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Why do Americans have to file taxes, even if their only source of income is from a regular job? | There are a few reasons: 1) Deductions and credits. We have a lot of them. While I suppose we could pass this information on to our employers for them to file, why would we want to? That just unnecessarily adds a middle-man as well as sharing potentially private information more than it needs to be shared. This is the one that effects the most people. 2) Income sources. While normal employment, contract work, and normal investment income already gets reported to the IRS, this is not true for all sources of income. For one, the U.S. is almost completely by itself on actually taxing income that its citizens earn outside of the U.S. While this policy is completely absurd, the only way for the government to know about such income is for the person to report it, since the IRS can't require foreign employers to send information to them. Also, barter income as well as other income that doesn't meet the qualifications for the payer to be required to inform the government requires the employee to self-report. Similarly, capital gains on things outside of normal investments (real estate, for instance) require self-reporting. Having said all of this, U.S. reporting requirements are absurd and illogical. For instance, the IRS already knows about all of my stock trading activity. My broker is required to report it to them. Yet, I still have to list out every single trade on my own return, which is really tedious and completely redundant. For charitable contributions, on the other hand, I only have to give the IRS the final total without listing out all of the individual donations, despite the fact that they don't have that information made available to them by another source. It makes no sense at all, but such is the federal government. |
Finding a good small business CPA? | People to ask: Granted I live in a small town, but when the same guy's name comes up more than once that's who you should hire... |
What's the appropriate way to signify an S-Corp? | S-Corp is a corporation. I.e.: you add a "Inc." or "Corp." to the name or something of that kind. "S" denotes a specific tax treatment which may change during the lifetime of the corporation. It doesn't refer to a legal status. |
I'm 23 and was given $50k. What should I do? | I would be realistic and recognize that however you invest this money, it is unlikely to be a life-changing sum. It is not going to provide an income which significantly affects your monthly budget, nor is it going to grow to some large amount which will allow you to live rent-free or similar. Therefore my advice is quite different to every other answer so far. If I was you, I would: I reckon this might get you through half the money. Take the other $25,000 and go travelling. Plan a trip to Europe, South America, Asia or Australia. Ask your job for 3 or 6 months off, and quit it they won't give it you. Find a few places which you would really like to visit, and schedule around them a lot of time to go where you want. Book your flights in advance, or book one way, and put aside enough money for the return when you know where you'll be coming back from. Stay in hostels, a tent or cheap AirBnB. Make sure you have a chance to meet other people, especially other people who are travelling around. Figure out in advance how much it will cost you a day to live basically, and budget for a few beers/restaurants/cinema/concert tickets/drugs/whatever you do to have fun. It's really easy nowadays to go all sorts of places, and be very spontaneous about what you want to do next. You will find that everywhere in the world is different, all people have something unusual about them, and everywhere is interesting. You will meet some great people and probably become both more independent and better at making friends with strangers. Your friends in other countries could stay friends for life. The first time you see Rome, the Great Barrier Reef, the Panama canal or the Tokyo fish market will be with you forever. You have plenty of years to fill up your 401K. You won't have the energy, fearlessness and openmindedness of a 23 year old forever. Go for it. |
How and where can I deposit money to generate future payments / income? | Reversing your math, I am assuming you have $312K to work with. In that case, I would simply shop around your local banks and/or credit unions and have them compete for your money and you might be quite surprised how much they are willing to pay. A couple of months ago, you would be able to get about 4.25% from Israel Bonds in Canada on 5 years term (the Jubilee product, with minimum investment of $25K). It's a bit lower now, but you should still be able to get very good rates if you shop around tier-2 banks or credit unions (who are more hungry for capital than the well-funded tier-1 banks). Or you could look at preferred shares of a large corporation. They are different from common shares in the sense they are priced according to the payout rate (i.e. people buy it for the dividend). A quick screen from your favorite stock exchange ought to find you a few options. Another option is commercial bonds. You should be able to get that kind of return from investment grade (BBB- and higher) bonds on large corporations these days. I just did a quick glance at MarketWatch's Bond section (http://cxa.marketwatch.com/finra/BondCenter/Default.aspx) and found AAA grade bonds that will yield > 5%. You will need to investigate their underlying fundamentals, coupon rate and etc before investing (second thought, grab a introduction to bonds book from Chapters first). Hope these helps. |
Are credit cards not viewed as credit until you miss one payment? | This does not directly address the question, but how the Bank views your behaviour is not the same as a credit reporting bureau. If you do not "go deep" on your card at all, you may be deemed not to be exercising the facility, indeed they may ask you to reduce your credit limit. This is not the same as "missing a payment". At the same time, do not just make the minimum payment. Ideally you should clear it within 3 months. Think of it as a very short term line of credit. Not clearing the balance within three months (or turning it over) demonstrates a cash flow problem, as does clearing it from another card. Some banks call this "kite flying" after similar behaviour in older days with cheque accounts. If you use the credit and show you can pay it off, you should never need to ask for a credit increase, it will be offered. The Bureau will be informed of these offers. Also, depending upon how much the bank trusts you, the Bureau may see a "monthly" periodic credit review, which is good if you have no delinquencies. Amex does this as a rule. |
Car finance (loan) insurance requirements (store car) | Okay, definitive answer for this particular company (Toyota Finance) is (somewhat surprisingly, and glad I asked) it must be fully insured at all times, including liability, even if being stored. I asked at a dealership and they answered "just fire and theft (of course)" but I ended up calling their finance department and the answer was the opposite. So there you go. Thanks for the answers (and for trying to talk me out of wasting money). |
Personal finance software for Mac that can track stocks and mutual funds? (Even manual updating of share prices will do.) | Quicken for Mac will track stocks and mutual funds and allows you to set the "home" currency. |
How to know which companies enter the stock market? | Thanks to the other answers, I now know what to google for. Frankfurt Stock Exchange: http://en.boerse-frankfurt.de/equities/newissues London Stock Exchange: http://www.londonstockexchange.com/statistics/new-issues-further-issues/new-issues-further-issues.htm |
What is insider trading exactly? | Using inside sensitive information about corporate and using the same to deal in securities, before the exchanges are made aware of the information. Its mostly used in derivatives to get maximum returns on investmens, but Its illegal in all the exchanges |
At what age should I start or stop saving money? | While there is no age limit, bear in mind that saving money makes sense only if it doesn't delay your paying off expensive debt. If you have credit cards or expensive loans you would be best placed to focus on paying them down before saving a lot. If you save and keep debt, you'll effectively lose money as the interest on your debt will usually be higher than you can earn on savings. Having said that, it's worth saving a small amount anyway to have as an emergency fund. As you pay off your debt, start saving the money you no longer have to pay out and it will soon pay dividends. |
What should I do with $4,000 cash and High Interest Debt? | When paying off multiple debts there is a protocol that many support. Payoff your debts according to the snowball method. The snowball method proposes that you make minimum payments on all debts except the smallest one. Payoff the smallest debt as quickly as possible. As smaller debts are paid off, that makes one less minimum payment you need to make, leaving you with more money to put against the next smallest debt. So in your case, pay off the smaller debt completely, then follow up on the larger one by making regular payments at least equal to the sum of your two current minimum payments. You'll see immediate progress in tackling your debt and have one less minimum to worry about, which can serve as a little safety of it's own if you have a bad month. As to saving the thousand dollars, that is pragmatic and prudent. It's not financially useful (you won't make any money in a savings account), but having cash on hand for emergencies and various other reasons is an important security for modern living. As suggested in another answer, you can forgo saving this thousand and put it against debt now, because you will have a freed up credit card. Credit can certainly give you that same security. This is an alternative option, but not all emergencies will take a credit card. You typically can't make rent with your credit card, for example. Good luck paying your debts and I hope you can soon enjoy the freedom of a debt free life. |
Is Cash Value Life Insurance (“whole life” insurance) a good idea for my future? | I have an answer and a few comments. Back to the basics: Insurance is purchased to provide protection in case of a loss. It sounds as though you are doing well, from a financial perspective. If you have $0 of financial obligations (loans, mortgages, credit cards, etc.) and you are comfortable with the amount that would be passed on to your heirs, then you DO NOT NEED LIFE INSURANCE. Life insurance is PROTECTION for your heirs so that they can pay off debts and pay for necessities, if you are the "bread-winner" and your assets won't be enough. That's all. Life insurance should never be viewed as an investment vehicle. Some policies allow you to invest in funds of your choosing, but the fees charged by the insurance company are usually high. Higher than you might find elsewhere. To answer your other question: I think NY Life is a great life insurance company. They are a mutual company, which is better in my opinion than a stock company because they are okay with holding extra capital. This means they are more likely to have the money to pay all of their claims in a specific period, which shows in their ratings: http://www.newyorklife.com/about/what-rating-agencies-say Whereas public companies will yield a lower return to their stock holders if they are just sitting on additional capital and not paying it back to their stock holders. |
Most common types of financial scams an individual investor should beware of? | In the case of an investment strategy, if you don't retain custodianship over your funds, or at least determine who is the custodian, then walk away. You should be able to get accurate account statements from a trustworthy third party at all times. |
