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Online brokers with a minimum stock purchase lower than $500 | With InteractiveBrokers there is no minimum trade amount, they also offer Australian Equities. |
Avoiding sin stock: does it make a difference? | This question drives at what value a shareholder actually provides to a corporation, and by extent, to the economy. If you subscribe for new shares (like in an Initial Public Offering), it is very straightforward to say "I have provided capital to the corporation, which it is using to advance its business." If you buy shares that already exist (like in a typical share purchase on a public exchange), your money doesn't go to the company. Instead, it goes to someone who paid someone who paid someone who paid someone (etc.) who originally contributed money to the corporation. In theory, the value of a share price does not directly impact the operation of the company itself, apart from what @DanielCarson aptly noted (employee stock options are affected by share price, impacting morale, etc.). This is because in theory, the true value of a company (and thus, the value of a share) is the present value of all future cashflows (dividends + final liquidation). This means that in a technical sense, a company's share price should result from the company's value. The company's true value does not result from the share price. But what you are doing as a shareholder is impacting the liquidity available to other potential investors (also as mentioned by @DanielCarson, in reference to the desirability for future financing). The more people who invest their money in the stock market, the more liquid those stocks become. This is the true value you add to the economy by investing in stocks - you add liquidity to the market, decreasing the risk of capital investment generally. The fewer people there are who are willing to invest in a particular company, the harder it is for an investor to buy or sell shares at will. If it is difficult to sell shares in a company, the risk of holding shares in that company is higher, because you can't "cash out" as easily. This increased risk then does change the value of the shares - because even though the corporation's internal value is the same, the projected cashflows of the shares themselves now has a question mark around the ability to sell when desired. Whether this actually has an impact on anything depends on how many people join you in your declaration of ethical investing. Like many other forms of social activism, success relies on joint effort. This goes beyond the direct and indirect impacts mentioned above; if 'ethical investing' becomes more pronounced, it may begin to stigmatize the target companies (fewer people wanting to work for 'blacklist' corporations, fewer people buying their products, etc.). |
If I believe a stock is going to fall, what options do I have to invest on this? | Shorting Stocks: Borrowing the shares to sell now. Then buying them back when the price drops. Risk: If you are wrong the stock can go up. And if there are a lot of people shorting the stock you can get stuck in a short squeeze. That means that so many people need to buy the stock to return the ones they borrowed that the price goes up even further and faster. Also whoever you borrowed the stock from will often make the decision to sell for you. Put options. Risk: Put values don't always drop when the underlying price of the stock drops. This is because when the stock drops volatility goes up. And volatility can raise the value of an option. And you need to check each stock for whether or not these options are available. finviz lists whether a stock is optional & shortable or not. And for shorting you also need to find a broker that owns shares that they are willing to lend out. |
How to share income after marriage and kids? | My own personal point of view. I earn about twice what my wife to be earns. We are planning on getting married next year. I ultimately do all the finances (basically because she hates that kind of thing) not because I'm in charge or whatever. To work out how we do this I wrote a spreadsheet: At the top it has my monthly pay in one column and her's in another. I add all our bills (against me initally). At the bottom I have a total of both of our "spending money". Spending money is wage - bills - savings I then move money out of my column into her column. My goal is that we pay all the bills and save a decent amount and have roughly the same amount to spend each month. So each persons spending money should be roughly equal. I then fine tune this as things change (if we get a pay rise we alter it, if a bill goes up or down we alter it) To manage this we have 4 accounts, a joint account to pay bills (both give a set amount to each mont), a savings acount (both give a set amount to each month) and our own accounts (where we get paid and where our spending money lives). Like everyone else says, this seems fair to me. I don't earn more, we both earn "an amount" and this should be split equally. |
Help required on estimating SSA benefit amounts | The social security administration has a webpage to get your Social Security estimate. It replaces the yearly estimate they used to mail everybody. It shows the amount you paid for social security and medicare and what they estimate you will receive at your retirement age. They also discuss disability benefits. Everybody should do this every year. Though it does take a few months to get the previous years numbers updated into the system. If you notice a problem with the money they think you paid into the system in a particular year, you can send them an old W-2 and get the numbers corrected. |
Do personal checks expire? [US] | It depends on the bank. According to the Uniform Commercial Code, a bank is not obliged to pay a cheque after six months, but may do so if it wants to. § 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith. Official link to UCC 4-404 As for your second question, if you stamp "void after 60 days" on your cheque; I don't have a specific answer for that part (yet). Update: I can find no specific rules about someone putting an arbitrary "void after xxx days" on their personal check. Businesess are alllowed to, but again the overriding rule seems to be that after six months it's the bank's choice, and you certainly couldn't make a cheque expire before six months, so I don't think that putting a stamp would make any difference. It's still up to the bank in the end. |
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. |
Where do I invest my Roth IRA besides stock market and mutual funds? | That depends, really. Generally speaking, though - Roth IRAs are THE PLACE for Stock-Market/Mutual-Fund investing. All the off the wall (or, not so off the wall) things like Real Estate investments, or buying up gold, or whatever other ideas you hear from people - they may be good or bad or whatnot. But your Roth IRA is maybe not the best place for that sort of thing. The whole philosophy behind IRAs is to deliberately set aside money for the future. Anything reasonable will work for this. Explore interesting investment ideas with today's money, not tomorrow's money. That being said - at your age I would go for the riskier options within what's available. If I were in your situation (and I have been, recently), I would lean toward low-fee mutual funds classified as "Growth" funds. My own personal opinion (THIS IS NOT ADVICE) is that Small Cap International funds are the place to be for young folks. That's a generalized opinion based on my feel for the world, but I don't think I'm personally competent to start making specific stock picks. So, mutual funds makes sense to me in that I can select the fund that generally aligns with my sense of things, and assume that their managers will make reasonably sound decisions within that framework. Of course that assumption has to be backed up with reputation of the specific MF company and the comparative performance of the fund relative to other funds in the same sector. As to the generalized question (how else can you work toward financial stability and independence), outside of your Roth IRA: find ways to boost your earning potential over time, and buy a house before the next bubble (within the next 18 months, I'm GUESSING). |
Pensions, annuities, and “retirement” | An annuity is a product. In simple terms, you hand over a lump sum of cash and receive an agreed annual income until you die. The underlying investment required to reach that income level is not your concern, it's the provider's worry. So there is a huge mount of security to the retiree in having an annuity. It is worth pointing out that with simple annuities where one gives a lump sum of money to (typically) an insurance company, the annuity payments cease upon the death of the annuitant. If any part of the lump sum is still left, that money belongs to the company, not to the heirs of the deceased. Fancier versions of annuities cover the spouse of the annuitant as well (joint and survivor annuity) or guarantee a certain number of payments (e.g. 10-year certain) regardless of when the annuitant dies (payments for the remaining certain term go to the residual beneficiary) etc. How much of an annuity payment the company offers for a fixed lump sum of £X depends on what type of annuity is chosen; usually simple annuities give the maximum bang for the buck. Also, different companies may offer slightly different rates. So, why should one choose to buy an annuity instead of keeping the lump sum in a bank or in fixed deposits (CDs in US parlance), or invested in the stock market or the bond market, etc., and making periodic withdrawals from these assets at a "safe rate of withdrawal"? Safe rates of withdrawal are often touted as 4% per annum in the US, though there are newer studies saying that a smaller rate should be used. Well, safe rates of withdrawal are designed to ensure that the retiree does not use up all the money and is left destitute just when medical bills and other costs are likely to be peaking. Indeed, if all the money were kept in a sock at home (no growth at all), a 4% per annum withdrawal rate will last the retiree for 25 years. With some growth of the lump sum in an investment, somewhat larger withdrawals might be taken in good years, but that 4% is needed even when the investments have declined in value because of economic conditions beyond one's control. So, there are good things and bad things that can happen if one chooses to not buy an annuity. On the other hand, with an annuity, the payments will continue till death and so the retiree feels safer, as Chris mentioned. There is also the serenity in not having to worry how the investments are doing; that's the company's business. A down side, of course, is that the payments are fixed and if inflation is raging, the retiree still gets the same amount. If extra cash is needed one year for unavoidable expenses, the annuity will not provide it, whereas the lump sum (whether kept in a sock or invested) can be drawn on for the extra expense. Another down side is that any money remaining is gone, with nothing left for the heirs. On the plus side, the annuity payments are usually larger than those that the retiree will get via the safe rate of withdrawal method from the lump sum. This is because the insurance company is applying the laws of large numbers: many annuitants will not survive past their life expectancy, and their leftover monies are pure profit to the insurance company, often more than enough (when invested properly by the company) to pay those old codgers who continue to live past their life expectancy. Personally, I wouldn't want to buy an annuity with all my money, but getting an annuity with part of the money is worthwhile. Important: The annuity discussed in this answer is what is sometimes called a single-premium or an immediate annuity. It is purchased at the time of retirement with a single (large) lump sum payment. This is not the kind of annuity that is described in JAGAnalyst's answer which requires payment of (much smaller) premiums over many years. Search this forum for variable annuity to learn about these types of annuities. |
Using Loan to Invest - Paying Monthly Installments by Selling Originally Bought Shares | The market can stay irrational longer than you can remain solvent -John Maynard Keynes The stocks could stagnate and trade in a thin range, or decline in value. You assume that your stocks will offer you ANY positive return for every month over 24 months. Just one month of negative returns puts you underwater. Thats whats wrong with it. Even if you identified any stock that has been up every month for a consecutive 24 months in the past, there is nothing that says it will be so in the future, and a broad market selloff will effect both indexes as well as individual stocks. Literally any adverse macroeconomic event in the next two years will put you underwater on your loan, no matter how much research you do on individual stocks. |
Unrealized Profit & Loss for Non-Stock Securities | Suddenly its not just comparing the current price to the price of the contract, or is it? Sure it is. Suppose you bought 100 option contracts (each for 100 shares) and paid a $1 per share premium ($10,000 total). Now those options are trading for $1.50 per share. You have an unrealized $0.50 gain per share, or $5,000. The $10,000 in options you bought are now worth $15,000. It holds whether they were bought to open or close a position, or whether they are puts or calls. The only difference is whether you bought or sold the options (the arithmetic is just reversed for selling an option). But lets say we have an Option, where the payoff is max(St-K, c0) where ct is the market price. What do you do then? Your current, unrealized P&L is different than the payoff. The payoff only happens at maturity. The current P&L is based on current market prices, just like stock. Option prices all have a "time premium" making them worth more than their payoff (intrinsic) value prior to maturity. |
