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What's the fuss about Credit Score / History? | If human beings were Homo Economicus, i.e. textbook rational and self-interested economic-minded beings, as opposed to simply human, then yes, simple advice like "just stay out of debt and your credit score will take care of itself" could work. Your simplification would be very persuasive to such a being. However, people are not perfectly rational. We buy something we shouldn't have, we charge it on a credit card, we can't afford to pay it off at the end of the month. We lose our job. Our furnace breaks down, or our roof leaks, and we didn't anticipate the replacement cost. Some of this is our fault, some of it isn't – basically, shit happens .. and we get into debt... maybe even knowing all the while we shouldn't have. Our credit history and score takes a hit. Only then do we find out there are consequences! Our interest rates go up, our insurance companies raise premiums, our prospective new employers or landlords run credit checks and either deny us the job or the apartment. Telling a person who asks for help about their credit history/score that they shouldn't have taken on debt in the first place is like telling the farmer he should have kept the barn door shut so the horse wouldn't run out. While it is not "bad" advice, it's not the only kind of advice to offer when somebody finds themselves in such a situation. Adding advice about corrective actions is more helpful. The person probably already know that they shouldn't have overspent in the first place and got into debt. Yes, remind them of the value of being sensible about debt in the first place – it's good reinforcement – but add some helpful advice to the mix. e.g. "So you're in debt. You shouldn't have lived beyond your means. But now that you are in this mess, here's what you can do to improve the situation." |
How to handle Client Deposits in Xero (or any finance software, really) | I haven't worked with Xero before, but can't you just set it up as accounts payable? Put in an accounts payable for the contract. When the client makes a payment, the accounts payable goes down and the cash goes up. |
The Intelligent Investor: Northern Pacific Railway example | Without reading the source, from your description it seems that the author believes that this particular company was undervalued in the marketplace. It seems that investors were blinded by a small dividend, without considering the actual value of the company they were owners of. Remember that a shareholder has the right to their proportion of the company's net value, and that amount will be distributed both (a) in the form of dividends and (b) on liquidation of the company. Theoretically, EPS is an indication of how much value an investor's single share has increased by in the year [of course this is not accurate, because accounting income does not directly correlate with company value increase, but it is a good indicator]. This means in this example that each share had a return of $10, of which the investors only received $1. The remainder sat in the company for further investment. Considering that liquidation may never happen, particularly within the time-frame that a particular investor wants to hold a share, some investors may undervalue share return that does not come in the form of a dividend. This may or may not be legitimate, because if the company reinvests its profits in poorer performing projects, the investors would have been better off getting the dividend immediately. However some value does need to be given to the non-dividend ownership of the company. It seems the author believes that investors failing to consider value of the non-dividend part of the corporation's shares in question led to an undervaluation of the company's shares in the market. |
Why do governments borrow money instead of printing it? | Governments borrowing money doesn't create new money. When banks "borrow" money (i.e. take deposits), it does effectively create money because the depositor expects to be able to get the money back at any time, but the bank assumes that most won't actually do this and lends out most of the money to other people. If everyone did actually ask for their money back at once, the illusion of the extra money created by this process would collapse, and the bank would go bust. In contrast when governments borrow money, the loan isn't repayable on demand, it has a fixed maturity and the money is only repaid at the end of that period (plus interest at defined points during the period). So holders of government debt don't have money they can spend (they can turn it into money they can spend but only by finding someone else to buy it). So government debt doesn't create inflation in itself. If they printed money, then they'd be devaluing the money of everyone who had saved or invested, whereas if they borrow money and use taxes to repay it, the burden falls more evenly across the economy and doesn't disproportionately penalise certain sets of people. |
Is it bad etiquette to use a credit or debit card to pay for single figure amounts at the POS | Until the CARD act, credit card rules required that merchants had no minimum purchase requirement to use a card. New rules permit a minimum but it must be clearly posted. Update - Stores can now refuse small credit card charges is an excellent article which clarifies the rules. It appears that these rules apply to credit, not debit cards. So to be clear - the minimum do not apply to the OP as he referenced using a debit card. "Superiority"? Hm. I'd be a bit embarrassed to charge such small amounts. Although when cash in my wallet is very low, I may have little choice. Note, and disclaimer, I am 48, 30 years ago when I started using cards, there were no POS machines. Credit card transactions had a big device that got a card imprint and the merchant looked up to see if your card was stolen in a big book they got weekly/monthly. Times have changed, and debit cards may be faster, especially if with cash you give the cashier $5.37 for a $2.37 transaction, but the guy entered $5 already. This often takes a manager to clear up. |
Why does capital gains tax apply to long term stock holdings? | Why only long term investments? What do they care if I buy and sell shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying "this company will grow". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply capital gains tax to my savings account at my local bank? Or a CD account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do that? During an IPO, the business certainly raises money, but after that I'm just buying and selling shares with other private shareholders. Why does the government give me an incentive to do this (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex. |
In a competitive market, why is movie theater popcorn expensive? | I'm kind of shocked that no formal behavioral modeling has been proposed as an explanation yet. One such model would be steep (hyperbolic, quasi-hyperbolic) discounting. Consumers would rather pay for popcorn later than for an expensive movie ticket now. For instance, consumers might when purchasing the ticket see a low value of popcorn and view the ticket price as the whole price because they do not predict purchasing popcorn. Then when entering the theater, the present value of popcorn is very high and they purchase it. There might therefore be a market for a commitment device (such as a popcornless theater) to make the appropriate decision ex-ante. Another commitment device that seems to be practiced is when individuals sneak their own popcorn into the theater. They may not actually want the popcorn, but by bringing their own they ensure they do not purchase the theater's. |
What is a better way for an American resident in a foreign country to file tax? | If you live outside the US, then you probably need to deal with foreign tax credits, foreign income exclusions, FBAR forms (you probably have bank account balances enough for the 10K threshold) , various monsters the Congress enacted against you like form 8939 (if you have enough banking and investment accounts), form 3520 (if you have a IRA-like local pension), form 5471 (if you have a stake in a foreign business), form 8833 (if you have treaty claims) etc ect - that's just what I had the pleasure of coming across, there's more. TurboTax/H&R Block At Home/etc/etc are not for you. These programs are developed for a "mainstream" American citizen and resident who has nothing, or practically nothing, abroad. They may support the FBAR/FATCA forms (IIRC H&R Block has a problem with Fatca, didn't check if they fixed it for 2013. Heard reports that TurboTax support is not perfect as well), but nothing more than that. If you know the stuff well enough to fill the forms manually - go for it (I'm not sure they even provide all these forms in the software though). Now, specifically to your questions: Turbo tax doesn't seem to like the fact that my wife is a foreigner and doesn't have a social security number. It keeps bugging me to input a valid Ssn for her. I input all zeros for now. Not sure what to do. No, you cannot do that. You need to think whether you even want to include your wife in the return. Does she have income? Do you want to pay US taxes on her income? If she's not a US citizen/green card holder, why would you want that? Consider it again. If you decide to include here after all - you have to get an ITIN for her (instead of SSN). If you hire a professional to do your taxes, that professional will also guide you through the ITIN process. Turbo tax forces me to fill out a 29something form that establishes bonafide residency. Is this really necessary? Again in here it bugs me about wife's Ssn Form 2555 probably. Yes, it is, and yes, you have to have a ITIN for your wife if she's included. My previous state is California, and for my present state I input Foreign. When I get to the state tax portion turbo doesn't seem to realize that I have input foreign and it wants me to choose a valid state. However I think my first question is do i have to file a California tax now that I am not it's resident anymore? I do not have any assets in California. No house, no phone bill etc If you're not a resident in California, then why would you file? But you might be a partial resident, if you lived in CA part of the year. If so, you need to file 540NR for the part of the year you were a resident. If you have a better way to file tax based on this situation could you please share with me? As I said - hire a professional, preferably one that practices in your country of residence and knows the provisions of that country's tax treaty with the US. You can also hire a professional in the US, but get a good one, that specializes on expats. |
If something is coming into my account will it be debit or credit in my account? | If you are considering this to be an entry for your business this is how you would handle it.... You said you were making a balance sheet for monthly expenses. So on the Balance Sheet, you would be debiting cash. For the Income Statement side you would be crediting Owner's Equity to balance the equation: Assets = Liabilities + Owner's Equity So if you deposited $100 to your account the equation would be affected thus: $ 100 in Assets (Debit to Cash Account) = 0 Liabilities - $100 (Credit to Owner's Equity) It is correctly stated above from the bank's perspective that they would be "Crediting" you account with $100, and any outflow from the bank account would be debiting your account. |
What is a subsidy? | Subsidy usually means gratuitous financial support. For example, if for whatever reason you live much below the living average paying utility services in full might be too expensive - you'll be out of money before you even think of buying food and basic clothes. Yet it's clear that once can't live in a city without utility services. So the government might have a program for subsidizing utility services for people with very low income - a person brings in proof of low income and once it is low enough government will step in and pay that person utility services in full or in part depending on actual income he proves. The same can be organized for anything government or some organization wishes to support for whatever reason. The key idea is someone gives you free money for spending on some specific purpose. |