Making $100,000 USD per month, no idea what to do with it | I would be more than happy to find a good use for your money. ;-) Well, you have a bunch of money far in excess of your regular expenses. The standard things are usually: If you are very confused, it's probably worth spending some of your windfall to hire professional help. It beats you groping in the dark and possibly doing something stupid. But as you've seen, not all "professionals" are equal, and finding a good one is another can of worms. If you can find a good one, it's probably worth it. Even better would be for you to take the time and thoroughly educate yourself about investment (by reading books), and then make a knowledgeable decision. Being a casual investor (ie. not full time trader) you will likely arrive, like many do, at a portfolio that is mostly a mix of S&P ETFs and high grade (eg. govt and AAA corporate) bonds, with a small part (5% or so) in individual stock and other more complicated securities. A good financial advisor will likely recommend something similar (I've had good luck with the one at my credit union), and can guide you through the details and technicalities of it all. A word of caution: Since you remark about your car and house, be careful about upgrading your lifestyle. Business is good now and you can afford nicer things, but maybe next year it's not so good. What if you are by then too used to the high life to give it up, and end up under mountains of debt? Humans are naturally optimistic, but be wary of this tendency when making assumptions about what you will be able to afford in the future. That said, if you really have no idea, hey, take a nice vacation, get an art tutor for the kids, spend it (well, ideally not all of it) on something you won't regret. Investments are fickle, any asset can crash tomorrow and ruin your day. But often experiences are easier to judge, and less likely to lose value over time. |
Super-generic mutual fund type | You can also create a CD ladder (say 1/3 in a 6 month CD, 1/3 in a 1 year CD, 1/3 in a 2 year CD) with half of your emergency fund money. You always want to leave some of it in a liquid account so you can get at it immediately without any interest penalty. CD's provide higher interest than a savings account. By staggering the lengths of the CD's, you give yourself more options, and can roll them over into CD's with higher rates (since interest rates are soooo low right now) as the CD's mature. |
What does it mean for a company to have its market cap larger than the market size? | First read mhoran's answer, Then this - If the company sold nothing but refrigerators, and had 40% market share, that's $4M/yr in sales. If they have a 30% profit margin, $1.2M in profit each year. A P/E of 10 would give a stock value totaling $12M, more than the market size. The numbers are related, of course, but one isn't the maximum of the other. |
What is a bond fund? | I used the term "bond fund" to mean a mutual fund which invests in bonds. Vanguard has a list. If you live in PA, OH, MA, FL, CA, NJ, or NY there are tax free funds you can invest in on that list. |
What exactly is a “bad,” “standard,” or “good” annual raise? If I am told a hard percentage and don't get it, should I look elsewhere? | Keep in mind that unless you have a contract that says you get a certain amount of raise every year, the employer is not required to give you any raise. The quality of a raise is too subjective for anyone to tell you how to judge it. You either get a raise you can live with, it makes you content/happy, and you continue working there, or you get a raise that does not satisfy you, and you jump ship to get more money. Some (most?) employers know that raises can be the tipping point for employees deciding to leave. If you consistently receive raises greater than inflation rate, the message is that the employer values you. If the opposite, they value you enough to continue your employment, but are willing to replace you if you decide to leave. Key thing here is there are three ways of getting increased pay with your current employer. Cost of living or annual raise is the one that we are discussing. Merit based raises are a second way. If you think you deserve a raise, due to loyal consistent contribution, or contributing above your duty, or for whatever reason, then ask for a raise. The third way is to be promoted or transferred to a higher paying position. Often times, you should also make your case to your supervisor why you should have the new position, similar to asking for a merit raise. |
Why would a tender offer be less than the market price? | Rational shareholders wouldn't accept such an offer. The company making the offer is simply trying to get a deal with questionable — though not illegal — tactics. Your answer is actually in the link you provided. Quoting from the fourth paragraph [emphasis is mine]: The SEC has cautioned investors about mini-tender offers, noting that "[s]ome bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price." The SEC's tips for investors regarding mini-tender offers may be found on the SEC's Web site at http://www.sec.gov/investor/pubs/minitend.htm. There's a lot more information at the SEC web page mentioned. One part I'll highlight from the SEC web page mentions another reason for a mini-tender: Investors need to scrutinize mini-tender offers carefully. Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price. Others make mini-tender offers at a premium – betting that the market price will rise before the offer closes and then extending the offer until it does or improperly canceling if it doesn't. You'll also find a lot more information at Wikipedia - Mini-tender offer. |
What are the differences between an investment mortgage and a personal mortgage? | I used to own a few investment properties, so I'm pretty familiar with this. As MrChrister mentions, lenders see investment mortgages as higher risk. People who fall into financial trouble are much more likely to let their investment properties go than their personal residence. Consequently, the interest rates and downpayment requirements are generally higher. Typically a mortgage for an investment property will require 20% down, vs. as low as 3-5% down for a personal residence. With excellent credit and some shopping around, you could probably do 10% down. Interest rates are typically about a half-percent higher as well. You'll also find that the more investment properties you have, the harder it becomes to finance new ones. Banks look at debt-to-income ratios to determine if you are over extended. Typically banks like to see that your housing payments are less than 20% or so of your income. However, with rental properties, housing payments generally account for far more than 20% of your rental income. Other income you have can offset that, but after buying 2-3 houses or so, your DTI generally creeps into the range where lenders are uncomfortable lending to you anymore. This is why you'll find that many rental properties are bought on land contracts with owner financing rather than with mortgages. |
Do I need to pay tax on the amount of savings I have in the bank? | Not for the amount in the accounts but for the interest you earn per year is taxable. But the sum of your all taxable incomes is under the limit, then you dont need to pay any income tax. The limit is available at wiki here But you should intimate your bank not to deduct TDS (Tax Deducted at Source) by submitting Form 15G/15H (which will be normally available in Bank itself), provided your total interest income for the year will not fall within overall taxable limits. You may calculate your income tax amount at Official website at here |
Do credit ratings (by Moody's, S&P, and Fitch) have any relevance? | They've pretty much shot any credibility they possessed. Follow the money. |
Do banks give us interest even for the money that we only had briefly in our account? | As mentioned in other answers the interest you make is negligible and the calculations would depend on the bank. In saying that the general trend is calculate daily, pay monthly. A typical scenario would be that every night at midnight the interest for your account at that point in time is calculated. This occurs every midnight and at the end of the month the sum of those calculations will be added to your account. You could have had several significant transactions pass through your account in one day although if the interest is calculated at a specific point in time some transactions may not contribute to any interest. These calculations are worth thinking about, even in circumstances of negligible returns, as it could assist when considering combining credit cards with home loan offset accounts so it is not a complete waste of time to understand how interest is calculated. The more you know ;) |
How do you determine “excess cash” for Enterprise Value calculations from a balance sheet? | Excess Cash = Cash & Equivalents + Long-Term Investments - Current Liabilities The problem this calculation of excess cash is that "long-term investments" can be illiquid things like real estate. Another flaw is that it gives no credit for Current Assets, like receivables, which can be used to offset Current Liabilities. The first thing I'd do is "net out" Current Assets and Current Liabilities, then add Cash back in. Excess Cash = Current Assets - Current Liabilities + Cash & Equivalents. It would be nice if GAAP would require Long-Term Investments to be broken out as a) liquid long-term investments (stocks, bonds) b) illiquid long-term investments (real estate, private equity, etc) |
Any difference between buying a few shares of expensive stock or a bunch of cheap stock | I was thinking that the value of the stock is the value of the stock...the actual number of shares really doesn't matter, but I'm not sure. You're correct. Share price is meaningless. Google is $700 per share, Apple is $100 per share, that doesn't say anything about either company and/or whether or not one is a better investment over the other. You should not evaluate an investment decision on price of a share. Look at the books decide if the company is worth owning, then decide if it's worth owning at it's current price. |
Pros and Cons of Interest Only Loans | The main disadvantage is that interest rates are higher for the interest-only loan. It's higher risk to the bank, since the principal outstanding is higher for longer. According to the New York Times, "Interest rates are usually an eighth- to a half-percentage point higher than on fully amortized jumbo loans." They're also tougher to qualify for, and fewer lenders offer them, again due to the risk to the bank. Since you can always put extra towards the principal, strictly speaking, these are the only downsides. The upside, of course, is that you can make a lower payment each month. The question is what are you doing with this? If this is the only way you can afford the payments, there's a good chance the house is too expensive for you. You're not building equity in the home, and you have the risk of being underwater if the house price goes down. If you're using the money for other things, or you have variable income, it might be a different story. For the former, reinvesting in a business you own might be a reason, if you're cognizant of the risks. For the latter, salespeople on commission, or financial industry types who get most of their income in bonuses, can benefit from the flexibility. |
Optimal way to use a credit card to build better credit? | nan |
devastated with our retirement money that we have left | Get a job, if you don't have one right now. Take deductions from your paycheck for an IRA or 401K if the company has one. |