Over the long term, why invest in bonds? | Many folks use bonds to diversify their portfolio since bonds rise and fall in value at different times and for different reasons than stocks. Bonds pay interest on a regular basis (usually monthly or quarterly) and so some people invest in bonds in order to match the interest payments to some regular expense they might have. The interest payment does not change (fixed income). For individual bonds, there is a maturity date at which you can expect to receive the face value of the bond (the issuer's creditworthiness is important here). You can make a little money on a bond by buying it when its value is lower than its face value and either selling later for a higher value, or waiting for it to mature. Often the minimum investment for a single bond is high, so if you don't have a large enough amount, you can still get the performance of bonds through a bond fund. These do not mature, so you don't have a guarantee of a return of your investment. However, they have access to more bonds than retail investors, so the funds can keep your money more fully invested. If you don't need the income, you can reinvest the dividends and have a little extra capital growth this way. |
Bond prices: Why is a high yield sometimes too good to be true? | Looking at the list of bonds you listed, many of them are long dated. In short, in a rate rising environment (it's not like rates can go much lower in the foreseeable future), these bond prices will drop in general in addition to any company specific events occurred to these names, so be prepared for some paper losses. Just because a bond is rated highly by credit agencies like S&P or Moody's does not automatically mean their prices do not fluctuate. Yes, there is always a demand for highly rated bonds from pension funds, mutual funds, etc. because of their investment mandates. But I would suggest looking beyond credit ratings and yield, and look further into whether these bonds are secured/unsecured and if secured, by what. Keep in mind in recent financial crisis, prices of those CDOs/CLOs ended up plunging even though they were given AAA ratings by rating agencies because some were backed by housing properties that were over-valued and loans made to borrowers having difficulties to make repayments. Hence, these type of "bonds" have greater default risks and traded at huge discounts. Most of them are also callable, so you may not enjoy the seemingly high yield till their maturity date. Like others mentioned, buying bonds outright is usually a big ticket item. I would also suggest reviewing your cash liquidity and opportunity cost as oppose to investing in other asset classes and instruments. |
In a competitive market, why is movie theater popcorn expensive? | A multiplex is a concession stand which happens to show movies in order to lure you into range of the smell of their popcorn. It has nothing to do with movie theater monopolies. As it was explained to me by my manager, back when I worked in a movie theater in a small Midwestern chain, for every movie, the studios take some percentage cut of gross ticket sales, varying from movie to movie. Star Wars: The Phantom Menace in 1999 was the first film for which the studio demanded 90% of gross ticket price — continuing a long-standing trend of raising the take which possibly began with the original first Star Wars movie. The other studios quickly followed suit and raised their take to 90%, especially for the big blockbusters — the textbook term is "oligopoly pricing" — and since then the percentage has inched ever closer to 100%. I forget exactly what it was on the second Matrix movie or Lord of the Rings: Return of the King, both of which premiered while I was at the theater, but the number that sticks in my head is 94%. Obviously the studios can't directly capture any revenue from the sale of popcorn — unlike the movie, it's not their product — so every time they raise their take, the theater compensates for lost revenue by raising the price of popcorn. This trend hasn't reversed with 3D and IMAX and all the new technologies coming down the pike. The only reason they're attractive to the theaters is that the theater can charge $15 a ticket rather than $10. Even on a small percentage share, that's a 50% jump in revenue, and covers the not insignificant cost of the projection equipment. 3D is also currently getting more butts in seats than 2D was, leading to somewhat more concessions sales — going to the movies is an outing and an event again — though that's tapering off as it becomes less and less of a novelty. The ticket prices aren't coming down, though. Moral of the story: like razors or printers, theaters lose a ton of money to show you movies due to studio oligopoly pricing, and make it up on popcorn. |
Is it better to buy US stocks on US stock exchanges as a European? | Liquidity on dual listed equities is rarely the same on both exchanges. More liquidity means you would typically get a better price assuming you execute the trades using the same order types. It's recommended to trade where the liquidity is greater unless your trading method benefits somehow from it being lower. It's important to remember that some ADRs (some European companies listed in US) have ADR fees which vary. USD/EUR transaction fees are low when using a decent broker but you're obviously participating in the currency risk. |
In India, what is the difference between Dividend and Growth mutual fund types? | A growth fund is looking to invest in stocks that will appreciate in stock price over time as the companies grow revenues and market share. A dividend fund is looking to invest in stocks of companies that pay dividends per share. These may also be called "income" funds. In general, growth stocks tend to be younger companies and tend to have a higher volatility - larger up and down swings in stock price as compared to more established companies. So, growth stocks are a little riskier than stocks of more established/stable companies. Stocks that pay dividends are usually more established companies with a good revenue stream and well established market share who don't expect to grow the company by leaps and bounds. Having a stable balance sheet over several years and paying dividends to shareholders tends to stabilize the stock price - lower volatility, less speculation, smaller swings in stock price. So, income stocks are considered lower risk than growth stocks. Funds that invest in dividend stocks are looking for steady reliable returns - not necessarily the highest possible return. They will favor lower, more reliable returns in order to avoid the drama of high volatility and possible loss of capital. Funds that invest in growth stocks are looking for higher returns, but with that comes a greater risk of losing value. If the fund manager believes an industry sector is on a growth path, the fund may invest in several small promising companies in the hopes that one or two of them will do very well and make up for lackluster performance by the rest. As with all stock investments, there are no guarantees. Investing in funds instead of individual stocks allows you invest in multiple companies to ride the average - avoid large losses if a single company takes a sudden downturn. Dividend funds can lose value if the market in general or the industry sector that the fund focuses on takes a downturn. |
How can I find ISIN numbers for stock options? | Go to http://www.isincodes.net/, and enter your data. For example entering Alphabet gives you the ISIN US02079K1079 (for standard US shares). If you want to understand the number format (and build them yourself), check wikipedia: https://en.wikipedia.org/wiki/International_Securities_Identification_Number |
What are the advantages of doing accounting on your personal finances? | In my opinion, every person, regardless of his or her situation, should be keeping track of their personal finances. In addition, I believe that everyone, regardless of their situation, should have some sort of budget/spending plan. For many people, it is tempting to ignore the details of their finances and not worry about it. After all, the bank knows how much money I have, right? I get a statement from them each month that shows what I have spent, and I can always go to the bank's website and find out how much money I have, right? Unfortunately, this type of thinking can lead to several different problems. Overspending. In olden days, it was difficult to spend more money than you had. Most purchases were made in cash, so if your wallet had cash in it, you could spend it, and when your wallet was empty, you were required to stop spending. In this age of credit and electronic transactions, this is no longer the case. It is extremely easy to spend money that you don't yet have, and find yourself in debt. Debt, of course, leads to interest charges and future burdens. Unpreparedness for the future. Without a plan, it is difficult to know if you have saved up enough for large future expenses. Will you have enough money to pay the water bill that only shows up once every three months or the property tax bill that only shows up once a year? Will you have enough money to pay to fix your car when it breaks? Will you have enough money to replace your car when it is time? How about helping out your kids with college tuition, or funding your retirement? Without a plan, all of these are very difficult to manage without proper accounting. Anxiety. Not having a clear picture of your finances can lead to anxiety. This can happen whether or not you are actually overspending, and whether or not you have enough saved up to cover future expenses, because you simply don't know if you have adequately covered your situation or not. Making a plan and doing the accounting necessary to ensure you are following your plan can take the worry out of your finances. Fear of spending. There was an interesting question from a user last year who was not at all in trouble with his finances, yet was always afraid to spend any money, because he didn't have a budget/spending plan in place. If you spend money on a vacation, are you putting your property tax bill in jeopardy? With a good budget in place, you can know for sure whether or not you will have enough money to pay your future expenses and can spend on something else today. This can all be done with or without the aid of software, but like many things, a computer makes the job easier. A good personal finance program will do two things: Keeps track of your spending and balances, apart from your bank. The bank can only show you things that have cleared the bank. If you set up future payments (outside of the bank), or you write a check that has not been cashed yet, or you spend money on a credit card and have not paid the bill yet, these will not be reflected in your bank balance online. However, if you manually enter these things into your own personal finance program, you can see how much money you actually have available to spend. Lets you plan for future spending. The spending plan, or budget, lets you assign a job to every dollar that you own. By doing this, you won't spend rent money at the bar, and you won't spend the car insurance money on a vacation. I've written before about the details on how some of these software packages work. To answer your question about double-entry accounting: Some software packages do use true double-entry accounting (GnuCash, Ledger) and some do not (YNAB, EveryDollar, Mvelopes). In my opinion, double-entry accounting is an unnecessary complication for personal finances. If you don't already know what double-entry accounting is, stick with one of the simpler solutions. |
Any tips for asset allocation across multiple retirement accounts? | I have a similar plan and a similar number of accounts. I think seeking a target asset allocation mix across all investment accounts is an excellent idea. I use excel to track where I am and then use it to adjust to get closer (but not exactly) to my target percentages. Until you have some larger balances, it may be prudent to use less categories or realize that you can't come exactly to your percentages, but can get close. I also simplify by primarily investing in various index funds. That means that in my portfolio, each category has 1 or 2 funds, not 10 or 20. |
Why use accounting software like Quickbooks instead of Excel spreadsheets? | Here are the few points: Hope that helps, |
How to increase my credit score | Do you have the option of paying cash for the phone? To answer your question though: Essentially, you have to use credit RESPONSIBLY. That doesn't mean go get a slew of loans and pay them off. As Ratish said, a credit card is a good start. I basically buy everything with a card and then pay it off every month when the bill comes out. I actually have two and I alternate but that's getting nitpicky. It should be noted that simply getting a card won't help your score. In fact, it may go down initially as the inquiry and new account opening may have a negative effect. The positive effect will happen as you develop good payment behavior over time. One big thing you can do, in your case, is always pay your mobile bill on time. Having a good payment history with them will go a long way to prove you are responsible. |
