of capitalism (I overproduced my product, I have more capacity than I can sell) and I can trade those good to other capitalists who similarly poorly planned production or capacity. Therefore the market for a system like is limited to businesses that do not plan well. Business that plan production or capacity to levels they can already sell for cash do not need a private system to offload goods. Alternatives to such a system include: (I don't know how many businesses are really in this over production / over capacity state. If my assumption that it isn't many is wrong, my answer is garbage.) This is a bartering system with a brokerage. I think we have historically found that common currencies create more trade and economic activity because the value of the note in your pocket, which is the same type of note in my pocket, is common and understood. Exchange rates typically slow down trade. (There are many other reasons to have different currency or notes on a global sale, but the exchange certainly is a hurdle to clear.) This brokerage is essentially adding a new currency (in a grand metaphor). And that new currency is only spendable on their brokerage, which is of limited use to society as a whole, assuming that society as a whole isn't a participating member of that brokerage. I can't really think of why this type of exchange is better than the current system we have now. I wouldn't invest in this as a business, or invest in this as a person looking for opportunity. |
How to Explain “efficient frontier” to child? | I know you really like bananas, but don't you think you would get tired of them after a while? Better stock up on some kiwi and mango just to mix it up a bit. I wouldn't want to risk eating only banana sandwiches, banana ice cream and banana bread for the rest of my life. I have don't think I could take it. Same goes for mango and kiwi, but I think if I had all three I could probably get along just fine. |
Apartment lease renewal - is this rate increase normal? | There could be a number of reasons for a rent increase. The only information I can offer is how I calculate what rent I will charge. The minimum I would ever charge per unit (Mortgage payment + Water) / Number of units This number is the minimum because it's what I need to keep afloat. Keep in mind these are ballpark numbers The target rent ((Mortgage payment + Water) / Number of units)*1.60 I mark up the price 60% for a few reasons. First, the building needs a repair budget. That money has to come from somewhere. Second, I want to put away for my next acquisition and third I want to make a profit. These get me close to my rental price but ultimately it depends on your location and the comparables in the area. If my target rent is 600 a month but the neighbors are getting 700-800 for the same exact unit I might ask more. It also depends on the types of units. Some of my buildings, all of the units are identical. Other buildings half of the units are bigger than the other half so clearly I wouldn't charge a equal amount for them. Ultimately you have to remember we're not in the game to lose money. I know what my renters are going to pay before I even put an offer in on a building because that's how I stay in business. It might go up over the years but it will always outpace my expenses for that property. |
What is the value in using the “split transaction” feature present in some personal finance management tools? | Split transactions are indispensable to anybody interested in accurately tracking their spending. If I go to the big-box pharmacy down the road to pick up a prescription and then also grab a loaf of bread and a jug of milk while there, then I'd want to enter the transaction into my software as: I desire entering precise data into the software so that I can rely on the reports it produces. Often, I don't need an exact amount and estimated category totals would have been fine, e.g. to inform budgeting, or compare to a prior period. However, in other cases, the expenses I'm tracking must be tracked accurately because I'd be using the total to claim an income tax deduction (or credit). Consider how Internet access might be commingled on the same bill with the home's cable TV service. One is a reasonable business expense and deduction for the work-at-home web developer, whereas the other is a personal non-deductible expense. Were split transaction capability not available, the somewhat unattractive alternatives are: Ignore the category difference and, say, categorize the entire transaction as the larger or more important category. But, this deliberately introduces error in the tracked data, rendering it useless for cases where the category totals need to be accurate, or, Split the transaction manually. This doesn't introduce error into the tracked data, but suffers another problem: It makes a lot of work. First, one would need to manually enter two (or more) top-level transactions instead of the single one with sub-amounts. Perhaps not that much more work than if a split were entered. Worse is when it comes time to reconcile: Now there are two (or more) transactions in the register, but the credit card statement has only one. Reconciling would require manually adding up those transactions from the register just to confirm the amount on the statement is correct. Major pain! I'd place split transaction capability near the top of the list of "must have" features for any finance management software. |
How to correct a tax return filed electronically and already approved? | Simply file an amended return to correct the mistake. This happens all the time and is a standard procedure that every legitimate tax pro can handle. You can work it out with the tax pro about whose mistake it was and who should pay for the additional service. |
Which US market indexes (Dow/DJIA, S&P500, NASDAQ) include reinvested dividends? | While the S&P500 is not a total return index, there is an official total return S&P500 that includes reinvested dividends and which is typically used for benchmarking. For a long time it was not available for free, but it can currently be found on yahoo finance using the ticker ^SP500TR. |
How do I get a Tax Exemption Certificate for export from the US if I am in another country? | How do you know you are playing their cost plus tax? Retailers in the US currently only collect state sales tax on purchasers who are based in the same state they are in. For example, our business is in NY so we charge NY state sales tax. We do not charge sales tax for anyone living in any other state (or country). If your shipping address is in South America, the people you are buying from in the US should not be charging you any tax. You may have to pay customs duties and fees, but these are not sales tax. |
Does dollar cost averaging apply when moving investments between fund families? | As mentioned by others, dollar cost averaging is just a fancy term for how many shares your individual purchases get when you are initially adding money to your investment accounts. Once the money is invested, annual or quarterly rebalancing serves the purpose of taking advantage of higher rates of growth in particular market sectors. You define the asset allocation based on your risk profile, time to retirement, etc., then you periodically sell the shares of the investments that have grown faster than the rest and buy more shares of the investments that are relatively cheaper. |
Is 6% too high to trade stocks on margin? | Okay so we are assuming that you can sustain 6% or more return on your investments. Personally I would compare that rate to what lines of credit are going for and do what ever is least expensive. Either way your risk is the same. Your net worth is the same. Your assets will be the same. Your liabilities will be the same. Its just a matter of who you owe it to and what the rate is. Don't be afraid of having a second mortgage. If the stocks go down either way you have to sell what's left and pay your debt. Or what I should maybe say is don't be more afraid of a line of credit more than margin in your investment account. |
Sanity check on choosing the term for a mortgage refinance | Have you looked at conventional financing rather than VA? VA loans are not a great deal. Conventional tends to be the best, and FHA being better than VA. While your rate looks very competitive, it looks like there will be a .5% fee for a refinance on top of other closing costs. If I have the numbers correct, you are looking to finance about 120K, and the house is worth about 140K. Given your salary and equity, you should have no problem getting a conventional loan assuming good enough credit. While the 30 year is tempting, the thing I hate about it is that you will be 78 when the home is paid off. Are you intending on working that long? Also you are restarting the clock on your mortgage. Presumably you have paid on it for a number of years, and now you will start that long journey over. If you were to take the 15 year how much would go to retirement? You claim that the $320 in savings will go toward retirement if you take the 30 year, but could you save any if you took the 15 year? All in all I would rate your plan a B-. It is a plan that will allow you to retire with dignity, and is not based on crazy assumptions. Your success comes in the execution. Will you actually put the $320 into retirement, or will the needs of the kids come before that? A strict budget is really a key component with a stay at home spouse. The A+ plan would be to get the 15 year, and put about $650 toward retirement each month. Its tough to do, but what sacrifices can you make to get there? Can you move your plan a bit closer to the ideal plan? One thing you have not addressed is how you will handle college for the kids. While in the process of long term planning, you might want to get on the same page with your wife on what you will offer the kids for help with college. A viable plan is to pay their room and board, have them work, and for them to pay their own tuition to community college. They are responsible for their own spending money and transportation. Thank you for your service. |
income tax for purchased/sold short term & long term shares | As mentioned by Dilip, you need to provide more details. In general for transacting on stocks; Long Term: If you hold the stock for more than one year then its long term and not taxable. There is a STT [Securities Transaction Tax] that is already deducted/paid during buying and selling of a stock. Short Term: If you hold the stock for less than one year, it's short term gain. This can be adjusted against the short term loss for the financial year. The tax rate is 10%. Day Trading: Is same as short term from tax point of view. Unless you are doing it as a full time business. If you have purchased multiple quantities of same stock in different quantities and time, then when you selling you have to arrive at profit or loss on FIFO basis, ie First in First Out |
How to start investing for an immigrant? | I am in a similar situation (sw developer, immigrant waiting for green card, no debt, healthy, not sure if I will stay here forever, only son of aging parents). I am contributing to my 401k to max my employer contribution (which is 3.5%, you should find that out from your HR). I don't have any specific financial goal in my mind, so beside an emergency fund (I was recommended to have at least 6 months worth of salary in cash) I am stashing away 10% of my income which I invest with a notorious robot-adviser. The rate is 80% stocks, 20% bonds, as I don't plan to use those funds anytime soon. Should I go back to my country, I will bring with me (or transfer) the cash, and leave my investments here. The 401K will keep growing and so the investments, and perhaps I will be able to retire earlier than expected. It's quite vague I know, but in the situation we are, it's hard to make definite plans. |
Take advantage of rock bottom oil prices | I would suggest that oil stocks are going down due to reduced earnings predictions. The market may go too far in selling off oil and oil-related stocks. You may be able to pick up a bargain, but beware that prices may continue to fall in the short to medium term. |
How to avoid getting back into debt? | The essential (and obvious) thing to avoid getting back into debt (or to reduce debt if you have it) is to make your total income exceed your total expenses. That means either increasing your income or reducing your total expenses. Either take effort. Basically, you need a plan. If your plan is to increase income, work out how. If the plan is to increase hours in your current, you need to allow for your needs (sleep, rest, etc) and also convince your employer they will benefit by paying you to work more hours. If your intent is to increase your hourly rate, you need to convince a current or prospective employer that you have the capacity, skills, etc to deliver more on the job, so you are worth paying more. If your intent is to get qualifications so you can get a better paying job, work out how much effort (studying, etc) you will apply, over how long, what expenses you will carry (fees, textbooks, etc), and how long you will carry them for (will you accept working some years in a higher paying job, to clear the debt?). Most of those options involve a lot of work, take time, and often mean carrying debt until you are in a position to pay it off. There is nothing wrong with getting a job while studying, but you have to be realistic about the demands. There is nothing sacrosanct about studying that means you shouldn't have a job. However, you need to be clear how many hours you can work in a job before your studies will suffer unnecessarily, and possibly accept the need to study part time so you can work (which means the study will take longer, but you won't struggle as much financially). If your plan is to reduce expenses, you need a budget. Itemize all of your spend. Don't hide anything from that list, no matter how small. Work out which of the things you need (paying off debt is one), which you can get rid of, which you need to reduce - and by how much. Be brutal with reducing or eliminating the non-essentials no matter how much you would prefer otherwise. Keep going until you have a budget in which your expenses are less than your income. Then stick to it - there is no other answer. Revisit your budget regularly, so you can handle things you haven't previously planned for (say, rent increase, increase fees for something you need, etc). If your income increases (or you have a windfall), don't simply drop the budget - the best way to get in trouble is to neglect the budget, and get into a pattern of spending more than you have. Instead, incorporate the changes into your budget - and plan how you will use the extra income. There is nothing wrong with increasing your spend on non-essentials, but the purpose of the budget is to keep control of how you do that, by keeping track of what you can afford. |