Online Foreign Exchange Brokerages: Which ones are good & reputable for smaller trades? | I used Oanda.com for Forex trading a couple years ago. I am in the US but I think it's available in the UK as well. At the time, they had no commissions and their spreads were comparable or better than other brokers. The spreads would just quite considerably when a big event like a Fed meeting or the unemployment figures come out, but I suspect that that is the same everywhere (or they have constant spreads and reject trades). They did not push the high leverages like other brokers were at the time. I considered this to be very reputable, because though the profits to be gotten through 100:1 leverage are great advertising, the reality is that one unexpected spike and a newbie would lose a bunch of money in a margin call. |
Non US-resident, need to file 83b election TODAY with the IRS - I have an SSN but it says “valid for work only with DHS auth” - is this OK? | Google that "valid for work..." phrase. You'll find that you have a SSN; it is valid for many purposes; it is valid for obtaining work, only when accompanied by DHS authorization. Doesn't anyone know how to use commas anymore? |
What does it really mean to buy a share? | I have been careful here to cover both shares in companies and in ETFs (Exchange Traded Funds). Some information such as around corporate actions and AGMs is only applicable for company shares and not ETFs. The shares that you own are registered to you through the broker that you bought them via but are verified by independent fund administrators and brokerage reconciliation processes. This means that there is independent verification that the broker has those shares and that they are ring fenced as being yours. The important point in this is that the broker cannot sell them for their own profit or otherwise use them for their own benefit, such as for collateral against margin etc.. 1) Since the broker is keeping the shares for you they are still acting as an intermediary. In order to prove that you own the shares and have the right to sell them you need to transfer the registration to another broker in order to sell them through that broker. This typically, but not always, involves some kind of fee and the broker that you transfer to will need to be able to hold and deal in those shares. Not all brokers have access to all markets. 2) You can sell your shares through a different broker to the one you bought them through but you will need to transfer your ownership to the other broker and that broker will need to have access to that market. 3) You will normally, depending on your broker, get an email or other message on settlement which can be around two days after your purchase. You should also be able to see them in your online account UI before settlement. You usually don't get any messages from the issuing entity for the instrument until AGM time when you may get invited to the AGM if you hold enough stock. All other corporate actions should be handled for you by your broker. It is rare that settlement does not go through on well regulated markets, such as European, Hong Kong, Japanese, and US markets but this is more common on other markets. In particular I have seen quite a lot of trades reversed on the Istanbul market (XIST) recently. That is not to say that XIST is unsafe its just that I happen to have seen a few trades reversed recently. |
I am under 18 years old, in the US, my parents have terrible credit, how can I take out a loan? | Depending on the state this might not be possible. Loans are considered contracts, and various states regulate how minors may enter into them. For example, in the state of Oregon, a minor may NOT enter into a contract without their parent being on the contract as well. So you are forced to wait until you turn 18. At that time you won't have a credit history, and to lenders that often is worse than having bad credit. I can't help with the car (other than to recommend you buy a junker for $500-$1,000 and just live with it for now), but you could certainly get a secured credit card or line of credit from your local bank. The way they are arranged is, you make a deposit of an amount of your choosing (generally at least $200 for credit cards, and $1,000 for lines of credit), and receive a revolving line with a limit of that same amount. As you use and pay on this loan, it will be reported in your credit history. If you start that now, by the time you turn 18 you will have much better options for purchasing vehicles. |
Where can I borrow money for investing? | If you are looking for money to speculate in the capital markets, then your brokers will already lend to you at a MUCH more favorable rate than an outside party will. For instance, with $4,000 you could EASILY control $40,000 with many brokers, at a 1% interest rate. This is 10:1 leverage, much like how US banks operate... every dollar that you deposit with them, they speculate with 10x as much. Interactive Brokers will do this for you with your current credit score. They are very reputable and clear through Goldman Sachs, so although reputable is subjective in the investment banking world, you won't have to worry the federal government raiding them or anything. If you are investing in currencies than you can easily do 50:1 leverage as an American, or 100:1 as anyone else. This means with only $400 dollars you can control $40,000 account. If you are investing in the futures market, then there are many many ways to double and triple and quadruple your leverage at the lowest interests rates. Any contract you enter into is a loan from the market. You have to understand, that if you did happen to have $40,000 of your own money, then you could get $4,000,000 account size for speculating, at 1% interest. Again, these are QUICK ways to lose your money and owe a lot more! So I'd really advise against it. A margin call in the futures market can destroy you. I advise you to just think more efficiently until you come up with a way to earn that much money initially, and then speculate. |
Is there a simple strategy of selling stock over a period of time? | Yes, there is an analogous strategy for selling: it's to sell a fixed number of shares per period of time. |
What is the difference between a check and a paycheck? | A paycheck is simply a check for your salary. It's just like a rent check, or a birthday check, or a grocery check... I've had "paychecks" that were personal checks from the owner of the business, I've had ones that are printed in the office I worked in and signed right there, and I've had paychecks that are printed through a third party company and mailed to me (my favorite, of course, is to forgo the "paycheck" entirely and get direct deposit :) ). Really, they're all just checks. Although that's a little disingenuous, because banks are often slightly more trusting of paychecks. However, this has little to do with it being a "paycheck," per se, and more to do with the fact that they see you getting the same check for (roughly) the same amount on a regular basis; having seen you get a paycheck for the same amount from the same company for the last 12 months, there is less risk of the check bouncing or being returned unpaid, so you can often get banks to waive their hold policy and just give you the money. |
Resources to begin trading from home? | As JoeTaxpayer has commented, the markets are littered with the carcasses of those who buy into the idea that markets submit readily to formal analysis. Financial markets are amongst the most complex systems we know of. To borrow a concept from mathematics - that of a chaotic system - one might say that financial markets are a chaotic system comprised of a nested structure of chaotic subsystems. For example, the unpredictable behaviour of a single (big) market participant can have dramatic effects on overall market behaviour. In my experience, becoming a successful investor requires a considerable amount of time and commitment and has a steep learning curve. Your actions in abandoning your graduate studies hint that you are perhaps lacking in commitment. Most people believe that they are special and that investing will be easy money. If you are currently entertaining such thoughts, then you would be well advised to forget them immediately and prepare to show some humility. TL/DR; It is currently considered that behavioural psychology is a valuable tool in understanding investors behaviour as well as overall market trends. Also in the area of psychology, confirmation bias is another aspect of trading that it is important to keep in mind. Quantitative analysis is a mathematical tool that is currently used by hedge funds and the big investment banks, however these methods require considerable resources and given the performance of hedge funds in the last few years, it does not appear to be worth the investment. If you are serious in wanting to make the necessary commitments, then here are a few ideas on where to start : There are certain technical details that you will need to understand in order to quantify the risks you are taking beyond simple buying and holding financial instruments. For example, how option strategies can be used limit your risk; how margin requirements may force your hand in volatile markets; how different markets impact on one another - e.g., the relationship between bond markets and equity markets; and a host of other issues. Also, to repeat, it is important to understand how your own psychology can impact on your investment decisions. |
Tracking Gold and Silver (or any other commodity investment) in Quicken 2010? | I was able to find a fairly decent index that trades very close to 1/10th the actual price of gold by the ounce. The difference may be accounted to the indexes operating cost, as it is very low, about 0.1%. The index is the ETFS Gold Trust index (SGOL). By using the SGOL index, along with a Standard Brokerage investment account, I was able to set up an investment that appropriately tracked my gold "shares" as 10x their weight in ounces, the share cost as 1/10th the value of a gold ounce at the time of purchase, and the original cost at time of purchase as the cost basis. There tends to be a 0.1% loss every time I enter a transaction, I'm assuming due to the index value difference against the actual spot value of the price of gold for any day, probably due to their operating costs. This solution should work pretty well, as this particular index closely follows the gold price, and should reflect an investment in gold over a long term very well. It is not 100% accurate, but it is accurate enough that you don't lose 2-3% every time you enter a new transaction, which would skew long-term results with regular purchases by a fair amount. |
Why is it that stock prices for a company seem to go up after a layoff? | If the market believes that the company is overstaffed, then management acknowledging the issue and resolving the problem can result in the price going up. It can also mean that external events drove the price up, and the bad news was lost in the other issues of the day. Sometimes layoffs are a sign of the company entering a long downward spiral; in other cases it is a sign of the beginning recovery. The layoffs can also be viewed as good news if they weren't as big as some experts feared. You have to look at the exact situation to understand why news x impacts the companies price. |
Can buying REIT's be compared to investing in Real Estate? | well yes but you should also begin to understand the sectoral component of real estate as a market too in that there can be commercial property; industrial property and retail property; each of which is capable of having slightly (tho usually similar of course) different returns, yields, and risks. Whereas you are saving to buy and enter into the residential property market which is different again and valuation principles are often out of kilter here because Buying a home although exposing your asset base to real estate risk isnt usually considered an investment as it is often made on emotional grounds not strict investment criteria. |
What is a “fiat” currency? Are there other types of currency? | In short. A fiat currency is money that has value only because (usually) a government says it does. A counter example (non-fiat currency) is a gold coin that has intrinsic value usually because it is made of valuable materials that people would trade goods/services. That is the value comes from what you are holding more than what it represents. |