How do Islamic Banking give loans for housing purposes? | As I understand it, if the "borrower" puts a down payment of 20% and the bank puts down 80%, then the bank and the "borrower" own the home jointly as tenants in common with a 20%-80% split of the asset amongst them. The "borrower" moves into the home and pays the bank 80% of the fair rental value of the home each month. {Material added/changed in edit: For the purposes of illustration, suppose that the "borrower" and the bank agree that the fair rental per month is 0.5% of the purchase cost. The "borrower" pays 80% of that amount i.e. 0.4% of the purchase cost to the bank on a monthly basis. The "borrower" is not required to do so but may choose to pay more money than this 0.4% of the purchase cost each month, or pay some amount in a lump sum. If he does so, he will own a larger percentage of the house, and so future monthly payments will be a smaller fraction of the agreed-upon fair rental per month. So there is an incentive to pay off the bank.} If and when the house is sold, the sale price is divided between "borrower" and bank according to the percentage of ownership as of the date of sale. So the bank gets to share in the profits, if any. On the other hand, if the house is sold for less than the original purchase price, then the bank also suffers in the loss. It is not a case of a mortgage being paid off from the proceeds and the home-owner gets whatever is left, or even suffering a loss when the dust has settled; the bank gets only its percentage of the sale price even if this amount is less than what it put up in the first place minus any additional payments made by the "borrower". I have no idea how other costs of home ownership (property taxes, insurance, repair and maintenance) or improvements, additions, etc are handled. Ditto what happens on Schedule A if such a "loan" is made to a US taxpayer. |
Is the Net Profit the 'final word' on a company's health? | To answer your question briefly: net income is affected by many things inside and outside of management control, and must be supplemented by other elements to gain a clear picture of a company's health. To answer your question in-depth, we must look at the history of financial reporting: Initially, accounting was primarily cash-based. That is, a business records a sale when a customer pays them cash, and records expenses when cash goes out the door. This was not a perfectly accurate system, as cashflow might be quite erratic even if sales are stable (collection times may differ, etc.). To combat problems with cash-based accounting, financial reporting moved to an accrual-based system. An accrual is the recording of an item before it has fully completed in a cash transaction. For example, when you ship goods to a customer and they owe you money, you record the revenue - then you record the future collection of cash as a balance sheet item, rather than an income statement item. Another example: if your landlord charges you rent on December 31st for the past year, then in each month leading up to December, you accrue the expense on the income statement, even though you haven't paid the landlord yet. Accrual-based accounting leaves room for accounting manipulation. Enron is a prime example; among other things, they were accruing revenue for sales that had not occurred. This 'accelerated' their income, by having it recorded years before cash was ever collectible. There are specific guidelines that restrict doing things like this, but management will still attempt to accelerate net income as much as possible under accounting guidelines. Public companies have their financial statements audited by unrelated accounting firms - theoretically, they exist to catch material misstatements in the financial statements. Finally, some items impacting profit do not show up in net income - they show up in "Other Comprehensive Income" (OCI). OCI is meant to show items that occurred in the year, but were outside of management control. For example, changes in the value of foreign subsidiaries, due to fluctuations in currency exchange rates. Or changes in the value of company pension plan, which are impacted by the stock market. However, while OCI is meant to pick up all non-management-caused items, it is a grey area and may not be 100% representative of this idea. So in theory, net income is meant to represent items within management control. However, given the grey area in accounting interpretation, net income may be 'accelerated', and it also may include some items that occurred by some 'random business fluke' outside of company control. Finally, consider that financial statements are prepared months after the last year-end. So a company may show great profit for 2015 when statements come out in March, but perhaps Jan-March results are terrible. In conclusion, net income is an attempt at giving what you want: an accurate representation of the health of a company in terms of what is under management control. However it may be inaccurate due to various factors, from malfeasance to incompetence. That's why other financial measures exist - as another way to answer the same question about a company's health, to see if those answers agree. ex: Say net income is $10M this year, but was only $6M last year - great, it went up by $4M! But now assume that Accounts Receivable shows $7M owed to the company at Dec 31, when last year there was only $1M owed to the company. That might imply that there are problems collecting on that additional revenue (perhaps revenue was recorded prematurely, or perhaps they sold to customers who went bankrupt). Unfortunately there is no single number that you can use to see the whole company - different metrics must be used in conjunction to get a clear picture. |
What could a malicious party potentially achieve by having *just* a name, account number, and sort code? | When you want to pay a bill on line there are several ways to do it. You can give them your credit card details: Name on Card, zip code, credit card number, and 3 or 4 digit security code on the back. Most of the information is available on the card or via an easy Google search. If the crook has your card they can use it to buy something. You can contact your bank's website and establish a one time or recurring transfer. You provide the information about the person/company. Your bank knows who you are because you used a secure system and your password. Their bank accepts the money because who would refuse money, they don't care who you are. You can provide the company with your bank info (bank number, your account number, and your name). If your bank limits their transactions via this method only to legitimate organizations, then your money will only be sent to legitimate organizations. But if the organization has no way of knowing who is on the other end of the phone or webpage, they may be withdrawing money from a bank account without the account owners permission. In the example article a person found a charity that had lax security standards, they were recognized by the bank as a legitimate organization, so the bank transferred the money. The charity will point to the form and say they had permission from the owner, but in reality they didn't. The subject of the article was correct, all the info required is on every check. It is just that most people are honest, and the few security hurdles that exist do stop most of the fraud. |
How do I build wealth? | CEOs are compensated with stocks and options on top of their salary. Most is in the form of stocks and options. You may see them with a fancy car, but they don't necessarily possess the car, house, etc. They merely control it, which is nearly as good. You may lease it, or time share it. It might be owned by the company and provided as a perk. To earn a million, there are 4 ways: a job, self-employed, own a business, and invest. The fastest way is to own a business. The slowest way is a job or self-employed. Investing is medium. To learn more, read Rich Dad's Cashflow Quadrants. |
How to deal with the credit card debt from family member that has passed away? | Sorry for your loss. I am not a lawyer and this isn;t legal advice -- which I am not licensed to give. But I've had to deal with some debt situations of my own. I think the worst case scenario is the creditor can get a judgment, but that won't be against you unless you were a co-signor. The collectors are going to prey on your decency to make you feel like you should pay it, but you are under no legal obligation to do so. If they file in court and then win a judgment, they may be able to collect on the assets of the estate. You mention no money but you mention a house. That is an asset with value, and putting it in your name isn't going to do much. You should see a lawyer on this, because it seems logical that they could collect on the value of the house at the time of the death, and even if it was willed to you it can still be attacked to pay the debt. Here is a good write-up on NJ death and debt and whether it can be inherited by the adult children: https://www.atrbklaw.com/bankruptcy-resources/83-articles/103-can-you-inherit-your-dead-parent-s-debts |
Why invest in becoming a landlord? | why does it make sense financially to buy property and become a landlord? Because then your investment generates cash instead of just sitting idle. All taxes, fees and repairs aside it would take almost 21 years before I start making profits. No - your profit will be the rents that you collect (minus expenses). You still have an asset that is worth roughly what you paid for it (and might go up in value), so you don't need to recoup the entire cost of the property before making a profit. Compared to investing the same 150k in an ETF portfolio with conservative 4% in annual returns I would have made around 140k € after taxes in the same 21 years i.e. almost doubled the money. If you charge 600 € / month (and never miss a month of rental income), after 21 years you have made 151k € in rents plus you still have a property. That property is most likely going to be worth more than you paid for it, so you should have at least 300k € in assets. Having said all that, it does NOT always make sense to invest in rental property. Being a landlord can be a hard job, and there are many risks involved that are different that risks in financial investments. |
What expenses do most people not prepare for that turn into “emergencies” but are not covered by an Emergency Fund? | The most obvious one these days is unexpected and extended unemployment. If you are living paycheck to paycheck, you are asking for trouble in this economy. |
I'm 23 and was given $50k. What should I do? | First of all, I am sorry for your loss. At this time, worrying about money is probably the least of your concerns. It might be tempting to try to pay off all your debts at once, and while that would be satisfying, it would be a poor investment of your inheritance. When you have debt, you have to think about how much that debt is costing you to keep open. Since you have 0%APR on your student loan, it does not make sense to pay any more than the minimum payments. You may want to look into getting a personal loan to pay off your other personal debts. The interest rates for a loan will probably be much less than what you are paying currently. This will allow you to put a payment plan together that is affordable. You can also use your inheritance as collateral for the loan. Getting a loan will most likely give you a better credit rating as well. You may also be tempted to get a brand new sports car, but that would also not be a good idea at all. You should shop for a vehicle based on your current income, and not your savings. I believe you can get the same rates for an auto loan for a car up to 3 years old as a brand new car. It would be worth your while to shop for a quality used car from a reputable dealer. If it is a certified used car, you can usually carry the rest of the new car warranty. The biggest return on investment you have now is your employer sponsored 401(k) account. Find out how long it takes for you to become fully vested. Being vested means that you can leave your job and keep all of your employer contributions. If possible, max out, or at least contribute as much as you can afford to that fund to get employee matching. You should also stick with your job until you become fully vested. The money you have in retirement accounts does you no good when you are young. There is a significant penalty for early withdrawal, and that age is currently 59 1/2. Doing the math, it would be around 2052 when you would be able to have access to that money. You should hold onto a certain amount of your money and keep it in a higher interest rate savings account, or a money market account. You say that your living situation will change in the next year as well. Take full advantage of living as cheaply as you can. Don't make any unnecessary purchases, try to brown bag it to lunch instead of eating out, etc. Save as much as you can and put it into a savings account. You can use that money to put a down payment on a house, or for the security and first month's rent. Try not to spend any money from your savings, and try to support yourself as best as you can from your income. Make a budget for yourself and figure out how much you can spend every month. Don't factor in your savings into it. Your savings should be treated as an emergency fund. Since you have just completed school, and this is your first big job out of college, your income will most likely improve with time. It might make sense to job hop a few times to find the right position. You are much more likely to get a higher salary by changing jobs and employers than you are staying in the same one for your entire career. This generally is true, even if you are promoted at the by the same employer. If you do leave your current job, you would lose what your employer contributed if you are not vested. Even if that happened, you would still keep the portion that you contributed. |
