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Any reason to keep around my account with my old, 'big' bank? | From my experience, payments from banks and other financial entities, such as loyalty programs, generally aren't as large as payments that go the other direction from consumer to bank. Thus, keeping a bank account open simply for some reward/loyalty points may just be changing your behavior for the wrong reasons. The more important scenario is whether or not you have any automated ACH payments or whether your bank account is linked to other services. Perhaps the biggest tell that you're in the clear is when those transactions start occurring from your credit union account. For example: If you had a direct deposit to your BMO bank account, make sure you see deposits start to appear in the credit union account. If you're making automatic withdraws to an online savings or brokerage account, make sure those transfers are stopped and that you instead see them coming out of your new credit union account. You shouldn't need to move the auto loan, but you will need to make sure you can pay it from the new account. Some financial advisors, such as in this BankRate article titled, Lenders can tap bank account for mortgage, even recommend keeping liabilities and assets at different locations. If for whatever reason your financial situation turned bleak, it would be more difficult for the bank to help itself to what's in your checking account. To avoid getting nickel and dimed to death by "payment processing fees", I tend to pay insurance bills yearly or semi-annually. Thus, consider if there is anything that may be coming due in the next 6 months. If so, you might want to get your new account hooked up while you still have all the routing numbers and account numbers in your head. It's a pain to dig this stuff up while also rushing to not be late. If all that is in order, close the account. |
Jointly filing taxes in 2 different states | Both states will want to tax you. Your tax home is where you maintain a domicile, are registered to vote, etc. and you will probably want to keep this as MA since you state that MA is your permanent residence and you are staying in a rented place in PA. But be careful about voter registration; that is one of the items that can be used to determine your state of residence. OK, so if you and your spouse are MA residents, you should file jointly as residents in MA and as nonresidents in PA. Do the calculations on the nonresident return first, and then the calculations on the resident return. Typically, on a nonresident tax return, the calculations are effectively the following: Report all your income (usually AGI from the Federal return). Call this $X. Compute the PA state tax due on $X. Note that you follow the rules for nonresidents in doing this, not the calculations used by PA residents. Call the amount of tax you computed as $Y. What part of the total income $X is attributable to PA sources? If this amount is $Z, then you owe PA $Y times (Z/X). On the resident return in MA, you will likely get some credit for the taxes paid to PA, and this will reduce your MA tax burden. Usually the maximum credit is limited to the lesser of actual tax paid to PA and what you would have had to pay MA for the same income. As far as withholding is concerned, your employer in PA will withhold PA taxes as if you are a PA resident, but you can adjust the amount via the PA equivalent of IRS Form W4 so as to account for any additional tax that might be due because you will be filing as a nonresident. Else you can pay estimated taxes via the PA equivalent of IRS Form 1040ES. Similarly, your wife can adjust her withholding to account for the MA taxes that you will owe on the joint income, or you can pay estimated taxes to MA too. Note that it is unlikely that your employer in Pennsylvania will withhold Massachusetts taxes (and send them to Massachusetts) for you, e.g. if it is a ma-and-pa store, but there may be special deals available if your employer does business in both states, i.e. is a MA-and-PA store. |
Wardrobe: To Update or Not? How-to without breaking the bank | If you budget for cloths and save up the money, you may be able to take advantage of sales when they are on. However only buy what you will use! You need to ask yourself what value you put on cloths compared to other things you can spend the money on. Also would you rather have money in the bank encase you need it rather than lots of cloths in the wardrobe? |
Why is it important to research a stock before buying it? | To a certain degree "the only sure thing I know is the price I paid for the stock is the fair price at the time I buy it" is absolutely right, by definition, and by the law of the free and efficient market and forces of supply and demand, freedom of public information about share price sensitive information, etc, etc, etc, and you've made a good point that eludes many investors I'd say. However, in practise, the market has many participants, and they will all be arriving at a different idea of what the "fair price" is by way of a slightly different analysis and slightly different information. In theory they all have the same information, but unfortunately in practise there is always some disparity. When one participant feels a stock is undervalued though the last thing they want to do is say so, instead they will start buying stock. They might feel it is undervalued by 20%, but that doesn't mean they'll keep buying and buying until it gets to 20%, they might push the price up just a little, then let the price drift down again, buy some more, relax, buy some more, etc. Over time the price will rise of course because the supply will become weaker, but even if the participant is correct about the 20% the price might have only risen 7% by the time they acquire all the stock they want given their risk models, market exposure and margin guidelines, etc, and it might be more than a year later before the price has actually risen to 20%, presumably because more and more other market participants have come to the same conclusion. The opposite can obviously also happen, a participant might dump stock it feels is over valued long before it hits the values it believes in. So right away you can see that pricing might not really reflect value, or "fair price". |
When do companies typically announce stock splits? | In 2005, Apple announced a split on Feb 11... CUPERTINO, California — February 11, 2005 — Apple® announced today that its Board of Directors has approved a two-for-one split of the Company’s common stock and a proportional increase in the number of Apple common shares authorized from 900 million to 1.8 billion. Each shareholder of record at the close of business on February 18, 2005 will receive one additional share for every outstanding share held on the record date, and trading will begin on a split-adjusted basis on February 28, 2005. ...one month after announcing earnings. CUPERTINO, California—January 12, 2005—Apple® today announced financial results for its fiscal 2005 first quarter ended December 25, 2004. For the quarter, the Company posted a net profit of $295 million, or $.70 per diluted share. These results compare to a net profit of $63 million, or $.17 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.49 billion, up 74 percent from the year-ago quarter. Gross margin was 28.5 percent, up from 26.7 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter’s revenue. I wouldn't expect Apple to offer another split, as it's become somewhat fashionable among tech companies to have high stock prices (see GOOG or NFLX or even BRK-A/BRK-B). Additionally, as a split does nothing to the underlying value of the company, it shouldn't affect your decision to purchase AAPL. (That said, it may change the perception of a stock as "cheap" or "expensive" per human psychology). So, to answer your question: companies will usually announce a stock split after releasing their financial results for the preceding fiscal year. Regardless of results, though, splits happen when the board decides it is advantageous to the company to split its stocks. |
How should I save money if the real interest rate (after inflation) is negative? | Inflation protected securities (i-bonds or TIPS). TIPS stands for Treasury Inflation Protected Securities. By very definition, they tend to protect your savings against inflation. They won't beat inflation, but will keep up with it. TIPS or iBonds have two parts. A fixed interest part and a variable interest portion which varies depending upon the current rates. The combined rate would match the inflation rate. They can be bought directly from the treasury (or from a broker or bank who might charge a commission) |
Recording of personal property contribution to S-Corp in QuickBooks | One approach would be to create Journal Entries that debit asset accounts that are associated with these items and credit an Open Balance Equity account. The value of these contributions would have to be worked out with an accountant, as it depends on the lesser of the adjusted basis vs. the fair market value, as you then depreciate the amounts over time to take the depreciation as a business expense, and it adjusts your basis in the company (to calculate capital gains/losses when you sell). If there were multiple partners, or your accountant wants it this way, you could then debit open balance equity and credit the owner's contribution to a capital account in your name that represents your basis when you sell. From a pure accounting perspective, if the Open Balance Equity account would zero out, you could just skip it and directly credit the capital accounts, but I prefer the Open Balance Equity as it helps know the percentages of initial equity which may influence partner ownership percentages and identify anyone who needs to contribute more to the partnership. |
Why does gold have value? | To start with gold has value because it is scarce, durable, attractive and can be made into jewellery. But that does not explain its current value. In the current economic climate, it is difficult for many investors to get a positive return on conventional investments such as equities or bonds. I theorise that, in such conditions, investors decide to park their money in gold simply because there are few other good options. This in itself drives the price of gold up, making it a better investment and causing a speculative boom. As you will see here, here, and here the gold price is negatively correlated with stock market indices. |
Is inflation a good or bad thing? Why do governments want some inflation? | Inflation is a bad thing. It makes it much more difficult for people to compare prices and prosperity over a long period of time. This causes people to ignore the wisdom of their elders (who remember prices from a long time ago). Back in my day, you could get a burger and fries for 15 cents -- a dime for the burger, and a nickel for the fries. But the minimum wage was only a quarter an hour! That doesn't help me decide if things have gotten better or worse. How long is "a long period of time"? That depends on the inflation rate. At 1 percent per year, 50 or 100 years is "a long time". At 10 percent per year, 5 or 10 years. At 100 percent per year, a few months. Because of the Spanish conquests of gold and silver mines in Mexico and Peru, prices in the sixteenth century rose by a factor of 5.5 during the century. This inflation was recognized as causing lots of social and governmental problems. Note that this means an average inflation rate of 2 percent per year for a century is known to be a very bad thing. There are several reasons that most governments want some inflation: |
I cosigned for a friend who is not paying the payment | If the bank is calling your employer, the federal Fair Debt Collection Practices Act (FDCPA) limits where and when debt collectors can contact consumer debtors. In many cases, debt collectors that contact debtors at work are violating the FDCPA. http://www.nolo.com/legal-encyclopedia/a-debt-collector-calling-me-work-is-allowed.html |
Is it possible to block previously authorized ACH access? | I had a similar situation a while ago, and here's what I learned: What are our options here to ensure that this company can't retry to take our money again via ACH? Close existing account and create a new one that has different account number? Yes. As a temporary solution keep ~$0 balance in the account so that their request for $840 can't be fulfilled? However, would our bank incur any fees because of insufficient funds each time the other company tries to charge us again? Bad idea. You may incur penalties for returned payment, or the bank may honor the payment and charge you overdraft fees. Provide to our bank the service termination notice that proves that we are not in business with the other company anymore and effectively block them. However, termination notice has only our signature Bank doesn't care. ACH withdrawal is akin to a check. The assumption is that the other side has entitlement. You can put stop payment once its processed and try to reverse it claiming fraud, but the end result will be #1: you'll end up getting a new account set up, while they try to recover the money. This is one of the reasons I'm reluctant allowing standing ACH authorizations any more. Generally, the American banking system is very much geared against the consumers, and in many ways is very retarded. In a more advanced countries (which is almost any other country than the US), the standing withdrawal authorization goes through your bank and can be revoked. |
Does VSMAX invest in smaller companies than FSEVX? | You are comparing apples and oranges: the charts show the capital appreciation excluding dividends. If you include dividends and calculate a total return over that period you see VSMAX up 132% vs. FSEVX up 129%, i.e. quite close. That residual difference is possibly due to a performance difference between the two benchmarks. |