Why did I lose 2 cents more than the difference in the stock prices on my Robinhood trade? | Free, huh? From their Commission and Fee Schedule: So if you literally bought two shares, then the SEC added one penny in fees and FINRA added one penny as a "Trading Activity Fee" Note that there are several other fees on their schedule that may not apply to you. If you had bought 100 shares instead, your total fees would have still been only 2 cents, but you would have lost $4 on the trade. So the fees are minuscule when you start doing larger orders. However, That should not discourage you from experimenting and learning. I'd rather pay 2 cents in fees on a 4 cent loss than 2 cents in fees on a $400 loss. Just chalk it up to the cost of experience. |
How to take advantage of home appreciation | Assuming "take advantage" means continue to build wealth, as opposed to blow it all on a fancy holiday... Downgrade As you already note, you could downgrade/downsize. This could happen via moving to a smaller house in the same area, or moving to an area where the cost of buying is less. HELOC Take out a Home Equity Line of Credit. You could use the line of credit to do home improvements further boosting the asset value (forced appreciation, assuming the appreciation to date is simply market based). Caution is required if the house has already appreciated "considerably" - you want to keep the home value within tolerance levels for the area. (Best not to have the only $300K house on a street of $190K-ers...) Home Equity Loan Assuming you have built up equity in the house, you could leverage that equity to purchase another property. For most people this would form part of the jigsaw for getting the financing to purchase again. |
What is meant by “priced in”? | Anyone who wants to can use any method they want. Ultimately, the price of the stock will settle on the valuation that people tend to agree on. If you think the priced in numbers are too low, buy the stock as that would mean that its price will go up as the future earnings materialize. If you think it's too high, short the stock, as its price will go down as future earnings fail to materialize. The current price represents the price at which just as much pressure pushes the price up as down. That means people agree it's reasonably approximating the expected future value. Imagine if I needed money now and sold at auction whatever salary I make in 2019. How much will I make in 2019? I might be disabled. I might be a high earner. Who knows? But if I auction off those earnings, whatever price it sells for represents everyone's best estimate of that value. But each participant in the auction can estimate that value however they want. If you want to know what something is worth, you see what you can sell it for. |
The doctor didn't charge the health insurance in time, am I liable? | That is your bill because the services were performed for you. You still can negotiate with the doctor however. Suggest that while you aren't willing to pay the full share, you will pay the negotiated amount he would have actually gotten from the insurance company (or some fraction thereof). Doc did make a mistake, but you are very much liable for it. |
Stock valuation - Volkswagen | The primary reason a scandal like this hurts the company is the "bottom line." Any legal action means defense costs. In this case the potential of massive fines became reality. And a buyback program. So, if any publicly traded company stacked up $10B in assets, doused it in diesel and set it on fire, their stock would take a dip too. Billions in revenue directed to the expense side of the ledger instead of the profit side. That money should have gone to building the company and dividends. |
How can people have such high credit card debts? | In the United States, when applying for credit cards, proof of income is on an honor system. You can make $15k a year and write on your application that you make $150k a year. They don't check that value other than to have their computer systems figure out risk and you get a yes or no. It was traditionally easy to attain credit, but that got tightened in 2008/2009 with the housing crisis. This is starting to change again and credit is flowing much more easily. |
How does a Value Added Tax (VAT) differ from a Sales Tax? | Sales taxes are charged at the point of purchase, while a VAT is assessed during the production process of the item. In the end, the amount paid by the consumer is the same, but with the VAT, the tax was collected from the manufacturer, instead of the consumer. One of the big arguments for VAT is that it prevents lost revenue due to things like smuggling (if sales tax increases past 10% smuggling spikes, so the VAT is a good mechanism if you're looking to implement large taxes on goods). It also keeps the tax burden away from shippers and other tiers of the production process that don't change the intrinsic value of the item. |
Why do stock prices change? [duplicate] | None of that is filtered my way as a "part owner". Sure it is, it's just not always obvious. When a company makes money it either: Other then the fourth option, the first three all increase the total value of the company. If you owned 1% of a company that was worth X, and is now worth X+1, the value of that 1% ownership should go up as well. One model of the value of a share of stock is the present value of all future cash flows that the company produces for its shareholders, which would be either through dividends, earnings (provided that they are invested back into the company) or through liquidation (sale). So as earnings increase (or more accurately as projected future earnings increase), so does the value of a share of the company. Also note that the payment of dividends causes the price of a stock to go down when the dividend is paid, since that's equity (cash) that's leaving the company, reducing the value of the company by an equivalent amount. Of course, there's also something to be said for the behavioral aspect of investing, meaning that people sometimes invest in companies that they like, and sell stock of companies that they don't like or disagree with (e.g. Nordstrom's). |
How should I deal with my long term gain this year? | I don't believe in letting the tax tail wag the investing dog. You have a stock you no longer wish to hold for whatever reason? Sell it. But to sell a loser, hoping it doesn't rise by the time you wish to re-buy it in 30 days is folly. This effort may gain you $50 if done right. No, it's not worth it either way. |
Bond ETFs as a means to achieve risk parity | How is it possible that long term treasury bonds, which the government has never defaulted on, can hold more risk as an ETF then the stock market index? The risk from long-term bonds isn't that the government defaults, but that interest rates go up before you get paid, so investors want bonds issued more recently at higher interest rates, rather than your older bonds that pay at a lower rate (so the price for your bonds goes down). This is usually caused by higher inflation rates which reduce the value of the interest that you will be paid. Do you assume more risk investing in bond ETFs than you would investing in individual bonds? If you are choosing the right ETFs, there should be a lower amount of risk because the ETFs are taking care of the difficult work of buying a variety of bonds. Are bond ETFs an appropriate investment vehicle for risk diversification? Yes, if you are investing in bonds, exchange traded funds are an appropriate way to buy them. The markets for ETFs are usually very liquid. |
Buy tires and keep car for 12-36 months, or replace car now? | If the car is in otherwise good shape, it's always less expensive to keep it longer. Think of it this way: you have to buy new tires no matter what. It's just a question of whether or not those new tires are attached to a new car or your current car. |
Paying restaurants in cash instead of credit card - how signficant is this? | Credit cards charge about 2% fee from merchants. This is already priced into the restaurant menu. Generally, dealing with cash will not cost the merchant significantly less since he needs to make more trips to the bank, pay fees for frequent cash deposits (banks charge per operation), and maintain a safe location for storage of that cash. Bottom line - I doubt it makes any significant difference to the restaurant owner. |
The doctor didn't charge the health insurance in time, am I liable? | I was in a similar situation years back and I refused to pay the bill. My point of view was that I provided the hospital with all information needed to submit the claim in a timely matter and that I should not be held responsible for their failure to do so. In the end they waived the charges. So while technically I might have been responsible for paying the charges, in reality I think they decided it wasn't worth the hassle of making me (I would have fought it all the way up to the top). Not sure that I would recommend this approach though :) |
ETF S&P 500 with Reinvested Dividend | The problem there is that there's a tax due on that dividend. So, if you wish, you can buy the ETF and specify to reinvest dividends, but you'll have to pay a bit of tax on them, and keep track of your basis, if the account isn't a retirement account. |
Dividend yeild per unit | I am also confused by what he says. The DJIA has not been at 900 for decades. However a $36 dividend is 4% per unit if you get $9 per unit per quarter. 2/3 of 4% is 6%,so that is inside his 7.5% to 5.5%. How much you have in dividend paying stocks vs. Bonds most often is a function of your age. For example, I have heard the advice of subtracting your age in years from 110 and that would be the percent you hold in dividend paying stocks. At age 30 you would have 80% in stocks. At age 60 you would be 50% in stocks. There are retirement funds that do this for you. But the 'bottom line' all depends on your risk tolerance. I have a large tolerance for risk. So even though I am currently retired I only have 10% of my money in a 'safe' investment (ticker=PGF). It pays 5.5% per year. The rest is in a leveraged junk bond fund (PHK) that pays 15.5% per year. |
In today's low interest environment, is it generally more economical to buy or lease a new car in the US? | The most economical way is to save your money, and buy a 1+ year old used car with cash. |
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. |
It is worth using a discount stock broker? I heard they might not get the best price on a trade? | Always use limit orders never market orders. Period. Do that and you will always pay what you said you would when the transaction goes through. Whichever broker you use is not going to "negotiate" for the best price on your trade if you choose a market order. Their job is to fill that order so they will always buy it for more than market and sell it for less to ensure the order goes through. It is not even a factor when choosing between TradeKing and Scottrade. I use Trade King and my friend uses ScottTrade. Besides the transaction fee (TK is a few $$ cheaper), the only other things to consider are the tools and research (and customer service if you need it) that each site offers. I went with TK and the lower transaction fee since tools and research can be had from other sources. I basically only use it when I want to make a trade since I don't find the tools particularly useful and I never take an analyst's opinion of a stock at face value anyway since everybody always has their own agenda. |
Does an individual share of a stock have some kind of unique identifier? | Nope, think what a nightmare that would be, a bunch of shares would be issued and then sold to tonnes of people, who might sell various partial numbers of them to others, who might buy them and others from 20 others all as part of one order though multiple fills... It would be nuts, and if one were to issue a certificate with the IDs of shares that were carried through such a process the likelihood is the fragmentation would be so great that 100K shares would have consist of almost as many fragments! Imagine a share certificate with 70K IDs/ranges? Yikes! |
How can I stop wasting food? | The best way to stop wasting food is to create a weekly plan. Every weekend, before making your grocery shopping, take 30-60 mins and plan (with your spouse if your married) for the next week's meals. It doesn't need to be too detailed, but it'll help you to approximate what you need in terms of food for the whole week and buy accordingly. I have a similar problem where I need to go out often and also work a lot. But spending some time on the weekend to create a plan helps me minimize my wastage a lot. My inspiration to do this has been from the below 2 articles from Trent in SimpleDollar http://www.thesimpledollar.com/2008/10/16/how-to-plan-ahead-for-next-weeks-meals-and-save-significant-money-a-step-by-step-guide/ http://www.thesimpledollar.com/2007/09/15/the-one-hour-project-plan-your-meals-for-one-week-in-advance/ |