Found an old un-cashed paycheck. How long is it good for? What to do if it's expired? | This varies by jurisdiction somewhat but speaking as a Canadian, a small business owner, and accountant (unregistered but some courses and accounting for multiple businesses) this is the answer if you were in Canada. In Canada the cheque cashing limit is 6 months. Therefor any bank will refuse to cash this cheque. It would be totally morally and legally acceptable to ask for a replacement cheque from your employer. In Canada they would generally have no problem issuing a replacement; in other jurisdictions with differing time limits they might want to cancel the original cheque first. |
How do you find out who the investors are in a U.S. stock? e.g. how ownership may be concentrated? | I don't think that you will be able to find a list of every owner for a given stock. There are probably very few people who would know this. One source would be whoever sends out the shareholder meeting mailers. I suspect that the company itself would know this, the exchange to a lesser extent, and possibly the brokerage houses to a even lesser extent. Consider these resources: |
Does “cash in lieu of dividend” incur any tax consequences in an IRA? | In a (not Roth) IRA, withdrawals are generally already taxed as regular income. So there should be no tax disadvantage to earning payment in lieu of dividends. It's possible that there is an exception for IRAs but I was unable to find one and I cannot see the reason for one since the dividend tax rate is usually lower than the income tax rate (which is why some company owners elect to receive part of the company profits via dividend rather than all through their salary). |
In Canada, how much money can I gift a friend or family member without them being taxed on it? | Canada doesn't seem to have a gift tax. http://www.taxtips.ca/personaltax/giftsandinheritances.htm |
Ballpark salary equivalent today of “healthcare benefits” in the US? | As a contractor, I have done this exact calculation many times so I can compare full time employment offers when they come. The answer varies greatly depending on your situation, but here's how to calculate it: So, subtracting the two and you get I've run many different scenarios with multiple plans and employers, and in my situation with a spouse and 1 child, the employer plans usually ended up saving me approximately $5k per year. So then, to answer your question: ...salary is "100k", "with healthcare", or then "X" "with no healthcare" - what do we reckon? I reckon I would want to be paid $5K more, or $105K. This is purely hypothetical though and assumes there are no other differences except for with or without health insurance. In reality, contractor vs employee will have quite a few other differences. But in general, the calculation varies by company and the more generous the employer's health benefits, the more you need to be compensated to make up for not having it. Note: the above numbers are very rough, and there are many other factors that come into play, some of which are: As a side note, many years ago, during salary talks with a company, I was able to negotiate $2K in additional yearly salary by agreeing not to take the health insurance since I had better insurance through my spouse. Health insurance in the US was much cheaper back then so I think closer to $5K today would be about right and is consistent with my above ballpark calculation. I always wondered what would have happened if I turned around and enrolled the following year. I suspect had I done that they could not have legally lowered my salary due to my breaking my promise, but I wouldn't be surprised if I didn't get a raise that year either. |
How to calculate car insurance quote | Question 1: Yes Question 2: There is no simple formula. Car insurance is mostly Statistics, because you have so many millions of cases that the variance is really low. This also means that, because the cost can be estimated so precisely, it is difficult to make an offer better than the competitors. For that reason every insurance company makes there own, arbitrary, segmentation of the data which leads them identify low risk groups they can offer a bonus to. Common ones are type of car or and driving experience, but it could be anything that is not forbidden by anti-discrimination-laws. Also additional perks like towing insurance etc. may give them an opportunity do differentiate themselves or to make easy profit. In fact it is a common tactic to offer prices that make close to no profit to fill up your book, then raise tariffs in then following years an make you profit with those who are to lazy to switch. |
Cheapest way to wire or withdraw money from US account while living in Europe | I use xoom.com to transfer money to India. I've been using them for over 2 years now, they are the fastest and the cheapest for me (the funds are usually available the same day). They seem to have added a lot of European countries to their list. Definitely worth a shot. |
Is it true that 90% of investors lose their money? | The article "Best Stock Fund of the Decade: CGM Focus" from the Wall Street Journal in 2009 describe the highest performing mutual fund in the USA between 2000 and 2009. The investor return in the fund (what the shareholders actually earned) was abysmal. Why? Because the fund was so volatile that investors panicked and bailed out, locking in losses instead of waiting them out. The reality is that almost any strategy will lead to success in investing, so long as it is actually followed. A strategy keeps you from making emotional or knee-jerk decisions. (BTW, beware of anyone selling you a strategy by telling you that everyone in the world is a failure except for the few special people who have the privilege of knowing their "secrets.") (Link removed, as it's gone dead) |
Does a growing economy mean the economy is becoming less efficient? | Growth and efficiency can occur independently of each other. For instance, if an economy consists of one inefficient business and then a second more efficient business opens to compete agains the first the overall efficiency increases while the economy grows. New industries tend to be inefficient at the beginning (since initiation is more important than optimisation) and then become more efficient over time. Agriculture is an amazingly efficient business if you consider how many people now produce the amount of food we consume in comparison to only 100 years ago. Plus, efficiency is not only about producing extra widgets. You could produce the same number of widgets for lower cost. Outsourcing to China (taking advantage of their lower cost of production) increases the efficiency of the US economy, but also increases the efficiency of the Chinese economy (since extra work is created producing more things). Lower costs in the US lead to increased investment in other production. Increased production in China leads to the rising wages there. Growth can be achieved in both places for very different reasons. So, no, growth doesn't have to come about through less efficiency. |
What does “Income generated in the U.S.” mean? | It means you must pay federal (and possibly state) tax on any income you produce in America -- including Internet and mail-order sales. Tax treaties may keep you from having to pay tax on it again in your own country, or may not. |
Is investing into real estate a good move for a risk-averse person at the moment | It's always a good move for risk-averse person, expecially in Europe. Because houses are not represented by number in an index. Therefor if you are risk-adverse, you will suffer less pain when house prices go down because you won't have a number to look at everyday like the S&P500 index. Because houses in Europe (Germany, Italy, Spain) are almost all made by concrete and really well done (string real marble cover, hard ceramic covers, copper pipes, ...) compared to the ones in US. The house will still be almost new after 30 years, it will just need a repaint and really few/cheap fixings. Because on the long run (20/30 years) hosues are guaranteed to rise in price, expecially in dense places like big city, NY, San Francisco, etc. The reason is simple: the number of people is ever growing in this world, but the quantity of land is always the same. Moreover there is inflation, do you really think that 30 years from now building a concrete house will be less expensive than today??? Do you think the concrete will cost less? Do you think the gasoline that moves the trucks that bring the concrete will be less expensive than now? Do you think the labour cost will be less expensice than now? So, 30 years from now building an house will be much more expensive than today, and therefor your house wil be more expensive too. On the lomng run stock market do not guarantee you to always increase. The US stock market have always been growing in the long run, but Japan stock market today is at the same level of 30 years ago. Guess what happened to you if you invested your money in the Japan stock market, 30 years ago, whilest your friend bought an hosue in Japan 30 years ago. He would now be rich, and you would now be poor. |
What are a few sites that make it easy to invest in high interest rate mutual funds? | Any investment company or online brokerage makes investing in their products easy. The hard part is choosing which fund(s) will earn you 12% and up. |
Why buy insurance? | First of all, insurance never covers the cost of the item, it is almost always a partial payout at best. For example, a typical house in the Northeast US where I live that costs $300,000 will have the actual house valued at maybe $100,00 and rest of the value will be in the land. Therefore, the insured value will typically be $100,000. The only problem is that to actually rebuild the house might easily cost $250,000. So, your idea that some kinds of insurance allows the beneficiary to recoup their loss is usually never true. As you say, from an actuarial point of view insurance is a sheer waste of money. For example, a typical house has maybe a 0.5% chance of burning down every year. In other words out of 2000 houses, maybe 1 will burn down every year. So, lets say you got $100,000 of insurance on your house. Then the value of that policy would be $100,000 / 2000 = $50 per year. An insurance company will charge around $700 per year for the policy. That means you are basically flushing $650 down the toilet every year to maintain that policy. The reason why they do this is what blankip says above, they are buying "peace of mind", a psychological product. In other they imagine they are somehow safe. So, even though they are losing money, paying it makes them feel as though they are not losing money. It's delusional, but then again most people have a lot of delusions of which insurance is just one of many. |
Is it better to buy US stocks on US stock exchanges as a European? | No, there are neither advantages nor disadvantages. I'll take on this question from an accounting standpoint. Financial statements, the tools at which the market determines (amongst other things) the value of a stock, are converted at year end to the home currency (see 1.1.3).If Company A has revenue of 100,000 USD and the conversion to EUR is .89, revenue in the European market will be reported as 89,000 EUR. These valuations, along with ratios, analysis, and "expert" opinions determine if a person should own shares in Company A. Now, if we're talking about comparing markets this is a entirely different question. Example: Should I buy stock of Company A, who is in the American market (as an European)? Should I buy stock of Company B, who is in the European market (as an American)? I would recommend this as additional level of diversification of your portfolio to inlcude possible large inflation of either the currency. The possible gains of this foreign exchange may be greater if one or the other currency becomes weak. |