What determines price fluctuation of groceries | Yes and no. First off, commodity prices reflect the cost of a good about 3 steps back in the retail supply chain; the agreed-upon price for the raw foodstuff between farmers/ranchers and manufacturers. Your grocer may carry bags of whole grain wheat, but that's certainly not all he carries that contains it. Same for corn, rice and other staple grains, as well as for fruits and vegetables, herbs (yes, you can buy basil by the ton on the CME), meats, various sugars, etc. So, a long-term sustained change in prices of a commodity foodstuff will eventually affect the real cost to you to buy things they're made from. However, in the short term, the retail supply chain will generally act as a buffer between these prices and the ones you see on the store shelf. Consumers don't like price increases, especially of necessities like food. When food costs go up, consumers can and will very quickly change their spending habits, buying cheaper options to get their needed calories. That makes manufacturers nervous; consumers not buying their product is a worse scenario than consumers buying their product at a reduced gain or even at a loss. So, manufacturers, and suppliers and retailers, will all absorb as much as they can of the cost of a commodities increase before beginning to pass it on to consumers. On the flip side, while consumers like price drops, they don't notice them as much as price increases. So, the supply chain will also absorb a fall in commodity prices by resisting price reductions in the consumer goods, as long as they can get away with it (which is usually longer than the price reduction actually lasts). The net effect is that processed food prices typically follow the gentle upward climb of long-term inflation, and only rarely do you see drastic price increases or decreases. Where this model breaks down a little bit is in highly perishable foodstuffs, especially seasonal or "wild-managed" foods; fruits and vegetables, seafood, etc. The limited time in which the stuff can be sold makes the process of getting a fish out of the ocean and a fruit off the tree and into your grocery store much more market-driven; the producers, suppliers and grocers are all in constant contact over what's available and how much they can get for what price. The prices therefore are typically a lower markup (unlike highly processed grain-based foods, there's not much added value to be marked up between the apple farmer picking the fruit and the grocer putting it on display), but also much more volatile; if there's a bumper crop of fruit, the farmer has to unload it all or it goes to waste, while similarly if an early freeze decimated the apple crop, the suppliers can't just get some of last year's bumper crop out of storage; they fight with everyone else for what little made it to market. Farmers will sometimes intentionally let excess crop spoil in order to maintain a minimum price for what they sell (the rest can at least be composted and used for fertilizer, saving them some money on maintenance), but there's no silver bullet for a shortage. This is why a lot of these foods, especially seafood, are considered luxury items; they're not stable enough for everyone to get as much as they want whenever they want, unlike staple grains. |
Retirement formula for annual compound interest with changing principal | I've found the systems that seem to work. Firstly, you need to find how much money is required to pay for the withdrawals after retirement, while still accruing interest. I couldn't seem to do this with an equation, but this bit of javascript worked: yearsToLast: Number of years of yearly withdrawals yearlyWithdrawal: Amount to withdraw each year interest: Decimal form of yearly compounding interest Now that we have how much is required at the beginning of the retirement, to figure out how much to add yearly to hit this mark, you'd use: amount: Previously found required amount to reach interest: Decimal form of yearly compounding interest yearsSaving: Number of years saving till amount needs to be hit I hope this helps some other poor soul, because I could find squat on how to do this. Max |
Interest on Amount Exceeding CC Balance? | The best answer to this is: Read the fine print on your credit card agreement. What is common, at least in the US, is that you can make any charges you want during a time window. When the date comes around that your statement balance is calculated, you will owe interest on any amount that is showing up as outstanding in your account. Example... To revise the example you gave, let's say Jan 1. your account balance was $0. Jan. 3rd you went out and spent $1,000. Your account statement will be prepared every XX days... usually 30. So if your last statement was Dec. 27th, you can expect your next statement to be prepared ~Jan.24 or Jan. 27. To be safe, (i.e. not accrue any interest charges) you will want to make sure that your balance shows $0 when your statement is next prepared. So back to the example you gave--if your balance showed $1,000... and you paid it off, but then charged $2,000 to it... so that there was now a new set of $2,000 charges in your account, then the bank would begin charging you interest when your next statement was prepared. Note that there are some cards that give you a certain number of days to pay off charges before accruing interest... it just goes back to my saying "the best answer is read the fine print on your card agreement." |
When's the best time to sell the stock of a company that is being acquired/sold? | I'm not sure what you expect in terms of answers, but it depends on personal factors. It pretty well has to depend on personal factors, since otherwise everyone would want to do the same thing (either everyone thinks the current price is one to sell at, or everyone thinks it's one to buy at), and there would be no trades. You wouldn't be able to do what you want, except on the liquidity provided by market makers. Once that's hit, the price is shifting quickly, so your calculation will change quickly too. Purely in terms of maximising expected value taking into account the time value of money, it's all about the same. The market "should" already know everything you know, which means that one time to sell is as good as any other. The current price is generally below the expected acquisition price because there's a chance the deal will fall through and the stock price will plummet. That's not to say there aren't clever "sure-fire" trading strategies around acquisitions, but they're certain to be based on more than just timing when to sell an existing holding of stock. If you have information that the market doesn't (and assuming it is legal to do so) then you trade based on that information. If you know something the market doesn't that's going to be good for price, hold. If you know something that will reduce the price, sell now. And "know" can be used in a loose sense, if you have a strong opinion against the market then you might like to invest based on that. Nothing beats being paid for being right. Finally, bear in mind that expected return is not the same as utility. You have your own investment goals and your own view of risk. If you're more risk-averse than the market then you might prefer to sell now rather than wait for the acquisition. If you're more risk-prone than the market then you might prefer a 90% chance of $1 to 90c. That's fine, hold the stock. The extreme case of this is that you might have a fixed sum at which you will definitely sell up, put everything into the most secure investments you can find, and retire to the Caribbean. If that's the case then you become totally risk-averse the instant your holding crosses that line. Sell and order cocktails. |
Should I open a credit card when I turn 18 just to start a credit score? | Yes, it is a very good idea to start your credit history early. It sounds like you have a good understanding of the appropriate use of credit, as a substitute for cash rather than a supplement to income. As long as you keep your expenses under control and pay off your card each month, I see no problems with the idea. Try to find a card with no annual fees, a low interest rate if possible (which will be difficult at your age), and with some form of rewards such as cash back. Look for a reputable issuing bank, and keep the account open even after you get a new card down the road. Your credit score is positively correlated with having an account open for a long time, having a good credit usage to credit limit ratio, and having accounts in good standing and paid on time. |
Investing in stocks with gross income (not yet taxed) cash from contract work? | In most jurisdictions, you want to split the transactions. Why? Because you want to report capital gains on your investment income, and this will almost always be taxed at a lower rate than employment income. See Wikipedia's article for more information about capital gains. In Canada, you pay tax on 50% of your realized capital gains. There are also ways to shelter your gains from tax; in Canada, TFSA, in the US, I believe these are 'roth' accounts. I actually think you have to split the transactions, at least in Canada and the U.S., though I'm not absolutely sure. Regardless, you want to do so if you plan on making money with your investments. If you plan on making a loss, please contact me as I'm happy to accept the money you are planning on throwing away. |
Anticipating being offered stock options in a privately held company upon employment. What questions should I ask? | I've had stock options at two different jobs. If you are not getting a significant ownership stake, but rather just a portion of options as incentive to come work there, I would value them at $0. If you get the same salary and benefits, but no stock options at another company and you like the other company better, I'd go to the other company. I say this because there are so many legal changes that seem to take value from you that you might as well not consider the options in your debate. That being said, the most important question I'd want to know is what incentive does the company have to going public or getting bought? If the company is majority owned by investors, the stock options are likely to be worth something if you wait long enough. You are essentially following someone else's bet. If the company is owned by 2 or 3 individuals who want to make lots of money, they may or may not decide to sell or go public. |
I have $100,000 in play money… what to do? | As you have already good on your retirement kitty. Assuming you have a sufficient cash for difficult situations, explore the options of investing in Shares and Mutual Funds. As you are new to Stock Market, begin slowly by investing into Mutual Funds and ETF for precious metals. This will help you understand and give you confidence on markets and returns. Real estate is a good option, the down side being the hassle of getting rental and the illiquid nature of the investment. |
Why do some symbols not have an Options chain for specific expiration dates? | The answer is actually very simple: the cost of data. Seriously. Call the CBOE tomorrow and ask yourself. They have two big programs: 1) the penny pilot program, where options trade at penny increments instead of 5 cent increments. This is only extended to a select few symbols because of the amount of data this can generate is too much for the data vendors. Data vendors store and sell historical data. The exchanges themselves often have a big data vending business too. 2) the weekly options program, where only select symbols get these chains because of the amount of data they will generate. Liquidity and demand are factors in determining if the CBOE will consider enabling those series on new issues. (although they have to give the list of which symbols are on these programs to the SEC) |
What options are available for a home loan with poor credit but a good rental history? | Take the long term view. Build up the cash. Once you have enough cash in the bank, you don't need a credit score. With 6 months living expenses in the bank after paying 20% down on a small house, he should have no issues getting a reasonably priced mortgage. However, if he waited just a bit longer he might buy the same house outright with cash. When I ran the computations for myself many years ago, it would have taken me half as long to save the money and pay cash for my home as it did for me to take a mortgage and pay it off. |