Why does gold have value? | Gold can be thought of to have value in one of two ways; (1) as a means and (2) as an end. Means takes the shape of currency. In this form, we value gold in the same way we value the dollar, it allows us to purchase things we want. As a medium of exchange, gold has no definitive value and is only assigned one during the process of an exchange. For example, I would be valuing one ingot of gold to be worth a dog if I traded a dog for one ingot of gold. The value of gold in this sense is subjective as each person decides for themselves what gold is worth during the transaction. Gold as an end is valued for its own sake. A good example of this is a jeweler who purchases gold directly because of the intrinsic property(s) gold possesses. This is closer to the "true value" of gold than using it as a means, but virtually no one in our society views gold in this manor because virtually no one can use gold in this manor. "You know what I could use right now, a block of gold." - said no one ever. But even if you are one of the select few who value gold for its own sake, this is usually done because gold provides a function. For example, if people no longer want to ware jewelry, then a jeweler will likely have to find a new line of work where he would likely no longer view gold as valuable as an ends. To sum up, gold has a perceived value for most people and an "intrinsic value" to a select few (for the time being). |
What financial data are analysed (and how) to come up with a stock recommendation? | The short answer: it depends. The long answer.. Off the top of my head, there are quite a number of factors that an analyst may look at when analyzing a stock, to come up with a recommendation. Some example factors to look at include: The list goes on. Quite literally, any and all factors are fair game for a recommendation. So, the question isn't really what analysts do with financial data, it is what do analysts do with financial data that meets your investment needs? As an example, if you have two analysts, one who is focused on growth stocks, and one who is focused on dividend growth, they may have completely different views on a company. If both analysts were to analyze Apple (AAPL) 5 years ago, the dividend analyst would likely say SELL or at the most HOLD, because back then Apple did not have a dividend. However, an analyst focused on growth would likely have said BUY, because Apple appeared to be on a clear upward trend in terms of growth. Likewise, if you have analysts who are focused on shorting stocks, and ones who are focused on deep value investing, the sell analyst may be selling SELL because they are confident the stock will go down in price, so you can make money on the short position. Conversely, the deep value investor may be saying BUY, because they believe that based on the companies strong balance sheet, and recent shake-ups in management the stock will eventually turn around. Two completely different views for the same company: the analyst focused on shorting is looking to make money by capitalizing on falling share price, while the analyst focused on deep value is looking for unloved companies in a tailspin whom s/he believe will turn around, the thesis being that if you dollar-cost-average as the price drops, when it corrects, you'll reap the rewards. That all said, to answer the question about what analysts look for: So really, you should be looking for analysts who align with your investment style, and use those recommendations as a starting point for your own purchases. Personally, I am a dividend investor, so I have passed many BUY recommendations from analysts and my former broker because those were based on growth stories. That does not mean that the analysts, my former broker, or myself, are wrong. But we were all incorrect given the context of how I invest, and what they recommend. |
Post tax versus pretax (ESPP versus straight investment) | This answer assumes that your purpose for using the ESPP is to generate a relatively safe 15% return on that portion of your income. Frequently before there were Roth 401K options the advice was: This advice was especially good for the younger workers because they wanted to have a Roth account but didn't want to miss the 401K match. As Roth 401K accounts were introduced that advice changed somewhat because it was possible to get the benefit of the Roth and still get the maximum match. for your situation what I would propose is: contribute to the 401K enough to get the maximum match. Contribute as much as you want or are allowed into the ESPP. Take the proceeds and contribute to an IRA or Roth IRA. If you reach the IRA max you have to decide if you will scale back the ESPP to contribute more to the 401K. |
Is a car loan bad debt? | A car loan might be considered "good" debt, if the following circumstances apply: If, on the other hand, you only qualify for a subprime loan, or you're borrowing to buy a needlessly expensive car, that's probably not a good idea. |
Should I buy a house with a friend? | I'll chime in here with the "don't do it crowd." I think it's fraught with ugly possibilities. However, you may, for various reasons, decide to say, "to hell with it, we'll make it work." If that is the case, treat it like a business transaction and not an emotional transaction. Work up a binding contract with your attorney for how the two of you will handle issues such as: Of absolutely critical importance is the bail-out clause: how will you handle it when one person says, "Sayonara." None of this ensures a smooth road - god knows I wouldn't do it - but it could help protect your sanity and some of your investment down the road. Good luck. |
How to account for startup costs for an LLC from personal money? | You don't even need to formally loan the LLC any money. You pay for the setup costs out of pocket, and then once the LLC is formed, you reimburse yourself (just like with an expense report). Essentially you submit an expense report to the LLC for the startup costs, and the LLC pays out a check to you, categorized for the startup expenses. |
Should I make extra payments to my under water mortgage or increase my savings? | You say you are underwater by $10k-15k. Does that include the 6% comission that selling will cost you? If you are underwater and have to sell anyway, why would you want to give the bank any extra money? A loss will be taken on the sale. Personally i would want the bank to take as much of that loss as possible, rather than myself. Depending on the locale the mortgage may or may not be non-recourse, ie the loan contract implies that the bank can take the house from you if you default, but if 'non-recourse' the bank has no legal way to demand more money from you. Getting the bank to cooperate on a short sale might be massively painful. If you have $ in your savings, you might have more leverage to nego with the bank on how much money you have to give them in the event the loan is not 'non-recourse'. Note that even if not 'non-recourse', it's not clear it would be worth the banks time and money to pursue any shortfall after a sale or if you just walk away and mail the keys to the bank. If you're not worried about your credit, the most financially beneficial action for you might be to simply stop paying the mortgage at all and bank the whole payments. It will take the bank some time to get you out of the house and you can live cost-free during that time. You may feel a moral obligation to the bank. I would not feel this way. The banks and bankers took a ton of money out of selling mortgages to buyers and then selling securities based on the mortgages to investors. They looted the whole system and pushed prices up greatly in the process, which burned most home buyers and home owners. It's all about business -my advice is to act like a business does and minimize your costs. The bank should have required a big enough downpayment to cover their risk. If they did not, then they are to blame for any loss they incur. This is the most basic rule of finance. |
Tax liability for stocks vested for a H1B visa holder | You're asking whether the shares you sold while being a US tax resident are taxable in the US. The answer is yes, they are. How you acquired them or what were the circumstances of the sale is irrelevant. When you acquired them is relevant to the determination of the tax treatment - short or long term capital gains. You report this transaction on your Schedule D, follow the instructions. Make sure you can substantiate the cost basis properly based on how much you paid for the shares you sold (the taxable income recognized to you at vest). |
Will paying off my car early hinder my ability to build credit? | No. Credit scores are primarily built by doing the following: To build credit, get a few major credit cards and a couple of store cards. Use one of them to make routine purchases like gas and groceries. Pay them on time every month. You're good to go. I would hate to sell stocks to pay off a loan -- try finding a better loan. If you financed through the dealer, try joining a credit union and see if you can get a better rate. |
New car: buy with cash or 0% financing | There is a 3rd option: take the cash back offer, but get the money from a auto loan from your bank or credit union. The loan will only be for. $22,500 which can still be a better deal than option B. Of course the monthly payment can make it harder to qualify for the mortgage. Using the MS Excel goal seek tool and the pmt() function: will make the total payment equal to 24K. Both numbers are well above the rates charged by my credit union so option C would be cheaper than option B. |
Stability of a Broker: What if your broker goes bankrupt? Could you lose equity in your account? | The Securities Investor Protection Corporation is roughly analogous to the FDIC for investments. There are some important differences like a lack of 100% guarantee you get all of your funds back. The SIPC understands you invested knowing there was some risk, and therefore you take that same risk in getting your money from a failed brokerage. However there is still a level of commitment and trust that lessen the risk of investing in the wrong place. Also, do not typo the acronym at your work computer. In the US (and perhaps elsewhere) it is a racist term, and you are likely to get some bad search results. http://www.sipc.org/how/brochure.cfm |
US Tax Form 1040EZ: Do I enter ALL income or ONLY income specified in W-2 forms? | Yes, you need to include income from your freelance work on your tax return. In the eyes of the IRS, this is self-employment income from your sole-proprietorship business. The reason you don't see it mentioned in the 1040EZ instructions is that you can't use the 1040EZ form if you have self-employment income. You'll need to use the full 1040 form. Your business income and expenses will be reported on a Schedule C or Schedule C-EZ, and the result will end up on Line 12 of the 1040. Take a look at the requirements at the top of the C-EZ form; you probably meet them and can use it instead of the more complicated C form. If you have any deductible business expenses related to your freelance business, this would be done on Schedule C or C-EZ. If your freelance income was more than $400, you'll also need to pay self-employment tax. To do this, you file Schedule SE, and the tax from that schedule lands on form 1040 Line 57. |
Was this bill forgotten by a medical provider, and do notices need to be sent before collections? | check the DATE OF SERVICE on all your invoices carefully. It's possible you actually DID pay already. Sometimes when a medical provider gets "mostly" paid by a third party insurer, they just drop the (small) remainder, as it's more cost than it's worth if it is a trivial amount. Alternatively, they wait until you show up for another office visit, and "ding" you then! |
How much money do I need to have saved up for retirement? | One common rule of thumb: you can probably get 4% or better returns on your investments ('"typical market rate of return is 8%, derate to allow for inflation and off years). Figure out what kind of income you will want in retirement and divide by 0.04 to get the savings you need to accumulate to support that. This doesn't allow for the fact that your needs are also going to increase with inflation; you can make a guess at that and use an inflated needs estimate. Not sophisticated, not precise, but it's a quick and dirty ballpark estimate. And sometimes it's surprisingly close to what a proper model would say. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | Besides overnight news events and auction mechanisms there is a more fundamental reason the price of a stock is always moving. Theoretically the stock price will move slightly even in the unlikely scenario that absolutely nothing of interest happens during the entire night. Let me go into that in some more detail: Stock valuation using Discounted Cash FLow One of the fundamental reasons that stock value is constantly changing is because underneath every stock there is a company that expects to make some kind of profit or loss in the future. We have to go into the fundamentals of stock value to understand why this is important: One popular way to determine the value of a stock is by looking into the future and summing up all the earnings (or cashflows) it has yet to produce. You have to reduce each amount by a certain factor that gets larger for payments that are farther into the future. Think of it this way: a dollar in hand now is better than a dollar that you get tomorrow. This method of valuation is called Discounted Cash Flow (abbr. DCF; see the wikipedia article on DCF) Time's effect on stock value Now take the Close price C, and the open price O. Let's assume that since there has been no news, the expectations for future earnings are the same for C and O. Remember that the discounting factor for these earnings is dependent on the time until the cashflow occurs? For O, this time is slightly shorter than for C, and therefore the value will be slightly higher (or lower, when the company is expected to incur losses). So now you can see that even without all the external forces that continuously push and pull on the stock price, a stock still changes in value over time. Hope this helps. |