Accepting high volatility for high long-term returns | Modern portfolio theory has a strong theoretical background and its conclusions on the risk/return trade-off have a lot of good supporting evidence. However, the conclusions it draws need to be used very carefully when thinking about retirement investing. If you were really just trying to just pick the one investment that you would guess would make you the most money in the future then yes, given no other information, the riskiest asset would be the best one. However, for most people the goal retirement investing is to be as sure as possible to retire comfortably. If you were to just invest in a single, very risky asset you may have the highest expected return, but the risk involved would mean there might be a good chance you money may not be there when you need it. Instead, a broad diversified basket of riskier and safer assets leaning more toward the riskier investments when younger and the safer assets when you get closer to retirement tends to be a better fit with most people's retirement goals. This tends to give (on average) more return when you are young and can better deal with the risk, but dials back the risk later in life when your investment portfolio is a majority of your wealth and you can least afford any major swings. This combines the lessons of MPT (diversity, risk/return trade-off) in a clearer way with common goals of retirement. Caveat: Your retirement goals and risk-tolerance may be very different from other peoples'. It is often good to talk to (fee-only) financial planner. |
Should I make more conservative investments in my company 401(K) if I'm going to leave the job in a couple of years? | It doesn't make a difference if you will be keeping it in the 401K or transferring it to an IRA, it is still retirement money that you plan on investing for decades. Pre-Enron many employees invested significant amounts of their retirement funds with the employer. One of the risks was that if a single stock was down at the wrong time, you were hurt if you needed to sell. If you are going from an S&P 500 in the 401K to an S&P 500 in the IRA, it doesn't matter if the the market is up or down, the two funds will be pretty much in synch. |
Why the need for human brokers while there are computers? | There are still human brokers on the floor primarily due to tradition. Their numbers have certainly dwindled, however, and it's reasonable to expect the number of floor traders to decrease even more as electronic trading continues to grow. A key reason for human brokers, however, is due to privacy. Certain private exchanges such as dark pools maintain privacy for high profile clients and institutional investors, and human brokers are needed to execute anonymous deals in these venues. Even in this region, however, technology is supplanting the need for brokers. I don't believe there is any human-broker-free stock exchange, but Nasdaq and other traditionally OTC (over the counter) exchanges are as close as it gets since they never even had trading floors. |
How do I find a legitimate, premium credit repair service? | Just a word of warning: Most of the companies that promise to repair your credit are scams or close to them. You could just as easily do yourself what they are going to charge you for. Essentially they write a letter to the credit agencies disputing most or all of the bad stuff on your credit report. When you do that, the credit agency sends an inquiry to the company that reported the negative information requiring them to justify it. If that company doesn't respond within x days, they remove the item from your credit report. These companies depend on the fact that some companies aren't going to hit that deadline or even respond. Perhaps they are just too busy to hassle with providing backup documentation for a $20 late payment. They are banking on getting a few of these cheap "outs" to your benefit and charging you for what amounts to sending out a bunch of form letters. If you don't mind writing a bunch of letters, then you can save a lot of money and get the exact same results. These companies want to pretend they have some insider knowledge or fancy lawyers that know special credit-magic, but they generally don't. The only option I'd consider legitimate and not a waste of your time is a referral from the non-profit National Federation for Credit Counseling. They aren't going to "fix your credit", but will give you advice on budgeting and repairing your credit on your own. |
Accepting personal “donations” (not as a non-profit) | I see two ways you can handle this. Use the gifts for the purpose of creating more free software. This is fundraising, and your cause is writing free software. The language is a little tricky from the PayPal Donate button (emphasis mine): This button is intended for fundraising. If you are not raising money for a cause, please choose another option. Nonprofits must verify their status to withdraw donations they receive. Users that are not verified nonprofits must demonstrate how their donations will be used, once they raise more than $10,000 USD. You don't have to be a nonprofit; they are only requiring existing nonprofits to verify their status. You don't even have to account for the donations if they are below $10,000. Give out your PayPal email address and instruct the gift-givers to simply send you money through their PayPal interface. They can mark it as a gift when they send the money. I think option one is how the various bloggers and other personal users are justifiying their collection of donations, and I think its a valid use of the PayPal Donate button. |
How do I know if a dividend stock is “safe” and not a “dividend yield trap”? | Let me provide a general answer, that might be helpful to others, without addressing those specific stocks. Dividends are simply corporate payouts made to the shareholders of the company. A company often decides to pay dividends because they have excess cash on hand and choose to return it to shareholders by quarterly payouts instead of stock buy backs or using the money to invest in new projects. I'm not exactly sure what you mean by "dividend yield traps." If a company has declared an dividend for the upcoming quarter they will almost always pay. There are exceptions, like what happened with BP, but these exceptions are rare. Just because a company promises to pay a dividend in the approaching quarter does not mean that it will continue to pay a dividend in the future. If the company continues to pay a dividend in the future, it may be at a (significantly) different amount. Some companies are structured where nearly all of there corporate profits flow through to shareholders via dividends. These companies may have "unusually" high dividends, but this is simply a result of the corporate structure. Let me provide a quick example: Certain ETFs that track bonds pay a dividend as a way to pass through interest payments from the underlying bonds back to the shareholder of the ETF. There is no company that will continue to pay their dividend at the present rate with 100% certainty. Even large companies like General Electric slashed its dividend during the most recent financial crisis. So, to evaluate whether a company will keep paying a dividend you should look at the following: Update: In regards to one the first stock you mentioned, this sentence from the companies of Yahoo! finance explains the "unusually" dividend: The company has elected to be treated as a REIT for federal income tax purposes and would not be subject to income tax, if it distributes at least 90% of its REIT taxable income to its share holders. |
A calculator that takes into account portfolio rebalancing? | My answer is Microsoft Excel. Google "VBA for dummies" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea. |
Consolidate my debt? Higher APR, but what does that actually mean? | does that mean that 30% of my monthly payment goes to interest? No, it's much worse then that. The APR is the annual percentage rate. An APR of 30% on $23,000 in debt that means you'll be charged $6,900 in interest for the year. You'll actually owe slightly less since you are reducing your principal slightly over the course of the year. If your monthly payment is $800, $575 of that will be going to interest. That means that over 70% of your monthly payment is going just to interest. This deal makes no sense at all! You'd be better off simply transferring all of your balances on to the credit card with the highest interest rate. You'd be paying almost $200 a month for the 'convenience' of writing one check rather than three. |
Are low commission trading sites safe? | I have used TradeKing for a couple of years now and love it. It really is a great site. They hold an IRA trading account for me and have been helpful in rolling money into that account, and with answering the occasional question. Previously I have used Scottrade and found that TradeKing is a much better value. |
total of all dividend payments for a particular company | No - there are additional factors involved. Note that the shares on issue of a company can change for various reasons (such as conversion/redemption of convertible securities, vesting of restricted employee shares, conversion of employee options, employee stock purchase programs, share placements, buybacks, mergers, rights issues etc.) so it is always worthwhile checking SEC announcements for the company if you want an exact figure. There may also be multiple classes of shares and preferred securities that have different levels of dividends present. For PFG, they filed a 10Q on 22 April 2015 and noted they had 294,385,885 shares outstanding of their common stock. They also noted for the three months ended March 31 2014 that dividends were paid to both common stockholders and preferred stockholders and that there were Series A preferred stock (3 million) and Series B preferred stock (10 million), plus a statement: In February 2015, our Board of Directors authorized a share repurchase program of up to $150.0 million of our outstanding common stock. Shares repurchased under these programs are accounted for as treasury stock, carried at cost and reflected as a reduction to stockholders’ equity. Therefore the exact amount of dividend paid out will not be known until the next quarterly report which will state the exact amount of dividend paid out to common and preferred shareholders for the quarter. |
Keeping our current home (second property) as a rental. Will it interfere with purchasing a third home? | Even after the real estate crash, there are banks that lend money outside of the rules I'll share. A fully qualified mortgage is typically run at debt to income ratios of 28/36, where 28% of your gross monthly income can apply to the mortgage, property tax, and insurance, and the 36% is the total monthly debt (including the mortgage, etc) plus car loan student loan, etc. It's less about the total loan on the potential than about these ratios. The bank may allow for 75% of monthly rent so until rentals are running at a profit, they may seem a loss, even while just breaking even. This is just an overview, each bank may vary a bit. |
Effective returns on investment in housing vs other financial instruments | The assumption that house value appreciates 5% per year is unrealistic. Over the very long term, real house prices has stayed approximately constant. A house that is 10 years old today is 11 years old a year after, so this phenomenon of real house prices staying constant applies only to the market as a whole and not to an individual house, unless the individual house is maintained well. One house is an extremely poorly diversified investment. What if the house you buy turns out to have a mold problem? You can lose your investment almost overnight. In contrast to this, it is extremely unlikely that the same could happen on a well-diversified stock portfolio (although it can happen on an individual stock). Thus, if non-leveraged stock portfolio has a nominal return of 8% over the long term, I would demand higher return, say 10%, from a non-leveraged investment to an individual house because of the greater risks. If you have the ability to diversify your real estate investments, a portfolio of diversified real estate investments is safer than a diversified stock portfolio, so I would demand a nominal return of 6% over the long term from such a diversified portfolio. To decide if it's better to buy a house or to live in rental property, you need to gather all of the costs of both options (including the opportunity cost of the capital which you could otherwise invest elsewhere). The real return of buying a house instead of renting it comes from the fact that you do not need to pay rent, not from the fact that house prices tend to appreciate (which they won't do more than inflation over a very long term). For my case, I live in Finland in a special case of near-rental property where you pay 15% of the building cost when moving in (and get the 15% payment back when moving out) and then pay a monthly rent that is lower than the market rent. The property is subsidized by government-provided loans. I have calculated that for my case, living in this property makes more sense than purchasing a market-priced house, but your situation may be different. |