Are there any other considerations for bonus sacrifice into Pension (UK) | The pension is indeed the clear winner and you haven't missed anything. It's easiest to just compare everything in current numbers as you've done and ignore investment opportunities. Given you expect to pay off your student loan in full, you should consider the repayment as a benefit for you too, so the balance is between £580 after tax and £1138 in your pension. As you say under the current tax regime you'd probably end up with £968 in your pocket from the pension. Some harder to value considerations: You might consider there's political risk associated with the pension, as laws may change over the years - but the government has so far not shown any inclination to penalise people who have already saved under one set of assumptions, so hopefully it's reasonably safe (I'm certainly taking that view with my own money!) Paying more towards your student loan or your mortgage is equivalent to investing at that interest rate (guaranteed). If you do the typical thing of investing your pension in the stock market, the investment returns are likely higher but more risky. In today's interest rate environment, you'd struggle to get a "safe" return that's anywhere near the mortgage rate. So if you're very risk averse, that would tilt the balance against the pension, but I doubt it would be enough to change the decision. Your pension might eventually hit the lifetime allowance of £1mn, after contributions and investment growth. If that's a possibility, you should think carefully about the plan for your contributions. If you do go over, the penalties are calibrated to cancel out the difference between higher-rate and basic-rate tax - i.e. cancelling out the tax benefits you outlined, but not the national insurance benefits. But if you do go over, the amount of money you'd have mean that you might also find yourself paying higher-rate tax on some of your pension income, at which point you could lose out. The lifetime allowance is really complicated, there's a Q+A about it here if you want to understand more. |
What choices should I consider for investing money that I will need in two years? | Are you going to South Africa or from? (Looking on your profile for this info.) If you're going to South Africa, you could do worse than to buy five or six one-ounce krugerrands. Maybe wait until next year to buy a few; you may get a slightly better deal. Not only is it gold, it's minted by that country, so it's easier to liquidate should you need to. Plus, they go for a smaller premium in the US than some other forms of gold. As for the rest of the $100k, I don't know ... either park it in CD ladders or put it in something that benefits if the economy gets worse. (Cheery, ain't I? ;) ) |
Buying my first car out of college | DO NOT buy this car. First, I want to say I love BMW's. There's a reason why they call them "ultimate driving machine" and why other car manufacturers compare their new models to BMWs. I own 330i and I absolutely love it. Every time you get into the car, it just begs you to push and abuse it. Everything from steering response to throttle to engine sound. Awesome car. However... 1) BMW is not known for their reliability. I've had to do numerous things to this car and if I didn't do the work myself (i like tinkering with cars), it would be a pretty big money pit (and actually still is). German parts are more expensive then regular cars. Labor will run you if you take it for service. Right now my car is on jack stands while I'm fixing an oil leak, replacing cooling system components which are known to fail and doing work with the cam timing system which uses bad seals. 2) If you buy a used car which is 3 years old, just remember all the wearable items and everything that wants to break, will break 3 years sooner on you. Someone else already pre-enjoyed your car's maintenance-free days. At 60k-80k things will start to go. Ask me how I know. So you'll start paying for maintenance way before your 5-year loan expires. Compare this 330i to the Acura Integra I used to have. Acura (aka Honda) had 194k miles when I sold it and I NEVER ONCE got stranded with the Acura. 3) Fuel economy is not that good and btw you have to use the most expensive gas. 4) If you are really set on buying a BMW because you enjoy driving and won't drive like an old lady (my apologies to those old ladies that drive at least the speed limit, but you are not the majority), then still do not by this one and check out auctions. I bought my 2003 330i in 2005 for 21k when it cost over 40k new. You could probably find one with less than 20k miles on it. My final advice is either a) learn to at least do basic maintenance or b) stick to always buying new cars which don't have any issues in first 4-7 years, then move on before you have to schedule your life around your cars. on the bright side I doubt you'll have to ever replace the exhaust and you can buy tail lights on e-bay for roughly $60 :) |
Should I give to charity by check or credit card? | This might be blasphemy in the context of an audience that may be most focused on the gift itself, but you should be donating in a manner that helps advance the landscape, as well as your particular favourite charity. Almost 90% of businesses are in the process of trying to move away from issuing and receiving checks, and several countries in the world have already stopped using them. Checks are inefficient, costly and in a resource constrained environment like that facing most charities, create an opportunity cost that is even higher than the manual processing cost that flows directly. As donors, we need to think about scale in a manner that many individual charities don't. Send your donation via ACH! |
Options vs Stocks which is more profitable | As already noted, options contain inherent leverage (a multiplier on the profit or loss). The amount of "leverage" is dictated primarily by both the options strike relative to the current share price and the time remaining to expiration. Options are a far more difficult investment than stocks because they require that you are right on both the direction and the timing of the future price movement. With a stock, you could choose to buy and hold forever (Buffett style), and even if you are wrong for 5 years, your unrealized losses can suddenly become realized profits if the shares finally start to rise 6 years later. But with options, the profits and losses become very final very quickly. As a professional options trader, the single best piece of advice I can give to investors dabbling in options for the first time is to only purchase significantly ITM (in-the-money) options, for both calls and puts. Do a web search on "in-the-money options" to see what calls or puts qualify. With ITM options, the leverage is still noticeably better than buying/selling the shares outright, but you have a much less chance of losing all your premium. Also, by being fairly deep in-the-money, you reduce the constant bleed in value as you wait for the expected move to happen (the market moves sideways more than people usually expect). Fairly- to deeply-ITM options are the ones that options market-makers like least to trade in, because they offer neither large nor "easy" premiums. And options market-makers make their living by selling options to retail investors and other people that want them like you, so connect the dots. By trading only ITM options until you become quite experienced, you are minimizing your chances of being the average sucker (all else equal). Some amateur options investors believe that similar benefits could be obtained by purchasing long-expiration options (like LEAPS for 1+ years) that are not ITM (like ATM or OTM options). The problem here is that your significant time value is bleeding away slowly every day you wait. With an ITM option, your intrinsic value is not bleeding out at all. Only the relatively smaller time value of the option is at risk. Thus my recommendation to initially deal only in fairly- to deeply-ITM options with expirations of 1-4 months out, depending on how daring you wish to be with your move timing. |
What steps should be taken, if any, when you find out your home's market value is underwater, i.e. worth less than the mortgage owed? | I will echo the others; your home should be worth more to you than its market value. It is YOUR HOME. It's where you come home every day to your wife and kids, where you build a life. Yes it's an investment, but it's not like a stock or bond that you hold for a little while and then cash out for the profit. The one time you should be worried about being "upside-down" on your mortgage is if you're getting out. If you're moving to a new job at a new company in a new city, you have to make good on the remaining loan balance, and that won't all be from the sale of the house. Unless you're at that point however, if you can afford making the payments and have no reason to move or to cash in equity (of which you have none), then just keep making the payments. Hey, it's better than rent; you'll never see rent money again, while even if you're underwater, you're making headway with each payment. |
Is it legal to receive/send “gifts” of Non-Trivial Amounts to a “friend”? | In almost all cases, gifts from employers are considered taxable compensation, based on the employer-employee nature of the relationship. Furthermore, cash gifts are always considered to be intended as wages, regardless of how you receive the money. Furthermore, regardless of whether you expect to receive anything in return (such as contractual consideration) or whether the amounts are large enough to be declared as taxable personal gifts, it is likely that the IRS would consider these payments to be "disguised wages", as these payments would fail several tests that the IRS uses to determine whether benefits provided by the employer are non-taxable, including: I'd recommend reviewing IRS publication 535 here, as well as publication 15-B here for more on what constitutes taxable wages & benefits. It seems very unlikely to me that you could make a persuasive legal defense in which you claimed to be working full-time for $60.00 per year and just happened to be receiving large personal gifts of $130,000.00. In my opinion it seems much more likely that these payments would be found to be taxable wages for services rendered. |
Stock spread: wide vs. narrow? | The point is that the bid and ask prices dictate what you can buy and sell at (at market, at least), and the difference between the two, or spread, contributes implicitly to your gains or losses. For example, say your $1 stock actually had a bid of $0.90 and an ask of $1.10; i.e. say that $1 was the last price. You would have to buy the stock at the ask price of $1.10, but now you can only sell that stock at the bid price of $0.90. Thus, you would need to make at least that $0.20 spread before you can make a profit. |
Why does a stock's price fluctuate so often, even when fresh news isn't available? | In addition to what @George Marian said, a very large portion of trades are from computer programs trained to make trades when certain apparent patterns are observed. Since these programs are not all designed in the same way, much of the supply and demand is a result of different algorithms with different "opinions" on what the stock is doing. |