What are my best options if I don't have a lot of credit lines for housing loans? | The short answer is, with limited credit, your best bet might be an FHA loan for first time buyers. They only require 3.5% down (if I recall the number right), and you can qualify for their loan programs with a credit score as low as 580. The problem is that even if you were to add new credit lines (such as signing up for new credit cards, etc.), they still take time to have a positive effect on your credit. First, your score takes a bit of a hit with each new hard inquiry by a prospective creditor, then your score will dip slightly when a new credit account is first added. While your credit score will improve somewhat within a few months of adding new credit and you begin to show payment history on those accounts, your average age of accounts needs to be two years or older for the best effect, assuming you're making all of the payments on time. A good happy medium is to have between 7 and 10 credit lines on your credit history, and to make sure it's a mix of account types, such as store cards, installment loans, and credit cards, to show that you can handle various types of credit. Be careful not to add TOO much credit, because it affects your debt-to-income ratio, and that will have a negative effect on your ability to obtain mortgage financing. I really suggest that you look at some of the sites which offer free credit scores, because some of them provide great advice and tips on how to achieve what you're trying to do. They also offer credit score simulators, which can help you understand how your score might change if, for instance, you add new credit cards, pay off existing cards, or take on installment loans. It's well worth checking out. I hope this helps. Good luck! |
How are the $1 salaries that CEOs sometimes take considered legal? | Taxable fringe benefits are included in taxable wages for the purpose of FLSA. So when those executives get to use company cars or company jets that value is "wage" even if it isn't salary. |
When is the best time to put a large amount of assets in the stock market? | It's a tricky question w/out more context. If your only options are between stock/funds and letting it sit (i.e. in a saving or CD), I'd have to say option one is the way to go (but that's based on my situation, and you did ask "if you .."). However, I think the true answer is "it depends." It depends on your risk tolerance and what are your short-term vs. long-term financial needs. Only after answering those questions you can then seek to strategize and diversify investment accordingly. |
How do I evaluate reasonability of home improvement projects? | If you're looking for some formula, I don't think one exists. People talk about this all the time and give conflicting advice. If there was a proven-accurate formula, they wouldn't be debating it. There are basically 3 reasons to do a home improvement project: (a) Correct a problem so that you prevent on-going damage to your home. For example, have a leaking roof patched or replaced, or exterminate termites. Such a job is worthwhile if the cost of fixing the problem is less than the cost of future damage. In the case of my termite and leaking roof examples, this is almost always worth doing. Lesser maintenance problems might be more debatable. Similarly, some improvements may reduce expenses. Like replacing an old furnace with a newer model may cut your heating bills. Here the question is: how long does it take to repay the investment, compared to other things you might invest your money in. Just to make up numbers: Suppose you find that a new furnace will save you $500 per year. If the new furnace costs $2000, then it will take 4 years to pay for itself. I'd consider that a good investment. If that same $2000 furnace will only cut your heating bills by $100 per year, then it will take 20 years to pay for itself. You'd probably be better off putting the $2000 into the stock market and using the gains to help pay your heating bill. (b) Increase the resale value of your home. If you are paying someone else to do the work, the harsh reality here is: Almost no job will increase the resale value by more than the cost of getting the job done. I've seen many articles over the years citing studies on this. I think most conclude that kitchen remodeling comes closet to paying for itself, and bathrooms come next. New windows are also up there. I don't have studies to prove this, but my guesses would be: Replacing something that is basically nice with a different style will rarely pay for itself. Like, replacing oak cabinets with cherry cabinets. Replacing something that is in terrible shape with something decent is more likely to pay back than replacing something decent with something beautiful. Like if you have an old iron bathtub that's rusting and falling apart, replacing it may pay off. If you have a 5-year-old bathtub that's in good shape but is not premium, top of the line, replacing it with a premium bathtub will probably do very little for resale value. If you can do a lot of the work yourself, the story changes. Many home improvement jobs don't require a lot of materials, but do require a lot of work. If you do the labor, you can often get the job done very cheaply, and it's likely that the increase in resale value will be more than what you spend. For example, most of my house has hardwood floors. Lots of people like pretty hardwood floors. I just restained the floors in two rooms. It cost me, I don't know, maybe $20 or $30 for stain and some brushes. I'm sure if I tried to sell the house tomorrow I'd get my twenty bucks back in higher sale value. Realtors often advise sellers to paint. Again, if you do it yourself, the cost of paint may be a hundred dollars, and it can increase the sale price of the house by thousands. Of course if you do the work yourself, you have to consider the value of your time. (c) To make your home more pleasant to live in. This is totally subjective. You have to make the decision on the same basis that you decide whether anything that is not essential to survival is worth buying. To some people, a bottle of fancy imported wine is worth thousands, even millions, of dollars. Others can't tell the difference between a $10,000 wine and a $15 wine. The thing to ask yourself is, How important is this home improvement to me, compared to other things I could do with the money? Like, suppose you're considering spending $20,000 remodeling your kitchen. What else could you do with $20,000? You could buy a car, go on an elaborate vacation, eat out several times a week for years, retire a little earlier, etc. No one can tell you how much something is worth to you. Any given home improvement may involve a combination of these factors. Like say you're considering that $20,000 kitchen remodeling. Say you somehow find out that this will increase the resale value by $15,000. If the only reason you were considering it was to increase resale value, then it's not worth it -- you'd lose $5,000. But if you also want the nicer kitchen, then it is fair to say, Okay, it will cost me $20,000, but ultimately I'll get $15,000 of that back. So in the long run it will only cost me $5,000. Is having a nicer kitchen worth $5,000 to me? Note, by the way, that resale value only matters if and when you sell the house. If you expect to stay in this house for 20 years, any improvements done are VERY long-term investments. If you live in it until you die, the resale value may matter to your heirs. |
Why can we cancel cheques, but not Western Union transfers? | When you send money with Western Union, it is essentially a cash transaction. You supply Western Union with the name of the recipient and a location. Your recipient then shows up at a Western Union office, shows some identification, and receives cash. At this point, the transaction is over. It is impossible to retract it at this point, because Western Union has already handed out cash, and they have no way of contacting the recipient any longer. This is the reason why you might want to legitimately use Western Union. It is an instant way to send cash to anyone anywhere in the world. Let's say that your best friend is stuck in a foreign land and desperately needs money. You can give him cash just as fast as each of you can get to a Western Union office, and you don't even need a local bank account to do so. Unfortunately, however, the nature of the service also makes it useful for scammers. You should never use this service to pay for something from someone you don't know, because there are absolutely no safeguards. As mentioned by user662852 in the comments, you can indeed cancel a Western Union money transfer if you do so before the money is picked up by the recipient. But after they pick it up, the cash is gone. |
Will a credit card issuer cancel an account if it never incurs interest? | Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank. |
Could the loan officer deny me even if I have the money as a first time home buyer? | A financial institution is not obligated to offer you a loan. They will only offer you a loan if they believe that they will make money off you. They use all the info available in order to determine if offering you a loan is profitable. In short, whether they offer you a loan, and the interest rate they charge for that loan, is based on a few things: How much does it cost the bank to borrow money? [aka: how much does the bank need to pay people who have savings accounts with them?]; How much does the bank need to spend in order to administer the loan? [ie: the loan officer's time, a little time for the IT guy who helps around the office, office space they are renting in order to allow the transaction to take place]; and How many people will 'default' and never be able to repay their loan? [ex: if 1 out of 100 people default on their loans, then every one of those 100 loans needs to be charged an extra 1% in order to recover the money the bank will lose on the person who defaults]. What we are mostly interested in here is #3: how likely are you to default? The bank determines that by determining your income, your assets, your current debts outstanding, your past history with payments (also called a credit score), and specifically to mortgages, how much the house is worth. If you don't have a long credit history, and because you don't have a long income history, and because you are putting <10% down on the condo [20% is often a good % to strive for, and paying less than that can often imply you will need mandatory mortgage insurance, depending on jurisdiction] the bank is a little more uncertain about your likelihood to pay. Banks don't like uncertainty, and they can deal with that uncertainty in two ways: (1) They can charge you a higher interest rate; OR (2) They can refuse you the loan. Now just because one bank refuses you a loan, doesn't mean all will - but being refused by one bank is probably a good indication that many / most institutions would refuse you, because they all use very similar analytical tools to determine your 'risk level'. If you are refused a loan, you can try again at another institution, or you can wait, save a larger down payment, and build your credit history by faithfully paying your credit card every month, paying your utilities, and making your car and rent payments on time. This will give the banks more comfort that you will have the ability to pay your mortgage every month, and a larger down payment will give them comfort that if the housing market dips, you won't owe more than the house is worth. My parting shot is this: If you are new in your career with no income history, be very careful about buying a property immediately, even if you get approved. A good rule of thumb is to only buy a property when you plan on living there for at least 5 years, or else you are likely to lose money overall, after factoring closing costs and maintenance fees. If you are refused a loan, that's probably a good sign that you aren't financially ready yet, but even if a bank approves you for a loan, you might not be ready yet either. |
How does giving to charity work? | I'll answer your second question: it depends what your charity is for. There are two types: i) Emergency (i.e. to respond to environmental or social disasters where it acts a bit like an insurance policy); ii) Development (i.e. where the intention is to subsidise something missing in the local economy); A lack of insurance is certainly a problem for people who lose their homes and livelihoods to disaster. Your donations can go far. As for development aid: "We find little evidence of a robust positive correlation between aid and growth," write two ex-IMF economists, Raghuram Rajan, who stepped down as IMF chief economist at the end of 2006, and Arvind Subramanian, who left the IMF this year. "One of the most enduring and important questions in economics is whether foreign aid helps countries grow ... There is a moral imperative to this question: it is a travesty for so many countries to remain poor if a relatively small transfer of resources from rich countries could set them on the path to growth ... But if there is no clear evidence that aid boosts growth, then handing out more money makes little sense," they conclude. I do somewhat further in declaring that charity is equivalent to trade dumping. By artificially lowering the real cost of a particular good it ensures that there will be no local investment in that good. Free clothes to Africa has destroyed the local textiles industry. Free doctors has resulted in more African doctors in New York than in the whole of Africa. So decide where your charity is going: emergencies or development? Then decide what you can afford. But your first investment should always be in yourself. If by making use of that investment you can benefit the economy and keep others around you employed and productive you will achieve far more. |
Good books for learning about tax strategy/planning | J.K. Lasser's Your Income Tax is, remarkably, a great read. It's a line by line review of the tax forms, and offers commentary and examples for every scenario. Of course, it's updated every year to reflect new rules and numbers. I actually read it from cover to cover the first year I started working. It's not going to offer convoluted strategies to use, but, you'll understand your tax return well enough to respond to the advice you encounter elsewhere. To mhoran's point - "Don't let the tax tail wag the investing dog." Taxes are important, but should take a back step to earning and investing. Those who didn't sell at the height of the dotcon bubble "to avoid the big tax bill" only saw in hindsight that paying taxes is part of success not failure. |
How much should I be contributing to my 401k given my employer's contribution? | First - yes, take the 2.5%. It could be better, but it's better than many get. Second - choosing from "a bunch" can be tough. Start by looking at the expenses for each. Read a bit of the description, if you can't tell your spouse what the fund's goal is, don't buy it. |