Ex-dividend date and time zones | Ex-Date is a function of the exchange, as well as the dividend. Consider Deutsche Bank AG, DB on the NYSE, DKR on Xetra. For a given dividend, each exchange sets the ex-date for trades on that exchange. (See http://www.sec.gov/answers/dividen.htm for a description of how it works in the US; other exchanges/countries are similar.) This ex-date is normally based on the dividends record date, which is when you must be on the company's books as a shareholder to receive the dividend, and based on when trades for an exchange are settled. The ex-date is the first date for which trades on that date will not settle until after the record date. This means that the ex-date can be different for different exchanges. If you sell your shares on an exchange before the ex-date for that exchange, you will not get the dividend. If you sell your shares on or after the ex-date for the exchange, you do not get the dividend. So it depends on the time zone of the exchange. Most stock exchanges trade T+3, but this can still come into play if there are bank holidays in different countries at different times. |
How can someone invest in areas that require you to be an accredited investor [without qualifying as an accredited investor]? | Unfortunately it is not possible for an ordinary person to become an accredited investor without a career change. Gaining any legal certification in investments typically require sponsorship from an investment company (which you would be working for). There are reasons why these kinds of investments are not available to ordinary people directly, and you should definitely consult an RIA (registered investment adviser) before investing in something that isn't extremely standardized (traded on an major exchange). The issue with these kinds of investments is that they are not particularly standardized (in terms of legal structure/settlement terms). Registered investment advisers and other people who manage investments professionally are (theoretically) given specific training to understand these kinds of non-standard investments and are (theoretically) qualified to analyze the legal documentation of these, make well informed investment decisions, and make sure that their investors are not falling into any kind of pyramid scheme. There are many many kinds of issues that can arise when investing in startups. What % of the company/ the company's profits are you entitled to? How long can the company go without paying you a dividend? Do they have to pay you a dividend at all? How liquid will your investment in the company be? Unfortunately it is common for startups to accept investment but have legal restrictions on their investors ability to sell their stake in the business, and other non-standard contract clauses. For example, some investment agreements have a clause which states that you can only sell your stake in the business to a person who already owns a stake in the business. This makes your investment essentially worthless - the company could run for an exponential amount of time without paying you a dividend. If you are not able to sell your stake in the company you will not be able to earn any capital gains either. The probability of a startup eventually going public is extremely small.. so in this scenario it is likely you will end up gaining no return investment (though you can be happy to know you helped a company grow!) Overall, the restrictions for these kinds of investments exist to protect ordinary folks from making investing their savings into things that could get them burned. If you want to invest in companies on FundersClub build a relationship with an RIA and work with that person to invest your money. It is easier, less risky, and not all that more expensive :) |
Theoretically, if I bought more than 50% of a company's stocks, will I own the company? | You'll own whatever fraction you bought. To own the company (as in, boolean - yes or no) you need to buy 100% of the outstanding stock. RE controlling the company, in general the answer is yes - although the mechanism for this might not be so straight forward (ie. you may have to appoint board members and may only be able to do so at pre-set intervals) and there may be conditions in the company charter designed to stop this happening. Depending on your jurisdiction certain ownership percentages can also trigger the need to do certain things so you may not be able to just buy 50% - in Australia when you reach 20% ownership you have to launch a formal takeover bid. |
Should I open a credit card when I turn 18 just to start a credit score? | Not only should you do this, you should tell your friends to do it too. Especially if a parent comes in to the bank with the child, banks fall over themselves to provide a card to someone whose only income is allowance. Really. Later, if you're 21 and your car broke and you don't get paid for another 11 days, NOBODY will lend you the money (or those money mart places that charge 300% a year will) to fix it. Never mind score (and yes for sure having a good score will be a result, and a good one) just having the card for emergencies makes all the difference to your early twenties. My kids have several friends who now can't get credit cards (some are students, some are underemployed) and end up missing paid days of work due to car troubles they can't pay to fix, or using those payday lenders, or other things that keep you poor. Get one while you can. Using it sensibly means you will have a great credit score in a decade or so, but just plain having it is worth more than you can know if you're not 18 yet. |
How can I investigate historical effect of Rebalancing on Return and Standard Deviation? | Doesn't "no rebalancing" mean "start with a portfolio and let it fly?" Seems like incorporation of rebalancing is more sophisticated than not. Just "buy" your portfolio at the start and see where it ends up with no buying/selling, as compared with where it ends up if you do rebalance. Or is it not that simple? |
How do I handle fund minimums as a beginning investor? | If you are comfortable picking individual stocks and can get into Robinhood you only need $1000 to get started. This means buying one stock of this, two stocks of that, etc. but it works. |
Should I negotiate a lower salary to be placed in a lower tax bracket? | I think Feral Oink said it well here when someone asked if they should negotiate for additional benefits in lieu of a portion of salary. "You never want to take a lower salary, especially not in exchange for something that is conditional e.g. benefits. Your salary is the only thing that is guaranteed as a condition of employment. Other things can be changed by the employer at a future point in time." Does it make sense to take a lower salary so I can still contribute to a Roth IRA? |
Is there a good strategy to invest when two stock companies either merge or acquisition? | There is a strategy called merger-arbitrage where you buy the stock of the acquired company when it sells for less than the final acquisition price. Usually the price will rise to about the acquisition price fairly rapidly after the merge is announced, so you have to move fast. The danger is that the merger gets called off (regulatory reasons, the acquired company board votes no) and you get left holding shares bought at a price higher than the price after the merger collapses. This is kind of an advanced strategy and a tough one to back test since each M&A deal is unique. |
Is it true that more than 99% of active traders cannot beat the index? | That is such a vague statement, I highly recommend disregarding it entirely, as it is impossible to know what they meant. Their goal is to convince you that index funds are the way to go, but depending on what they consider an 'active trader', they may be supporting their claim with irrelevant data Their definition of 'active trader' could mean any one or more of the following: 1) retail investor 2) day trader 3) mutual fund 4) professional investor 5) fund continuously changing its position 6) hedge fund. I will go through all of these. 1) Most retail traders lose money. There are many reasons for this. Some rely on technical strategies that are largely unproven. Some buy rumors on penny stocks in hopes of making a quick buck. Some follow scammers on twitter who sell newsletters full of bogus stock tips. Some cant get around the psychology of trading, and thus close out losing positions late and winning positions early (or never at all) [I myself use to do this!!]. I am certain 99% of retail traders cant beat the market, because most of them, to be frank, put less effort into deciding what to trade than in deciding what to have for lunch. Even though your pension funds presentation is correct with respect to retail traders, it is largely irrelevant as professionals managing your money should not fall into any of these traps. 2) I call day traders active traders, but its likely not what your pension fund was referring to. Day trading is an entirely different animal to long or medium term investing, and thus I also think the typical performance is irrelevant, as they are not going to manage your money like a day trader anyway. 3,4,5) So the important question becomes, do active funds lose 99% of the time compared to index funds. NO! No no no. According to the WSJ, actively managed funds outperformed passive funds in 2007, 2009, 2013, 2015. 2010 was basically a tie. So 5 out of 9 years. I dont have a calculator on me but I believe that is less than 99%! Whats interesting is that this false belief that index funds are always better has become so pervasive that you can see active funds have huge outflows and passive have huge inflows. It is becoming a crowded trade. I will spare you the proverb about large crowds and small doors. Also, index funds are so heavily weighted towards a handful of stocks, that you end up becoming a stockpicker anyway. The S&P is almost indistinguishable from AAPL. Earlier this year, only 6 stocks were responsible for over 100% of gains in the NASDAQ index. Dont think FB has a good long term business model, or that Gilead and AMZN are a cheap buy? Well too bad if you bought QQQ, because those 3 stocks are your workhorses now. See here 6) That graphic is for mutual funds but your pension fund may have also been including hedge funds in their 99% figure. While many dont beat their own benchmark, its less than 99%. And there are reasons for it. Many have investors that are impatient. Fortress just had to close one of its funds, whose bets may actually pay off years from now, but too many people wanted their money out. Some hedge funds also have rules, eg long only, which can really limit your performance. While important to be aware of this, that placing your money with a hedge fund may not beat a benchmark, that does not automatically mean you should go with an index fund. So when are index funds useful? When you dont want to do any thinking. When you dont want to follow market news, at all. Then they are appropriate. |
How can foreign investor (residing outside US) invest in US company stocks? | Instead of SSN, foreign person should get a ITIN from the IRS. Instead of W9 a foreigner should fill W8-BEN. Foreigner might also be required to file 1040NR/NR-EZ tax report, and depending on tax treaties also be liable for US taxes. |
How do I enter Canadian tax info from US form 1042-S and record captial gains from cashing in stock options? | I can't give you a specific answer because I'm not a tax accountant, so you should seek advice from a tax professional with experience relevant to your situation. This could be a complicated situation. That being said, one place you could start is the Canada Revenue Agency's statement on investment income, which contains this paragraph: Interest, foreign interest and dividend income, foreign income, foreign non-business income, and certain other income are all amounts you report on your return. They are usually shown on the following slips: T5, T3, T5013, T5013A To avoid double taxation, Canada and the US almost certainly have a foreign tax treaty that ensures you are only taxed in your country of residence. I'm assuming you're a resident of Canada. Also, this page states that: If you received foreign interest or dividend income, you have to report it in Canadian dollars. Use the Bank of Canada exchange rate that was in effect on the day you received the income. If you received the income at different times during the year, use the average annual exchange rate. You should consult a tax professional. I'm not a tax professional, let alone one who specializes in the Canadian tax system. A professional is the only one you should trust to answer your question with 100% accuracy. |
What should I consider when I try to invest my money today for a larger immediate income stream that will secure my retirement? | I don't think you should mix the two notions. Not starting out with at least. It takes so much money, time and expertise to invest for income that, starting out at least, you should view it as a goal, not a starting point. Save your money in the lowest cost investments you can find. If you are like me, you can't pick a stock from a bond, so put your money into a target retirement fund. Let the experts manage the risk and portfolio. Start early and save often! At only 35 you have lots of time. Perhaps you are really into finance, in which case you might somebody manage your own portfolio. Great, but for now, let an expert do the heavy lifting. You are an app developer. Your best bet to increase your income stream with via your knowledge and expertise. While you are still so young, you should use labor to make money, and then save that money for retirement. I am going to make an assumption that where you are will software development means you can become a great developer long before you can become a great financier. Play to your strengths. I am also afraid you are over estimating how comfortable you are with risk. Any "investment" that has the kinds of returns you are looking for is going to be wildly risky. I would say those types of opportunities are more "speculation" rather than "investments." There isn't necessarily anything wrong with speculations, but know the difference in risk. Are you really willing to gamble your retirement? |