Does dollar cost averaging apply when moving investments between fund families? | Dollar cost averaging doesn't (or shouldn't) apply here. DCA is the natural way we invest in the market, buying in by a steady dollar amount each pay period, so over time we can buy more shares when the market is down, and fewer when it's higher. It's more psychological than financial. The fact is that given the market rises, on average, over time, if one has a lump sum to invest, it should be deployed based on other factors, not just DCA'd in. As I said, DCA is just how we all naturally invest from our income. The above has nothing to do with your situation. You are invested and wish to swap funds. If the funds are with the same broker, you should be able to execute this at the closing price. The sell and buy happen after hours and you wake up the next day with the newly invested portfolio. If funds are getting transferred from broker to broker, you do have a risk. The risk that they take time, say even 2 days when funds are not invested. A shame to lose a 2% market move as the cost of moving brokers. In this case, I'd do mine and my wife's at different times. To reduce that risk. |
As an American working in the UK, do I have to pay taxes on foreign income? | Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US. http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your "home" country already taxed you at 10% (for the sake of example), then you only need to pay the "remaining" 10% in the UK. However, the tax law in the UK does allow you to choose between "arising" basis and "remittance" basis on your income from the country you are domiciled in. What I have explained above is based on when income "arises." But the laws are complicated, and you are almost always better off by paying it on "arising" basis. |
Td Ameritrade Roth IRA question | Since you're 20-30 years out of retirement, you should be 90% to 100% in stocks, and in one or two broad stock market funds likely. I'm not sure about the minimums at TD Ameritrade, but at Vanguard even $3k will get you into the basic funds. One option is the Targeted Retirement Year funds, which automatically rebalance as you get closer to retirement. They're a bit higher expense usually than a basic stock market fund, but they're often not too bad. (Look for expenses under 0.5% annually, and preferably much lower - I pay 0.05% on mine for example.) Otherwise, I'd just put everything into something simple - an S&P500 tracker for example (SPY or VOO are two examples) that has very low management fees. Then when your 401(k) gets up and running, that may have fewer options and thus you may end up in something more conservative - don't feel like you have to balance each account separately when they're just starting, think of them as one whole balancing act for the first year or two. Once they're each over $10k or so, then you can balance them individually (which you do want to do, to allow you to get better returns). |
Gigantic point amount on rewards card - what are potential consequences? | If you want to maximize your expected benefits, at minimal risk of financial repercussions or sleepless nights, I would suggest the following. Send an email explaining the situation, and announce that you plan to use the points if they do not advise otherwise. Here is an example message: Dear sir/madam, I recently contacted your helpdesk to mention that I believe my points balance is higher than it should be, and I was told that I could consider the extra points a gift. I assume that settles it, but in case I am mistaken please contact me within 4 weeks. My customer number is xxxx. Kind regards, Note that it is no problem if they don't reply, but you may want to push for a (possibly automated) confirmation of receiving your message. I would not be surprised if they still reduce your balance sometime in the future, but you should be reasonably covered if they try to reclaim any points that you already spent. |
Corporate Coverdell ESA Tax Liability | Not sure how authoritative it is, but according to this site, yes: Can a corporation, partnership or other non-living entity make the contribution to an ESA? Yes. The tax law does not restrict the ability to make contributions to living individuals. Corporations and other entities may make contributions without regard for the usual donor income limit. However, the same site indicates that you can just give the child the $2K and have them contribute to their own ESA, so yes, the income limit is pretty easy to get around. |
Mortgage implications if I were to quit my job shortly after being approved? | You mention that you would quit right after getting approved. But in the United States there would be one last check as a part of closing. Therefore it would be best to wait until after closing to quit your job. Waiting until after closing would also protect you from some hiccup that causes a delay in closing, thus requiring the need to reapply for the loan. |
Pay off credit card debt or earn employer 401(k) match? | I'd take the match, but I wouldn't contribute beyond your match, for two reasons: |
W-8BEN? What's the tax from selling my software to a U.S. company, from abroad? | You should not form a company in the U.S. simply to get the identification number required for a W-8BEN form. By establishing a U.S.-based company, you'd be signing yourself up for a lot of additional hassle! You don't need that. You're a European business, not a U.S. business. Selling into the U.S. does not require you to have a U.S. company. (You may want to consider what form of business you ought to have in your home country, however.) Anyway, to address your immediate concern, you should just get an EIN only. See businessready.ca - what is a W8-BEN?. Quote: [...] There are other reasons to fill out the W8-BEN but for most of you it is to make sure they don’t hold back 30% of your payment which, for a small company, is a big deal. [...] How do I get one of these EIN US taxpayer identification numbers? EIN stands for Employer Identification Number and is your permanent number and can be used for most of your business needs (e.g. applying for business licenses, filing taxes when applicable, etc). You can apply by filling out the Form SS-4 but the easier, preferred way is online. However, I also found at IRS.gov - Online EIN: Frequently Asked Questions the following relevant tidbit: Q. Are any entity types excluded from applying for an EIN over the Internet? A. [...] If you were incorporated outside of the United States or the U.S. territories, you cannot apply for an EIN online. Please call us at (267) 941-1099 (this is not a toll free number) between the hours of 6:00 a.m. to 11:00 p.m. Eastern Time. So, I suggest you call the IRS and describe your situation: You are a European-based business (sole proprietor?) selling products to a U.S.-based client and would like to request an EIN so you can supply your client with a W-8BEN. The IRS should be able to advise you of the correct course of action. Disclaimer: I am not a lawyer. Consider seeking professional advice. |
I was given a 1099-misc instead of a w-2 what are my next steps? | I agree that you should have received both a 1099 and a W2 from your employer. They may be reluctant to do that because some people believe that could trigger an IRS audit. The reason is that independent contractor vs employee is supposed to be defined by your job function, not by your choice. If you were a contractor and then switched to be an employee without changing your job description, then the IRS could claim that you should have always been an employee the entire time, and so should every one of the other contractors that work for that company with a similar job function. It's a hornet's nest that the employer may not want to poke. But that's not your problem; what should you do about it? When you say "he added my Federal and FICA W/H together", do you mean that total appears in box 4 of your 1099? If so, it sounds like the employer is expecting you to re-pay the employer portion of FICA. Can you ask them if they actually paid it? If they did, then I don't see them having a choice but to issue a W2, since the IRS would be expecting one. If they didn't pay your FICA, then the amount this will cost you is 7.65% of what would have been your W2 wages. IMHO it would be reasonable for you to request that they send you a check for that extra amount. Note: even though that amount will be less than $600 and you won't receive a 1099 in 2017 for it, legally you'll still have to pay tax on that amount so I think a good estimate would be to call it 10% instead. Depending on your personality and your relationship with the employer, if they choose not to "make you whole", you could threaten to fill out form SS-8. Additional Info: (Thank you Bobson for bringing this up.) The situation you find yourself in is similar to the concept of "Contract-to-Hire". You start off as a contractor, and later convert to an employee. In order to avoid issuing a 1099 and W2 to the same person in a single tax year, companies typically utilize one of the following strategies: Your particular situation is closest to situation 2, but the reverse. Instead of retroactively calling you a W2 employee the entire time, your employer is cheating and attempting to classify you as a 1099 contractor the entire time. This is frowned upon by the IRS, as well as the employee since as you discovered it costs you more money in the form of employer FICA. From your description it sounds like your employer was trying to do you a favor and didn't quite follow through with it. What they should have done was never switch you to W2 in the first place (if you really should have been a contractor), or they should have done the conversion properly without stringing you along. |
Variable Annuity inside a Roth IRA? What is this and how can I switch it to something else? | This answer is provided mostly to answer your question "what is it?" A variable annuity is a contract between you and an insurance company. The insurance company takes a bunch of money up front as a lump sum, and will pay you some money yearly - like earning interest. (In this case, they will probably be paying you the money into the account itself). How much they return is, as the name suggests, variable. It can be anything, depending on what the contract says. Mostly, there will be some formula based on the stock market - frequently, the performance of the Standard & Poors 500 Index. There will typically be some minimum returns and maximum returns - if the stock market tanks, your annuity will not lose a ton of value, but if the stock market goes up a lot in one year (as it frequently does), you will not gain a lot of value either. If you are going to be in the market for a long amount of time (decades, e.g. "a few years out of college" and then a little), it makes a lot more sense to invest in the stock market directly. This is essentially what the insurance company is going to do, except you can cut out the middleman. You can get a lot more money that way. You are essentially paying the insurance company to take on some stock market risk for you - you are buying some safety. Buying safety like this is expensive. Variable annuities are the right investment for a few people in a few circumstances - mostly, if you're near retirement, it's one way to have an option for a "safe" investment, for a portion (but not all) of your portfolio. Maybe. Depending on the specifics, a lot. If you are under, like, 50 or so? Almost certainly a terrible investment which will gradually waste your money (by not growing it as fast as it deserves to be grown). Since you want to transfer it to Vanguard, you can probably call Vanguard, ask to open a Roth IRA, and request assistance rolling it over from the place it is held now. There should be no legal restrictions or tax consequences from transferring the money from one Roth IRA account to another. |