Economics Books | Economics without math is a tall order, since it seems that one of the things economists love to do is try and reduce everything down to mathematical formulas. OTOH you are asking about a lot of topics besides economics. A few books I might suggest would be those three should do a good job of introductory info and helping you understand the basics and vocabulary. If you want more, one of the better 'recommended reading lists' for things financial that I've ever found is here |
Working in Iran for foreign company | You should talk to a lawyer who's familiar with the matter. I'm not such a lawyer. For the best of my understanding, at least with regards to the US, the answer to all three of your questions is no. Legally, a US company cannot employ Iranian residents and transfer money to Iran. However, I know of Iranians working in the US. So if you manage to secure a H1b visa and move to the US - you can work and earn money here. What you do with it after you earned it - is your business. |
How to prevent myself from buying things I don't want | One of the most effective tools we have to keep ourselves from doing things is procrastination. Most of the time procrastination is a bad thing because we use it to avoid doing things we should be doing. But it's equally effective at keeping us from doing things that are not good for us, like overspending or overeating. How do we procrastinate things like this? Put it on a big, fat, TODO list somewhere that you seldom look at. That will get it out of your head...your subconscious will not keep bugging you about it because it's not worried about forgetting it. Save the discount code in the list so you know you will have it if you ever want it. Put other things that you are unlikely to do any time soon on that same list. Then move on with your life and enjoy your freedom from useless and expensive clutter. I use online TODO lists (also google docs) for keeping track of things I'm supposed to be doing. One of my lists, "long term purchases," contains a bunch of expensive stuff that I have wanted at some point but not gotten around to purchasing. I think the list has saved me a lot of money. Stuff stays on that list a long time. Ultimately most of the items on the list either become cheap or I lose interest in them. There's a reason salesmen push you to buy NOW NOW NOW. They know if you procrastinate the decision, you are much less likely to buy. |
Why do people buy insurance even if they have the means to overcome the loss? | You're making the assumption that a person would be aware, in advance, that they'd have enough resources to pay the costs of anything that might happen. Second, you're assuming the cost of insurance would outweigh what the person would have to pay out of pocket if they didn't have insurance. In other words as an example, if the insurance premiums on my car are so high that it would be cheaper for me to replace it myself in cash then it might make sense, but how likely is that to be the case? There's a gambling adage that I think applies here - "Always bet with the house's money". Why would I put my own money on the line in the event of some event rather than pay for an insurance policy that takes care of it for me? That way, my costs are predictable and manageable - I pay the premiums and perhaps a deductible, and that's it. |
Dividends and tax withholding for ETF vs Mutual Fund for U.S. Non-Resident Alien? | Does my prior answer here to a slightly different question help at all? Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country? |
What happen in this selling call option scenario | But what happen if the stock price went high and then go down near expiry date? When you hold a short (sold) call option position that has an underlying price that is increasing, what will happen (in general) is that your net margin requirements will increase day by day. Thus, you will be required to put up more money as margin to finance your position. Margin money is simply a "good faith" deposit held by your broker. It is not money that is debited as cash from the accounting ledger of your trading account, but is held by your broker to cover any potential losses that may arise when you finally settle you position. Conversely, when the underlying share price is decreasing, the net margin requirements will tend to decrease day by day. (Net margin is the net of "Initial Margin" and "Variation Margin".) As the expiry date approaches, the "time value" component of the option price will be decreasing. |
Formation of S-Corp for Gambling Trade | You probably don't need S-Corp. There's no difference between what you can deduct on your Schedule C and what you can deduct on 1120S, it will just cost you more money. Since you're gambling yourself, you don't need to worry about liability - but if you do, you should probably go LLC route, much cheaper and simpler. The "reasonable salary" trick to avoid FICA won't work. Don't even try. Schedule C for professional gamblers is a very accepted thing, nothing extraordinary about it. |
How do owners in a partnership earn income? | The partnership agrees to pay each of you salaries and/or bonuses, typically based on the net profit brought in. You do have a legal document setting out the rules for this partnership, right? If so, the exact answer should be in there. If you don't or it isn't, you need a lawyer yesterday. |
How much can you write off on a car lease through a LLC? | An expense is an expense. You can deduct your lease payment subject to some limitations, but you don't make out by having more expenses. Higher expenses mean lower profit. Is leasing better than owning? It depends on the car you'd buy. If your business doesn't benefit from flashiness of your car, then buying a quality used car (a few years old at most) would probably be a wiser decision financially. I'd think hard about whether you really need an up-to-date car. |
At what age should I start or stop saving money? | It's nearly always a good idea to save for your future, if you don't already have sufficient funds to see out the rest of your days. The hardest part of the saving decision is knowing exactly what portion of your funds to save. If we save too aggressively, we risk having an adverse impact on our everyday life and, of course, there's always the possibility that we'll never make it to old age. But if we don't save, we risk the prospect of a poverty stricken retirement. It's not always easy to find a balance. The best solution is to make so much money that we cannot possibly spend it all! |
Oh, hail. Totaled car, confused about buy-back options | It seems like there are a few different things going on here because there are multiple parties involved with different interests. The car loan almost surely has the car itself as collateral, so, if you stop paying, the bank can claim the car to cover their costs. Since your car is now totaled, however, that collateral is essentially gone and your loan is probably effectively dead already. The bank isn't going let you keep the money against a totaled car. I suspect this is what the adjuster meant when he said you cannot keep the car because of the loan. The insurance company sounds like they're going to pay the claim, but once they pay on a totaled car, they own it. They have some plan for how they recover partial costs from the wreck. That may or may not allow you (or anyone else) to buy it from them. For example, they might have some bulk sale deal with a salvage company that doesn't allow them to sell back to you, they may have liability issues with selling a wrecked car, etc. Whatever is going on here should be separate from your loan and related to the business model of your insurance company. If you do have an option to buy the car back, it will almost surely be viewed as a new purchase by the insurances company and your lender, as if you bought a different car in similar condition. |
Does this sound like a great idea regarding being a landlord and starting a real estate empire? | A lot of people do this. For example, in my area nice townhouses go for about $400K, so if you have $80,000 you can buy one and rent it. Here are the typical numbers: So you would make $350 per month or $4,200 per year on $80,000 in capital or about 5% profit. What can go wrong: (1) The property does not rent and sits vacant. You must come up with $2100 in mortgage payments, taxes, and insurance every month without fail or default. (2) Unexpected expenses. A new furnaces costs over $5,000. A new roof costs $7,000. A new appliance costs $600 to $2000 depending on how upscale your property is. I just had a toilet fixed for a leaky plunger. It cost me $200. As you can see maintenance expenses can quickly get a lot higher than the $50 shown above... and not only that, if you fix things as cheaply as possible (as most landlords do), not only does that decrease the rentability of the property, but it causes stuff to break sooner. (3) Deadbeats. Some people will rent your property and then not pay you. Now you have a property with no income, you are spending $2100 per month to pay for it, AND you are facing steep attorney fees to get the deadbeats evicted. They can fight you in court for months. (4) Damage, wear and tear. Whenever a tenant turns over there is always a lot of broken or worn stuff that has to be fixed. Holes in the wall need to be patched. Busted locks, broken windows, non-working toilets, stains on the carpet, stuck doors, ripped screens, leaky showers, broken tiles, painting exterior trim, painting walls, painting fences, etc. You can spend thousands every time a tenant changes. Other caveats: Banks are much more strict about loaning to non home owners. You usually have to have reserve income. So, if you have little or no income, or you are stretched already, it will be difficult to get commercial loans. For example, lets say your take-home pay is $7,000 and you have no mortgage at all (you rent), then it is fine, the bank will loan you the money. But lets say you only have $5,000 in take home pay and you have an $1,800 mortgage on your own home. In that case it is very unlikely a bank will allow you to assume a 2nd mortgage on a rental property. The more you try to borrow, the more reserve income the bank will require. This tends to set a limit on how much you can leverage. |
Walking away from an FHA loan | Nearly every state in the US is full-recourse. If one doesn't seek bankruptcy protection, creditors can seek judgement, and collect assets. Foreclosures frequently sell for approximately half the market price. Considering unemployment risk, homes can be risky. A far better way to accumulate wealth is with equities (stocks). However, the risk converts from insolvency to liquidation since during times of high unemployment, equities are also cheap, causing any liquidation used to fund current expenses to be potentially ruinous. |
How much money should I lock up in my savings account? | Lets imagine two scenarios: 1) You make 10.4k (40% of total income) yearly contributions to a savings account that earns 1% interest for 10 years. In this scenario, you put in 104k and earned 5.89k in interest, for a total of 109.9k. 2) You make the same 10.4k yearly contribution to an index fund that earns 7% on average for 10 years. In this scenario you put in the same 104k, but earned 49.7k in interest*, for a total of 153.7k. The main advantage is option 1) has more liquidity -- you can get the money out faster. Option 2) requires time to divest any stocks / bonds. So you need enough savings to get you through that divestment period. Imagine another two scenarios where you stop earning income: 1-b) You stop working and have only your 109.9k principal amount in a 1% savings account. If you withdraw 15.6k yearly for your current cost of living, you will run through your savings in 7 years. 2-b) You stop working and have only 20k (2 years of savings) in savings that earns 1% with 153.7k in stocks that earns 7%. If you withdraw your cost of living currently at 15.6k, you will run through your investments in 15 years and your savings in 2 years, for a total of 17 years. The two years of income in savings is extremely generous for how long it starts the divestment process. In summary, invest your money. It wasn't specified what currency we are talking about, but you can easily find access to an investment company no matter where you are in the world. Keep a small amount for a rainy day. |