What is a subsidy? | A subsidy is a payment made by a group (usually the state) to individuals or corporations in order to shift the balance if the rational economic decision for the individual would be detrimental to the group as a whole otherwise. For example, if there are different quality kinds of crops that can be planted, for example a GM maize that brings in high yields but can only be processed to High Fructose Corn Syrup or a naturally bred corn that brings lower yields but tastes well enough for direct consumption, then if demand for both exceeds supply, the economic choice for the individual farmer is to plant the former. If the claims that HFCS contribute to obesity are founded, then it is in the public interest to produce less of it, and more alternative foods. Given that a market rather than a planned economy is desired, this cannot be achieved by decree, but rather money is used as an incentive. In the long term, this investment may very well pay off through reduced health care costs, so it is a rational economic decision from the state's point of view. In a world where all actors make decisions that are fully in their self interest, in principle subsidies would not be needed as consumers would demand healthy rather than cheap foods, and market mechanisms would provide these. |
Harmony Gold Mining Company is listed on the NYSE and JSE at different prices? | The quotes on JSE are for 100 share lots. The quotes on NYSE are for single shares. That still leaves some price difference, but much less than you calculated. (EDIT: Equivalently, the price is quoted in 1/100th of a Rand. The Reuter's listing makes this explicit since the price is listed as ZAc rather than ZAR. http://www.reuters.com/finance/stocks/overview?symbol=HARJ.J) As noted in the other answer currently up, NYSE is quoting American Depositary Receipts (ADRs) for this company, which is not directly its stock. The ADR in this case, if you check the prospectus, is currently 1 share of the ADR = 1 share of the stock on its home market. A US institution (in this case it looks like BNY Mellon) is holding shares of stock to back each ADR. Arbitrage is possible and does happen. It's not perfect though, because there are a variety of other cost and risk factors that need to be considered. There's a good review here: Report by JP Morgan Some summary points: |
Clothing Store Credit Card Account closed but not deleted | There are three parties involved here: there's the store that issued you the card, then they have some bank that's actually handling the account, and there is some network (VISA, MasterCard, etc.) that the transactions go through. So one avenue to consider is seeing whether all three are aware of you canceling the card. |
Should I start investing in property with $10,000 deposit and $35,000 annual wage | In general people make a few key mistakes with property: 1) Not factoring in depreciation properly. Houses are perpetually falling down, and if you are renting them perpetually being trashed by the tenants as well - particularly in bad areas. Accurate depreciation costs can often run in the 5-20% range per year depending on the property/area. Add insurance to this as well. 2) Related to 1), they take the index price of house price rises as something they can achieve, when in reality a lot of the house price 'rise' is just everyone having to spend a lot of money keeping them standing up. No investor can actually track a house price graph due to 1) so be careful to make reasonable assumptions about actual achievable future growth. 3) Failure to price in the huge transaction costs (often 5%+ per sale) and capital gains/other taxes (depends on the exact tax structure where you are). These add up very fast if you are buying and selling at all frequently. 4) Costs in either time or fees to real estate rental agents. Having to fill, check, evict, fix and maintain rental properties is a lot more work than most people realise, and you either have to pay this in your own time or someone else’s. Again, has to be factored in. 5) Liquidity issues. Selling houses in down markets is very, very hard. They are not like stocks where they can be moved quickly. Houses can often sit on the market for years before sale if you are not prepared to take low prices. As the bank owns your house if you fail to pay the mortgage (rents collapse, loss of job etc) they can force you to fire sale it leaving you in a whole world of pain depending on the exact legal system (negative equity etc). These factors are generally correlated if you work in the same cities you are buying in so quite a lot of potential long tail risk if the regional economy collapses. 6) Finally, if you’re young they can tie you to areas where your earnings potential is limited. Renting can be immensely beneficial early on in a career as it gives you huge freedom to up sticks and leave fast when new opportunities arise. Locking yourself into 20yr+ contracts/activities when young can be hugely inhibiting to your earnings potential – particularly in fast moving jobs like software development. Without more details on the exact legal framework, area, house type etc it’s hard to give more specific advise, but in general you need a very large margin of safety with property due to all of the above, so if the numbers you’re running are coming out close, it’s probably not worth it, and you’re better of sticking with more hands off investments like stocks and bonds. |
Loan holder wants a check from the insurance company that I already cashed and used to repair my car | There are at least three financial institutions involved here: your insurance company's bank, the money center, and your bank. Normally, they would keep records, but given that the money center didn't even ask for your signature, "normal" probably doesn't apply to them. Still, you can still ask them what records they have, in addition to the other two institutions; the company's bank and your bank likely have copies of the check. |
Premium classification when selling covered calls in a traditional IRA? | If you hold stock in a traditional IRA and sell a covered call against that stock, the premium received for writing that call belongs to the IRA just as would any other gain, dividend, or interest. It is not a contribution but simply adds to the balance in the IRA. The nature of the gain (capital or ordinary) is not relevant since all parts of the IRA balance are treated the same when funds are (eventually) withdrawn. |
What is the difference between “good debt” vs. “bad debt”? | I think people are conflating two orthogonal sets of terms. Unsecured/secured and good/bad are not synonyms. Debt may be secured or unsecured. If I take a loan against a car or house it is typically secured, so the object is collateral against the loan. Bad debt in financial terms is a loan that is not expected to be recovered. A bank might write off a loan or a portion of a loan as bad debt if the borrower goes bankrupt or into administration for example. Both secured and unsecured loans may be considered bad debt. I think the context in which the question is being asked is how to distinguish between sensible and inadvisable borrowing. An extreme example of inadvisable borrowing would be to buy a PC on a store card. PCs devalue very quickly and a store card may charge 30% APR, so paying the minimum off each month would mean paying more than twice the sticker price for a product that is now worth less than half the original borrowed amount. On the other hand, a 3% mortgage when borrowing less than 60% of the value of a property is a good bet from a lender's perspective, and would be a good debt to have (not as good as no debt, but better thhan a high APR one). |
Non Resident Alien(Working full time on F1-OPT) new car sales tax deduction | A non-resident alien is only allowed for deductions connected to producing a US-sourced income (See IRC Sec. 873). Thus you can only deduct things that qualify as business expenses, and State taxes on your wages. In addition you can deduct a bunch of stuff explicitly allowed (like tax preparation, charitable contributions, casualty losses, etc) but sales tax is not in that list. |
How do freight derivatives like Forward Freight Agreements (FFAs) work? | The product descriptions for FFA swaps and options can be found here: http://www.lchclearnet.com/freight/ffas/products.asp The index (e.g. the BFA) is based on the settlement prices of the P2, P2A, and C4 contracts and the panamax TC routes. As such it's just a performance index and replicates the returns you'd get from holding a portfolio of the constituents. I think from the clearing descriptions everything should be clear. The wording in the link on the Baltic Exchange website is a bit nebulous. I think they mean standardised instead of specified. Because that's what sets the FFABA apart from OTC agreements or OTC spot markets. Edit: For more information on financial instruments in general see the Handbook of Financial Instuments. I haven't got the latest edition but I doubt he will mention FFAs, CFSAs, or anything that's specific to maritime markets but after all they're just plain forward agreements over a not-so-common underlying. |
Is 401k as good as it sounds given the way it is taxed? | There are 3 options (option 2 may not be available to you) When you invest 18,000 in a Traditional 401k, you don't pay taxes on the 18k the year you invest, but you pay taxes as you withdraw. There's a Required Minimum Distribution required after age 70. If your income is low enough, you won't pay taxes on your withdrawals. Otherwise, you pay as if it is income. However, you don't pay payroll tax (Social Security / Medicare) on the withdrawals. You pay no tax until you withdraw. When you invest 18,000 in a Roth 401k, you pay income tax on the 18,000 in the year it's invested, but you pay nothing after that. When you invest 18,000 in a taxable investment account, you pay income tax on that 18,000 in the year it's invested, you pay tax on dividends (even if they're re-invested), and then you pay capital gains tax when you withdraw. But remember, tax rules and tax rates are only good so long as Congress doesn't change the applicable laws. |
End of financial year: closing transactions | I'm not sure there's a good reason to do a "closing the books" ceremony for personal finance accounting. (And you're not only wanting to do that, but have a fiscal year that's different from the calendar year? Yikes!) My understanding is that usually this process is done for businesses to be able to account for what their "Retained Earnings" and such are for investors and tax purposes; generally individuals wouldn't think of their finances in those terms. It's certainly not impossible, though. Gnucash, for example, implements a "Closing Books" feature, which is designed to create transactions for each Income and Expenses account into an end-of-year Equity Retained Earnings account. It doesn't do any sort of closing out of Assets or Liabilities, however. (And I'm not sure how that would make any sense, as you'd transfer it from your Asset to the End-of-year closing account, and then transfer it back as an Opening Balance for the next year?) If you want to keep each year completely separate, the page about Closing Books in the Gnucash Wiki mentions that one can create a separate Gnucash file per year by exporting the account tree from your existing file, then importing that tree and the balances into a new file. I expect that it makes it much more challenging to run reports across multiple years of data, though. While your question doesn't seem to be specific to Gnucash (I just mention it because it's the accounting tool I'm most familiar with), I'd expect that any accounting program would have similar functionality. I would, however, like to point out this section from the Gnucash manual: Note that closing the books in GnuCash is unnecessary. You do not need to zero out your income and expense accounts at the end of each financial period. GnuCash’s built-in reports automatically handle concepts like retained earnings between two different financial periods. In fact, closing the books reduces the usefulness of the standard reports because the reports don’t currently understand closing transactions. So from their point of view it simply looks like the net income or expense in each account for a given period was simply zero. And that's largely why I'm just not sure what your goals are. If you want to look at your transactions for a certain time, to "just focus on the range of years I'm interested in for any given purpose" as you say, then just go ahead and run the report you care about with those years as the dates. The idea of "closing books" comes from a time when you'd want to take your pile of paper ledgers and go put them in storage once you didn't need to refer to them regularly. Computers now have no challenges storing "every account from the beginning of time" at all, and you can filter out that data to focus on whatever you're looking for easily. If you don't want to look at the old data, just don't include them in your reports. I'm pretty sure that's the "better way to keep the books manageable". |
What's the appropriate way to signify an S-Corp? | S-Corp is a corporation. I.e.: you add a "Inc." or "Corp." to the name or something of that kind. "S" denotes a specific tax treatment which may change during the lifetime of the corporation. It doesn't refer to a legal status. |