Why is it not a requirement for companies to pay dividends? | This answer will expand a bit on the theory. :) A company, as an entity, represents a pile of value. Some of that is business value (the revenue stream from their products) and some of that is assets (real estate, manufacturing equipment, a patent portfolio, etc). One of those assets is cash. If you own a share in the company, you own a share of all those assets, including the cash. In a theoretical sense, it doesn't really matter whether the company holds the cash instead of you. If the company adds an extra $1 billion to its assets, then people who buy and sell the company will think "hey, there's an extra $1 billion of cash in that company; I should be willing to pay $1 billion / shares outstanding more per share to own it than I would otherwise." Granted, you may ultimately want to turn your ownership into cash, but you can do that by selling your shares to someone else. From a practical standpoint, though, the company doesn't benefit from holding that cash for a long time. Cash doesn't do much except sit in bank accounts and earn pathetically small amounts of interest, and if you wanted pathetic amounts of interests from your cash you wouldn't be owning shares in a company, you'd have it in a bank account yourself. Really, the company should do something with their cash. Usually that means investing it in their own business, to grow and expand that business, or to enhance profitability. Sometimes they may also purchase other companies, if they think they can turn a profit from the purchase. Sometimes there aren't a lot of good options for what to do with that money. In that case, the company should say, "I can't effectively use this money in a way which will grow my business. You should go and invest it yourself, in whatever sort of business you think makes sense." That's when they pay a dividend. You'll see that a lot of the really big global companies are the ones paying dividends - places like Coca-Cola or Exxon-Mobil or what-have-you. They just can't put all their cash to good use, even after their growth plans. Many people who get dividends will invest them in the stock market again - possibly purchasing shares of the same company from someone else, or possibly purchasing shares of another company. It doesn't usually make a lot of sense for the company to invest in the stock market themselves, though. Investment expertise isn't really something most companies are known for, and because a company has multiple owners they may have differing investment needs and risk tolerance. For instance, if I had a bunch of money from the stock market I'd put it in some sort of growth stock because I'm twenty-something with a lot of savings and years to go before retirement. If I were close to retirement, though, I would want it in a more stable stock, or even in bonds. If I were retired I might even spend it directly. So the company should let all its owners choose, unless they have a good business reason not to. Sometimes companies will do share buy-backs instead of dividends, which pays money to people selling the company stock. The remaining owners benefit by reducing the number of shares outstanding, so they own more of what's left. They should only do this if they think the stock is at a fair price, or below a fair price, for the company: otherwise the remaining owners are essentially giving away cash. (This actually happens distressingly often.) On the other hand, if the company's stock is depressed but it subsequently does better than the rest of the market, then it is a very good investment. The one nice thing about share buy-backs in general is that they don't have any immediate tax implications for the company's owners: they simply own a stock which is now more valuable, and can sell it (and pay taxes on that sale) whenever they choose. |
How can I calculate how much an option would be worth after X days if the underlying stock changed by +/- $Y? | You'd need to know the delta and the theta of the option. You can either calculate them yourself using a model like Black-Scholes (assuming you have a market price and can imply a volatility, and know the other factors that go into the model) or, you can see if your broker quotes "greeks" as well (mine does). The delta is the sensitivity (rate of change in value) to the underlying stock price, and the theta is the sensitivity to time passing (usually expressed in $/day). So if your option has a delta of .5 and a theta of -.04, when one day passes and the underlying stock goes up $3, the option will gain roughly $1.50 due to the underlying stock price and lose $0.04 due to time passing. |
How to invest in stocks without using an intermediary like a broker? Can shares be bought direct? | In theory you can buy shares directly from someone else who owns them. In practise, if the stock is listed on an exchange, they are unlikely to own them directly, they are likely to own them through an intermediary. You will have to pay fees to that intermediary to transfer the shares to your name. There are thousands of small companies owned by the guy who started it and a few other investors. You can buy stock in that kind of company directly from the existing owners, as long as they are willing to sell you some. It's a super-high risk investment strategy, though. This is the kind of deal that happens on Dragons Den. |
How to prevent myself from buying things I don't want | To me, your question emphasizes something I've heard many times before: personal finance is as much or more about behavior than it is about mathematics or "head knowledge". Sure, you know you shouldn't be wasting a lot of money on something you will use very infrequently, but how do you make this behavior stick? Here are a few tricks that might help: The other aspects of your question really touch more on psychology than finance. But getting yourself into a discipline habit with money will help. And realizing the full cash price of items in relation to how much your disposable income is will help you get control of your impulses, as you review your budget monthly, and keep limit yourself using the envelope system. But honestly, everybody wants stuff they don't have, it's human nature. The key is finding ways to put physical limits and guards on yourself to keep you from obeying the self-destructive impulses. |
How can a 529 plan help me save for my child's college education? | You get to put money away with special tax incentives (ie - no or less taxes to pay) They are state sponsored and therefore pretty reliable, but some states are better than others. Like with many of these tax incentive type accounts (FSA, Dependent Care Spending Accounts) they are use it or lose it. (In a 529, use it or transfer it). So the money put away is a sunk cost towards education and cannot be repurposed for something else should your kid not want to attend school. http://money.howstuffworks.com/personal-finance/financial-planning/529.htm |
How can a 'saver' maintain or increase wealth in low interest rate economy? | Personally, I invest in mutual funds. Quite a bit in index funds, some in capital growth & international. |
Why would a long-term investor ever chose a Mutual Fund over an ETF? | http://www.efficientfrontier.com/ef/104/stupid.htm would have some data though a bit old about open-end funds vs an ETF that would be one point. Secondly, do you know that the Math on your ETF will always work out to whole numbers of shares or do you plan on using brokers that would allow fractional shares easily? This is a factor as $3,000 of an open-end fund will automatically go into fractional shares that isn't necessarily the case of an ETF where you have to specify a number of shares when you purchase as well as consider are you doing a market or limit order? These are a couple of things to keep in mind here. Lastly, what if the broker you use charges account maintenance fees for your account? In buying the mutual fund from the fund company directly, there may be a lower likelihood of having such fees. I don't know of any way to buy shares in the ETF directly without using a broker. |
What should I invest in to hedge against a serious crash or calamity? | If peak oil is a concern, hedge against the effects of high oil prices. Reduce your dependence on the gas pump by moving closer to the places you normally drive, or adjust your lifestyle so that you need less. Buy things now that depend on fossil fuels (there's a long list). If instability is a concern, invest in a place where the chance of instability is less. If a freak event is a concern, think through what the consequences would be, and hedge accordingly. Etc. Etc. |
How can an Indian citizen get exposure to global markets? | It isn't just ETFs, you have normal mutual funds in India which invest internationally. This could be convenient if you don't already have a depository account and a stockbroker. Here's a list of such funds, along with some performance data: Value Research - Equity: International: Long-term Performance. However, you should also be aware that in India, domestic equity and equity fund investing is tax-free in the long-term (longer than one year), but this exemption doesn't apply to international investments. Ref: Invest Around the World. |
High-risk investing is better for the young? Why? | Would my high-risk investment choices, aside from the main question, have any bearing on the road I want to go down and test (managing mutual/hedge funds)? Absolutely! First of all, understand that hedge fund managers are managing other people's money. Those people desire a certain risk profile and expected return, so your hedge fund will need to meet those expectations. Plus, hedge fund managers don't typically get fixed fees alone - they also get a percentage of any gains the fund makes; so managers have a vested interest in making sure that hedge funds perform well. |
Should I move my money market funds into bonds? | There is a thing called the Sharpe Ratio. This Ratio takes return/risk with risk being defined as the standard deviation of prices over time. According to Financial theory the investment with the highest (best) Sharpe Ratio is a market portfolio. Technically accepting the lower risk of a treasury is accepting an amplified lower return(market sharpe would be 1 than tbill sharpe would be at most .9999999999999). Because of this, unless there are liquidity restraints (don't buy ETFs with your payroll money DUH) you should ALWAYS be in market funds, otherwise you are leaving money on the table. Everything else is just speculation. Now the real question is value or growth....... |
Why is retirement planning so commonly recommended? | If you can afford it, there are very few reasons not to save for retirement. The biggest reason I can think of is that, simply, you are saving in general. The tax advantages of 401k and IRA accounts help increase your wealth, but the most important thing is to start saving at an early age in your career (as you are doing) and making sure to continue contributing throughout your life. Compound interest serves you well. If you are really concerned that saving for retirement in your situation would equate to putting money away for no good reason, you can do a couple of things: Save in a Roth IRA account which does not require minimum distributions when you get past a certain age. Additionally, your contributions only (that is, not your interest earnings) to a Roth can be withdrawn tax and penalty free at any time while you are under the age of 59.5. And once you are older than that you can take distributions as however you need. Save by investing in a balanced portfolio of stocks and bonds. You won't get the tax advantages of a retirement account, but you will still benefit from the time value of money. The bonus here is that you can withdraw your money whenever you want without penalty. Both IRA accounts and mutual fund/brokerage accounts will give you a choice of many securities that you can invest in. In comparison, 401k plans (below) often have limited choices for you. Most people choose to use their company's 401k plan for retirement savings. In general you do not want to be in a position where you have to borrow from your 401k. As such it's not a great option for savings that you think you'd need before you retire. Additionally 401k plans have minimum distributions, so you will have to periodically take some money from the account when you are in retirement. The biggest advantage of 401k plans is that often employers will match contributions to a certain extent, which is basically free money for you. In the end, these are just some suggestions. Probably best to consult with a financial planner to hammer out all the details. |