How does Value Averaging work in practice? | If you were to stick to your guns, then yes, that's what you'd need to do. In practice, that kind of a hit should get your attention, and you'd be wise to look at why your investment dropped 10% in a month. Value averaging, dollar-cost averaging, or any other investment strategy needs to be done with eyes open and ears to the ground. At least with value averaging you need to look at your valuation each month! From my own experience, dollar-cost averaging breeds laziness and I ended up not paying much attention to what I was investing in, and lost a fair bit of money. Bottom line is you still have to think about what you're doing, and adjust. |
Saving tax for long term stock investment capital gain by quiting my current job? | The capital gains is counted towards your income. If you cash out 1 Million dollars, you have a 1 Million dollar income for that year, which puts you at the 39.6% tax bracket. However, because that 1 Million dollars is all long term capital gains, you will only have to pay 20% of it in long term capital gains taxes. The best you can do is to cash the 1 Million dollars through several years instead of just all at once. This will put in a lower tax bracket and thus will pay lower capital gains tax. |
How should I think about stock dividends? | I would say the most important thing to consider is the quality of the company relative to the price you pay for it. No dividend also means that you will not pay taxes on dividends. |
Trying to understand Return on Capital (Joel Greenblatt's Magic Formula version) | Just to clarify things: The Net Working Capital is the funds, the capital that will finance the everyday, the short term, operations of a company like buying raw materials, paying wages erc. So, Net Working Capital doesn't have a negative impact. And you should not see the liabilities as beneficial per se. It's rather the fact that with smaller capital to finance the short term operations the company is able to make this EBIT. You can see it as the efficiency of the company, the smaller the net working capital the more efficient the company is (given the EBIT). I hope you find it helpful, it's my first amswer here. Edit: why do you say the net working capital has a negative impact? |
Looking for a good source for Financial Statements | You can access financial statements contained within 10K and 10Q filings using Last10K.com's mobile app: Last10K.com/mobile Disclosure: I work for Last10K.com |
Buying & Selling Call Options | You're correct. If you have no option position at execution then you carry no risk. Your risk is only based on the net number of options you're holding at execution. This is handled by your broker or clearinghouse. Pretend that you wrote 1000 options, (you're short the call) then you bought 1000 of the same option (bought to cover) ... you are now flat and have zero options exposure. Pretend you bought 1000 options (you're long the calls) then you sold 1000 of them (liquidated your long) ... you are now flat and have zero options exposure. |
Credit Card Points from Refund | Because your friend isn't going to like the ~2% charge they have to pay to the credit card company on the $10,000 purchase. Credit card companies make money off of transactions. The cardholder normally doesn't pay any transaction fees (and in fact can make a profit via rewards), but the merchant has to pay a certain amount of money to the credit card company for the transaction. In this case, the apartment owners ate the charge, likely because it was easier for them to send a check than to refund the cost of the fee through the credit card company. If you started doing this a lot to take advantage of this, I would imagine they would get smart and refuse your business (it'll be pretty obvious what you're doing if you're not signing any leases). |
Why would you not want to rollover a previous employer's 401(k) when changing jobs? | The biggest reason why one might want to leave 401k money invested in an ex-employer's plan is that the plan offers some superior investment opportunities that are not available elsewhere, e.g. some mutual funds that are not open to individual investors such as S&P index funds for institutional investors (these have expense ratios even smaller than the already low expense ratios of good S&P index funds) or "hot" funds that are (usually temporarily) closed to new investors, etc. The biggest reason to roll over 401k money from an ex-employer's plan to the 401k plan of a new employer is essentially the same: the new employer's plan offers superior investment opportunities that are not available elsewhere. Of course, the new employer's 401k plan must accept such roll overs. I do not believe that it is a requirement that a 401k plan must accept rollovers, but rather an option that a plan can be set up to allow for or not. Another reason to roll over 401k money from one plan to another (rather than into an IRA) is to keep it safe from creditors. If you are sued and found liable for damages in a court proceeding, the plaintiff can come after IRA assets but not after 401k money. Also, you can take a loan from the 401k money (subject to various rules about how much can be borrowed, payment requirements etc) which you cannot from an IRA. That being said, the benefits of keeping 401k money as 401k money must be weighed against the usually higher administrative costs and usually poorer and more limited choices of investment opportunities available in most 401k plans as Muro has said already. |
Are lottery tickets ever a wise investment provided the jackpot is large enough? | You can have a positive expected return on a lottery ticket purchase, but only if the lottery requires all players to pick their own numbers and doesn't have an option to buy a ticket with a randomly generated set of numbers. This is because people are very bad at picking random numbers, and will tend to pick numbers that are fairly evenly spaced or based on dates rather than genuinely random numbers. For example in January 1995 the UK national lottery happened to have fairly well-spaced numbers (7, 17, 23, 32, 38 & 42), and there were 133 winners with all six numbers. So they way to win is to wait for a draw where a rollover jackpot is high enough that your expected winnings are positive if you are the only winner, and pick a set of numbers that looks stupidly non-random, but is not so very non-random that people will have picked it anyway, like 1, 2, 3, 4, 5, 6. For a "pick 6 in the range from 1-49" lottery you might pick something like 3, 42, 43, 44, 48, 49. But it doesn't work if there's a random option, since a significant number of players will use it and get genuinely random numbers, and so your chances of being the only winner get much smaller. |
How are the best way to make and save money at 22 years old | Determine how much you are going to save first. Then determine where you can spend your money. If you're living with your parents, try to build an emergency fund of six months income. The simplest way is to put half of your income in the emergency fund for a year. Try to save at least 10% of your income for retirement. The earlier you start this, the longer you'll have to let the magic of compounding work on it. If your employer offers a 401k with a match, do that first. If not, consider an IRA. You probably want to do a Roth now (because you probably pay little in taxes so the deduction from a standard IRA won't help you). After the year, you'll have an emergency fund. Work out how much money you'll need for rent, utilities, and groceries when you're on your own. Invest that in some way. Pay off student loans if you have any. Buy a car that you can keep a long time if you need one. Go to night school. Put any excess money in a savings account or mutual fund. This is money for doing things related to housing. Perhaps you'll need to buy a washer/dryer. Or pay a down payment on a mortgage eventually. Saving this money now does two things: first, it gives you savings for when you need it; second, it keeps you from getting used to spending your entire paycheck. If you are used to only having $200 of spending cash out of each check, you will fit your spending into that. If you are used to spending $800 every two weeks, it will be hard to cut your spending to make room for rent, etc. |
Are companies like EquityZen legitimate and useful? | Stuff I wish I had known, based on having done the following: Obtained employment at a startup that grants Incentive Stock Options (ISOs); Early-exercised a portion of my options when fair market value was very close to my strike price to minimize AMT; made a section 83b) election and paid my AMT up front for that tax year. All this (the exercise and the AMT) was done out of pocket. I've never see EquityZen or Equidate mention anything about loans for your exercise. My understanding is they help you sell your shares once you actually own them. Stayed at said startup long enough to have my exercised portion of these ISOs vest and count as long term capital gains; Tried to sell them on both EquityZen and Equidate with no success, due to not meeting their transaction minimums. Initial contact with EquityZen was very friendly and helpful, and I even got a notice about a potential sale, but then they hired an intern to answer emails and I remember his responses being particularly dismissive, as if I was wasting their time by trying to sell such a small amount of stock. So that didn't go anywhere. Equidate was a little more friendly and was open to the option of pooling shares with other employees to make a sale in order to meet their minimum, but that never happened either. My advice, if you're thinking about exercising and you're worried about liquidity on the secondary markets, would be to find out what the minimums would be for your specific company on these platforms before you plunk any cash down. Eventually brought my request for liquidity back to the company who helped connect me with an interested external buyer, and we completed the transaction that way. As for employer approval - there's really no reason or basis that your company wouldn't allow it (if you paid to exercise then the shares are yours to sell, though the company may have a right of first refusal). It's not really in the company's best interest to have their shares be illiquid on the secondary markets, since that sends a bad signal to potential investors and future employees. |
Why do stock prices of retailers not surge during the holidays? | Systemic and well know patterns in sales are priced in to the security. Typically companies with very cyclical earnings like this will issue guidance of earnings per share within a range. These expected earnings are priced in before the earnings are actually booked. If a company meets these expectations the stock will likely stay relatively flat. If the company misses this expectation, the stock, generally, will get slammed. This kind of Wall Street behavior typically mystifies media outlets when a company's stock declines after reporting a record high level of whatever metric. The record high is irrelevant if it misses the expectation. There is no crystal ball but if something is both well known and expected it's already been "priced in." If the well known expected event doesn't occur, maybe it's a new normal. |
In which country can I set up a small company so that I pay a lower rate of corporate tax? | Grass is always greener at the other side of the hill. Tax is only a small proportion of your costs. you could easily set up a small company in a so called tax haven. But are you willing to emigrate? If not, will the gain in less taxes cover the frequent travel costs? Even if you would like to emigrate less tax might be deceiving. I recently had a discussion with a US based friend. In the US petrol is way cheaper then in Europe. THere were many examples in differences, but when you actually sum up everything, cost of living was kind of the same. So you might gain on tax, but loose on petrol, or child care to just name some examples For big companies who think globally it makes sense to seek the cheapest tax formula. For them it does not matter where they are located. For us mortals it does. |
How it actually works? Selling a call on a stock I hold, but has done poor, might the market thinks may rise | You seem to have it right. You will be selling what's known as a covered call. When you sell the call, you enter it as "sell to open" and the system should see that you own the stock. You need to be approved for options trading, not all accounts are. As far as this particular trade goes - No, the stock doesn't necessarily get called away the day it's in the money, but it can be. If the stock closes just in the money around the time of expiration are you ok will selling it for the strike price? Remember, the option buyer is taking a small risk, the cost of this option, hoping the stock will go far above that price. |