Did an additional $32 billion necessarily get invested into Amazon.com stock on October 26th, 2017? | The market capitalization of a stock is the number of shares outstanding (of each stock class), times the price of last trade (of each stock class). In a liquid market (where there are lots of buyers and sellers at all price points), this represents the price that is between what people are bidding for the stock and what people are asking for the stock. If you offer any small amount more than the last price, there will be a seller, and if you ask any small amount less than the last price, there will be a buyer, at least for a small amount of stock. Thus, in a liquid market, everyone who owns the stock doesn't want to sell at least some of their stock for a bit less than the last trade price, and everyone who doesn't have the stock doesn't want to buy some of the stock for a bit more than the last trade price. With those assumptions, and a low-friction trading environment, we can say that the last trade value is a good midpoint of what people think one share is worth. If we then multiply it by the number of shares, we get an approximation of what the company is worth. In no way, shape or form does it not mean that there is 32 billion more invested in the company, or even used to purchase stock. There are situations where a 32 billion market cap swing could mean 32 billion more money was invested in the company: the company issues a pile of new shares, and takes in the resulting money. People are completely neutral about this gathering in of cash in exchange for dilluting shares. So the share price remains unchanged, the company gains 32 billion dollars, and there are now more shares outstanding. Now, in some sense, there is zero dollars currently invested in a stock; when you buy a stock, you no longer have the money, and the money goes to the person who no longer has the stock. The issue here is the use of the continuous tense of "invested in"; the investment was made at some point, but the money doesn't really stay in this continuous state of being. Unless you consider the investment liquid, and the option to take money out being implicit, it being a continuous action doesn't make much sense. Sometimes the money is invested in the company, when the company causes stocks to come into being and sells them. The owners of stocks has invested money in stocks in that they spent that money to buy the stocks, but the total sum of money ever spent on stocks for a given company is not really a useful value. The market capitalization is an approximation, which under the efficient market hypothesis (that markets find the correct price for things nearly instantly) is reasonably accurate, of the value the company has collectively to its shareholders. The efficient market hypothesis isn't accurate, but it is an acceptable rule of thumb. Now, this value -- market capitalization -- is arguably not the total value of a company: other stakeholders include bond holders, labour, management, various contract counter-parties, government and customers. Some companies are structured so that almost all value is captured not by the stock owners, but by contract counter-parties (this is sometimes used for hiding assets or debts). But for most large publically traded companies, it (in theory) shouldn't be far off. |
Is it sensible to keep savings in a foreign currency? | I don't think that it's a good idea to have cash savings in different currencies, unless you know which will be the direction of the wind for that currency. You can suffer a lot of volatility and losses if you just convert your savings to another currency without knowing anything about which direction that pair will take. Today we can see Brexit, but this is a fact that has been discounted by the market, so the currencies are already adjusted to that fact, but we don't know what will happen in the future, maybe Trump will collapse the US economy, or some other economies in Asia will raise to gain more leadership. If you want to invest in an economy, I think that it's a best idea to invest on companies that are working in that country. This is a way of moving your money to other currencies, and at least you can see how is the company performing. |
What is the best way to make a bet that a certain stock will go up in the medium term? | I think that those options might well be your best bet, given the potential 700% return in one year if you're right. You could look and see if any Synthetic Zeros (a Synthetic Zero is a derivative that will pay out a set amount if the underlying security is over a certain price point) exist for the share but chances are if they do they wouldn't offer the 700% return. Also might be worth asking the question at the quant stack exchange to see if they have any other ideas. |
How does the market adjust for fees in ETPs? | Because ETFs, unlike most other pooled investments, can be easily shorted, it is possible for institutional investors to take an arbitrage position that is long the underlying securities and short the ETF. The result is that in a well functioning market (where ETF prices are what they should be) these institutional investors would earn a risk-free profit equal to the fee amount. How much is this amount, though? ETFs exist in a very competitive market. Not only do they compete with each other, but with index and mutual funds and with the possibility of constructing one's own portfolio of the underlying. ETF investors are very cost-conscious. As a result, ETF fees just barely cover their costs. Typically, ETF providers do not even do their own trading. They issue new shares only in exchange for a bundle of the underlying securities, so they have almost no costs. In order for an institutional investor to make money with the arbitrage you describe, they would need to be able to carry it out for less than the fees earned by the ETF. Unlike the ETF provider, these investors face borrowing and other shorting costs and limitations. As a result it is not profitable for them to attempt this. Note that even if they had no costs, their maximum upside would be a few basis points per year. Lots of low-risk investments do better than that. I'd also like to address your question about what would happen if there was an ETF with exorbitant fees. Two things about your suggested outcome are incorrect. If short sellers bid the price down significantly, then the shares would be cheap relative to their stream of future dividends and investors would again buy them. In a well-functioning market, you can't bid the price of something that clearly is backed by valuable underlying assets down to near zero, as you suggest in your question. Notice that there are limitations to short selling. The more shares are short-sold, the more difficult it is to locate share to borrow for this purpose. At first brokers start charging additional fees. As borrowable shares become harder to find, they require that you obtain a "locate," which takes time and costs money. Finally they will not allow you to short at all. Unlimited short selling is not possible. If there was an ETF that charged exorbitant fees, it would fail, but not because of short sellers. There is an even easier arbitrage strategy: Investors would buy the shares of the ETF (which would be cheaper than the value of the underlying because of the fees) and trade them back to the ETF provider in exchange for shares of the underlying. This would drain down the underlying asset pool until it was empty. In fact, it is this mechanism (the ability to trade ETF shares for shares of the underlying and vice versa) that keeps ETF prices fair (within a small tolerance) relative to the underlying indices. |
Investing in dividend-yielding stocks with money borrowed from margin account? | I wouldn't recommend leveraged dividend fishing. Dividend stocks with such high dividends are highly volatile, you will run out of collateral to cover your trades very quickly |
What if 40% of the remaining 60% Loan To Value (ratio) is not paid, or the borrower wants to take only 60% of the loan? | Let me summarize your question for you: "I do not have the down payment that the lender requires for a mortgage. How can I still acquire the mortgage?" Short answer: Find another lender or find more cash. Don't overly complicate the scenario. The correct answer is that the lender is free to do what they want. They deem it too risky to lend you $1.1M against this $1.8M property, unless they have $700k up front. You want their money, so you must accept their terms. If other lenders have the same outlook, consider that you cannot afford this house. Find a cheaper house. |
Why are stocks having less institutional investors a “good thing”? | It's not necessarily bad but it can cause the stock price to become a lot more volatile. Depends on which side of the bet you're on ;) Suppose a hedge fund manager thinks a company is poorly run. He may buy a ton of shares so that he can get rid of the current CEO and replace it with his/her own. For the hedge fund and others long on the stock, this is good. Those who are trading options or using some short-term strategies could get screwed because of the sudden volatility. My next point is related to the above. What is the intrinsic value of a stock? The current price of a stock is the equilibrium of all investor's perception of the stock's value. Professionals make up a value for a stock using models such as DCF. Once they do so they trade based on what they believe the value of the stock is. You might calculate a stock is worth 70 and I believe it's 80 so the stock price is going to fluctuate a bit but it should keep within that range (assuming we're the only investors). Then comes a hedge fund manager, say Carl Icahn, and discloses a stake in our stock. "Wow, the stock must be really valuable!" Everyone starts buying this stock so up it goes to 90, simply because the guy who seems to know what he's doing bought it. The point here is that now it's not trading based on intrinsic value, now it's purely psychological. Ie. it's now a momentum stock, which you have no idea when it'll crash. Look at Tesla, Netflix, or just google momentum stocks. All the big crashes in stock prices happen when these big funds unload their stocks. A surge in supply will cut the price. The problem is you can't predict when some fund manager will decide to sell some stake of his. Tying everything together is liquidity. The more liquid a stock is, the easier it is to obtain and the less volatile it is. The more people playing the game, with not too big shares of stock, the faster the price will converge to some equilibrium and with less volatility. Institutional investors take away liquidity. |
How are stock buybacks not considered insider trading? | Buybacks do not increase the company's value. Cash is traded for outstanding shares. This is similar to a dividend, but instead of cash, investors receive a rising share-price. Whether an investor prefers a cash dividend or capital gains is less important than the outcome that their investment is gaining value for them. |
Why don't some places require a credit card receipt signature, and some do? | This is basically done to reduce costs and overhead, with agreement of the credit card issuers. When the card is physically present and the charge is low, the burden of keeping the signed receipts and of additional delays at the cash register is not worth the potential risk of fraud. Depending on the location and the specific charge-back history of the business, the limit above which signature is required differs. In one supermarket in the area I live they require signatures only on charges above $50. In another, 10 miles away from the first one, they require signatures on charges above $25. |
Stocks and Bankruptcy | As Mhoran said, the risks of buying a bankrupt company are huge, and even successful bankruptcy turnarounds don't involve keeping the same stock. For instance, the GM bankruptcy was resolved by the company more or less selling all its valuable assets (brands, factories, inventory) to a new version of itself, using that money to pay off what liabilities it could, and then dissolving. The new company then issued new stock, and you had to buy the new stock to see it rise; the old stock became worthless. AA could have gone the same way; Delta could have bought it out of bankruptcy and consumed it outright, with any remaining shareholders being paid off at market value. That's probably the best the market was hoping for. Instead, the deal is a much more equal merger; AMR brings a very large airport network and aircraft fleet to the table, and Delta brings its cash, an also-considerable fleet and network, and a management team that's kept that airline solvent. The stockholders, therefore, expect to be paid off at a much higher per-share price, either in a new combined stock, in Delta stock, or in cash. |
Is buying or selling goods for gold or silver considered taxable? | Of course. The rationale is exactly the same as always: profit is taxed. The fact that you use intermediate barter to make that profit is irrelevant. To clarify, as it seems that you think it makes a difference that no money "changed hands". Consider this situation: So far your cost is $10000. How will the tax authority address this? They will look at the fair market value of the barter. You got gold worth of $20000. So from their perspective, you got $20000, and immediately exchanged it into gold. What does it mean for you? That you're taxed on the $10000 gain you made on your product X (the $20000 worth of barter that you received minus the $10000 worth of work/material/expenses that you spend on producing the merchandise), and that you have $20000 basis in the gold that you now own. If in a year, when you plan to sell the gold, its price drops - you can deduct investment losses. If its price goes up - you'll have investment gain. But for the gain you're making on your product X you will pay taxes now, because that's when you realized it - sold the merchandize and received in return something else of a value. |
Are warehouse clubs like Costco and Sam's Club worth it? | I know that for me personally, if I buy that giant box of Goldfish instead of the bags, it doesn't mean I'm saving money... just eating a lot more Goldfish. The trick, I think, to buying in bulk is to make sure that you're not consuming in bulk. You're not likely to go through more dishwasher detergent just because you bought the big bottle, but you may find the kids are eating a lot more fruit snacks, or you're throwing away half of that huge bag of baby carrots that went bad, because you bought in bulk. |