2 houses 450k each or one 800k? | Forget the math's specifics for a moment: here's some principles. Additional housing for a renter gives you returns in the form of money. Additional housing for yourself pays its returns in the form of "here is a nice house, live in it". Which do you need more of? If you don't need the money, get a nicer house for yourself. If you need (or want) the money, get a modest house for yourself and either use the other house as a rental property, or invest the proceeds of its sale in the stock market. But under normal circumstances (++) don't expect that buying more house for yourself is a good way to increase how much money you have. It's not. (++ the exception being during situations where land/housing value rises quickly, and when that rise is not part of a housing bubble which later collapses. Generally long-term housing values tend to be relatively stable; the real returns are from the rent, or what economists call imputed rent when you're occupying it yourself.) |
Retirement savings vs building lucrative assets | Fahad, in finance we make a distinction between investments that tend to grow in value and assets that hold value. Investments that grow in value are generally related to investing in well-thought out businesses. Investments can be done in retirement accounts through stocks and bonds but also owning part of a business directly. Good investments make more and more money off the money you put in. Common examples of assets include gold and other non-productive property like real-estate you don't rent or cars. You can even have some assets in your retirement account as many would argue government bonds behave like assets. All of these things tend to (more or less) go up in value as the cost of everything goes up in value, but don't tend to make you any excess money in the long run. There is certainly a place for both investments and assets. Especially as a young person it is good to lean toward investments as you likely have a lot of time for the money to grow as you get older. As RonJohn suggests, in the United States this is fairly easy as retirement accounts are common there is a long history of stable financial law even in crises. Pakistan's institutions are fairly stable and improving but still assets and investments of all types can be riskier. So, I recommend taking your father's advice... partially. Having some assets are good in riskier situations, but good investments are generally the way to grow comfortably wealthy. A good mix of the two is the way to grow wealthy slowly while protecting yourself from risk. You, your father and your neighbors know you local situation better than I, who has only visited a number of Pakistan's neighboring countries, so I can't really give more detailed advice but hopefully this gets you started. |
Missing opportunity cost of mortgage prepayment | I agree with Joe that you seem to have your stuff together. However I can't disagree more otherwise. You are getting a loan at such a cheap rate that it would be almost impossible to not substantially beat that rate over the next 15-20 years. You paying off your home early might give you warm fuzzy feeling but would make me queezy. This is a MONEY website. Make money. For our purposes let's say your home is worth 500k, you can get a fixed rate loan at 3% over 30 years, and you can earn 7% on your investments per year. Note that I have earned 12% on mine the past 15 years so I am being pretty conservative. So let's not get into your other stuff because that is fine. Let's focus just on that 500k - your house. Interest only Loan for the whole thing- The flip side is you pay off your house. Your house could be worth 400K in 30 years. Probably not but neighborhood could decline, house not kept up, or whatever. Your house is not a risk-free investment. And it fluctuate in many areas more than the stock market. But let's just say your area stays OK or normal. In 30 years you can expect your house to be worth somewhere between 700k to 1.5 million. Let's just say you did GREAT with your house. Guess what? At 1.5 million selling price you still lost 1.5 million because of your decision plus sunk your money into a less liquid option. Let the bank take the risk on your house price. The warm fuzzy feeling will be there when you realize you could rebuy your house two times over in 6-7 years. Note: I know my example doesn't use your exact numbers. I am just showing what your true cost is of making a decision in the most extreme way. I am guessing you have great credit and might be able to find an all interest loan at 3%. So not doing this is costing you 1.5 million over 30 years. Given a lower home price after 30 years or a higher rate of return this easily be much more. IF you earned 12% over the 30 year period you would be costing yourself 16 million - do the math. Now you are talking about doing something in-between. Which means you will basically have the same risk factors with less return. |
Is it safe to take a new mortgage loan in Greece? | While I would be very leery of making any Investments in Greece, and if I lived there might want to strongly consider a larger than average investment in 'international' funds (such as an index fund on the US, UK, or German exchanges) Having debt in Greece might not be such a bad thing... if only it was denominated in local currency. The big issue is that right now, you'd be taking out a loan on property in greece, that would be denominated in Euros. If worse comes to worse, and Greece is kicked out of the EU and forced to go back to the drachma, then you might be in a situation where the bank says "this loan is in Euros, we want payment in the same" and if the drachma is plummeting vs the Euro, you could find your earning power (presuming you were then paid in drachma) greatly diminished.. And since you'd be selling the house for drachma, you might be way under-water in terms of the value of the house (due to currency exchange) vs what you owed. Now, if Greece were currently on the drachma, and you were talking about a mortgage in the same, I'd say go for it. Since what tends to happen when a government has way overspent is they just print more money rather than default.. that tends to lead to inflation, and a falling currency value vs other countries. None of which is bad for someone with a debt which would be rapidly shrinking due to the effect of inflation. but right now, safer to rent. |
Are solar cell panels and wind mills worth the money? | To answer the investment aspect takes a bit of math. First, solar insolation numbers: This represents the average sun-hours per day for a given area. You can see the range from 4 to 6, or 1460 hrs to about 2190 hrs of sun per year depending on location. I believe electricity also has a range of cost, but 15 cents per KWH is a good average. So, a 1KW panel will produce as much as $328 per year of electricity in a high sun-hrs area, but only $219 in a lower sun-hrs area. If we agree to ignore the government subsidies and look for the stable price unaffected by outside influence, an installed price of even $2500 would produce a return of 13% and a reasonable full payback over an 8 year period. I call this installed price a tipping point, the price where this purchase provides a decent return. Some would accept a lower return, and therefore a higher price. As duff points out, this should be treated as the post rebate/tax credit price. Those help to push the price below this point. At the price point where the energy cost per panel is below, the government intervention may be unnecessary. The power companies may find consumer owned panels are the cheapest way to clip the peak consumption which tends to be the most expensive power demand.) One can take the insolation numbers and cost of local power to produce a grid showing the return for a 1KW panel in $$/year. (At this point the cost of money kick in. The present value of $100/yr is far higher today than if short term rates were say, 8%) Once panels drop to where they are compelling for the higher return areas, I'd expect volume to drive continued improvements in cost and better economies of scale. Initially, the need for storage isn't there, as the infrastructure is in place to drive your meter backwards if you produce more than you use. The peek sun coincides with peek demand and the electric companies are happy to have your demand go negative during those times. Update - the conversation with Duff led me to research 'demand charge' a bit more. You see, the utility company has to have equipment to generate the peak demand, usually occurring in the early afternoon, say 12N-2PM as the sun is brightest and AC use in particular, highest. I found that Austin energy has a PDF describing the fee for this. Simply put, the last kW of demand will cost you $14.03 in summer months and $12.65 in winter. This adds to $160/yr that a 1kW panel might save the owner. Even if one does capture the full power at peak every month, $100 is still non-trivial. This factor alone justifies $1000 worth of panel cost, and as Duff points out, the government may find it cheaper to use this method to clip peak demand than by funding bigger power generators. To summarize, the question isn't so much "are they worth it" as "what is a xKW panel worth?" (A function of annual savings and time value of money.) The ever decreasing installed cost for a given system makes solar an inevitable part of the future power technology. I am not a green tree hugging guy, but I do like to breathe fresh air as much as anyone. I'm happy with whatever role solar plays in cutting down pollution. |
How to report house used for 100% business? | As DJClayworth said, be very careful with this one! The property is a residence, not a business location. Given that, it is almost a certainty that the IRS is not going to let you claim 100% of the expenses for the home as a business expense, even if nobody's actually living there. You may get away with doing this for a period of time and not run into zoning or other issues such as those DJ mentioned, but it's like begging for trouble. You run the very real risk of being audited if you try to do what you're proposing, and rest assured, whatever you saved in taxes will disappear like smoke in the wind under an audit. That being said, there's no reason you can't call a tax service and ask a simple question, because in answering it they're going to hope to gain your business. It'd be well worth the phone call before you land yourself in any hot water with the IRS. I can tell you that I'd rather have a double root canal with no anesthetic than go through an audit, even when I didn't do anything wrong! (grin) Good luck! |
What low-fee & liquid exchange-traded index funds / ETFs should I consider holding in a retirement portfolio? | If liquidity and cost are your primary objectives, Vanguard is indeed a good bet. They are the walmart of finance and the absolute best at minimizing fees and other expenses. Your main portfolio holding should be VTI, the total stock market fund. Highly liquid and has the lowest fees out there at 0.05%. You can augment this with a world-minus-US fund if you want. No need to buy sector or specific geography funds when you can get the whole market for less. Add some bond funds and alternative investments (but not too much) if you want to be fully diversified. |
Should I stockpile nickels? | I agree with George. I'll also add that you have to think about the cost of melting the coins for their raw materials. Not exactly free in terms of equipment, facilities and energy costs. |
At what point do index funds become unreliable? | Private investors as mutual funds are a minority of the market. Institutional investors make up a substantial portion of the long term holdings. These include pension funds, insurance companies, and even corporations managing their money, as well as individuals rich enough to actively manage their own investments. From Business Insider, with some aggregation: Numbers don't add to 100% because of rounding. Also, I pulled insurance out of household because it's not household managed. Another source is the Tax Policy Center, which shows that about 50% of corporate stock is owned by individuals (25%) and individually managed retirement accounts (25%). Another issue is that household can be a bit confusing. While some of these may be people choosing stocks and investing their money, this also includes Employee Stock Ownership Plans (ESOP) and company founders. For example, Jeff Bezos owns about 17% of Amazon.com according to Wikipedia. That would show up under household even though that is not an investment account. Jeff Bezos is not going to sell his company and buy equity in an index fund. Anyway, the most generous description puts individuals as controlling about half of all stocks. Even if they switched all of that to index funds, the other half of stocks are still owned by others. In particular, about 26% is owned by institutional investors that actively manage their portfolios. In addition, day traders buy and sell stocks on a daily basis, not appearing in these numbers. Both active institutional investors and day traders would hop on misvalued stocks, either shorting the overvalued or buying the undervalued. It doesn't take that much of the market to control prices, so long as it is the active trading market. The passive market doesn't make frequent trades. They usually only need to buy or sell as money is invested or withdrawn. So while they dominate the ownership stake numbers, they are much lower on the trading volume numbers. TL;DR: there is more than enough active investment by organizations or individuals who would not switch to index funds to offset those that do. Unless that changes, this is not a big issue. |