Can I get my property taxes lowered? | There is no relationship between the government appraisal and the mortgage appraisal. The loan appraisal is done by a lender to determine if the property value is in agreement with the loan amount. The government appraisal is done to determine how much to charge you in taxes. They use the values of residences and commercial property to get their operating budget each year. They also set the rate to generate the amount of income money they need. If they cut all appraisals in half, they would just double the rate. In some jurisdictions the government appraises every year, in other places every three years. Some only when the property is sold. In some jurisdictions the maximum increase or decrease in government appraisal is set by law. But then they reset after the house is sold. That being said. Use this time to review the appraisal from the government. They may have facts wrong. They may think you have a pool, or more bedrooms or a garage, when you don't. Some jurisdictions use an automated process, others do a more detailed/individual process. If there was a mistake ten years ago with the description it will never get caught unless you complain. Check with the governemnt website for how to appeal. Some have windows of opportunity for an appeal. |
I have a horrible 401k plan, with high expenses. Should I stay with it or move my money elsewhere? | As to the rollover question. Only rollover to a ROTH if you have other funds you can use to pay the taxes you will be hit with if you do that. DO NOT pay the taxes out of the funds in the 401k. If you don't have a way to pay the taxes, then roll it to a traditional IRA. You never want to pay the government any taxes 'early' and you don't want to reduce the balance. beyond that, A lot depends on how long you figure you will be with that company. If it's only a few years, or if you and other employees can make enough of a fuss that they move the fund to someplace decent (any of the big no-load companies such as Vanguard would be a better custodian), then I'd go ahead and max it out. If you figure to be there for a long while, and it looks like someone is in bed with the custodian and there's no way it will be changed, then maybe look to max out a Roth IRA instead. |
Can I use FOREX markets to exchange cash? | As far as I understand, OP seems to be literally asking: "why, regarding the various contracts on various exchanges (CBE, etc), is it that in some cases they are 'cash settled' and in some 'physically settled' -?" The answer is only that "the exchange in question happens to offer it that way." Note that it's utterly commonplace for contracts to be settled out physically, and happens in the billions as a daily matter. Conversely zillions in "cash settled" contracts play out each day. Both are totally commonplace. Different businesses or entities or traders would use the two "varieties" for sundry reasons. The different exchanges offer the different varieties, ultimately I guess because they happen to think that niche will be profitable. There's no "galactic council" or something that enforces which mode of settlement is available on a given offering - ! Recall that "a given futures contracts market" is nothing more than a product offered by a certain exchange company (just like Burger King sells different products). I believe in another aspect of the question, OP is asking basically: "Why is there not, a futures contract, of the mini or micro variety for extremely small amounts, of currency futures, which, is 'physically' settled rather than cash settled ..?" If that's the question the answer is just "whatever, nobody's done it yet". (Or, it may well exist. But it seems extremely unlikely? "physically" settled currencies futures are for entities operating in the zillions.) Sorry if the question was misunderstood. |
How does a bank make money on an interest free secured loan? | Very good answers as to how 0% loans are typically done. In addition, many are either tied to a specific large item purchase, or credit cards with a no interest period. On credit card transactions the bank is getting a fee from the retailer, who in turn is giving you a hidden charge to cover that fee. In the case of a large purchase item like a car, the retailer is again quite likely paying a fee to cover what would be that interest, something they are willing to do to make the sale. They will typically be less prone to deal as low a price in negotiation if you were not making that deal, or at times they may offer either a rebate or special low to zero finance rates, but you don't get both. |
Frustrated Landlord | If you're losing money or breaking even, you own a bad investment. The problem you have is that you are emotionally invested in your tenant. That isn't a bad thing in general but it's costing you money and, unless interest rates fall enough to justify a refi or property taxes go down in your area, that's kind of unlikely to change. Option #1 - Tell your wife that you are willing to accept a loss up to a certain level because of your long term relationship with your tenant. In a perfect world, the two of you would then discuss what the "magic number" would be where you got out and come to a compromise. For example, if you are comfortable losing up to $3,000 per year and she is unhappy with any loss, you may agree on selling the house when your losses climb to $1,500. In a less perfect world, it would cause an argument as she has already told you what she wants you to do. Option #2 - Raise the rent to the break even point. From what you've said, this will likely result in the loss of your tenant but you could then rent to someone else for significantly more. Option #3 - Sell the house. It's an investment property which means it's supposed to make money for you. It can do that very quickly by way of a sale and then it's no longer your problem. Option #4 - Sell the house to your tenant. You bought it for $50,000 and it's currently worth $150,000 (roughly). The problem you face is that property taxes have gone up and caused your mortgage to increase past your tenants ability to pay. My guess is, after 15 years, your payoff is somewhere in the high $20's to mid 30's assuming you got a 30 year loan and haven't refinanced. If you sell to her for say $75,000 (or even up to $90,000) you will still make a profit (wife is happy), she will get a mortgage she can afford and be able to stay in the house (you and the tenant are happy). Added bonus is that her property taxes would be lower (assuming a different rate for investment property in your area). I would discuss this at length with your wife as well before making such an offer. Option #5 - Get a property management company. As mentioned above, they will keep a percentage but will remove your emotions from the equation altogether and turn the situation into a winner. I don't know if your wife is right in saying you don't have the stomach for this, but I do think your heart is getting in the way in this particular situation. I get the feeling that if your tenant was 25 years old and had only been renting from you since last October, you would have no problem raising the rent to market levels at every renewal. |
Can I trade more than 4 stocks per week equally split between two brokers without “pattern day trading” problems? | Yes, this is a way to avoid the pattern day trader regulation. The only downside being that your broker will have different commission rates and your capital will be split amongst several places. |
Are stock prices purely (or mostly) only based on human action? | Stock prices are indeed proportional to supply and demand. The greater the demand for a stock, the greater the price. If they are, would this mean that stock prices completely depend on HOW the public FEELS/THINKS about the stock instead of what it is actually worth? This is a question people have argued for decades. Literature in behavioral finance suggests that investors are not rational and thus markets are subject to wild fluctuation based on investor sentiment. The efficient market theory (EMT) argues that the stock market is efficient and that a stock's price is an accurate reflection of its underlying or intrinsic value. This philosophy took birth with Harry Markovitz's efficient frontier, and Eugene Fama is generally seen as the champion of EMT in the 1960's and onward. Most investors today would agree that the markets are not perfectly efficient, and that a stock's price does not always reflect its value. The renowned professor Benjamin Graham once wrote: In the short run, the market is a voting machine but in the long run it is a weighing machine. This suggests that prices in the short term are mainly influenced by how people feel about the stock, while in the long run the price reflects what it's actually worth. For example, people are really big fans of tech stocks right now, which suggests why LinkedIn (stock: LNKD) has such a high share price despite its modest earnings (relative to valuation). People feel really good about it, and the price might sustain if LinkedIn becomes more and more profitable, but it's also possible that their results won't be absolutely stellar, so the stock price will fall until it reflects the company's fundamentals. |
If I have $1000 to invest in penny stocks online, should I diversify risk and invest in many of them or should I invest in just in one? | I've never invested in penny stocks. My #1 investing rule, buy what you know and use. People get burned because they hear about the next big thing, go invest! to just end up losing everything because they have no clue in what they're investing in. From what I've found, until you have minimum of $5k to invest, put everything in a single investment. The reason for this, as others have mentioned, is that commissions eat up just about all your profits. My opinion, don't put it in a bond, returns are garbage right now - however they are "safe". Because this is $1000 we're talking about and not your life savings, put it in a equity like a stock to try and maximize your return. I aim for 15% returns on stocks and can generally achieve 10-15% consistently. The problem is when you get greedy and keep thinking it will go above once you're at 10-15%. Sell it. Sell it right away :) If it drops down -15% you have to be willing to accept that risk. The nice thing is that you can wait it out. I try to put a 3 month time frame on things I buy to make money. Once you start getting a more sizable chunk of money to play around with you should start to diversify. In Canada at least, once you have a trading account with a decent size investment the commissions get reduced to like $10 a trade. With your consistent 10% returns and additional savings you'll start to build up your portfolio. Keep at it and best of luck! |
Accidentally opened a year term CD account, then realized I need the money sooner. What to do? | I did find this information from the US Department of the Treasury: What are the penalties for withdrawing money early from a Time Certificate of Deposit (CD)? Federal law stipulates that all time certificates of deposit (CD) that are cashed out early are subject to a minimum penalty. If you withdraw an amount within the first six days after deposit, the penalty consists of at least seven days' simple interest. Other than that, national banks can set their own penalties; there is no maximum. Additionally, you may want to review the Account Agreement that the bank provided when you opened the account, as it explains the early withdrawal penalties. Check the paperwork to see if there is a short period at the start where the penalty is minimal. Each bank can set their own rules for the maximum penalty. Some base it on x months interest, some as a percentage of the CD, others may use a more complex formula. |
How risky is it to keep my emergency fund in stocks? | From mid 2007 to early 2009 the DJI went down about 50 %. This market setback won't happen on a single day or even a few weeks. Emergency funds should be in cash only. Markets could be closed for an unknown period of time. Markets where closed September 11 until September 17 in 2001. |