Definition of “U.S. source” for US non-resident alien capital gains tax | The examples you provide in the question are completely irrelevant. It doesn't matter where the brokerage is or where is the company you own stocks in. For a fairly standard case of an non-resident alien international student living full time in the US - your capital gains are US sourced. Let me quote the following text a couple of paragraphs down the line you quoted on the same page: Gain or loss from the sale or exchange of personal property generally has its source in the United States if the alien has a tax home in the United States. The key factor in determining if an individual is a U.S. resident for purposes of the sourcing of capital gains is whether the alien's "tax home" has shifted to the United States. If an alien does not have a tax home in the United States, then the alien’s U.S. source capital gains would be treated as foreign-source and thus nontaxable. In general, under the "tax home" rules, a person who is away (or who intends to be away) from his tax home for longer than 1 year has shifted tax homes to his new location upon his arrival in that new location. See Chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses I'll assume you've read this and just want an explanation on what it means. What it means is that if you move to the US for a significant period of time (expected length of 1 year or more), your tax home is assumed to have shifted to the US and the capital gains are sourced to the US from the start of your move. For example: you are a foreign diplomat, and your 4-year assignment started in May. Year-end - you're not US tax resident (diplomats exempt), but you've stayed in the US for more than 183 days, and since your assignment is longer than 1 year - your tax home is now in the US. You'll pay the 30% flat tax. Another example: You're a foreign airline pilot, coming to the US every other day flying the airline aircraft. You end up staying in the US 184 days, but your tax home hasn't shifted, nor you're a US tax resident - you don't pay the flat tax. Keep in mind, that tax treaties may alter the situation since in many cases they also cover the capital gains situation for non-residents. |
Understanding the phrase “afford to lose” better | Keep in mind that it's a cliche statement used as non-controversial filler in articles, not some universal truth. When you were young, did you mom tell you to eat your vegetables because children are starving in Ethiopia? This is the personal finance article equivalent of that. Generally speaking, the statement as an air of truth about it. If you're living hand to mouth, you probably shouldn't be thinking about the stock market. If you're a typical middle class individual investor, you probably shouldn't be messing around with very speculative investments. That said, be careful about looking for some deeper meaning that just isn't there. If the secret of investment success is hidden in that statement, I have a bridge to sell you that has a great view of Brooklyn. |
Does a withdrawal of $10000 for 1st home purchase count against Roth IRA basis? | TL;DR: No, it doesn't count against the Roth IRA basis. You can find out by looking at Form 8606 Part III, which is the part for distributions from Roth IRA. Line 19 is the sum of nonqualified distributions, plus qualified first-time homebuyer distributions. You would put $10000 here. Then you would subtract $10000 on line 20 (qualified first-time homebuyer expenses) to get $0 on line 21. You enter your basis on line 22, but since line 21 was 0, you stop. You do not subtract anything from your basis. If you take out more than $10000, then it's only the part over $10000 that is subtracted from your basis. |
How much principal do I get back with a target-maturity ETF? | Adding a couple more assumptions, I'd compute about $18.23 would be that pay out in 2018. This is computed by taking the Current Portfolio's Holdings par values and dividing by the outstanding shares(92987/5100 for those wanting specific figures used). Now, for those assumptions: Something to keep in mind is that bonds can valued higher than their face value if the coupon is higher than other issues given the same risk. If you have 2 bonds maturing in 3 years of the same face value and same risk categories though one is paying 5% and the other is paying 10% then it may be that the 5% sells at a discount to bring the yield up some while the other sells at a premium to bring the yield down. Thus, you could have bonds worth more before they mature that will eventually lose this capital appreciation. |
Advice for opening an IRA as a newbie | As other people have indicated, traditional IRAs are tax deductable for a particular year. Please note, though, that traditional IRAs are tax deferred (not tax-free) accounts, meaning that you'll have to pay taxes on any money you take out later regardless of why you're making the withdrawal. (A lot of people mistakenly call them tax free, which they're not). There is no such thing as a "tax-free" retirement account. Really, in terms of Roth vs. Traditional IRAs, it's "pay now or pay later." With the exception of special circumstances like this, I recommend investing exclusively in Roth IRAs for money that you expect to grow much (or that you expect to produce substantial income over time). Just to add a few thoughts on what to actually invest in once you open your IRA, I strongly agree with the advice that you invest mostly in low-cost mutual funds or index funds. The advantage of an open-ended mutual fund is that it's easier to purchase them in odd increments and you may be able to avoid at least some purchase fees, whereas with an ETF you have to buy in multiples of that day's asking price. For example, if you were investing $500 and the ETF costs $200 per share, you could only purchase 2 shares, leaving $100 uninvested (minus whatever fee your broker charged for the purchase). The advantage of an ETF is that it's easy to buy or sell quickly. Usually, when you add money to a mutual fund, it'll take a few days for it to hit your account, and when you want to sell it'll similarly take a few days for you to get your money; when I buy an ETF the transaction can occur almost instantly. The fees can also be lower (if the ETF is just a passive index fund). Also, there's a risk with open-ended mutual funds that if too many people pull money out at once the managers could be forced to sell stocks at an unfavorable price. |
Large BUY LIMIT orders' effect on a stock's price | If an offered price is below what people are willing to sell for, it is simply ignored. (What happens if I offer to buy lots of cars as long as I only have to pay $2 each? Same thing.) |
In your 20s how much money should you have and how to properly use & manage it? | You need a budget. You need to know how much you make and how much you spend. How much you earn and what you choose to spend you money on is your choice. You have your own tolerance for risk and your own taste and style, so lifestyle and what you own isn't something that we can answer. The key to your budget is to really understand where you money goes. Maybe you are the sort of person who needs to know down to the penny, maybe you are a person who rounds off. Either way you should have some idea. How should I make a budget? and How can I come up with a good personal (daily) budget? Once you know what you budget is, here are some pretty standard steps to get started. Each point is a full question in of itself, but these are to give you a place to start thinking and learning. You might have other priorities like a charity or other organizations that go into your priority like. Regardless of your career path and salary, you will need a budget to understand where you money is, where it goes, and how you can reach your goals and which goals are reasonable to have. |
Relation between inflation rates and interest rates | When the inflation rate increases, this tends to push up interest rates because of supply and demand: If the interest rate is less than the inflation rate, then putting your money in the bank means that you are losing value every day that it is there. So there's an incentive to withdraw your money and spend it now. If, say, I'm planning to buy a car, and my savings are declining in real value, then if I buy a car today I can get a better car than if I wait until tomorrow. When interest rates are high compared to inflation, the reverse is true. My savings are increasing in value, so the longer I leave my money in the bank the more it's worth. If I wait until tomorrow to buy a car I can get a better car than I would be able to buy today. Also, people find alternative places to keep their savings. If a savings account will result in me losing value every day my money is there, then maybe I'll put the money in the stock market or buy gold or whatever. So for the banks to continue to get enough money to make loans, they have to increase the interest rates they pay to lure customers back to the bank. There is no reason per se for rising interest rates to consumers to directly cause an increase in the inflation rate. Inflation is caused by the money supply growing faster than the amount of goods and services produced. Interest rates are a cost. If interest rates go up, people will borrow less money and spend it on other things, but that has no direct effect on the total money supply. Except ... you may note I put a bunch of qualifiers in that paragraph. In the United States, the Federal Reserve loans money to banks. It creates this money out of thin air. So when the interest that the Federal Reserve charges to the banks is low, the banks will borrow more from the Feds. As this money is created on the spot, this adds to the money supply, and thus contributes to inflation. So if interest rates to consumers are low, this encourages people to borrow more money from the banks, which encourages the banks to borrow more from the Feds, which increases the money supply, which increases inflation. I don't know much about how it works in other countries, but I think it's similar in most nations. |
Does my net paycheck decrease as the year goes on due to tax brackets filling up? | Most countries with income tax, including the USA, design their withholding system so that in straightforward cases, tax is withheld from each month's paycheck on an annualized basis: tax for a month is calculated on the assumption that you will keep earning the same monthly amount for the rest of the year, and the withholding is set so that the tax is spread evenly across the year. Another way of putting that is that in practice you only get the tax brackets allocated proportionately throughout the year - so up till the end of August you'll only have been assigned 8/12 of the $37450 bracket, and so on. So if your income doesn't change and your general tax affairs don't change, your paycheck also shouldn't change. If your income is irregular or changes during the year then things can get more complicated. As other answers have noted, withholdings are calculated according to tables that normally just take into account that specific month's income. There are various possible changes to your tax affairs that might cause the withholdings to change. For example there'd be an impact from any change in your contributions to tax advantaged things like health insurance or retirement, health or education savings. You might also use form W-4 to change your withholdings yourself. Note that even with a regular income that doesn't change through the year, you might find yourself either owing money or being owed a refund when you file your taxes after the end of the year. It's worth making sure that your W-4 accurately records the allowances you are entitled to, to minimize or eliminate this adjustment. |
What is a good 5-year plan for a college student with $15k in the bank? | First thing to do right now, is to see if there's somewhere equally liquid, equally risk free you can park your cash for higher rate of return. You can do this now, and decide how much to move into less liquid investments on your own pace. When I was in grad school, I opened a Roth IRA. These are fantastic things for young people who want to keep their options open. You can withdraw the contributions without penalty any time. The earnings are tax free on retirement, or for qualified withdrawls after five years. Down payments on a first home qualify for example. As do medical expenses. Or you can leave it for retirement, and you'll not pay any taxes on it. So Roth is pretty flexible, but what might that investment look like? It in depends on your time horizon; five years is pretty short so you probably don't want to be too stock market weighted. Just recognize that safe short term investments are very poorly rewarded right now. However, you can only contribute earnings in the year they are made, up to a 5000 annual maximum. And the deadline for 2010 is gone. So you'll have to move this into an IRA over a number of years, and have the earnings to back it. So in the meanwhile, the obvious advice to pay down your credit card bills & save for emergencies applies. It's also worth looking at health and dental insurance, as college students are among the least likely to have decent insurance. Also keep a good chunk on hand in liquid accounts like savings or checking for emergencies and general poor planning. You don't want to pay bank fees like I once did because I mis-timed a money transfer. It's also great for negotiating when you can pay in cash up front; my car insurance for example, will charge you more for monthly payments than for every six months. Or putting a huge chunk down on a car will pretty much guarantee the best available dealer financing. |