value of guaranteeing a business loan | You should ask the bank supplying the SBA loan about the % of ownership that is required to personally guarantee the loan. Different banks give different figures, but I believe the last time I heard about this it was 20% or more owners must personally guarantee the loan. Before you spend a lot of money on legal fees drawing up a complicated scheme of shares, ask the bank what they require. Make sure you speak with an underwriter since many service people don't know the rules. |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | Ignore sunk costs and look to future returns. Although it feels like a loss to exit an investment from a loss position, from a financial standpoint you should ignore the purchase price. If your money could be better invested somewhere else, then move it there. You shouldn't look at it as though you'll be more financially secure because you waited longer for the stock to reach the purchase price. That's psychological, not financial. Some portion of your invested wealth is stuck in this particular stock. If it would take three months for the stock to get back to purchase price but only two months for an alternate investment to reach that same level, then obviously faster growth is better. Your goal is greater wealth, not arbitrarily returning certain investments to their purchase price. Investments are just instrumental. You want more wealth. If an investment is not performing, then ignore purchase price and sunken costs. Look at the reasonable expectations about an investment going forward. |
How to share income after marriage and kids? | I can only share with you my happened with my wife and I. First, and foremost, if you think you need to protect your assets for some reason then do so. Be open and honest about it. If we get a divorce, X stays with me, and Y stays with you. This seems silly, even when your doing it, but it's important. You can speak with a lawyer about this stuff as you need to, but get it in writing. Now I know this seems like planning for failure, but if you feel that foo is important to you, and you want to retain ownership of foo no mater what, then you have to do this step. It also works both ways. You can use, with some limitations, this to insulate your new family unit from your personal risks. For example, my business is mine. If we break up it stays mine. The income is shared, but the business is mine. This creates a barrier that if someone from 10 years ago sues my business, then my wife is protected from that. Keep in mind, different countries different rules. Next, and this is my advise. Give up on "his and hers" everything. It's just "ours". Together you make 5400€ decide how to spend 5400€ together. Pick your goals together. The pot is 5400€. End of line. It doesn't matter how much from one person or how much from another (unless your talking about mitigating losses from sick days or injuries or leave etc.). All that matters is that you make 5400€. Start your budgeting there. Next setup an equal allowance. That is money, set aside for non-sense reasons. I like to buy video games, my wife likes to buy books. This is not for vacation, or stuff together, but just little, tiny stuff you can do for your self, without asking "permission". The number should be small, and equal. Maybe 50€. Finally setup a budget. House Stuff 200€, Car stuff 400€. etc. etc. then it doesn't matter who bought the house stuff. You only have to coordinate so that you don't both buy house stuff. After some time (took us around 6 months) you will find out how this works and you can add on some rules. For example, I don't go to Best Buy alone. I will spend too much on "house stuff". My wife doesn't like to make the budget, so I handle that, then we go over it. Things like that. |
Why doesn’t every company and individual use tax-havens to pay less taxes? | And yet, the same law that these individuals and companies use to lower their taxes applies for every citizen and company of the country. Thus, in principle, every individual and company could make use of these methods. Clearly, they do not. Why? Misconception number 1. How did you conclude they do not? Because NY Times didn't spend time doing an expose' on your plumber? The Panama Papers and the Paradise Papers contain the files from merely three companies that help in this large industry. This is a story about poor IT policies of three companies. A potential reason could be the price charged to set up and maintain these services. This is a significant deterrent. The costs of forming offshore entities are perpetuated by the expensive lawyers, registered agents and incompetent government representatives in these tiny jurisdictions. (For what its worth, even most United States are pretty incompetent at these administrative processes. Really only a few financial centers and a few exceptions have it all streamlined.) These are scale problems primarily. The incompetence of different nation/state's public sectors will make you realize everything you take for granted. The main message emerging from Panama Papers, Paradise Papers, and the like, is that it is the rich, powerful and famous who make use of and benefit from tax havens. But not exclusively for tax purposes. Newspapers, and even the organization leaking this information, is driving clicks to a gullible and impressionable public. I've talked with ICIJ (who release and push the discussion on the Panama/Paradise Papers), they really do believe in their "tax expose'" angle, but lack any consideration of how business work. 'Tax Haven'. These are sovereign nations with due process with democratically elected legislatures who looked at their budget and realized they don't need to fund their government via passive taxes. Their governments offer a good and service that people want, and it provides enough revenues to their governments. Many of these jurisdictions have well evolved corporate laws for fast evolving business models. For example, The Segregated Portfolio Company in the British Virgin Islands is more well defined and supported by clearer case law and is more useful entity than a Series LLC in the few United States that support it. There are at least a dozen reasons why someone would use a "tax haven", where only one of them is "tax". |
How to prevent myself from buying things I don't want | To me the key is a budget. Each month, before it begins, decide on what to spend on each dollar that you earn. Money should be allotted for normal expenses such as housing, food, transportation, and utilities. If you have any consumer debt that should be a priority. Extra money should go to eliminate that debt. There should be money allotted to savings goals (such as retirement, home down payment, or vacation home). Also there should be money set aside for clothing and giving. Giving is an important part and often overlooked part of wealth creation. Somewhere in there you should also give yourself a bit of free money. For example one of the things I spend my free money on is coffee. I buy freshly ground coffee from a really good supplier. It is a bit expensive, but that is okay as it does not preclude me from meeting other goals. If you still have money left after all of that increase your giving some, your savings some, and your free money some. You can then spend that money without guilt. If your budget includes $100 of free money per month, and you want something that costs $1000, save up the $1,000 and then buy it. Do not borrow to buy free money stuff! Doing those sorts of things will make you weigh purchasing decisions very carefully. If you find that you cannot stick to a budget, you should enlist a friend to be your accountability partner. They have to be very good with money. |
Is it necessary to pay tax if someone lends me money to put into my mortgage? | A revocable trust? Else the title would be his...vs recieving a gift that large. Make it a business investment like a holding company. And use the trust as agreement to shares. |
Is 'days to cover' a useful metric in identifying the potential for a short squeeze? | SeekingAlpha has an article about short squeezes that states: The higher the number of days to cover means the possibility for a short squeeze is greater, and the potential size of the short squeeze is also greater Logically, this makes sense. A short squeeze occurs when a lack of supply meets excess demand for a stock, so the potential for a squeeze increases when supply and demand begin to get out of equilibrium. Think of two things that would cause the days to cover to increase and what effect they would have on supply and demand. The current short interest (numerator) increases. This implies that if some event triggers short sellers to cover their position, there are a higher number of short sellers who will need to do so. This heightens the chances that demand will exceed supply. The average daily volume (denominator) decreases. This implies that fewer investors are trading the stock, so if an event triggers short sellers to cover their positions, there might not be enough traders in the market willing to sell their shares. (Obviously, if a short-squeeze occurs, volume may increase because traders who were unwilling to sell their shares become willing). |
Can you explain why it's better to invest now rather than waiting for the market to dip? | This simulation game uses actual historical S&P 500 data to test whether you can "time the market." You start with $10,000 invested, and it plays back 10 years of index values, in which time you can choose to sell (once), and if you do sell you can subsequently buy (once). Then you find out how you did relative to just holding what you started with. If you play it enough times, you might eventually beat it once. I never did. |
Is dividend taxation priced in derivatives? | While derivative pricing models are better modeling reality as academia invests more into the subject, none sufficiently do. If, for example, one assumes that stock returns are lognormal for the purposes of pricing options like Black Scholes does, the only true dependent variable becomes log-standard deviation otherwise known as "volatility", producing the infamous "volatility smile" which disappears in the cases of models with more factors accounting for other mathematical moments such as mean, skew, and kurtosis, etc. Still, these more advanced models are flawed, and suffer the same extreme time mispricing as Black Scholes. In other words, one can model anything however one wants, but the worse the model, the stranger the results since volatility for a given expiration should be constant across all strikes and is with better models. In the case of pricing dividends, these can be adjusted for the many complexities of taxation, but the model becomes ever more complex and extremely computationally expensive for each eventuality. Furthermore, with more complexity in any model, the likelihood of discovering a closed form in the short run is less. For equities in a low interest rate, not high dividend yield, not low volatility, low dividend tax environment, the standard swap pricing models will not provide results much different from one where a single low tax rate on dividends is assumed. If one is pricing a swap on equity outside of the bounds above, the dividend tax rate could have more of an effect, but for computational efficiency, applying a single assumed dividend tax rate would be optimal with D*(1-x), instead of D in a formula, where D is the dividend paid and x is the tax rate. In short, a closed form model is only as good as its assumptions, so if anomalies appear between the actual prices of swaps in the market and a swap model then that model is less correct than the one with smaller anomalies of the same type. In other words, if pricing equity swaps without a dividend tax rate factored more closely matches the actual prices than pricing with dividend taxes factored then it could be assumed that pricing without a dividend tax factored is superior. This all depends upon the data, and there doesn't seem to be much in academia to assist with a conclusion. If equity swaps do truly provide a tax advantage and both parties to a swap transaction are aware of this fact then it seems unlikely swap sellers wouldn't demand some of the tax advantage back in the form of a higher price. A model is no defense since volatility curves persist despite what Black Scholes says they should be. |
How would I prove my claim in a class action settlement on a “stock misconduct” case when I shorted the stock? | No. You shorted the stock so you are not a shareholder. If you covered your short, again you are not a shareholder as you statement of account must show. You cannot participate in the net settlement fund. |
Why trade futures if you have options | That question makes assumptions that don't hold in general As to why to deal with futures: Well, there's just one contract per maturity date, not a whole chain of contracts (options come at different strike prices). That in turn means that all the liquidity is in that one contract and not scattered across the chain. Then, moreover, it depends what underlying contracts you're talking about. Often, especially when dealing with commodities, there is no option chain on the spot product but only options on the futures contracts. In summary, the question is somewhat bogus. Options and futures evolved historically and independently, and were not meant to be substitutable by one another. So their rights and obligations are just a historical by-product and not their defining feature. I suggest you refine it to a specific asset class. |
15 year mortgage vs 30 year paid off in 15 | I just wanted to point out that the most "leverage" for pre-paying occurs at the very beginning of the mortgage, and declines rapidly after that. So, your very best scenario is to get the 30-year, and make one extra payment entirely to principal the first month of every year. This causes the amortization to drop by 96 payments, to about 22 years. I don't know of any other way that you can get nearly 4 times value for your money (22 payments extra to save 96 payments later). After that, reducing from 22 to 15 years takes more of your money for the same result, but do it if you want. I actually did this, and it put me way ahead when I sold the house about 12 years later. |
Does it make sense to buy an index ETF (e.g. S&P 500) when the index is at an all-time high? | In other words, to a first-order approximation, the S&P 500 is always at an all-time high. I'm going to run with this observation a bit. The crash of '87 was remarkable. It was a drop of 1/3 in a short time, yet, when one looked at the year, the Dow was up nearly 5% with dividends included. A one-year Rip Van Winkler would have woken up thinking it an unremarkable year. I actually recall a conversation I had on Aug 25th 1987. I was discussing the market with a colleague over lunch, and while I didn't call the top that day, I remarked that it didn't matter much, that 5-10 years later just staying in the market would have been the right thing. Compare this 87-95 chart to the longer term chart derobert shows. In his chart, this is all but a blip. In my chart you can see it took about 3-1/2 years to be in the black, as the market then shot up from there. A dollar cost averager would not have bought at that short term high, well not more than a tiny bit. The best I can do to conclude is to say I'd never just buy in all at once. You buy in over time, X% of your income each month, and if you have a chunk to invest, smooth it out over a few years. |