What Happens to Cofounders' Shares when they IPO? | A company typically goes public in order to bring in additional capital. In an IPO, the company (through its officials) will typically do so by issuing additional shares, and offering to sell those to investors. If they did not do that, then there would be no net capital gain for the company; if person A sells share in company C to person B, then company C does not benefit directly from the exchange. By issuing and selling additional shares, the total value of all stock in the company can increase. Being publicly traded also greatly increases the confidence in the valuation of the company, as a consequence of the perfect market theory. There is nothing in this that says that initial investors (cofounders, employees, etc.) need to sell their shares in the process. They might choose to do so, or they might not; or they might be prevented from doing so by terms of any agreements that they have signed or by insider trading laws. Compare What happens to internal stock when a company goes public? Depending on specifics, it might be reasonable for the company to perform a share split prior to the initial public offering. That, however, doesn't affect the total value of the shares, only the price per share. |
Will ADR owner enjoy same benefit as common shares holders | I would say you should invest in the market that is more convenient for you, bearing in mind that if you buy ADRs you may have some things to keep an eye on depending on certain events as mentioned by duffbeer703. So, if you are investing with an account in the U.S., go with the ADRs as that will avoid some currency conversion hassles and possible exchange rate issues. I am not certain, but I have a feeling that would also make it easier for you to keep the taxman happy. |
Why is Insider Trading Illegal? | It is illegal because laws are written by people, and laws of stock trade are written, in part, to make it appear "fair" and thus contribute to the willingness of the people to invest their money in that particular venue. Profiting from information on the stock market that some people have and some can't have is considered "unfair", since it presumably excludes the latter from profit-making opportunities and thus makes their trades less profitable than otherwise. Since it is universally felt so, people made laws that prohibit such behavior. I am not aware of any research that shows beyond doubt that allowing insider trading would really ruin stock markets, but such thing would be very hard to prove. There are arguments to both sides, and the side that supports prohibiting such trade has a clear majority, so it is prohibited. |
Is there a tax deduction for renting office space in service of employer? | According to this post on TurboTax forums, you could deduct it as an "Unreimbursed Employee" expense. This would seem consistent with the IRS Guidelines on such deductions: An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is appropriate and helpful to your business. An expense does not have to be required to be considered necessary. Office rent is not listed explicitly among the examples of deductible unreimbursed employee expenses, but this doesn't mean it's not allowed. Of course you should check with a tax professional if you want to be sure. |
Why is economic growth so important? | nan |
Why is it that stock prices for a company seem to go up after a layoff? | As others have pointed out, there are often many factors that are contributing to a stock's movement other than the latest news. In particular, the overall market sentiment and price movement very often is the primary driver in any stock's change on a given day. But in this case, I'd say your anecdotal observation is correct: All else equal, announcements of layoffs tend to drive stock prices upwards. Here's why: To the public, layoffs are almost always a sign that a company is willing to do whatever is needed to fix an already known and serious problem. Mass layoffs are brutally hard decisions. Even at companies that go through cycles of them pretty regularly, they're still painful every time. There's a strong personal drain on the chain of executives that has to decide who loses their livelihood. And even if you think most execs don't care (and I think you'd be wrong) it's still incredibly distracting. The process takes many weeks, during which productivity plummets. And it's demoralizing to everyone when it happens. So companies very rarely do it until they think they have to. By that point, they are likely struggling with some very publicly known problems - usually contracting (or negative) margins. So, the market's view of the company at the time just before layoffs occur is almost always, "this company has problems, but is unable or unwilling to solve them.". Layoffs signal that both of those possibilities are incorrect. They suggest that the company believes that layoffs will fix the problem, and that they're willing to make hard calls to do so. And that's why they usually drive prices up. |
Should I get cash from credit card at 0% for 8 months and put it on loans? | Do you know how many people end up with an 18-21% rate on their credit card? They started off with low teaser rates. There was an article about it recently on Yahoo. Mainly this comes from a lack of discipline, or an unforeseen emergency. However, lets assume, that you are a bit uncommon and have iron discipline. It comes down to a math question. What is the rate on your student loan? I am going to assume 6%, and lets say that you are now paying interest. So there is 7 months between now an then, you would pay $140 (4000 * .06/12 * 7) in interest if you left it on the student loan. Typically there is not really a free lunch with the zero percent interest rate CC. They often charge a 3% balance transfer fee, so you would pay that on the entire amount, about $120. Is it worth the $20? I would say not. However, those simple calculations are not really correct. Since you would have to pay the CC $588.6/month to take care of this, you have to shrink the balance on the student loan to do a true apples to apples comparison. So doing a little loan amortization, you can retire $4000 on the student loan only paying $583/month, and paying a total of $80.40 in interest. So it would cost you money to do what you are suggesting if there is a 3% transfer fee. Even if there is no transfer fee, you only save about $80 in interest. If it was me, I would direct my energy in other areas, like trying to bring in more money to make this student loan go away ASAP. Oh and GO STEELERS! |
Are 'per trade' fees charged on every order or just once per stock? | You will be hit every time, once every buy order and once every sell order. Commissions to the broker are paid every time they do something for you. This is true regardless if it is a security in which you are already invested. It is true regardless if you make or lose money. It is just as sure as death and taxes. |
Mutual Funds Definition and Role | I think you are asking about actively managed funds vs. indexes and possibly also vs. diversified funds like target date funds. This is also related to the question of mutual fund vs. ETF. First, a fund can be either actively managed or it can attempt to track an index. An actively managed fund has a fund manager who tries to find the best stocks to invest in within some constraints, like "this fund invests in large cap US companies". An index fund tries to match as closely as possible the performance of an index like the S&P 500. A fund may also try to offer a portfolio that is suitable for someone to put their entire account into. For example, a target date fund is a fund that may invest in a mix of stocks, bonds and foreign stock in a proportion that would be appropriate to someone expecting to retire in a certain year. These are not what people tend to think of as the canonical examples of mutual funds, even though they share the same legal structure and investment mechanisms. Secondly, a fund can either be a traditional mutual fund or it can be an exchange traded fund (ETF). To invest in a traditional mutual fund, you send money to the fund, and they give you a number of shares equal to what that money would have bought of the net asset value (NAV) of the fund at the end of trading on the day they receive your deposit, possibly minus a sales charge. To invest in an ETF, you buy shares of the ETF on the stock market like any other stock. Under the covers, an ETF does have something similar to the mechanism of depositing money to get shares, but only big traders can use that, and it's not used for investing, but only for people who are making a market in the stock (if lots of people are buying VTI, Big Dealer Co will get 100,000 shares from Vanguard so that they can sell them on the market the next day). Historically and traditionally, ETFs are associated with an indexing strategy, while if not specifically mentioned, people assume that traditional mutual funds are actively managed. Many ETFs, notably all the Vanguard ETFs, are actually just a different way to hold the same underlying fund. The best way to understand this is to read the prospectus for a mutual fund and an ETF. It's all there in reasonably plain English. |
US resident with Canadian income via T4A-NR | As per the Canada-U.S. Tax Treaty (the “Treaty”), a U.S. corporation carrying on business in Canada is only subject to taxation on income earned in Canada through a fixed place of business or permanent establishment. Therefore, if a U.S. company does not have a permanent establishment (PE) in Canada then their Canadian source business income is not subject to Canadian federal tax. https://www.fin.gc.ca/treaties-conventions/USA_-eng.asp |
Shorting Stocks And Margin Account Minimum | The margin money you put up to fund a short position ($6000 in the example given) is simply a "good faith" deposit that is required by the broker in order to show that you are acting in good faith and fully intend to meet any potential losses that may occur. This margin is normally called initial margin. It is not an accounting item, meaning it is not debited from you cash account. Rather, the broker simply segregates these funds so that you may not use them to fund other trading. When you settle your position these funds are released from segregation. In addition, there is a second type of margin, called variation margin, which must be maintained while holding a short position. The variation margin is simply the running profit or loss being incurred on the short position. In you example, if you sold 200 shares at $20 and the price went to $21, then your variation margin would be a debit of $200, while if the price went to $19, the variation margin would be a credit of $200. The variation margin will be netted with the initial margin to give the total margin requirement ($6000 in this example). Margin requirements are computed at the close of business on each trading day. If you are showing a loss of $200 on the variation margin, then you will be required to put up an additional $200 of margin money in order to maintain the $6000 margin requirement - ($6000 - $200 = $5800, so you must add $200 to maintain $6000). If you are showing a profit of $200, then $200 will be released from segregation - ($6000 + $200 = $6200, so $200 will be release from segregation leaving $6000 as required). When you settle your short position by buying back the shares, the margin monies will be release from segregation and the ledger postings to you cash account will be made according to whether you have made a profit or a loss. So if you made a loss of $200 on the trade, then your account will be debited for $200 plus any applicable commissions. If you made a profit of $200 on the trade then your account will be credited with $200 and debited with any applicable commissions. |
German stock exchange, ETR vs FRA | I still can't understand why there is a price discrepancancy. There isn't. It's the same stock and price differences between such major exchanges will always be minimal. I think you simply haven't paid attention to the date range. It seems Google finance only has data for FRA:BMW reaching back to 2011, so if you try to look at the development of your investment since 2009, you're not getting comparable data. |
Please explain the relationship between dividend amount, stock price, and option value? | The exchanges artificially push the price of the stock down on the ex-div date. Often the impact of paying the dividend is absorbed by the ebb and flow of trading in the stock later in the day by the market. I think this was noticable with Nokia because the company is in poor shape and the stock has plunged recently. Dividends are a great way for companies to return value to shareholders. The trend for many companies, particularly growth stocks is to reinvest profits to grow the company. Former growth stocks like Microsoft like to just sit on billions of dollars and do nothing with it. |