Pros & cons of investing in gold vs. platinum? | Platinum use is pretty heavily overweight in industrial areas; according to the linked Wikipedia article, 239 tonnes of platinum was sold in 2006, of which 130 tonnes went to vehicles emissions control devices and another 13.3 tonnes to electronics. Gold sees substantial use as an investment as well as to hedge against economical decline and inflation, with comparatively little industrial ("real world", as some put it) use. That is their principal difference from an investment point of view. According to Wikipedia's article on platinum, ... during periods of economic uncertainty, the price of platinum tends to decrease due to reduced industrial demand, falling below the price of gold. Gold prices are more stable in slow economic times, as gold is considered a safe haven and gold demand is not driven by industrial uses. If your investment scenario is a tanking world economy, for reason of its large industrial usage, I for one would not count on platinum to not fall in price. Of course gold may fall in price as well, but since it is not primarily an industrial use commodity, I would personally expect gold to do better in such a scenario. |
Ways to save for child's college education where one need not commit to set contributions? [duplicate] | 529 plans. They accumulate earnings over time and by the time your child goes to college you will be able to withdraw funds for college TAX FREE. The best part about 529s is that there are several different options you can choose from, and you aren't limited to the plans sponsored by your state, you can use whichever plan works best for you. For example, I live in South Carolina and use Utah's Educational Savings Plan because it has no minimum amount to open one up and it has low fees. Hope this helped. Good luck with your search! |
Is there an advantage to keeping a liquid emergency fund if one also has an untapped line of credit? | People treat an emergency fund as some kind of ace-in-the-hole when it comes to financial difficulty, but it is only one of many sources of money that you can utilize. What is an emergency? First, you have to define what an emergency is. Is it a lost job? Is it an unplanned event (pregnancy, perhaps)? Is it a medical emergency? Is it the death of you or your spouse? Also, what does it mean to be unplanned? Is being so unhappy with your job that you give a 2-week notice an emergency? Is one month of planning an emergency? Two? Only you can answer these questions for yourself, but they significantly shape your financial strategy. Planning is highly dependent on your cashflow, and, for some people, it may take them a year to build enough savings to enable them to take 3 months off work. For others, they may be able to change their spending to build up enough for 3 months in 1 month. Also, you have to consider the length of the emergency. Job-loss is rarely permanent, but it's rarely short as well. The current average is 30.7 weeks: that's 7 months! Money in an Emergency There are six main places that people get money during a financial emergency: A good emergency strategy takes all six of these into account. Some emergencies may lean more on one source than the other. However, some of these are correlated. For example, in 2008, three things happened: the stock market crashed, unsecured debt dried up, and people faced financial emergency (lost jobs, cut wages). If you were dependent on a stock portfolio and/or a line of credit, you'd be up a creek, because the value of your investments suddenly decreased, and you can't really tap your now significantly limited line of credit. However, if you had a one or more of cash savings, unemployment income, and unemployment insurance, you would probably have been OK. Budgeting for an emergency When you say "financial emergency", most people think job loss. However, the most common cause of bankruptcy in the US is medical debt. Depending on your insurance situation, this could be a serious risk, or it may not be. People say you should have 3x-6x of your monthly income in savings because it's an easy, back-of-the-envelope way to handle most financial emergency risk, but it's not necessarily the most prudent strategy for you. To properly budget for an emergency, you need to fully take into account what emergencies you are likely to face, and what sources of financing you would have access to given the likely factors that led to that emergency. Generally, having a savings account with some amount of liquid cash is an important part of a risk-mitigation strategy. But it's not a panacea for every kind of emergency. |
Should I consolidate loans and cards, or just cards, leaving multiple loans? | First of all, congratulations on admitting your problem and on your determination to be debt-free. Recognizing your mistakes is a huge first step, and getting rid of your debt is a very worthwhile goal. When considering debt consolidation, there are really only two reasons to do so: Reason #1: To lower your monthly payment. If you are having trouble coming up with enough money to meet your monthly obligations, debt consolidation can lower your monthly payment by extending the time frame of the debt. The problem with this one is that it doesn't help you get out of debt faster. It actually makes it longer before you are out of debt and will increase the total amount of interest that you will pay to the banks before you are done. So I would not recommend debt consolidation for this reason unless you are truly struggling with your cashflow because your minimum monthly payments are too high. In your situation, it does not sound like you need to consolidate for this reason. Reason #2: To lower your interest rate. If your debt is at a very high rate, debt consolidation can lower your interest rate, which can reduce the time it will take to eliminate your debt. The consolidation loan you are considering is at a high interest rate on its own: 13.89%. Now, it is true that some of your debt is higher than that, but it looks like the majority of your debt is less than that rate. It doesn't sound to me that you will save a significant amount of money by consolidating in this loan. If you can obtain a better consolidation loan in the future, it might be worth considering. From your question, it looks like your reasoning for the consolidation loan is to close the credit card accounts as quickly as possible. I agree that you need to quit using the cards, but this can also be accomplished by destroying the cards. The consolidation loan is not needed for this. You also mentioned that you are considering adding $3,000 to your debt. I have to say that it doesn't make sense at all to me to add to your debt (especially at 13.89%) when your goal is to eliminate your debt. To answer your question explicitly, yes, the "cash buffer" from the loan is a very bad idea. Here is what I recommend: (This is based on this answer, but customized for you.) Cut up/destroy your credit cards. Today. You've already recognized that they are a problem for you. Cash, checks, and debit cards are what you need to use from now on. Start working from a monthly budget, assigning a job for every dollar that you have. This will allow you to decide what to spend your money on, rather than arriving at the end of the month with no idea where your money was lost. Budgeting software can make this task easier. (See this question for more information. Your first goal should be to put a small amount of money in a savings account, perhaps $1000 - $1500 total. This is the start of your emergency fund. This money will ensure that if something unexpected and urgent comes up, you won't be so cash poor that you need to borrow money again. Note: this money should only be touched in an actual emergency, and if spent, should be replenished as soon as possible. At the rate you are talking about, it should take you less than a month to do this. After you've got your small emergency fund in place, attack the debt as quickly and aggressively as possible. The order that you pay off your debts is not significant. (The optimal method is up for debate.) At the rate you suggested ($2,000 - 2,500 per month), you can be completely debt free in maybe 18 months. As you pay off those credit cards, completely close the accounts. Ignore the conventional wisdom that tells you to leave the unused credit card accounts open to try to preserve a few points on your credit score. Just close them. After you are completely debt free, take the money that you were throwing at your debt, and use it to build up your emergency fund until it is 3-6 months' worth of your expenses. That way, you'll be able to handle a small crisis without borrowing anything. If you need more help/motivation on becoming debt free and budgeting, I recommend the book The Total Money Makeover by Dave Ramsey. |
I have about 20 000 usd. How can invest them to do good in the world? | FTSE ethical investment index: http://www.ftse.com/products/indices/FTSE4Good "The FTSE4Good Index is a series of ethical investment stock market indices launched in 2001 by the FTSE Group. A number of stock market indices are available, for example covering UK shares, US shares, European markets, and Japan, with inclusion based on a range of corporate social responsibility criteria. Research for the indices is supported by the Ethical Investment Research Services (EIRIS)." - Wikipedia |
How does a lender compute equity requirement for PMI? | In regards to the legal recourse, no there is none. Also, despite your frustrations with Citi, it may not be their fault. Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs). This randomization mandate from the government was issued in order to combat fraud, but it is really causing more trouble for homeowners because it took away appraiser accountability. Basically, there's nothing we can do to fire an appraiser anymore. I've had appraiser do terrible jobs, just blatantly wrong, and have gone the distance with the dispute process only to find they won't change the value. My favorite real-life example came from an appraiser who got the bedroom count wrong (4 instead of 5); yet he took pictures of 5 bedrooms. The one he excluded he stated it shouldn't count because it didn't have a closet. Problem is, it DID have a closet. I had the homeowner take pictures of all of the closets in his house, and send them in. He still refused to change the count. After close to 2 months of the dispute process, the ARC came in and changed the count, but did not chagne the value, stating that the room count didn't increase the sqft, and there would be no adjustment in value. I was floored. The only solution we had was to wait for the appraisal to expire, then order it again; which we did. The new appraiser got the count right, and surprisingly (not really), it came in at the right value... In regards to the value necessary to avoid MI, they are likely using 80%, but it's not based on your current balance vs the value, it's based on the new loan amount (which will include costs, prepaids, skipped mortgage payments, etc) vs the value. Here are your options: Get a new appraisal. If you are confident the value is wrong, go somewhere else and get a new appraisal. Restructure the loan. Any competent Loan Officer would have noticed that you are very close to 80%, and should have offer you the option of splitting the mortgage into a 1st and 2nd loan. Keeping the first loan at 80%, and taking out a 2nd for the difference would avoid MI. Best Regards, Jared Newton |
Buying an option in the money, at the money, or out of the money | You can do some very crafty hedging with the variety of options. For instance, deep out of the money options are affected more by changes of market volatility, knowing this you can get long or short vega very easily, as opposed to necessarily betting on changes in the underlying asset. |
What could a malicious party potentially achieve by having *just* a name, account number, and sort code? | I think the answer to this must differ from country to country. I have lived in several countries where the normal everyday way of making a payment is to instruct my bank to transfer the money to the recipient's account. Of course this means I must know his name, SC and account number – but this is an accepted part of the system; businesses routinely display that information on invoices and correspondence. It is simply not regarded as confidential. DumbCoder's comment suggests that if he has that information he can take money from my account without my permission – in other words, my bank will pay money out of my account on someone else's request, without my authority. Is this correct? In which country or countries can this happen? (I must go there quickly and begin stealing people's money.) |
How do you translate a per year salary into a part-time per hour job? | All things being equal, a $55,000/year job with 25% benefit load is about $68,750/year. That's a little more than $34/hr. Your rate really depends on the nature of the work. If it's strictly a part-time job where you are an employee, you're probably looking at a $28-38/hr range. If you're an independent contractor, the rate should be higher, as you're paying the taxes, doing other administrative stuff. How much higher depends on the industry... software/it rates are usually 1.5-2x, construction is driven by the union scale in many places, etc. Note that you need to meet criteria defined by the IRS to successfully maintain independent contractor status from a tax POV. |
Are there capital gains taxes or dividend taxes if I invest in the U.S. stock market from outside of the country? | Found a great article (with bibliography) that covers taxation on investment activity by non resident aliens - even covers the special 15% tax on dividends for Canadian residents. It's (dividend tax rate) generally 30% for other NRAs (your 2nd question). And it confirmed my suspicion that there are no capital gains taxes for NRAs. (1st Q) Source: http://invest-faq.com/articles/tax-non-us-nat.html |