Why don't banks give access to all your transaction activity? | I would say a lot of the answers here aren't quite right. The main issue here is that banking is a highly oligopolous industry - there are few key players (the UK, for example, has only 5 major banks operating under a variety of brands: it's all the same companies underneath) and the market is very, very hard to enter owing to the immense regulatory burden. Because the landscape is so narrow and it's possible to keep close tabs on all your competitors, there's no incentive to spend money on shiny new things to keep up with the competition - the industry is purely reactive. If nobody else has an awesome, feature-filled online portal, there's no need for any one bank to make one. If everybody is reactive, and nobody proactive, then it's a short logical deduction that improvements happen at a glacial pace. Also take into account that when you've got this toxic "bare-minimum" form of competition, the question for these people soon turns to "what can we get away with?" which results in things like subpar online portals with as much information as you like delivered on paper for a hefty charge, and extortionate, price fixed administrative fees. Furthermore your transaction history is super valuable information. There are one or two highly profitable companies who collate international transaction data and whose sole job in life is to restrict access to that information to the highest bidders. Your transaction history is an asset in a multibillion dollar per year industry, and as such it is not surprising that banks don't want to give it out for free. |
How can a Canadian establish US credit score | Sorry. As far as I know, a person's SS is the only way to establish credit. This is the first thing they ask whenever you apply for any service in the US. |
Reconciling transactions reimbursing myself for expenses as self-employed (UK) | For anyone that's curious, I had a number of chats with Quickbooks who recommended I import only the relevant business transactions from my personal account & personal credit card in order to lower the tax liability. This way money "paid" from the business account to myself rightly shows up as a transfer and not as income. This means when generating a tax report, it calculates the correct rate of tax to be paid based on income minus allowable expenses, regardless which account they came from. |
For a major expensive home renovation (e.g. addition, finished basement, or new kitchen) should one pay cash or finance with a loan? Would such a loan be “good” debt? | The reason for borrowing instead of paying cash for major renovations should be the same for the decision about whether to borrow or pay cash for the home itself. Over history, borrowing using low, tax-deductible interest while increasing your retirement contributions has always yielded higher returns than paying off mortgage principal over the long term. You should first determine how much you need to save for retirement, factor that into your budget, then borrow as much as needed (and can afford) to live at whatever level of home you decide is important to you. Using this same logic, if interest rates are low enough, it would behoove you to refinance with cash out leveraging the cash to use as additional retirement savings. |
Why is early exercise generally not recommended for an in-the-money option? | Investopedia states: While early exercise is generally not advisable, because the time value inherent in the option premium is lost upon doing so, there are certain circumstances under which early exercise may be advantageous. For example, an investor may choose to exercise a call option that is deeply in-the-money (such an option will have negligible time value) just before the ex-dividend date of the underlying stock. This will enable the investor to capture the dividend paid by the underlying stock, which should more than offset the marginal time value lost due to early exercise. So the question is how well do you see the time value factor here? |
Should I be more aggressive in a Roth IRA, 401k, or taxable account? | I think you may be drawing the wrong conclusion about why you put what type of investment in a taxable vs. tax-advantaged account. It is not so much about risk, but type of return. If you're investing both tax-advantaged and taxable accounts, you can benefit by putting more tax-inefficient investments inside your tax-advantaged accounts. Some aggressive asset types, like real estate, can throw off a lot of taxable income. If your asset allocation calls for investing in real estate, holding it in a 401k or IRA can allow more of your money to remain invested, rather than having to use it to pay for taxes. And if you're holding in a Roth IRA, you get that tax free. But bonds, a decidedly non-aggressive asset, also throw off a lot of taxable income. You're able to hold them in a tax-advantaged account and not pay taxes on the income until you withdraw it from the account (or tax free in the case of a Roth account.) An aggressive stock fund that is primarily expected to provide returns via price appreciation would do well in a taxable account because there's likely little tax consequence to you until it is sold. |
Can paying down a mortgage be considered an “investment”? | I think it is just semantics, but this example demonstrates what they mean by that: If you put $100 in a CD today, it will grow and you will be able to take out a greater amount plus the original principal at a later time. If you put $100 extra on your house payment today, you may save some money in the long run, but you won't have an asset that you wouldn't otherwise have at the end of the term that you can draw on without selling the property. But of course, you can't live on the street, so you need another house. So ultimately you can't easily realize the investment. If you get super technical, you could probably rationalize it as an investment, just like you could call clipping coupons investing, but it all comes down to what your financial goals are. What the advisers are trying to tell you is that you shouldn't consider paying down your mortgage early as an acceptable substitute for socking away some money for retirement or other future expenses. House payments for a house you live in should be considered expenses, in my opinion. So my view is that paying off a note early is just a way of cutting expenses. |
What is 'consolidating' debt and why do people do it? | With the scenario that you laid out (ie. 5% and 10% loans), it makes no sense at all. The problem is, when you're in trouble the rates are never 5% or 10%. Getting behind on credit cards sucks and is really hard to recover from. The problem with multiple accounts is that as the banks tack on fees and raise your interest rate to the default rate (usually 30%) when you give them any excuse (late payment, over the limit, etc). The banks will also cut your credit lines as you make payments, making it more likely that you will bump over the limit and be back in "default" status. One payment, even at a slightly higher rate is preferable when you're deep in the hole because you can actually pay enough to hit principal. If you have assets like a house, you'll get a much better rate as well. In a scenario where you're paying 22-25% interest, your minimum payment will be $150-200 a month, and that is mostly interest and penalty. "One big loan" will usually result in a smaller payment, and you don't end up in a situation where the banks are jockeying for position so they get paid first. The danger of consolidation is that you'll stop triggering defaults and keep making your payments, so your credit score will improve. Then the vultures will start circling and offering you more credit cards. EDIT: Mea Culpa. I wrote this based on experiences of close friends whom I've helped out over the years, not realizing how the law changed in 2009. Back around 2004, a single late payment would trigger universal default on most cards, jacking all rates up to 30% and slashing credit lines, resulting in over the limit and other fees. Credit card banks generally apply payments (in order, to interest on penalties, penalties, interest on principal, principal) in a way that makes it very difficult to pay down principal for people deep in debt. They would also offer "payment plans" to entice you to pay Bank B vs. Bank A, which would trigger overlimit fees from Bank A. Another change is that minimum payments were generally 2% of statement balance, which often didn't cover the monthly finance charge. The new law changed that, resulting in a payment of 1% of balance + accrued interest. Under the old regime, consolidation made it less likely that various circumstances would trigger default, and gave the struggling debtor one throat to choke. With the new rules, there are definitely a smaller number of scenarios where consolidation actually makes sense. |
Is investing in an ETF generally your best option after establishing a Roth IRA? | ETFs are a type of investment, not a specific choice. In other words, there are good ETFs and bad. What you see is the general statement that ETFs are preferable to most mutual funds, if only for the fact that they are low cost. An index ETF such as SPY (which reflects the S&P 500 index) has a .09% annual expense, vs a mutual fund which average a full percent or more. sheegaon isn't wrong, I just have a different spin to offer you. Given a long term return of say even 8% (note - this question is not a debate of the long term return, and I purposely chose a low number compared to the long term average, closer to 10%) and the current CD rate of <1%, a 1% hit for the commission on the buy side doesn't bother me. The sell won't occur for a long time, and $8 on a $10K sale is no big deal. I'd not expect you to save $1K/yr in cash/CDs for the years it would take to make that $8 fee look tiny. Not when over time the growth will overshaddow this. One day you will be in a position where the swings in the market will produce the random increase or decrease to your net worth in the $10s of thousands. Do you know why you won't lose a night's sleep over this? Because when you invested your first $1K, and started to pay attention to the market, you saw how some days had swings of 3 or 4%, and you built up an immunity to the day to day noise. You stayed invested and as you gained wealth, you stuck to the right rebalancing each year, so a market crash which took others down by 30%, only impacted you by 15-20, and you were ready for the next move to the upside. And you also saw that since mutual funds with their 1% fees never beat the index over time, you were happy to say you lagged the S&P by .09%, or 1% over 11 year's time vs those whose funds had some great years, but lost it all in the bad years. And by the way, right until you are in the 25% bracket, Roth is the way to go. When you are at 25%, that's the time to use pre-tax accounts to get just below the cuttoff. Last, welcome to SE. Edit - see sheegaon's answer below. I agree, I missed the cost of the bid/ask spread. Going with the lowest cost (index) funds may make better sense for you. To clarify, Sheehan points out that ETFs trade like a stock, a commission, and a bid/ask, both add to transaction cost. So, agreeing this is the case, an indexed-based mutual fund can provide the best of possible options. Reflecting the S&P (for example) less a small anual expense, .1% or less. |
Inherited Stock | Since you reference SS, I surmise you are in the US. Stock you inherit gets a stepped up basis when it's inherited. (so long as it was not contained within a tax deffered retirement account.) When you sell, the new basis is taken from that day you inherited it. It should be minimal compared to your desire to diversify. |
Impact of EIN on taxation | Is it possible if (After getting EIN) I change my LLC type (disregarded entity or C type or S type or corporation or change in number of members) for tax saving ? You marked your question as "real-estate", so I'm guessing you're holding rental properties in your LLC. That means that you will not be able to qualify for S-Corp, only C-Corp treatment. That in turn means that you'll be subject to double taxation and corporate tax rate. I fail to see what tax savings you're expecting in this situation. But yes, you can do it, if you so wish. I suggest you talk to a licensed tax adviser (EA/CPA licensed in your State) before you make any changes, because it will be nearly impossible to reverse the check-the-box election once made (for at least 5 years). |
Saving $1,000+ per month…what should I do with it? | Since you already have an emergency fund in place, focus your extra funds on paying off debts like student loans. While some have advised you to play the stock market, not one person has mentioned the word "risk". You are gambling ("investing") your money in the hopes your money will grow. Your student loan is real liability. The longer you keep the loan, the more interest you will pay. You can pay off your student loan in 21 months if you pay $1,100 each month. After the 21 months, you can almost fully fund a 401(k) each year. That will be amazing at your age. Our company gives us the Vanguard Retirement Fund with a low expense ratio of 0.19%. It is passive automated investing where you don't have to think about it. Just add money and just let it ride. |
Where are open-end funds traded? | I assume that mutual funds are being discussed here. As Bryce says, open-ended funds are bought from the mutual fund company and redeemed from the fund company. Except in very rare circumstances, they exist only as bits in the fund company's computers and not as share certificates (whether paper or electronic) that can be delivered from the selling broker to the buying broker on a stock exchange. Effectively, the fund company is the sole market maker: if you want to buy, ask the fund company at what price it will sell them to you (and it will tell you the answer only after 4 pm that day when a sale at that price is no longer possible unless you committed to buy, say, 100 shares and authorized the fund company to withdraw the correct amount from your bank account or other liquid asset after the price was known). Ditto if you want to sell: the mutual fund company will tell you what price it will give you only after 4 pm that day and you cannot sell at that price unless you had committed to accept whatever the company was going to give you for your shares (or had said "Send me $1000 and sell as many shares of mine as are needed to give me proceeds of $1000 cash.") |