Should I fund retirement with a static asset allocation or an age based glide path? | The thing about the glide path is that the closer you're to the retirement age, the less risk you should be taking with your investments. All investments carry risk, but if you invest in a volatile stock market at the age of 20 and lose all your retirement money - it will not have the same effect on your retirement as if you'd invest in a volatile stock market at the age of 65 and then lose all your retirement money. Static allocation throughout your life without changing the risk factor, will lead you to a very conservative investment path, which would mean you're not likely to lose your investments, but you're not likely to gain much either. The point of the glide path is to allow you taking more risks early with more chances of higher gains, but to limit your risks down the road, also limiting your potential gains. That is why it is always suggested to start your retirement funds early in your life, to make sure you have enough time to invest in potentially high return stocks (with high risk), but when you get close to your retirement age, it is advised to do exactly the opposite. The date-targeted funds do that for you, but you can do it on your own as well. As to the academic research - you don't need to go that far. Just look at the graphs to see that over long period investments in stocks give much better return than "conservative" bonds and treasuries (especially when averaging the investments, as it usually is with the retirement funds), but over a given short period, investments in stocks are much more likely to significantly lose in value. |
Personal Asset Protection - How to protect asset against a deficiency judgement? | You should talk to a bankruptcy attorney local to you. While bankruptcy laws are federal, there are a variety of local rules. As an example in CA, I've heard of a trustee going after a debtor's IRA account. Retirement accounts are generally off limits, but not always. Additionally, structuring your assets for the purpose of shielding them from creditors after the start of foreclosure proceedings may constitute fraud. At the very least that may open those assets back up to your creditor(s). |
Is there a way to buy raw oil today and sell it in 1 year time? | You can buy the exchange traded fund ETFS WTI Crude Oil (CRUD), amongst other ETFS products. http://funds.ft.com/uk/Tearsheet/Summary?s=CRUD:LSE:USD Note these funds do not 'jump' when the crude oil futures contracts are in contango (e.g. June contract is priced higher than May) and the futures roll-over, as they do monthly. When this happens the EFTS continues with no movement. Currently May is $52.85 and June is $54.15 (so in contango). LSE:CRUD is $13.40 and if the crude oil futures rolled-over it would carry straight on at that value. For this reason one should be cautious buying and holding LSE:CRUD longterm. |
Excessive Credit Check from Comcast | In general, it is unusual for a credit check to occur when you are terminating a contract, since you are no longer requesting credit. If the credit check was a "hard pull" it will stay on your credit report for 2 years, but will only have an impact on your credit score for up to 12 months. If the check is a "soft pull" it has no impact on your credit score. Since you're past the 12 months boundary anyway, I wouldn't worry about it. That being said, please feel free to continue your investigation and report back if you can get Comcast to admit they performed the 2nd credit check. I'm sure we'd all be interested to hear their explanation for it. |
Figuring flood insurance into financing cost | We recently had a sump pump fail during a rainy weekend. Never had more than an inch or so of water on the floor. Total cost to remove the water, dry out the basement, and repair the damage to the paneling and wallboard: more than $7,000 plus the new sump pump. We are not in a flood zone. In a flood zone the cost of the loss could be total. A flood is also the type of hazard that can also destroy the value of land. No way I would want to self insure for this known hazard. |
Fund equalisation / dividend | Do all/most unit trusts have equalisation policy? It is really that some value of the fund is given to the investor, so the fund value goes down by that much per unit. It depends on the type of mutual funds. For example, there are growth type mutual funds that do not give any dividend and the total value of the fund is reflected in its price. Do the companies whose stocks we owned directly apply equalisation policy on their dividends as well? Why not? As far a stock price is concerned, it usually decrease by the same amount of the dividend payout at ex-date, so in effect, the market in a way does the equalization, the company directly does not do it. |
I am a contractor with revenue below UK's VAT threshold. Should I register for VAT? | I love the flat rate VAT scheme. It's where you pay a percentage based on your industry. An example might be Computer repair services, where you'll pay 10.5% of your total revenue to the HMRC. But you'll be invoicing for VAT at 20% still. Would definitely recommend registering for it since you're expecting to cross the threshold anyway. And like DumbCoder said, you also get a first year discount of 1%, so in the example above, you'd end up paying 9.5% VAT on your turnover. I personally found it a pain to invoice without VAT (my clients expected it), so registering made sense regardless of the fact I was over threshold. The tricky bit is keeping under the £150k turnover so you stay eligible for the flat rate. It does get more complex otherwise. |
What should I be doing to protect myself from identity theft? | Every 90 days add an Initial Fraud Alert to each of the 3 major credit bureaus. |
What's the smartest way to invest money gifted to a child? | I was in a similar situation with my now 6 year old. So I'll share what I chose. Like you, I was already funding a 529. So I opened a custodial brokerage account with Fidelity and chose to invest in very low expense index fund ETFs which are sponsored by Fidelity, so there are no commissions. The index funds have a low turnover as well, so they tend to be minimal on capital gains. As mentioned in the other answer, CDs aren't paying anything right now. And given your long time to grow, investing in the stock market is a decent bet. However, I would steer clear of any insurance products. They tend to be heavy on fees and low on returns. Insurance is for insuring something not for investing. |
Equity prices during currency devaluation — Mexico 1994 | Yes, this phenomenon is well documented. A collapse of an economy's exchange rate is coincidented with a collapse in its equities market. The recent calamities in Turkey, etc during 2014 had similar results. Inflation is highly correlated to valuations, and a collapse of an exchange rate is highly inflationary, so a collapse of an exchange rate is highly correlated to a collapse in valuations. |
Can you short a stock before the ex-div. date to make a profit? | When you short a stock and the stock goes ex-div. you have to pay out an amount equal to the dividend. So in your example, GG would short the stock at $10.00, buy back at $9.00 and be charged $1.00 for the dividend. Net effect $0.00. |
Making a big purchase over $2500. I have the money to cover it. Should I get a loan or just place it on credit? | There are a couple of things to consider here that are relevant to your situation: |
Why is “cheque cashing” a legitimate business? | How does this get any business? You'd be surprised on how much profit these type of businesses can bring in and the number of people who cash their checks this way. They make profit off people who want their checks cashed ASAP. Usually cheques written to "cash" or something can just be cashed for free at the bank right? Yes, most banks cash your check for free. Some may not cash it right away and may require a few days to process. Some charge a small fee if the check is not from the same bank. Some personal checks may not even be processed the same day as well. Wouldn't the only cheques that people would cash at these places be bad cheques? Yes and no. Yes because it may be "easier" to try to cash a fraudulent check at these type of check cashing places. However, some places may only cash business checks and require your ID in which they write down the information in order to possibly track you down in the future. Also some places only cash a check to a certain amount. And wouldn't this mean that the business will lose a lot of money since it pays out cash but then has the cheque bounce? Of course the business loses money if the check bounces or is fake. That is why they try to minimize their losses with certain requirements that needs to met before the check can be cashed. Who uses these services exactly? Just about anyone who needs their check cashed ASAP or like ChrisW stated in his answer is trying to keep their money on the low. There is a demand for this service even though it may seem shady to you. |
Working on a tax free island to make money? | The Cayman Islands has an income tax enacted, it is just currently 0%. It raises revenues from its tourism, import duties, and business registration. It is part of the UK commonwealth and therefore enjoys the military protection of that federation, but doesn't have to spend on it. But unlike the US, the UK does not have an umbrella federal income tax on its overseas territories, so the Cayman Islands doesn't have to pass that down to its citizens nor do its citizens/residents have to be encumbered by one. It was not taxed by the King when it was first incorporated (hm, might need to fact check that). They also didn't go to war with the king over some small tax, so they got treated differently than some other North American colonies you might think of. The Cayman Islands is not the only government that raises revenues this way. Delaware also has a 0% income tax and raises the majority of its revenues on business registration (and perpetual franchise taxes on those businesses), allowing it to spare its citizens from passive income taxes. But unlike a US state, a citizen or business in a UK overseas territory does not have federal regulatory overhead, making it more attractive as a worldwide financial center. |
Can a wealthy investor invest in or make a deal with a company before it goes public / IPO? | IPO is "Initial Public Offering". Just so you know. The valuations are done based on the company business model, intellectual property, products, market shares, revenues and profits, assets, and future projections. You know, the usual stuff. Yes, it is. And very frequently done. In fact, I can't think of any company that is now publicly traded, that didn't start this way. The first investor, the one who founds the company, is the first one who invests in it after raising the capital (even if it is from his own bank account to pay the fees for filing the incorporation papers). What is the difference between "normal" investor and "angel"? What do you refer to as "angel"? How is it abnormal to you? Any investor can play a role, depending on the stake he/she has in the company. If the stake is large enough - the role will be significant. If the stake is the majority - the investor will in fact be able major decisions regarding the company. How he bought the stocks, whether through a closed offering, initial investment or on a stock exchange - doesn't matter at all. You may have heard of the term "angels" with regards to high-tech start up companies. These are private investors (not funds) that invest their own money in start ups at very early stages. They're called "angels" because they invest at stages at which it is very hard for entrepreneurs to raise money: there's no product, no real business, usually it is a stage of just an idea or a patent with maybe initial prototype and some preliminary business analysis. These people gamble, in a sense, and each investment is very small (relatively to their wealth) - tens of thousands of dollars, sometimes a hundred or two thousands, and they make a lot of these. Some may fail and they lose the money, but those that succeed - bring very high returns. Imagine investing 10K for 5% stake at Google 15 years ago. Those people are as investors as anyone else, and yes, depending on their stake in the company, they can influence its decisions. |
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