I started some small businesses but need help figuring out taxes. Should I hire a CPA? | The only professional designations for people allowed to provide tax advice are Attorney, EA or CPA. Attorney and CPA must be licensed in the State they practice in, EA's are licensed by the Federal government. Tax preparers are not allowed to provide any tax advice, unless they hold any of these designations. They are only allowed to prepare your tax forms for you. So no, tax preparer is not a solution. Yes, you need to talk to a tax adviser (EA/CPA licensed in your State, you probably don't need a tax attorney). You should do that before you start earning money - so that you can plan properly and understand what expenses you can incur and how they're handled with regards to your future income tax payments. You might also want to consider a bookkeeping service (many EA/CPA offices offer the bookkeeping as well). But that you can also do yourself, not all that complicated if you don't have tons of transactions and accounts. |
How does a tax exemption for an action = penalty for inaction? | There's a significant difference between "discount" and "surcharge". For starters - legal difference. If you have a list price of $X - that's the price you're committed to sell regardless of the payment method. So it doesn't matter if I pay with cash or credit - I'll pay $X. However, it costs you more when I pay with credit - so you want to pass that cost on me. You charge me surcharge - an addition to the price. In some States in the US and in some other countries - that is against the law. You cannot add on top of the listed price any amount regardless of the payment method. However, you can say that the list price is $X, which includes the assumed credit card surcharge of $Y. And then you give discount of $Y to anyone not paying with credit card. The list price is still $X, regardless of the payment method. You don't have to give the discount, the discount is your cost of doing business. But that would be legal in some places (not all!) that forbid credit card surcharge. So the main difference from legal perspective is that you're not allowed to add to the list price, but you're allowed to discount from it. Regarding taxes - exemption/deduction is not a penalty for negative. Exemption/deduction is an implementation of a social policy. For example, it is for the public benefit for everyone to own a house. So the Congress comes up with a deduction of mortgage interest. However, you're not penalized if you don't own a house by paying higher taxes. Your tax rate doesn't change. You just don't get to deduct something that you might be able to deduct had you owned a house with a mortgage. This is, again - a discount of a list price, not a surcharge. You're not penalized if you don't have a house or don't have a mortgage, but if you do - you get a break. The author you're quoting claims that bottom line would be the same as if you considered the absence of a deduction as a penalty. But that's not true, because even if you do have a mortgage you may not be able to deduct it because your income is too high, the mortgage is for too much, or your mortgage is not on the primary residence. So mere existence of the mortgage doesn't directly correlate to the existence of the deduction. Similarly with credit card surcharges - you may get a cash discount, but you may get the similar amount of money back even if you use a credit card. Not as a cash discount but rather as rewards, cash-backs or points. However, if there's no cash discount, you won't be getting these if you're paying cash. So again - you're not penalized for having a credit card by not getting a discount, because you may still get it in a different way - and if you don't, you still may end up not getting it. So the quote is a rather simplistic and negative view and more of an opinion than stating a fact. |
Covered Call Writing - What affects the price of the options? | There are some excellent responses to this question at the time of this post. I have had the greatest success writing 1-month options. The 2 main reasons are as follows: With little time to expiration as stated in the question the implied volatility of the option is dictating the premium. Looking for the highest premiums is a mistake because you are taking a conservative strategy and re-creating it into a high-risk strategy. My sweet spot is a 2-4% monthly return for my initial profit and then mastering management techniques to protect that return and even enhancing it. |
How should I be contributing to my 401(k), traditional or Roth? | I'm of the opinion that it doesn't matter much unless something in your life changes in retirement. And since many retirement planners assume a default income target of 80 percent of pre-retirement income, I figure many people's tax bracket isn't moving much. The most interesting reason I know to Go Roth in a 401k is limits. You can only contribute like $17k, whether Roth or not. In a traditional contribution, some of the 17k you put in goes to taxes when taken out, but in a Roth contribution you pay taxes up front. So if you have more than $17k to invest, Roth lets you sneak some more into the system. |
Is there a general guideline for what percentage of a portfolio should be in gold? | By mentioning GLD, I presume therefore you are referring to the SPRD Gold Exchange Traded Fund that is intended to mirror the price of gold without you having to personally hold bullion, or even gold certificates. While how much is a distinctly personal choice, there are seemingly (at least) three camps of people in the investment world. First would be traditional bond/fixed income and equity people. Gold would play no direct role in their portfolio, other than perhaps holding gold company shares in some other vehicle, but they would not hold much gold directly. Secondly, at the mid-range would be someone like yourself, that believes that is in and of itself a worthy investment and makes it a non-trivial, but not-overriding part of their portfolio. Your 5-10% range seems to fit in well here. Lastly, and to my taste, over-the-top, are the gold-gold-gold investors, that seem to believe it is the panacea for all market woes. I always suspect that investment gurus that are pushing this, however, have large positions that they are trying to run up so they can unload. Given all this, I am not aware of any general rule about gold, but anything less than 10% would seem like at least a not over-concentration in the one area. Once any one holding gets much beyond that, you should really examine why you believe that it should represent such a large part of your holdings. Good Luck |
What would I miss out on by self insuring my car? | You lose your agent services. When my wife wrecked our car 3 years ago our agent took care of everything. He got us a rental car, made the arrangements to get it fixed, checked in to see how we were doing, and even helped us set up a second opinion on my wifes wrist surgery. The accident was ruled the fault of the uninsured driver who decided to take off through the red light. But our insurance was the one that covered it all total expenses over 80k. We would have had to eat most of those with out full coverage. Most everything was set up (our rental car, estimates on repair, even her inital consutation with the surgeon) before the investigator had filed her report. Our agents first question was is everyone ok. His second was what can i do to help? He never asked us what happened and was always ahead of our needs in dealing with it. If these things are not important to you, you can probably save quite a bit of money self insuring. But if you are in an accident and unable to do them yourself, do you have someone to do it for you? Do you trust them to handle your business and are you willing to saddle them with the responsibility of dealing with it? To me insurance is less about me and more about my family. It was nice that my agent did all of that for me. I would have been willing to do it myself though. But I am glad to know he is there for my wife if something happens to me. |
Corporate Equity Draw vs Income | You tagged with S-Corp, so I assume that you have that tax status. Under that situation, you don't get taxed on distributions regardless of what you call them. You get taxed on the portion of the net income that is attributable to you through the Schedule K that the S-Corp should distribute to you when the S-Corp files its tax return. You get taxed on that income whether or not it's distributed. If you also work for the small business, then you need to pay yourself a reasonable wage. The amount that you distribute can be one factor in determining reasonableness. That doesn't seem to be what you asked, but it is something to consider. |
Where can I find accurate historical distribution data for mutual funds? | If you want to go far upstream, you can get mutual fund NAV and dividend data from the Nasdaq Mutual Fund Quotation Service (MFQS). This isn't for end-users but rather is offered as a part of the regulatory framework. Not surprisingly, there is a fee for data access. From Nasdaq's MFQS specifications page: To promote market transparency, Nasdaq operates the Mutual Fund Quotation Service (MFQS). MFQS is designed to facilitate the collection and dissemination of daily price, dividends and capital distributions data for mutual funds, money market funds, unit investment trusts (UITs), annuities and structured products. |
Is there a rule that a merchant must identify themself when making a charge | Obviously, the credit card's administators know who this charge was submitted by. Contact them, tell them that you don't recognize the charge, and ask them to tell you who it was from. If they can't or won't, tell them you suspect fraud and want it charged back, then wait to see who contacts you to complain that the payment was cancelled. Note that you should charge back any charge you firmly believe is an error, if attempts to resolve it with the company aren't working. Also note that if you really ghink this is fraud, you should contact your bank and ask them to issue a new card number. Standard procedures exist. Use them when appropriate. |
How to calculate average drawdown of a trading system? | First of all, I think I'll clear off some confusion in the topic. The Sterling Ratio is a very simple investment portfolio measurement that fits nicely to the topic of personal finance, although not so much to a foreign exchange trading system. The Sterling Ratio is mainly used in the context of hedge funds to measure its risk-reward ratio for long term investments. To do so, it has been adapted to the following in order to appear more like the Sharpe Ratio: I Suppose this is why you question the Average Largest Draw-down. I'll come back to that later. It's original definition, suggested by the company Deane Sterling Jones, is a little different and perhaps the one you should use if you want to measure your trading system's long term risk-reward ratio, which is as followed: Note: Average Annual Draw-down has to be negative on the above-mentioned formula. This one is very simple to calculate and the one to use if you want to measure any portfolio's long-term results, such an example of a 5 or 10 years period and calculate the average of each years largest drawdown. To answer @Dheer's comment, this specific measurement can also be used in personal investments portfolio, which is considered a topic related to personal finance. Back to the first one, which answers your question. It's used in most cases in investment strategies, such as hedging, not trading systems. By hedging I mean that in these cases long term investments are made in anti-correlated securities to obtain a diversified portfolio with a very stable growth. This one is calculated normally annually because you rely on the Annual Risk-Free Rate. Having that in mind I think you can guess that the Average Largest Drawdown is the average between the Largest/Maximum Drawdown from each security in the portfolio. And this doesn't make sense in a trading system. Example: If you have invested in 5 different securities where we calculated the Largest Draw-down for each, such as represented in the following array: MaxDD[5] = { 0.12, 0.23, 0.06, 0.36, 0.09 }, in this case your Average Largest Draw-down is the average(MaxDD) that equals 0.172 or 17,2% If your portfolio's annual return is 15% and the Risk-free Rate is 10%, your Sterling Ratio SR = (0.15 - 0.10)/0.172, which result to 0.29. The higher the rate better is the risk-reward ratio of your portfolio. I suggest in your case to only use the original Sterling Ratio to calculate your long-term risk-reward, in any other case I suggest looking at the Sharpe and Sortino ratios instead. |
Why does Yahoo Finance's data for a Vanguard fund's dividend per share not match the info from Vanguard? | In the context of EDV, 4.46 is the indicated dividend rate. The indicated dividend rate is the rate that would be paid per share throughout the next year, assuming dividends stayed the same as prior payment. sources: |
If a stock doesn't pay dividends, then why is the stock worth anything? | You are missing the fact that the company can buy back its own shares. For simplicity, imagine the case that you own ALL of the shares of XYZ corporation. XYZ is very profitable, and it makes $1M per year. There are two ways to return $1M to you, the shareholder: 1) The company could buy back some fraction of your shares for $1M, or 2) The company could pay you a $1M dividend. After (1) you'd own ALL of the shares and have $1M. After (2) you'd own ALL of the shares and have $1M. After (1) the total number of shares would be fewer, but saying you owned less of XYZ would be like complaining that you are shorter when your height is measured in inches than in centimeters. So indeed, a buyback is an alternative to a dividend. Furthermore, buybacks have a number of tax advantages over dividends to taxable shareholders (see my answer in Can I get a dividend "free lunch" by buying a stock just before the ex-dividend date and selling it immediately after?). That said, it is important to recognize the shareholders who are less savvy about knowing when to accept the buyback (by correctly valuing the company) can get burned at the profit of the savvy shareholders. A strategy to avoid being burned if you aren't price savvy is simply to sell a fraction in order to get your pro rata share of the buyback, in many respects simulating a dividend but still reaping some (but not all) of the tax advantages of a buyback. |