Why does ExxonMobil's balance sheet show more liabilities than assets? | Exxon Mobil is one of the most profitable corporations in the world. Their annual earnings are typically in the $10s of billions of dollars. They have revenues in the hundreds of billions of dollars per year. They also return $10+ billion dollars to their stockholders each year in dividends and stock purchases. That's with $300bn market capitalization - meaning they return 3% of their total market cap each year to their shareholders, aside from any movement in the stock itself. On the other hand, their total current liabilities are around $175bn. That's what, six months' revenue? Who'd you rather lend to, Exxon, or ... anyone else? AAPL and GOOG maybe better risks, but not by much. Almost every other company on the planet is a more dangerous risk. Judging them solely by Assets is silly - they don't exactly sit on the oil they extract. They take it out of the ground and sell it to people. |
How much power does a CEO have over a public company? | If Steve Jobs [Tim Cook] were to decide to try to kill Apple, does he have the power to do so? Yes. But he would be held accountable. In addition to the other answers, the CEO is a fiduciary of the corporation. That means his/her actions must be in good faith and look out for the well-being of the company. Otherwise, he could be sued and held liable for civil damages and even criminally prosecuted for malfeasance. |
Importance of dividend yield when evaluating a stock? | The dividend yield can be used to compare a stock to other forms of investments that generate income to the investor - such as bonds. I could purchase a stock that pays out a certain dividend yield or purchase a bond that pays out a certain interest. Of course, there are many other variables to consider in addition to yield when making this type of investment decision. The dividend yield can be an important consideration if you are looking to invest in stocks for an income stream in addition to investing in stocks for gain by a rising stock price. The reason to use Dividend/market price is that it changes the dividend from a flat number such as $1 to a percentage of the stock price, which thus allows it to be more directly compared with bonds and such which return a percentage yeild. |
Why do credit cards have minimum limits? | They have a minimum to discourage applications for that particular card. Every application costs them money because they have to pay the credit agencies to pull the applicant's credit history. So one way they save money and reduce their cost of business is to discourage people from applying if they're not creditworthy enough for that product. Credit card companies tailor their products into different income/credit brackets. Those who have less creditworthiness would be better suited for a different product than what you're referring, similar to those with greater creditworthiness. |
What does Capital Surplus mean? | I think it's easiest to illustrate it with an example... if you've already read any of the definitions out there, then you know what it means, but just don't understand what it means. So, we have an ice cream shop. We started it as partners, and now you and I each own 50% of the company. It's doing so well that we decide to take it public. That means that we will be giving up some of our ownership in return for a chance to own a smaller portion of a bigger thing. With the money that we raise from selling stocks, we're going to open up two more stores. So, without getting into too much of the nitty gritty accounting that would turn this into a valuation question, let's say we are going to put 30% of the company up for sale with these stocks, leaving you and me with 35% each. We file with the SEC saying we're splitting up the company ownership with 100,000 shares, and so you and I each have 35,000 shares and we sell 30,000 to investors. Then, and this depends on the state in the US where you're registering your publicly traded corporation, those shares must be assigned a par value that a shareholder can redeem the shares at. Many corporations will use $1 or 10 cents or something nominal. And we go and find investors who will actually pay us $5 per share for our ice cream shop business. We receive $150,000 in new capital. But when we record that in our accounting, $5 in total capital per share was contributed by investors to the business and is recorded as shareholder's equity. $1 per share (totalling $30,000) goes towards actual shares outstanding, and $4 per share (totalling $120,000) goes towards capital surplus. These amounts will not change unless we issue new stocks. The share prices on the open market can fluctuate, but we rarely would adjust these. Edit: I couldn't see the table before. DumbCoder has already pointed out the equation Capital Surplus = [(Stock Par Value) + (Premium Per Share)] * (Number of Shares) Based on my example, it's easy to deduce what happened in the case you've given in the table. In 2009 your company XYZ had outstanding Common Stock issued for $4,652. That's probably (a) in thousands, and (b) at a par value of $1 per share. On those assumptions we can say that the company has 4,652,000 shares outstanding for Year End 2009. Then, if we guess that's the outstanding shares, we can also calculate the implicit average premium per share: 90,946,000 ÷ 4,652,000 == $19.52. Note that this is the average premium per share, because we don't know when the different stocks were issued at, and it may be that the premiums that investors paid were different. Frankly, we don't care. So clearly since "Common Stock" in 2010 is up to $9,303 it means that the company released more stock. Someone else can chime in on whether that means it was specifically a stock split or some other mechanism... it doesn't matter. For understanding this you just need to know that the company put more stock into the marketplace... 9,303 - 4,652 == 4,651(,000) more shares to be exact. With the mechanics of rounding to the thousands, I would guess this was a stock split. Now. What you can also see is that the Capital Surplus also increased. 232,801 - 90,946 == 141,855. The 4,651,000 shares were issued into the market at an average premium of 141,855 ÷ 4,651 == $30.50. So investors probably paid (or were given by the company) an average of $31.50 at this split. Then, in 2011 the company had another small adjustment to its shares outstanding. (The Common Stock went up). And there was a corresponding increase in its Capital Surplus. Without details around the actual stock volumes, it's hard to get more exact. You're also only giving us a portion of the Balance Sheet for your company, so it's hard to go into too much more detail. Hopefully this answers your question though. |
Is there a significant danger to market orders as opposed to limit orders? | The Key aspect is the risk of market orders; You should be worried about point 2 & 3 when you are doing market orders. |
Options liquidity and trading positions larger than the daily volume? | One broker told me that I have to simply read the ask size and the bid size, seeing what the market makers are offering. This implies that my order would have to match that price exactly, which is unfortunate because options contract spreads can be WIDE. Also, if my planned position size is larger than the best bid/best ask, then I should break up the order, which is also unfortunate because most brokers charge a lot for options orders. |
Is laminate flooring an “Improvement” or “Depreciable Property”? | Aesthetics aside, laminate floor is attached to the floor and as such is a part of the building. So you depreciate it with the building itself, similarly to the roof. I believe the IRS considers these permanently attached because the foam itself is permanently attached, and is a part of the installation. To the best of my knowledge, the only flooring that is considered as a separate unit of property is tucked-in carpet or carpet pads (typically installed in commercial buildings, not homes). Everything else you'll have to prove to be an independent separate unit of property. Technically, you can take the tucked in carpet, and move it elsewhere as-is and be able to install it there assuming the size fits. You cannot do it with the foam (at the very least you'll need a new foam cover in the new location since you cannot take the foam with you from the old one). That's the difference between a "separate unit of property" and "part of the building". Note that the regulations in this area have changed significantly starting of 2014, so you may want to talk to a professional. |
Why do new car loans, used car loans, and refinanced loans have different rates and terms? | There are normally three key factors that define different kinds of loans, these factors affect the risk that the lender takes on and so the interest rate. The interest rate on any loan is linked to market interest rates; the lender shouldn't be able to receive a higher rate of interest for lending the money at no risk, and the level of risk that the lender believes the borrower to have. The three features of a particular loan are: These reduce the risk of complete or total non-payment (default) of the principal or any missed interest payments. Taken in order: Amortising Here some of the monthly payment pays a proportion of the underlying principal of the loan. This reduces the amount outstanding and so reduces the capacity for default on the full principal as part of the principal has already been paid. Security In a secured loan there is an asset such as a car, house, boat, gold, shares etc. that has a value on resale that is held against the loan. The lender may repossess the security if the borrower defaults and recover their money that way. This also acts as a "stick" using the loss of property to convince the borrower that it is better to keep paying the interest. The future value of the security will be taken into account when deciding how much this reduces the interest rate. Guarantor A guarantor to a loan guarantees that the borrower will repay the loan and interest in full and, if the borrower does not fulfil that obligation, the lender is able to seek legal redress from the guarantor for the borrower's debts. Each of these reduce the risk of the loan as detailed and so reduce the interest rate. The interest rate, then, is made up of three parts; the market interest rate (m) plus the interest rate premium for the borrower's own credit worthiness (c) minus the value of the features of the loan that help to reduce risk (l). The interest rate of the loan (r) is categorised as: r = m + c - l. Credit ratings themselves are an inexact science and even when two lenders are looking at the same credit score for the same person they will give a different interest rate premium. This is mostly for business reasons, and the shape of their loan book, that are too tedious to go through here. All in all the different types of loan give flexibility at the cost of a different interest rate. If you don't want the chance of your car being repossessed you don't take a secured loan, if you have a family member who can help and doesn't mind taking on your risk take a guaranteed loan. |
Is paying off your mortage a #1 personal finance priority? | It is one thing to take the advice of some numb-skulls on a web site, it is another thing to take the advice of someone who is really wealthy. For myself, I enjoy a very low interest rate (less than 3%) and am aggressively paying down my mortgage. One night I was contemplating slowing that down, and even the possibility of borrowing more to purchase another rental property. I went to bed and picked up Kevin O'Leary's book(Cold Hard Truth On Men, Women, and Money: 50 Common Money Mistakes and How to Fix Them), which I happened to be reading at the time. The first line I read, went something like: The best investment anyone can make is to pay off their mortgage early. He then did some math with the assumption that the person was making a 3% mortgage payment. Any conflicting advice has to be weighted against what Mr. O'Leary has accomplished in his life. Mark Cuban also has a similar view on debt. From what I heard, 70% of the Forbes richest list would claim that getting out of debt is a critical step to wealth building. My plan is to do that, pay off my home in about 33 (September '16) more weeks and see where I can go from there. |
Book or web site resources for an absolute beginner to learn about stocks and investing? | The Motley Fool's How to Invest How To Invest Benjamin Graham's The Intelligent Investor The Intelligent Investor If you like The Intelligent Investor then try Benjamin's Security Analysis. But that one is not a beginner book. |