What happens when a (Internation) Central securities depository goes bankrupt? | There is no generic answer and it would depend on case to case basis. CSD are built on strong foundation in the sense they would have very low cost base and generally would not go bankrupt. However if such a situation as CSD provide an essential role, the regulator, central bank and Government would all step in to prevent a total collapse. They would be forced merged with other entity or more capital raised or put under watch by Govt appointed trustee to settle issues so that there is least or No impact. |
At what interest rate should debt be used as a tool? | Average return on the S&P500 over the last 10 years has been 1.6 %; so if you'd invested in that with money borrowed at 3 % you would have lost (so far). Investing with borrowed money implies you think you can beat the market: that you're a cleverer investor than whoever decided to lend you the money. Whoever decided to lend you the money decided that you are the best (return/risk ratio) investment for their money. It might make sense to invest borrowed money if you don't need to pay it back if things go wrong: if you're an investment professional whose bonus depends on the profit you make, but who won't need to repay any loss. It might also makes sense to borrow money if you're going to 'add value', e.g. sweat equity: for example if you use it to renovate a house or (if you're a business) to hire more staff. But the question was "What guidelines do you use" and the answer is, "I don't make passive investments with borrowed money." My Dad did it, i.e. didn't repay his mortgage as soon as he could have: but that was because (back in the '70s) he had a long-term (government-sponsored) mortgage for about 1.5 % (designed to help first-time buyers or something like that), at a time when banks were paying higher interest rates on (ultra-safe) deposits. |
Why haven't there been personal finance apps or softwares that use regression modeling or A.I.? | What would they be trying to predict? The value YNAB and Mint provide is objective truth about what you've spent. They can force you to think about the tradeoffs inherent in budgeting by showing that you've overspent one category, and making you decide where to find the money to cover it. They can call your attention to a credit card swipe that's larger than you intended, to a subscription you didn't intend to keep, etc. by just generally getting you to read and think about your transaction history and the sums of transactions per category and overall. Prediction doesn't really enter into it. One way to understand Mint's business model is as a service that collects training data for machine learning models that do try to predict things, such as how stock prices will move or whether users will click on certain ads. |
Got charged ridiculous amount for doctor's walk in visit. What are my options? | If you are disputing the size of the charge for specific services, like you think that they overcharged for lab work, you can try disputing it with the business office staff at the doctor's office. If, on the other hand, you just think that the overall bill is too expensive then you really only have one option. You can ask if they will reduce the bill for you. Most hospitals and clinics I've dealt with have programs set up for this, but you usually access them by filling out paperwork demonstrating financial hardship (along with supporting documents). It never hurts to ask. But with the services already rendered the only person with an interest in reducing the bill is you. The reduction, if any, will probably depend on what the clinic thinks your ability to pay is compared with the cost to them of pursuing you for payment, as well as the amount of funding they have for bill reduction. When I worked in the financial services office of a hospital a $400 bill would not even have been reviewed for discounting-- the balance would be too low to devote staff time to reviewing. It's frustrating, and even asking in advance might not have given you accurate (or any!) information on what the cost of the visit would be, so your ability to shop around is limited. Unfortunately, that doesn't give you any additional options in this case. |
An online casino owes me money and wants to pay with a wire transfer. Is this safe? | I have won a large amount of money on an online casino. How reputed is the company? Have you done any research around it? It has taken 2 months for me to see any payouts. Last week I received $2300 check from them. Did you win everything in the same period? If so there is no reason why they sent you a smaller check of $2300 instead of the full amount. This should raise a red flag. Why would someone write multiple checks. The only valid reason is you won in different months. The payout for first month was $2300 and they sent a check. The payout for next month is large amount ... the request for Bank Details. that they would rather wire me the money and they are asking for my banking account number and routing number. Although giving bank account number and routing has some risks. This is the fundamental information that is need to make a credit to your account directly. You would be giving this to quite a few entities / people. In most countries, this information is printed on every check that you write from your account. Is this safe? Or am I stupid for even considering this? Online world is full of traps and this could be a scam. So proceed with extreme caution. Insist of check. In worst case open a different savings account, that does not allow direct debits, does not have over draft, etc. Use this to receive money and move it into your regular account. |
Ways to avoid being labeled a pattern day trader | FINRA Description of Day Trading rules The rules adopt a new term "pattern day trader," which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period. So, there's several ways to avoid being labeled a pattern day trader: |
What is the minimum lot size (number of shares) for the London Stock Exchange? | 1 lot is 100 shares on London stock exchange |
Analyze a security using Benjamin Graham's Defensive Investor Criteria | Everything you are doing is fine. Here are a few practical notes in performing this analysis: Find all the primary filing information on EDGAR. For NYSE:MEI, you can use https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000065270&type=10-K&dateb=&owner=exclude&count=40 This is the original 10-K. To evaluate earnings growth you need per share earnings for the past three years and 10,11,12 years ago. You do NOT need diluted earnings (because in the long term share dilution comes out anyway, just like "normalized" earnings). The formula is avg(Y_-1+Y_-2+Y_-3) / is avg(Y_-10+Y_-11+Y_-12) Be careful with the pricing rules you are using, the asset one gets complicated. I recommend NOT using the pricing rules #6 and #7 to select the stock. Instead you can use them to set a maximum price for the stock and then you can compare the current price to your maximum price. I am also working to understand these rules and have cited Graham's rules into a checklist and worksheet to find all companies that meet his criteria. Basically my goal is to bottom feed the deals that Warren Buffett is not interested in. If you are interested to invest time into this project, please see https://docs.google.com/document/d/1vuFmoJDktMYtS64od2HUTV9I351AxvhyjAaC0N3TXrA |
Buying a small amount (e.g. $50) of stock via eToro “Social Trading Network” using a “CFD”? | Concerning the Broker: eToro is authorized and registered in Cyprus by the Cyprus Securities Exchange Commission (CySEC). Although they are regulated by Cyprus law, many malicious online brokers have opened shop there because they seem to get along with the law while they rip off customers. Maybe this has changed in the last two years, personally i did not follow the developments. eToro USA is regulated by the Commodity Futures Trading Commission (CFTC) and thus doing business in a good regulated environment. Of course the CFTC cannot see into the future, so some black sheep are getting fined and even their license revoked every now and then. It has no NFA Actions: http://www.nfa.futures.org/basicnet/Details.aspx?entityid=45NH%2b2Upfr0%3d Concerning the trade instrument: Please read the article that DumbCoder posted carefully and in full because it contains information you absolutely have to have if you are to do anything with Contract for difference (CFD). Basically, a CFD is an over the counter product (OTC) which means it is traded between two parties directly and not going through an exchange. Yes, there is additional risk compared to the stock itself, mainly: To trade a CFD, you sign a contract with your broker, which in almost all cases allows the broker A CFD is just a derivative financial instrument which allows speculating / investing in an asset without trading the actual asset itself. CFDs do not have to mirror the underlying asset's price and price movement and can basically have any price because the broker quotes you independently of the underlying. If you do not know how all this works and what the instrument / vehicle actually is and how it works; and do not know what to look for in a broker, please do not trade it. Do yourself a favor and get educated, inform yourself, because otherwise your money will be gone fast. Marketing campaigns such as this are targeted at people who do not have the knowledge required and thus lose a significant portion (most of the time all) of their deposits. Answer to the actual question: No, there is no better way. You can by the stock itself, or a derivative based on it. This means CFDs, options or futures. All of them require additional knowledge because they work differently than the stock. TL;DR: DumbCoder is absolutely right, do not do it if you do not know what it is about. EDIT: Revisiting this answer and reading the other answers, i realize this sounds like derivatives are bad in general. This is absolutely not the case, and i did not intend it to sound this way. I merely wanted to emphasize the point that without sufficient knowledge, trading such products is a great risk and in most cases, should be avoided. |
Why does Warren Buffett say his fund performance, relatively, is likely to be better in a bear market than in a bull market? | To understand his comments about bear-market performance it's important to take them in context. (My research method was Crtl+F: bear; read around the highlights. This is not a complete survey of 60+ years of letters.) In his earlier letters, statements about bull market performance are always made in reference to Buffet's belief that many of BH's current holdings are in undervalued securities. Ex: To the extent possible, therefore, I am attempting to create my own work-outs by acquiring large positions in several undervalued securities. Such a policy should lead to the fulfillment of my earlier forecast – an above average performance in a bear market. It is on this basis that I hope to be judged (p 6; emphasis mine). Similar statements are made throughout the earlier letters, along with this interesting note: In a year when the general market had a substantial advance I would be well satisfied to match the advance of the Averages (p 6). So to your question of why BH fund performance is likely to be better in a bear market than in a bull market, I believe the implicit assertion is that undervalued securities are more resilient in a bear market (presumably because they don't have as far to fall, and are also less likely to be subject to a bubble). Buffet is also explicitly asserting that when facing a choice to either (a) position BH to weather a possible downturn or (b) position BH to enjoy a bullish stock that is outpacing the market, he would choose the former over the later. As to your assertion that he always says this, I can find no reference to bear market's in the letters past 1960. |
Is the amount taxable if my grandfather sells agricultural land | As your is a very specific case, please get an advice of CA. It should not cost you much and make it easier. The sale of agriculture land is taxable in certain conditions and exempt from tax in other cases. Sale of agricultural land is subject to capital gains tax. But there are certain exemptions under Section 54B, subject to conditions, which are as follows: If deemed taxable, you can avail indexation, ie the price at which you grandfather got [the date when he inherited it as per indexation] and pay 10% on the difference. If the price is not known, you can take the govt prescribed rate. As there is a large deposit in your fathers account, there can be tax queries and need to be answered. Technically there is no tax liable even if your grandfather gifts the money to your father. More details at http://www.telegraphindia.com/1130401/jsp/business/story_16733007.jsp and http://www.incometaxindia.gov.in/publications/4_compute_your_capital_gains/chapter2.asp |
What are the alternatives to compound interest for a Muslim? | There are lot of options. I personally avoid keeping money in bank accounts and invest in one of the funds. It's just my personal opinion, you can ask your Ulamas |
Is the MBA an overrated degree/qualification? | The quality of the MBA is really what decides if it's worth it. You have to make sure the school where you are going to is highly regarded or even prestigious. There is a big difference between what you find prestigious and others find prestigious. The student believing it is an awesome school is not enough, the companies and recruiters must believe it too. Make sure you do your homework on the ranking of the MBA program. Additionally, your undergraduate plays a role how well your MBA is perceived. A decent undergraduate degree complemented with an MBA from a highly ranked school will put you in a trajectory for a high salary and a management position. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | What are the risks, if any The risks are exemplified by the outcomes presented on this website, including: There's a chance you will end up paying large mortgage payments on a house occupied by an ex-friend and paying large amounts of money to lawyers to try and get things straightened out. You could come out of it a lot poorer and with your credit rating wrecked. |