Optimal way to use a credit card to build better credit? | First I would like to say, do not pay credit card companies in an attempt to improve your credit rating. In my opinion it's not worth the cash and not fair for the consumer. There are many great resources online that give advice on how to improve your credit score. You can even simulate what would happen to your score if you did "this". Credit Karma - will give you your TransUnion credit score for free and offers a simulation calculator. If you only have one credit card, I would start off by applying for another simply because $700 is such a small limit and to pay a $30 annual fee seems outrageous. Try applying with the bank where you hold your savings or checking account they are more likely to approve your application since they have a working relationship with you. All in all I would not go out of my way and spend money I would not have spent otherwise just to increase my credit score, to me this practice is counter intuitive. You are allowed a free credit report from each bureau, once annually, you can get this from www.annualcreditreport.com, this won't include your credit score but it will let you see what banks see when they run your credit report. In addition you should check it over for any errors or possible identity theft. If there are errors you need to file a claim with the credit agency IMMEDIATELY. (edit from JoeT - with 3 agencies to choose from, you can alternate during the year to pull a different report every 4 months. A couple, every 2.) Here are some resources you can read up on: Improve your FICO Credit Score Top 5 Credit Misconceptions 9 fast fixes for your credit scores |
Would you withdraw your money from your bank if you thought it was going under? | The article you link scares me; but I still have faith that the FDIC will keep me protected. Personally, if the FDIC goes broke, there is something more fundamentally wrong with the government as a whole and dollars won't worry me much. There are lots of issues with the FDIC, and I think the answers lie outside of simply printing more money and funding the FDIC further. There is likely more bad before this storm is over, and I might be ignorant, but I still want to operate normally. My money would stay where it is with things being how I see them in today |
Is there a correlation between self-employment and wealth? | In a well-managed company, employees bring more dollars to their employers than the employers pay the employees (salary and benefits). Employees trade potential reward for security (a regular paycheck). Employers take on the risk of needing to meet payroll and profit from the company's income, minus expenses. The potential rewards are much higher as an employer (self or otherwise), so the ones that do make it do quite well. But this is also consistent with your other statement that the reverse is not true; the risk of self-employment is high, and many self-employed people don't become millionaires. |
With respect to insider trading, what is considered “material information”? | Some history: In the US, this is very tightly controlled and regulated. Although stock market securities insider trading is a relatively new crime around the world (20-30 year old), the United States is exceptional for offering the longest sentences for it, although it is still far more lucrative than and carries lower sentences than something like petty larceny. The perception of illegal insider trading has changed in the US over the years, although it is based on much older fraud statutes the regulators and the courts have only really developed modern case law against insider trading in the past 20-30 years. The US relies on its vast network of registered broker-dealers to detect and report abnormal trading activity and the regulator (SEC) can quickly obtain emergency court orders from rent-a-judges (Administrative Law Judges) to freeze trader's assets to prevent them from withdrawing, or quickly enacting sanctions. So this reality helps deter trading on material inside information. So for someone that needs to get an information advantage on the market, it is [simply] necessary for them to rationalize how this information could be inferred from public sources. Similarly there is a thin line between non-public information and public information, the "lab experiment" example would be material insider information, but the fact that there will be litigation over a company's key patents may be "public" as soon as the lawyer submits the complaint to the court system. It is also worth noting that there are A LOT of financial products trading in the capital markets, and illegal insider trading laws only applies to trading of shares of a company. So if a major holder in gold is about to liquidate all their holdings, being short gold futures is not subject to civil and criminal sanctions. Hope this helps. The above examples should help you understand what kind of information is material inside information and what kind is not, and how it is relevant to trading decisions. |
Should I get a personal loan to pay on my mortgage to go “above water” to qualify for a refinance? | It depends on how long it will take you to pay off the personal loan, the rate for the personal loan, the refi rate you think you can get, how much principal you will have to add to get the refi (may have gone up since then). Since you did not provide all the necessary details, the general answer is to sketch out your total payments (mortgage + personal loan) with and without the refi over the life of the mortgage and see if you end up with more money in your pocket with the refi. My overall impression based on the details you did provide is that you will probably find it worthwhile to do the refi. |
Why Google Finance puts to two decimal places for the trading volumes? | Many brokerages offer automatic dividend reinvestment. It is very infrequent that these dividends are exactly a whole share. So, if you have signed up for automatic dividend reinvestment, many brokerages will reinvest your dividends and assign to you a fractional share. I can't speak for how these shares work with regards to voting, but I can say that the value of these fractional holdings does change with stock price as if one genuinely could hold a fraction of a share. |
Why does selling and then rebuying stock not lead to free money? | I think the simple answer to your question is: Yes, when you sell, that drives down the price. But it's not like you sell, and THEN the price goes down. The price goes down when you sell. You get the lower price. Others have discussed the mechanics of this, but I think the relevant point for your question is that when you offer shares for sale, buyers now have more choices of where to buy from. If without you, there were 10 people willing to sell for $100 and 10 people willing to buy for $100, then there will be 10 sales at $100. But if you now offer to sell, there are 11 people selling for $100 and 10 people buying for $100. The buyers have a choice, and for a seller to get them to pick him, he has to drop his price a little. In real life, the market is stable when one of those sellers drops his price enough that an 11th buyer decides that he now wants to buy at the lower price, or until one of the other 10 buyers decides that the price has gone too low and he's no longer interested in selling. If the next day you bought the stock back, you are now returning the market to where it was before you sold. Assuming that everything else in the market was unchanged, you would have to pay the same price to buy the stock back that you got when you sold it. Your net profit would be zero. Actually you'd have a loss because you'd have to pay the broker's commission on both transactions. Of course in real life the chances that everything else in the market is unchanged are very small. So if you're a typical small-fry kind of person like me, someone who might be buying and selling a few hundred or a few thousand dollars worth of a company that is worth hundreds of millions, other factors in the market will totally swamp the effect of your little transaction. So when you went to buy back the next day, you might find that the price had gone down, you can buy your shares back for less than you sold them, and pocket the difference. Or the price might have gone up and you take a loss. |
Credit card closed. Effect on credit score (USA) | You need to find out if the credit card has been reporting these failed automated payments as late or missed payments to your credit report. To do this, go to annualcreditreport.com (the official site to get your free credit reports) and request your report from all three bureaus. If you see late or missing payments reported for the months where you made a payment but then they did an automatic payment anyway, you should call up the credit card company, explain the situation, and ask them to retract those negative reports. If they refuse, you should dispute the reports directly with the credit bureaus. If they have been reporting late payments even though you have been making the payments, that will impact your credit much more than the fact that they closed your account. Unfortunately, they can turn off your credit account for any reason they like, and there isn't much you can do about that. Find yourself another job as soon as you can, get back on your feet, pay off your debt, and think very carefully before you open another credit card in the future. Don't start a new credit card unless you can ensure that you will pay it off in full every month. |
Should I pay off my 50K of student loans as quickly as possible, or steadily? Why? | Here's my take on it (and quite a few people might disagree) - student loans aren't bankruptable, so they'll stay with you forever. So if you want to reduce your risk over time and have a funded emergency fund and some cash put aside for, say, a car or another major expense, then I'd try to throw money at the student loan to get rid of it quickly. |
Why can't house prices be out of tune with salaries | Those folks should be introduced to some real estate folks I know, they'd get along famously, being as how they still think it's 2007. The amount of housing out there requires that a large market of consumers is available to purchase them. If housing prices rose infinitely ahead of salaries, the market for potential buyers would continue to shrink until supply would outstrip demand. And then we have the wonderful housing bubble like the one that we just went through (or in some places like China, have the potential to go through). Short version: It violates the relationship between supply and demand. |
Getting Cash from Credit Card without Fees | This was actually (sort of) possible a few years ago. The US Mint, trying to encourage use of dollar coins, would sell the coins to customers for face value and no shipping. Many people did exactly what you are proposing: bought hundreds/thousands of dollars worth of coins with credit cards, reaped the rewards, deposited the coins in the bank, and paid off the credit cards. See here, for example. Yeah, they don't have that program any more. Of course, this sort of behavior was completely predictable and painfully obvious to the credit card companies, who, as far as I know, never let users net rewards on cash advances. They're trying to make money after all, unlike the Mint, which, uh, well... |
How can a company charge a closed credit card? | If this is a pre-authorized automatic billing, and if you have signed any contract with the merchant, cancelling may not block any future charges from the merchant. Happens with gyms, magazines, memberships quite often. There is a time period after the cancellation this will occur, then it'll be completely dead. |
Does bull/bear market actually make a difference? | Who are the losers going to be? If you can tell me for certain which firms will do worst in a bear market and can time it so that this information is not already priced into the market then you can make money. If not don't try. In a bull market stocks tend to act "normally" with established patterns such as correlations acting as expected and stocks more or less pricing to their fundamentals. In a bear market fear tends to overrule all of those things. You get large drops on relatively minor bad news and modest rallies on even the best news which results in stocks being undervalued against their fundamentals. In the crash itself it is quite easy to make money shorting. In an environment where stocks are undervalued, such as a bear market, you run the risk that your short, no matter how sure you are that the stock will fall, is seen as being undervalued and will rise. In fact your selling of a "losing" stock might cause it to hit levels where value investors already have limits set. This could bring a LOT of buyers into the market. Due to the fact that correlations break down creating portfolios with the correct risk level, which is what funds are required to do not only by their contracts but also by law to an extent, is extremely difficult. Risk management (keeping all kinds to within certain bounds) is one of the most difficult parts of a manager's job and is even difficult in abnormal market conditions. In the long run (definitions may vary) stock prices in general go up (for those companies who aren't bankrupted at least) so shorting in a bear market is not a long term strategy either and will not produce long term returns on capital. In addition to this risk you run the risk that your counterparty (such as Lehman brothers?) will file for bankruptcy and you won't be able to cover the position before the lender wants you to repay their stock to them landing you in even more problems. |