Is this formula accurate for weighing the difference between an S-Corp and LLC? | It might be best to step back and look at the core information first. You're evaluating an LLC vs a Corporation (both corporate entities). Both have one or more members, and both are seen similarly (emphasis on SIMILAR here, they're not all the same) to the IRS. Specifically, LLC's can opt for a pass-through tax system, basically seen by the IRS the same way an S-Corp is. Put another way, you can be taxed as a corporate entity, or it's P/L statements can "flow through" to your personal taxes. When you opt for a flow-through, the business files and you get a separate schedule to tie into your taxes. You should also look at filing a business expense schedule (Schedule C) on your taxes to claim legitimate business expenses (good reference point here). While there are several differences (see this, and this, and this) between these entities, the best determination on which structure is best for you is usually if you have full time employ while you're running the business. S corps limit shares, shareholders and some deductions, but taxes are only paid by the shareholders. C corps have employees, no restrictions on types or number of stock, and no restrictions on the number of shareholders. However, this means you would become an employee of your business (you have to draw monies from somewhere) and would be subject to paying taxes on your income, both as an individual, and as a business (employment taxes such as Social Security, Medicare, etc). From the broad view of the IRS, in most cases an LLC and a Corp are the same type of entity (tax wise). In fact, most of the differences between LLCs and Corps occur in how Profits/losses are distributed between members (LLCs are arbitrary to a point, and Corps base this on shares). Back to your question IMHO, you should opt for an LLC. This allows you to work out a partnership with your co-worker, and allows you to disburse funds in a more flexible manner. From Wikipedia : A limited liability company with multiple members that elects to be taxed as partnership may specially allocate the members' distributive share of income, gain, loss, deduction, or credit via the company operating agreement on a basis other than the ownership percentage of each member so long as the rules contained in Treasury Regulation (26 CFR) 1.704-1 are met. S corporations may not specially allocate profits, losses and other tax items under US tax law. Hope this helps, please do let me know if you have further questions. As always, this is not legal or tax advice, just what I've learned in setting several LLCs and Corporate structures up over the years. EDIT: As far as your formulas go, the tax rate will be based upon your personal income, for any pass through entity. This means that the same monies earned from and LLC or an S-corp, with the same expenses and the same pass-through options will be taxed the same. More reading: LLC and the law (Google Group) |
Why do governments borrow money instead of printing it? | “Why do governments borrow money instead of printing it? (When printing money, one doesn't need to pay interest).” Good question. Numerous leading economists, including a couple of economics Nobel Laureates have asked the same question and concluded that borrowing can be dispensed with. First, Milton Freidman set out a monetary system in a paper in the American Economic Review which involved no government borrowing, and govt just printed money (in a responsible fashion of course) as and when needed. See: http://www.jstor.org/pss/1810624 A second Nobel Laureate with similar views was William Vickrey. A third economist with similar views (of Keynes’ era) was Abba Lerner. Keynes said of Lerner, “Lerner's argument is impeccable, but heaven help anyone who tries to put it across to the plain man at this stage of the evolution of our ideas”. |
What is the correct answer for percent change when the start amount is zero dollars $0? | Anyone who has any business looking at growth numbers will know thay are meaningless in the first year, So all they need to know is that it's the first year. It's no different than the Billboard music charts' treatment of the "last week's chart ranking" and "movement up/down" columns. It will help with visual layout if the figure used is about the same size as a percentage number. "New" fits nicely. |
Is it possible to make money off of a private company? | Another way to do this is go to work for that company. Companies in this situation normally offer low pay, long hours, and stock options. Given a sufficient grant, it could be all very lucrative or worthless. Even if you have no electronics background you might be able to work in a different capacity. There were secretaries at various companies that became wealthy off of their stock options. |
Where can I invest for the Short Term and protect against Inflation? | Your goals are mutually exclusive. You cannot both earn a return that will outpace inflation while simultaneously having zero-risk of losing money, at least not in the 2011 market. In 2008, a 5+% CD would have been a good choice. Here's a potential compromise... sacrifice some immediate liquidity for more earnings. Say you had $10,000 saved: In this scheme, you've diversified a little bit, have access to 50% of your money immediately (either through online transfer or bringing your bonds to a teller), have an implicit US government guarantee for 50% of your money and low risk for the rest, and get inflation protection for 75% of your money. |
Indicators a stock is part of a pump and dump scheme? | Note: the answer below is speculative and not based on any first-hand knowledge of pump-and-dump schemes. The explanation with spamming doesn't really makes sense for me. Often you see a stock jump 30% or more in a single day at a particular moment in time. Unlikely that random people read their emails at that time and decide to buy. What I think happens is the pumper does a somewhat risky thing: starts buying a lot of shares of a stock that has declined a lot and had low volumes during the previous days. As the price starts to increase other people start to notice the jump and join the buying spree (also don't forget that some probably use buy-stop orders which are triggered when the price reaches a particular level). Also there should be some automatic trading involved (maybe HFT firms do pump-and-dumps) as you have to trade a big volume in a relatively short time span. I think it is unlikely to be done by human operators. Another explanation would be that there is a group of pumpers (to spread the risk so to speak). Update: As I think more of it, it is not necessary to buy "a lot of shares". You could buy some shares, sell them to another pumper and buy from them again at a higher price in several iterations. I think this could also work if you do it fast enough. These scheme makes sense only you previously bought many shares at the low price, possibly during several weeks. Once the price is pumped high enough you can start selling the shares you previously bought (in the days preceding the pump). |
Why have U.S. bank interest rates been so low for the past few years? | I've wondered the same thing. And, after reading the above replies, I think there is a simpler explanation. It goes like this. When the bank goes to make a loan they need capital to do it. So, they can get it from the federal reserve, another bank, or us. Well, if the federal reserve will loan it to them for lets say 0.05%, what do you think they are going to be willing to pay us? Id say maybe 0.04%. Anyway, I could be wrong, but this makes sense to me. |
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. |
Why do car rental companies prefer/require credit over debit cards? | A few reasons make sense: They have a defined process for rentals, risk assessment, and customer credit. Especially for a large corporation, making changes to that process is not trivial, adds risk/uncertainty, and will be costly. Such changes for a relatively small customer base might not makes sense. Many rental companies DO allow you to rent with a debit card. Why do some businesses take cash only? With a debit card, there is no third party guarantee. With a credit card, the cash is coming from a well-established third party who will pay (assuming no disputes) and has a well-established history of paying. Even if the merchant holds your account, it is still your cash under the control of you and your bank until the deposit clears the merchants bank. It is not surprising they view that as more risk and potentially not worth hassling with debit. |
Why is the price of my investment only updated once per day? | Mutual funds are only traded once per day, while other securities can be traded any time during the day. Mutual funds are actually a collection of other things that have value, such as stocks. The price of a mutual fund is calculated at the end of the day after the market closes by looking at how much the collection of things changed in value during the day. |
What does the Fed do with the extra money it is printing? | Usually the FED uses newly printed money to buy US treasuries from Goldman Sachs, JP Morgan, etc.. These banks then lend out the new cash which expands the money supply. During the height of the crisis the FED printed over $1.0 Trillion and bought....well...almost anything the banks couldn't offload elsewhere. Mortgage Backed Securities, Credit Default Swaps, you name it - they bought it. Must be nice to always have a customer to sell your junk investments to. They also bought these securities at face value - not at market value. Chart from here. The FED announced in early November, 2010 that they will print another $600 billion and buy US Treasuries. They will be buying ALL the debt that will be sold by the US government for the next 8 months. This was admitted by the Dallas FED chairman in this article: For the next eight months, the nation’s central bank will be monetizing the federal debt. "Monetizing" is a fancy word for printing money. I think this was done because the US government ran out of customers for its debt. China has reduced its purchases of US debt and the Social Security Trust Fund is no longer buying US debt since it is running a deficit. |
What is a good way to keep track of your credit card transactions, to reduce likelihood of fraud? | Read your bill, question things that don't look familiar. People who steal credit card numbers don't bother to conceal themselves well. So if you live in Florida, and all of the sudden charges appear in Idaho, you should investigate. Keeping charge slips seems counter-productive to me. I already know that I bought gasoline from the station down the street, a slip of paper whose date may or may not align with the credit card bill is not very useful. The half-life for a stolen card is hours. So you tend to see a bunch of charges appearing quickly. If someone is stealing $20 a week from you over an extended period of time, the theif is probably someone you live or work with, and paper slips won't help you there either. |
Where to Park Proceeds from House Sale for 2-5 Years? | Your objectives are contradictory and/or not possible. Eliminating the non-taxable objective: You could divide the $100K in 5 increments, making a "CD ladder" $25K in 3mo CD (or savings a/c) $25K in 6 mo CD $25K in 9mo CD $25K in 1 yr CD or similar structure (6mo also works well) Every maturing CD you are able to access cash and/or invest in another longest maturity CD, and earn a higher rate of interest. This plan also works well to plan for future interest rates hikes. If you are forced to access (sell CD's) ALL the $$$ at any time, you will only lose accrued interest, none of the principal. All FDIC guaranteed. If non-taxable is the highest priority, "invest" in a tax-free money market fund....see Vanguard Funds. You will not have FDIC guarantee. |
Investing: P/E Ratio basic question | The idea here is to get an idea of how to value each business and thus normalize how highly prized is each dollar that a company makes. While some companies may make millions and others make billions, how does one put these in proper context? One way is to consider a dollar in earnings for the company. How does a dollar in earnings for Google compare to a dollar for Coca-cola for example? Some companies may be valued much higher than others and this is a way to see that as share price alone can be rather misleading since some companies can have millions of shares outstanding and split the shares to keep the share price in a certain range. Thus the idea isn't that an investor is paying for a dollar of earnings but rather how is that perceived as some companies may not have earnings and yet still be traded as start-ups and other companies may be running at a loss and thus the P/E isn't even meaningful in this case. Assuming everything but the P/E is the same, the lower P/E would represent a greater value in a sense, yes. However, earnings growth rate can account for higher P/Es for some companies as if a company is expected to grow at 40% for a few years it may have a higher P/E than a company growing earnings at 5% for example. |
How to get started with savings, paying off debt, and retirement? | The word you are looking for is "budget" You can't pay off debt if you are spending more than you earn. Therefore, start a budget that you both work on at the same time, and both agree 100% with. Evaluate your progress on that budget on a regular basis. From your question, you understand what your obligations are and you seem to manage money pretty well. Therefore your key to retirement is just the ticket you need. As newlyweds, you both have to be VERY aware that the main reason a marriage fails in the US is money issues. Starting out with a groundwork where you both agree to your budget and can keep it will help you a lot in your upcoming life. Then, for some details Sprinkle your charitable donations anywhere in the list where you feel it is important. |
The best credit card for people who pay their balance off every month | BillShrink.com lets you compare credit cards based on all your specifics (miles vs. cash, where you shop the most, etc) and tells you what the best card is for your specific habits. MOD EDIT Looks like billshrink.com is shut down. From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013. While we’re sad to say goodbye, we hope we’ve been able to help you be better informed and save some money along the way! The good news is that much of the innovative award-winning BillShrink technology will still be available via our StatementRewards platform (made available to customers by our partnering financial institutions). Moreover, we expect to re-launch a new money-saving service in the future. To see more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will retain your email address only to announce a preview of the new tool. If you do not want us to retain your email address, you can opt out in the form below. This opt out feature will be available until September 31, 2013. If you have already opted out previously, you do not need to opt out again. If you have any further questions, contact us at info@billshrink.com. Thanks, The BillShrink/Truaxis Team |
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