Is it wise for an independent contractor to avoid corporation tax by planning to only break even each year? | First, point: The CRA wants you to start a business with a "Reasonable expectation of profit". They typically expect to see a profit within 5 years, so you may be inviting unwanted questions from future auditors by using a breakeven strategy. Second point: If the goal is to pay as little tax as possible, you may want to consider having the corporation pay you as little as possible. Corporate income taxes are much lower than personal income taxes, according to these two CRA links: How it works is that your company pays you little as an outright salary and offers you perks like a leased company car, expense account for lunch and entertainment, a mobile phone, computer, etc. The company owns all of this stuff and lets you use it as part of the job. The company pays for all this stuff with corporate pre-tax dollars as opposed to you paying for it with personal after-tax dollars. There are specifics on meals & entertainment which modify this slightly (you can claim 50%) but you get the idea. The actual rate difference will depend on your province of residence and your corporate income level. There is also a requirement for "Reasonable Expenses", such that the expenses have to be in line with what you are doing. If you need to travel to a conference each year, that would be a reasonable expense. Adding your family and making it a vacation for everyone would not. You can claim such expenses as a sole proprietor or a corporation. The sole-proprietorship option puts any after-expense profits into your pocket as taxable income, where the corporate structure allows the corporation to hold funds and limit the amount paid out to you. I've seen this strategy successfully done first-hand, but have not done it myself. I am not a lawyer or accountant, consult these professionals about this tax strategy before taking any action. |
What is a 10 Year Treasury Note and How Can it be Used to Calculate the Intrinsic Value of a Stock? | It's a form of debt issued by the United States Treasury. As the name implies, a 10-year note is held for 10 years (after which you get the face value in cash), and it pays interest twice per year. It's being used in the calculator to stand for a readily available, medium-term, nearly risk-free investment, as a means of "discounting" the value that the company gains. The explanation for why the discounting is done can be found on the page you linked. As a Canadian you could use the yield of comparable Canadian treasury securities as quoted by Bank of Canada (which seem to have had the bottom fall out since the new year), although I don't suppose American notes would be hard for a Canadian investor to come by, so if you wanted to be conservative you could use the US figure as long as it's higher. |
Paying taxes on dividends even though your capital gains were $0? | The issue for you seems to be the sequence of events. Presumably, there will be a gain in the fund. In one year, you have a fund worth $100,000 and the $8500 your netted from the $10,000 dividend. (Dividends are taxed at 15% for most of us. If your taxable income is under $38K single, it's $0) An $8500 net return for the year. Now, if there were no initial dividend, and at the end of a full year, your $100K grew to $110K, and then gave you the $10K dividend, you might not be so unhappy. Even on day 2, you now have a fund worth $90K with a basis of $100K, and the promise of future dividends or cap gains. When you sell, the first $10K of gain from this point will effectively be tax free due to this quick drop. To directly answer the last few sentences, dividends and cap gains are different. And different still, for the way a fund processes them. |
Personal finance web service with account syncing in Germany | As much as I know StarMoney has also a web service for banking. |
Query regarding international transaction between governments | Buyer A didn't send money to the US government, Buyer A sent money to Seller B, a US resident. I think the most common way to facilitate a transaction like this is a regular old international wire transfer. Buyer A in India goes to their bank to exchange X INR to $1mm USD. $1mm USD is then wire transferred to Seller B's bank account. The USD was sold to Buyer A, either by funds held by Buyer A's bank, or foreign exchange markets, or possibly the US government. Seller B may owe taxes on the gain derived from the sale of this thing to Buyer A, but that taxation would arise regardless of who the buyer was. Buyer A may owe an import tax in India upon importing whatever they bought. I don't think it's common to tax imported money in this sort of transactional setting though. |
BoA Closed my Accounts and Froze my Funds. How can I get money back besides cashier's check? | I'd suggest you contact the Office of the Controller of Currency, who regulates BOA and file a complaint. This whole deal seems shady. According to the OCC FAQ, the fact that they closed the account is in their prerogative. However, I would think they are obligated to quickly return your funds, but can't find anything specific to that. The banks are very sensitive to having complaints filed against them, so if nothing else this may encourage them to be more helpful, even if your complaint isn't actionable. OCC Complaint Process. This topic on how long a bank can hold a large deposit before making funds available may also be helpful. |
Why could rental costs for apartments/houses rise while buying prices can go up and down? | Economically, you would say that purchased and rented real estate are not perfect substitutes--they are largely separate markets. Only a few people are able to easily switch from one to the other and that choice is sticky--for example, once you buy a house, prices would have to rise a lot for it to be worth it to sell it and move into an apartment. In both markets there is a supply and demand curve, but the slope of the demand curve for houses to purchase is much steeper than the demand curve for rentals. The market for new housing fluctuates rapidly because it requires a large change in housing prices to change the number of people looking to buy a house. Most decisions to buy a house are not driven by the state of the housing market. This describes a supply/demand graph with a very steep demand curve. Additionally, because of the leverage provided by mortgages, the demand for houses depends critically on relatively small changes in the interest rate and availability of loans. Thus the steep demand curve shifts all over the place as borrowing conditions change. On the other hand, apartment prices are more stable because people easily move from one apartment to another and people living in their parent's basements easily move into apartments if prices change. A small change in the price or quantity of rentals brings about reasonable response in quantity demanded. This is the situation where the demand curve is shallow. In addition, rentals are not tied to interest rates tightly, nor are they as strongly tied to economic conditions (in a recession, people avoid buying but renters continue to rent). |
Google Finance: Input Parameters For Simple Moving Averages | The difference is that for the one year time frame the data is represented based on daily data and the SMA is 20 days, whilst for the 5 year timeframe the data is automatically represented as weekly data with the SMA represented by 20 weeks not 20 days anymore. This happens due to daily data on this chart being too much data to represent over a 5 year period so the data defaults to weekly data over such a long period. If the chart is represented as weekly data then any indicators will also have to be represented in weekly data. If you use a more sophisticated charting program you can actually select to see daily or weekly data over longer periods such as 5 years or more. |
Why I cannot find a “Pure Cash” option in 401k investments? | Technically there could be a true cash fund, but the issue is it would need to have some sort of cost associated with it, which would mean it would have negative yield or would charge a fee. In some cases, this might be preferable to having it invested in "cash equivalents," which as you note are not cash. It is important to note that there is nothing, even cash or physical precious metals, that is considered zero risk. They all just have different risks associated with them, that may be an issue under certain circumstances. In severe deflation, cash is king, and all non-cash asset classes and debt could go down in value. Under severe inflation, cash can become worthless. One respondent mentioned an alternative of stopping contributing to a 401k and depositing money in a bank, but that is not the same as cash either. In recent decades, people have been led to believe that depositing your money in the bank means you hold that in cash at the bank. That is untrue. They hold your deposit on their books and proceed to invest/loan that money, but those investments can turn sour in an economic and financial downturn. The same financial professionals would then remind you that, while this is true, there is the Federal Deposit Insurance Corporation (FDIC) that will make you whole should the bank go under. Unfortunately, if enough banks went under due to lack of reserves, the FDIC may be unable to make depositors whole for lack of reserves. In fact, they were nearing this during the last financial crisis. The sad thing is that the financial industry is bias against offering what you said, because they make money by using your money. Fractional reserve banking. You are essentially holding IOUs from your bank when you have money on deposit with them. Getting back to the original question; you could do some searching and see if there is an institution that would act as a cash depository for physical cash in your IRA. There are IRA-approved ways of holding physical precious metals, which isn't all too different of a concept from holding physical cash. 401k plans are chosen by your company and often have very limited options available, meaning it'd be unlikely you could ever hold physical cash or physical precious metals in your 401k. |
Putting borrowed money into an SIPP | If it were possible to take a loan out for a SIPP investment in the future .. I would suggest having an equivalent invested amount already in an ISA .. simply to cover you in the event of a job loss including additional cash in a deposit account. Secondly .. to increase your chances of success with this strategy I would also suggest doing this when the odds are more in your favour during the bottoming out cycle of a market crash. Thirdly .. it depends on how knowledgeable you are about investment , I would suggest being invested globally & in many different sectors to take advantage of various price movements. |
Investing in dividend-yielding stocks with money borrowed from margin account? | My gut is to say that any time there seems to be easy money to be made, the opportunity would fade as everyone jumped on it. Let me ask you - why do you think these stocks are priced to yield 7-9%? The DVY yields 3.41% as of Aug 30,'12. The high yielding stocks you discovered may very well be hidden gems. Or they may need to reduce their dividends and subsequently drop in price. No, it's not 'safe.' If the stocks you choose drop by 20%, you'd lose 40% of your money, if you made the purchase on 50% margin. There's risk with any stock purchase, one can claim no stock is safe. Either way, your proposal juices the effect to creating twice the risk. Edit - After the conversation with Victor, let me add these thoughts. The "Risk-Free" rate is generally defined to be the 1yr tbill (and of course the risk of Gov default is not zero). There's the S&P 500 index which has a beta of 1 and is generally viewed as a decent index for comparison. You propose to use margin, so your risk, if done with an S&P index is twice that of the 1X S&P investor. However, you won't buy S&P but stocks with such a high yield I question their safety. You don't mention the stocks, so I can't quantify my answer, but it's tbill, S&P, 2X S&P, then you. |
What's the fuss about Credit Score / History? | Use credit and pay your bills on time. That's really about it. If you do that, you don't need to think about credit score. It's really a big distraction that is dwelled on too much. |
What is the tax liability from an inheritance from a trust and reported on a K-1 form? | You don't need to submit a K-1 form to anyone, but you will need to transcribe various entries on the K-1 form that you will receive onto the appropriate lines on your tax return. Broadly speaking, assets received as a bequest from someone are not taxable income to you but any money that was received by your grandmother's estate between the time of death and the time of distribution of the assets (e.g. interest, mutual fund distributions paid in cash, etc) might be passed on to you in full instead of the estate paying income tax on this income and sending you only the remainder. If so, this other money would be taxable income to you. The good news is that if the estate trust distributions include stock, your basis for the stock is the value as of the date of death (nitpickers: I am aware that the estate is allowed to pick a different date for the valuation but I am trying to keep it simple here). That is, if the stock has appreciated, your grandmother never paid capital gains on those unrealized capital gains, and you don't have to pay tax on those capital gains either; your basis is the appreciated value and if and when you sell the stock, you pay tax only on the gain, if any, between the day that Grandma passed away and the day you sell the stock. |
Are TD e-Series Funds worthwhile, or am I better off with ETFs? Why or why not? | M Attia, the advantages of the TD e-series are that they are a low cost way to index your portfolio as well it gives you to opportunity to invest small amounts at a time. With ETF's, purchasing small amounts at a time would simply get too expensive. |
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