Wash Sales and Day Trading | You are correct. She cannot claim the initial loss of $1,000 on her taxes, she can only report the $500 profit. However, the IRS does allow her to add the $1,000 loss to the basis cost of her replacement shares. e.g. |
Can stock brokerage firms fail? | Yes, any company can go under. SIPC offers a level of protection. They don't guarantee against stocks dropping, but will replace stocks that you owned, but the broker stole from you. (overgeneralization). There's a $500K limit, with $250K max in cash. |
Stopping Payment on a Check--How Long Does it Take? | Is this a USA bank to a USA bank transaction? If so, it will clear in one to two business days. Once cleared, the landlord cannot stop pay it. He can, however, dishonestly claim it was a fraudulent check and attempt a chargeback. If you want absolute certainty the money will not be recalled, go to the landlord's bank and cash the check as a non-customer. You will have to pay a small fee, but you will walk out with cash. I suggest you take a photocopy of the check, and staple your receipt to it as evidence that the check was cashed for any impending legal proceedings. |
Which is the better strategy for buying stocks monthly? | You will invest 1000£ each month and the transaction fee is 10£ per trade, so buying a bunch of stocks each month would not be wise. If you buy 5 stocks, then transaction costs will eat up 5% of your investment. So if you insist on taking this approach, you should probably only buy one or two stocks a month. It sounds like you're interested in active investing & would like a diversified portfolio, so maybe the best approach for you is Core & Satellite Portfolio Management. Start by creating a well diversified portfolio "core" with index funds. Once you have a solid core, make some active investment decisions with the "satellite" portion of the portfolio. You can dollar cost average into the core and make active bets when the opportunity arises, so you're not killed by transaction fees. |
Do property taxes get deducted 100% from the Annual Tax Return or only a fraction of them? | To bring more clarity to the issue, Viriato will be entitle to deduct property tax depending upon whether he is claiming standard deduction (which varies on some factors including filling as married or single) or itemized deduction. If he is claiming, itemized deduction Example 1 is correct. Example 2 suffers from another mistake. He can get refund of only income tax portion of $5000 and not $5000. |
Should my husband's business pay my business? | It depends on the finances involved, but particularly if you're not billing anything right now and may have no revenue this year, it's probably a good idea to bill his company. This is in part because some deductions or other tax treatments are only allowed if you have revenue and/or income. The biggest example I can think of is the Solo 401k - you can only contribute up to your self employed income. If you're planning to contribute to one (and you should, they're amazingly powerful tools for saving for retirement and for reducing your tax burden), you will have to have some revenue in order to have something to pay yourself with. I don't believe you have to charge him, though, if it makes more tax sense not to (for example, if his business is operating at a loss and cannot benefit from expensing it, but you'd then have to pay taxes on your own income from it). |
Making a big purchase over $2500. I have the money to cover it. Should I get a loan or just place it on credit? | It is going to save you more money in the long run to pay at once with cash. If you take out a loan, you will pay interest on the balance, costing you money. If you pay off the balance immediately, there is no difference between the options and your question becomes irrelevant. There is no credit rating benefit to placing large purchases on your cards, especially since your credit is fine. My advice is to pay in cash in this case, mostly because it makes you 'feel' the purchase. This is what you are describing in your question. This instinct helps you recognize potential problems, instead of masking them with debt. Questions like: "Do I need this?" "Am I overextending myself financially with this purchase?" "Am I holding enough cash-on-hand for emergencies?" You may be fine in these areas, but I would still argue that cash makes you a better buyer because the expense feels much more significant, making you more cautious and discerning. You are right to feel these things before dropping a large sum of money. Let it inform you and help you make better decisions. Don't mask it or be paralyzed by it! |
Is there a “standard deduction” for Line 5 on Schedule A of Federal taxes? | The $10,400 is in the question, in two pieces. His employer withheld $8000, and her employer withheld $2400. Thus they paid together $10,400 in income taxes, which are deductible if you itemize deductions and choose income taxes over sales taxes (you can deduct one or the other). There's nothing "standard" about the amount, though it is standard to take the income tax deduction (almost always higher than sales tax). |
SEP-IRA doing 1099 work on the side of a W2 employee job | The limit on SEP IRA is 25%, not 20%. If you're self-employed (filing on Schedule C), then it's taken on net earning, which in your example would be 25% of $90,000. (https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people) JoeTaxpayer is correct as regards the 401(k) limits. The elective deferrals are per person - That's a cap in sum across multiple plans and across both traditional and Roth if you have those. In general, it's actually across other retirement plan types too - See below. If you're self-employed and set-up a 401(k) for your own business, the elective deferral is still aggregated with any other 401(k) plans in which you participate that year, but you can still make the employer contribution on your own plan. This IRS page is current a pretty good one on this topic: https://www.irs.gov/retirement-plans/one-participant-401k-plans Key quotes that are relevant: The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both: •Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: ◦$18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus •Employer nonelective contributions up to: ◦25% of compensation as defined by the plan, or ◦for self-employed individuals, see discussion below It continues with this example: The amount you can defer (including pre-tax and Roth contributions) to all your plans (not including 457(b) plans) is $18,000 in 2015 and 2016. Although a plan's terms may place lower limits on contributions, the total amount allowed under the tax law doesn’t depend on how many plans you belong to or who sponsors those plans. EXAMPLE Ben, age 51, earned $50,000 in W-2 wages from his S Corporation in 2015. He deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan. His business contributed 25% of his compensation to the plan, $12,500. Total contributions to the plan for 2015 were $36,500. This is the maximum that can be contributed to the plan for Ben for 2015. A business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that his limits on elective deferrals are by person, not by plan. He must consider the limit for all elective deferrals he makes during a year. Notice in the example that Ben contributed more that than his elective limit in total (his was $24,000 in the example because he was old enough for the $6,000 catch-up in addition to the $18,000 that applies to everyone else). He did this by declaring an employer contribution of $12,500, which was limited by his compensation but not by any of his elective contributions. Beyond the 401(k), keep in mind that elective contributions are capped across different types of retirement plans as well, so if you have a SEP IRA and a solo 401(k), your total contributions across those plans are also capped. That's also mentioned in the example. Now to the extent that you're considering different types of plans, that's a whole question in itself - One that might be worth consulting a dedicated tax advisor. A few things to consider (not extensive list): As for payroll / self-employment tax: Looks like you will end up paying Medicare, including the new "Additional Medicare" tax that came with the ACA, but not SS: If you have wages, as well as self-employment earnings, the tax on your wages is paid first. But this rule only applies if your total earnings are more than $118,500. For example, if you will have $30,000 in wages and $40,000 in selfemployment income in 2016, you will pay the appropriate Social Security taxes on both your wages and business earnings. In 2016, however, if your wages are $78,000, and you have $40,700 in net earnings from a business, you don’t pay dual Social Security taxes on earnings more than $118,500. Your employer will withhold 7.65 percent in Social Security and Medicare taxes on your $78,000 in earnings. You must pay 15.3 percent in Social Security and Medicare taxes on your first $40,500 in self-employment earnings and 2.9 percent in Medicare tax on the remaining $200 in net earnings. https://www.ssa.gov/pubs/EN-05-10022.pdf Other good IRS resources: |
Bank will not accept loose change. Is this legal? | The bank certainly doesn't have to take it for a deposit; that's not a debt. There have been several cases where disgruntled debtors have attempted deliberately annoying ways to pay their debts; the apocryphal example being pennies. Courts are not likely to support such efforts since it's obvious that a) the action is malicious and (relevant to you) b) it's really on you to maintain your money in a wieldy form. If you allow your money to become unwieldy, nobody owes you anything. I wonder about the meta-meaning of that. And whether, in that light it really makes sense to worry about 5% or rolling. As far as getting rid of it, when I bought out a girlfriend's piggybank at par, I just made sure to walk out of the house with $5 in change in my pocket and unload $2-3 at every retailer, none ever objected and some appreciated. Quarters were traded to coin laundry users. When going on transit I brought a bunch, the machines never grumbled. I burned through the cache much faster than expected. |
How does the Pension system work in Poland? | littleadv's answer gives a concise summary of the system as it stands now, but much more changed than just the portion of the mandatory contribution that was diverted to the private plan. In broad terms, the balances of your accounts and your future benefit won't change. It's only the source of these benefits that's changing. The Bloomberg article describes the changes this way: The state will take over the amount of bonds that pension funds held as of end of Sept. 3 and turn them into pension liabilities in the state-run social security system... The state will assume control of 51.5 percent of pension-fund assets, including bonds guaranteed by the government and “other non-stock assets” After the change, Polish workers that held bonds in the private portion of their retirement portfolios will instead have more payments from the state-run pension system. The balances of your retirement portfolio and your future benefits shouldn't change, but the reality may depend on how the state pension system is managed and any future changes the government implements. The effect this change will have on future benefits isn't clear, because the change may simply delay the problem of high levels of outstanding sovereign debt, not solve it. The government stated that because increasing numbers of workers invested their money in private pension funds, less money went into the government's fund, which forced them to issue sovereign debt in order to cover the shortfall in their current pension liabilities. The government's recent cancellation of government bonds in the hands of private pensions will decrease their overall outstanding debt, but in exchange, the government is increasing its future pension liabilities. Years down the road, the government may find that they need to issue more sovereign debt to cover the increased pension liabilities they're taking on today. In other words, they may find themselves back in the same situation years down the road, and it's difficult to predict what changes they might make at that time. |
car loan but 2 people on title | Yes, but then either of you will need the other's permission to sell the car. I strongly recommend you get an agreement on that point, in writing, and possibly reviewed by a lawyer, before entering into this kind of relationship. (See past discussions of car titles and loan cosigners for some examples of how and why this can go wrong.) When doung business with friends, treating it as a serious business transaction is the best way to avoid ruining the friendship. |
Pay off mortgage or invest in high value saving account | Basically, the easiest way to do this is to chart out the "what-ifs". Applying the amortization formula (see here) using the numbers you supplied and a little guesswork, I calculated an interest rate of 3.75% (which is good) and that you've already made 17 semi-monthly payments (8 and a half months' worth) of $680.04, out of a 30-year, 720-payment loan term. These are the numbers I will use. Let's now suppose that tomorrow, you found $100 extra every two weeks in your budget, and decided to put it toward your mortgage starting with the next payment. That makes the semi-monthly payments $780 each. You would pay off the mortgage in 23 years (making 557 more payments instead of 703 more). Your total payments will be $434,460, down from $478.040, so your interest costs on the loan were reduced by $43,580 (but, my mistake, we can't count this amount as money in the bank; it's included in the next amount of money to come in). Now, after the mortgage is paid off, you have $780 semi-monthly for the remaining 73 months of your original 30-year loan (a total of $113,880) which you can now do something else with. If you stuffed it in your mattress, you'd earn 0% and so that's the worst-case scenario. For anything else to be worth it, you must be getting a rate of return such that $100 payments, 24 times a year for a total of 703 payments must equal $113,880. We use the future value annuity formula (here): v = p*((i+1)n-1)/i, plugging in v ($113880, our FV goal), $100 for P (the monthly payment) and 703 for n (total number of payments. We're looking for i, the interest rate. We're making 24 payments per year, so the value of i we find will be 1/24 of the stated annual interest rate of any account you put it into. We find that in order to make the same amount of money on an annuity that you save by paying off the loan, the interest rate on the account must average 3.07%. However, you're probably not going to stuff the savings from the mortgage in your mattress and sleep on it for 6 years. What if you invest it, in the same security you're considering now? That would be 146 payments of $780 into an interest-bearing account, plus the interest savings. Now, the interest rate on the security must be greater, because you're not only saving money on the mortgage, you're making money on the savings. Assuming the annuity APR stays the same now vs later, we find that the APR on the annuity must equal, surprise, 3.75% in order to end up with the same amount of money. Why is that? Well, the interest growing on your $100 semi-monthly exactly offsets the interest you would save on the mortgage by reducing the principal by $100. Both the loan balance you would remove and the annuity balance you increase would accrue the same interest over the same time if they had the same rate. The main difference, to you, is that by paying into the annuity now, you have cash now; by paying into the mortgage now, you don't have money now, but you have WAY more money later. The actual real time-values of the money, however, are the same; the future value of $200/mo for 30 years is equal to $0/mo for 24 years and then $1560/mo for 6 years, but the real money paid in over 30 years is $72,000 vs $112,320. That kind of math is why analysts encourage people to start retirement saving early. One more thing. If you live in the United States, the interest charges on your mortgage are tax-deductible. So, that $43,580 you saved by paying down the mortgage? Take 25% of it and throw it away as taxes (assuming you're in the most common wage-earner tax bracket). That's $10895 in potential tax savings that you don't get over the life of the loan. If you penalize the "pay-off-early" track by subtracting those extra taxes, you find that the break-even APR on the annuity account is about 3.095%. |
If the U.S. defaults on its debt, what will happen to my bank money? | In principle, a default will have no effect on your bank account. But if the US's credit rating is downgraded, the knock-on effects might cause some more bank failures, and if the debt ceiling is still in place then the FDIC insurance might not be able to pay out immediately. |
How much money do I need to have saved up for retirement? | One opinion related to savings is to save 30% of your take home salary every month, split the amount into two parts depending on your age (29) one part would be 30% of 30% and another 70% of 30%. Take the 70% and buy blue chip stock and take the 30% and buy govt. bonds. Each 10 years adjust the percentages at 40, 40% on bonds and 60% on stock. Only cash out on the day you retire, otherwise ignore all market/economic movements. With this and the statutory savings (employment retirement) you should be ok. |
Stock market vs. baseball card trading analogy | Baseball cards don't pay dividends. But many profitable companies do just that, and those that don't could, some day. Profits & dividends is where your analogy falls apart. But let's take it further. Consider: If baseball cards could somehow yield a regular stream of income just for owning them, then there might be yet another group of people, call them the Daves. These Daves I know are the kind of people that would like to own baseball cards over the long term just for their income-producing capability. Daves would seek out the cards with the best chance of producing and growing a reliable income stream. They wouldn't necessarily care about being able to flip a card at an inflated price to a Bob, but they might take advantage of inflated prices once in a while. Heck, even some of the Steves would enjoy this income while they waited for the eventual capital gain made by selling to a Bob at a higher price. Plus, the Steves could also sell their cards to Daves, not just Bobs. Daves would be willing to pay more for a card based on its income stream: how reliable it is, how high it is, how fast it grows, and where it is relative to market interest rates. A card with a good income stream might even have more value to a Dave than to a Bob, because a Dave doesn't care as much about the popularity of the player. Addendum regarding your comment: I suppose I'm still struggling with the best way to present my question. I understand that companies differ in this aspect in that they produce value. But if stockholders cannot simply claim a percentage of a company's value equal to their share, then the fact that companies produce value seems irrelevant to the "Bobs". You're right – stockholders can't simply claim their percentage of a company's assets. Rather, shareholders vote in a board of directors. The board of directors can decide whether or not to issue dividends or buy back shares, each of which puts money back in your pocket. A board could even decide to dissolve the company and distribute the net assets (after paying debts and dissolution costs) to the shareholders – but this is seldom done because there's often more profit in remaining a going concern. I think perhaps what you are getting hung up on is the idea that a small shareholder can't command the company to give net assets in exchange for shares. Instead, generally speaking, a company runs somewhat like a democracy – but it's each share that gets a vote, not each shareholder. Since you can't redeem your shares back to the company on demand, there exists a secondary market – the stock market – where somebody else is willing to take over your investment based on what they perceive the value of your shares to be – and that market value is often different from the underlying "book value" per share. |
Does the “Free Ride” rule always apply to your entire collection of shares in a particular stock? | Your question is unanswerable as you haven't provided enough information. I.e. If those shares cost $1000 and you have $50000 ( or any number above $1000) of cash available in the account then you can't possibly free ride. I think your understanding of the free ride rule is incorrect. Basically what this rule is stating is that you have to have the cash when the trade is placed in order to settle the trade. Otherwise you are taking on margin (which you can't do in a cash account). So at order entry you have to have the cash to cover the purchase so it's able to be settled. If you do, no problem and you can sell that stock before trade settlement. There is no law that says you have to hold it past trade settlement. However, you cannot spend the same dollar more than once before it settles. This site does a good job explaining this more throughly with examples: http://www.invest-faq.com/articles/trade-day-free-ride.html |
How should I value personal use television for donation? | Is it a tube television, digital, analog, what? Tube televisions are no longer made in (or imported to) the U.S., and if it's an analog set then it would require a digital converter just for anyone to use it for watching broadcast signals, since analog television signals are gone and have been replaced by DTV. That makes all the difference in the world as far as valuation. If it doesn't have resale value to begin with then I doubt you can put a real value on it for donation purposes. |
Market Cap lower than Shares Outstanding x Share Price? | The definition of market cap is exactly shares oustanding * share price, so something is wrong here. It seems that the share price is expressed in pence rather pounds. There's a note at the bottom: Currency in GBp. Note the 'p' rather than 'P'. So the share price of '544' is actually 544p, i.e. £5.44. However it's not really clear just from the annotations which figures are in pence and which are actually in pounds. It seems that the market cap is in pounds but the enterprise value is in pence, given that 4.37 billion is about the right value in pounds whereas 441 billion only really makes sense if expressed in pence. It looks like they actually got the enterprise value wrong by a factor of 100. Perhaps their calculation treated the share price as being denominated in pounds rather than pence. |
Vanguard Target Retirement Fund vs. Similar ETF Distribution (w/ REIT) | Your approach sounds solid to me. Alternatively, if (as appears to be the case) then you might want to consider devoting your tax-advantaged accounts to tax-inefficient investments, such as REITs and high-yield bond funds. That way your investments that generate non-capital-gain (i.e. tax-expensive) income are safe from the IRS until retirement (or forever). And your investments that generate only capital gains income are safe until you sell them (and then they're tax-cheap anyway). Of course, since there aren't really that many tax-expensive investment vehicles (especially not for a young person), you may still have room in your retirement accounts after allocating all the money you feel comfortable putting into REITs and junk bonds. In that case, the article I linked above ranks investment types by tax-efficiency so you can figure out the next best thing to put into your IRA, then the next, etc. |
Why is being “upside down” on a mortgage so bad? | Sample Numbers: Owe $100k on house. House (after 'crash') valued at: $50K. Reason for consternation: What rational person pays $100k for property that is only worth half that amount? True Story: My neighbor paid almost $250K (a quarter-of-a-million dollars - think about that..) for a house that when he walked (ran!) away from it was sold by the bank for $88K. Unless he declares bankruptcy (and forgoes all his other assets, including retirement savings) he still owes the bank the difference. And even with bankruptcy, he may still owe the bank - this should cause anyone to be a bit concerned about being up-side down in a mortgage loan. |
Are variable rate loans ever a good idea? | Up to some degree, a higher or lower interest rate means a bit less or a bit more money in your pocket. If the interest rate gets too high, you may be in trouble. So you first look at the situation and ask yourself: At what interest rate would I be in trouble? If this is a $20,000 student loan, then even a very high rate wouldn't be trouble. It would be unfortunate and unpleasant, but not fatal. For a $800,000 mortgage, that's different. Each percent more is $8,000 a year. Going from 3% to 10% would change the interest from $24,000 to $80,000 a year, which would be fatal for many people. In a situation where you can afford increasing variable payments without problems you can go for it. If your variable rate would vary over time between 4% and 6% you would still be even. In that situation, go for variable (taking into account where you think interest rates will go in the future). For a mortgage, the security would likely be more important. (On the other hand, if your dad is a multi-millionaire who would help you out, then that big rate increase wouldn't be fatal, and you could go for a variable rate mortgage). In some countries, you can cancel any loan contract when the interest rate is raised. So raising a variable mortgage interest rate would allow you to look elsewhere without early repayment penalties. Check out if that is the case for you. |
Incorporating, issuing stock and evaluating it | No. Mark-to-market valuation relies on using a competitive market of public traders to determine the share price --- from free-market trading among independent traders who are not also insiders. Any professional valuation would see through the promotional nature of the share offer. It is pretty obvious that the purchaser of a share could not turn around and sell their share for $10, unless the 'free hosting' that is worth most of the $10 follows it... and that's more of hybrid of stock and bond than pure stock. It is also pretty obvious that selling a few shares for $10 does not mean one could sell 10,000,000 shares for $10, because of the well known decreasing marginal value effect from economics. While this question seems hypothetical, as a practical matter offering to sell share of unregistered securities in a startup for $10 to the general public, is likely to run afoul of state or federal securities laws -- irregardless of the honesty of the business or any included promotional offers. See http://www.sec.gov/info/smallbus/qasbsec.htm for more information about the SEC regulations for raising capital for small businesses. |
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