Could someone explain this scenario about Google's involvement in the wireless spectrum auction? | If history is any guide, Page’s idealistic impulses could result in a vaster, more sprawling company. The following is an example of one of Page’s idealistic impulses (wanting people to share spectrum) which could result in a vaster, more sprawling company (if they hadn't been outbid, Google would have expanded by buying a business asset i.e. spectrum which they didn't need). I've no experience with bidding. I don't understand what's happening at all An 'auction' is a way to sell something. Instead of offering it for sale at a fixed price, you offer it 'to the highest bidder'. Someone (e.g. Google) says, "I'll offer you [some amount: e.g. a million dollars] for it." If no-one else exceeds that bid, then you say 'sold' and Google has bought it. Alternatively someone else comes along with a higher bid, "I'll offer you two million dollars for it," in which case they're the new high bidder, and you'll sell it to them unless the process repeats itself with anyone counter-offering an even higher bid. See also http://en.wikipedia.org/wiki/Auction and http://en.wikipedia.org/wiki/Spectrum_auction The "Disadvantages" section of this article alleges (currently without a citation) that: Despite the apparent success of spectrum auctions, an important disadvantage limiting both efficiency and revenues is demand reduction and collusive bidding. The information and flexibility in the process of auction can be used to reduce auction prices by tacit collusion. When bidder competition is weak and one bidder holds an apparent advantage to win the auction for specific licenses, other bidders will often choose not to the bid for higher prices, hence reducing the final revenue generated by the auction.[citation needed] In this case, the auction is best thought of as a negotiation among the bidders, who agree on who should win the auction for each discrete bit of spectrum. Google's bid made that impossible (or, at least, ensured that the winning bid would be at least as high as the minimum which was set by Google's bid). |
What is a reasonable salary for the owner and sole member of a small S-Corp? | The answer depends on this: If you had to hire someone to do what you are doing in the S-corp, what would you pay them? If you are doing semi-unskilled work part-time, then $20k might be reasonable. If you are a professional working full time, it's too low. Don't forget that, in addition to "billable" work, you are also doing office tasks, such as invoicing and bookkeeping, that the IRS will also want to see you getting paid for. There was an important court ruling on this subject recently: Watson v. Commissioner. Watson owned an S-Corp where he was the sole employee. The S-Corp itself was a 25% owner in a very successful accounting firm that Watson worked through. All of the revenue that Watson generated at the accounting firm was paid to the S-Corp, which then paid Watson through salary and distributions. Watson was paying himself $24k a year in salary and taking over $175k a year in distributions. For comparison, even first-year accountants at the firm were making more than $24k a year in salary. The IRS determined that this salary amount was too low. To determine an appropriate amount for Watson's salary, the IRS did a study of the salaries of peers in firms of the same size as the firm Watson was working with, taking into account that owners of firms earn a higher salary than non-owners. The number that the IRS arrived at was $93k. Watson was allowed to take the rest ($80k+ each year) as distributions. Again, this number was based on a study of the salaries of peers. It was far short of the $200k+ that the S-Corp was pulling in from the accounting firm. Clearly, Watson was paying himself far too low of a salary. But even at this extreme example, where Watson's S-Corp was directly getting all of its revenue from one accounting firm in which Watson was an owner, the IRS still did not conclude that all of the revenue should have been salary and subject to payroll taxes. You should ask an accountant or attorney for advice. They can help you determine an appropriate amount for your salary. Don't be afraid of an audit, but make sure that you can defend your choices if you do get audited. If your choices are based on professional advice, that will help your case. See these articles for more information: |
Which r in perpetuity formula to pricing a business? | In the equity markets, the P/E is usually somewhere around 15. The P/E can be viewed as the inverse of the rate of a perpetuity. Since the average is 15, and the E/P of that would be 6.7%, r should be 6.7% on average. If your business is growing, the growth rate can be incorporated like so: As you can see, a high g would make the price negative, in essence the seller should actually pay someone to take the business, but in reality, r is determined from the p and an estimated g. For a business of any growth rate, it's best to compare the multiple to the market, so for the average business in the market with your business's growth rate and industry, that P/E would be best applied to your company's income. |
Why is there inconsistent returns difference between direct and regular Mutual Funds? | (This answer refers to the US investment landscape) I'm not sure your classification of funds as direct and regular accurately reflects the nature of the mutual fund industry. It's not the funds themselves that are "direct" or "regular." Rather it's the way an investor chooses to invest in them. If you make the investment yourself through your brokerage account, you may say it's a direct investment. If you pay a financial advisor to do this for you, it's "regular." For a given fund, you could make the investment yourself or you could use an advisor. Note that many funds have various share classes. Share classes may be accessed in different ways. The institutional class may be accessible through your 401(k) or perhaps not even there, for example. The premium class may require a certain minimum investment. Some classes will have a front-end-load or back-end-load. Each of these will have a different expense ratio and fees even though the money ends up in the same portfolio. These expenses are, by law, publicly available in the prospectus and in numerous other places. Share classes with higher fees will earn less each year after fees, just as you suggest. Your intuition is correct on this point. Now, there is one fee to be aware of that funds either have or do not have. That's a 12b-1 fee. This fee is a kickback to financial advisors who funnel your money into their fund. If you use a financial advisor, he or she will likely put your money into these funds because they have a financial incentive to do so. That way they get paid twice: once by you and once by the mutual fund. It has been robustly shown in the finance academic literature that funds without this fee dominate (are better in some ways and in no ways worse than) funds with this fee. I suppose you could say that funds and share classes with a 12b-1 fee were designed for "regular" investment and those without were designed for "direct" but that doesn't mean you can't invest in a 12b-1 fee fund directly nor that you can't twist your advisor's arm into getting you into a good fund without a 12b-1. Unfortunately, if you have this level of knowledge, then you probably don't need a financial advisor. |
What is the opposite of a sunk cost? A “sunk gain”? | liquid asset A sunk cost may turn out to be a loss or it may make you a profit, but what makes it "sunk" is: you can't get it back. The opposite is a cost that you can later redeem, which makes it "liquid". |
Why might it be a bad idea to invest 100% of your 401(k) into a stock index fund? | At your age, I don't think its a bad idea to invest entirely in stocks. The concern with stocks is their volatility, and at 40+ years from retirement, volatility does not concern you. Just remember that if you ever want to call upon your 401(k) for anything other than retirement, such as a down payment on a home (which is a qualified distribution that is not subject to early distribution penalties), then you should reconsider your retirement allocations. I would not invest 100% into stocks if I knew I were going to buy a house in five years and needed that money for a down payment. If your truly saving strictly for a retirement that could occur forty years in the future, first good for you, and second, put it all in an index fund. An S&P index has a ridiculously low expense ratio, and with so many years away from retirement, it gives you an immense amount of flexibility to choose what to do with those funds as your retirement date approaches closer every year. |
What taxes are assessed on distributions of an inherited IRA? | Distributions from an inherited IRA will be taxed as ordinary income and there are required minimum distributions for the inherited account. Assuming you were 55 at the time of your mother's death, your life expectancy according to the IRS is 29.6 years. Your required yearly distributions on $200,000 would be roughly $6800. For each year that you didn't withdraw that, you would owe a 50% penalty of the distribution amount (~$3400). That's probably better than the tax hit you would take if you pulled it all in as income in a 5 year window (ie. all right now since you're at the end of the window). |
What is the preferred way to set up personal finances? | The absolute best advice I ever received was this: You will need three categories of savings in your life: 1) Retirement Savings This is money you put away (in 401-Ks and IRAs) for the time in your life when you can no longer earn enough income to support yourself. You do not borrow against it nor do you withdraw from it in emergencies or to buy a house. 2) Catestrophic savings This is money you put back in case of serious events. Events like: prolonged job loss, hospitalization, extended illness, loss of home, severe and significant loss of transportation, very large aplliance loss or damage. You do not take trips to the Bahamas or buy diamond rings with this money. 3) Urgent, relatively small, need savings. This is the savings you can use from time to time. Use it for bills that arise unexpectedly, unforseen shortfalls in your budget, needed repairs such as car repairs and small appliance repairs, surprising fines, fees, and bills. Put 10% of your income into each category of savings. 10% intro retirement savings, another, separate, 10% intro Catestrophic savings, and yet another 10% intro urgent, small need, savings. So, as you can see, already 30% of your income is already spoken for. Divide up the remaining 70% intro fixed (I recommend 50% toward fixed expenses) and variable expenses. Fixed includes those things that you pay once every month such as housing, utilities, car payment, debt repayment, etc. Variable includes discretionary things like eating out, gifts, and splurges. Most importantly, partner with someone who is your opposite. If you are a saver at heart partner with a spender. If you are a spender partner with a saver. There are three rules to live by regarding the budget: A) no one spends any money unless it is in the budget B) the budget only includes those things to which both the saver and the spender agree C) the budget can, and will, be modified as the pay period unfolds. A budget is a plan not a means to beat the other person up. Plans change as new information arises. A budget must be flexible. The urgent use savings will help to make the budget flexible. Edit due to comments: @enderland Perhaps you do not have children living with you. I am a saver, my wife is a spender. When it came time to do the budget I would forget things like the birthdays of my children, school fees due next pay period, shopping for Christmas gifts, needed new clothes and shoes for the children, broken small appliances that needed to be fixed or replaced, special (non reoccurring) house maintenence (like steam cleaning the carpet), gifts to relatives and friends, exceptional assistance to relatives, etc. As my wife was the spender she would remind me of these things. Perhaps you do not have these events in your life. I am glad to have these events in my life as that means that I have people in my life that I care about. What good is a fat savings account if I have no loved ones that benefit from it? |
Preferred vs Common Shares in Private Corporation | To follow up on Quid's comment, the share classes themselves will define what level of dividends are expected. Note that the terms 'common shares' and 'preferred shares' are generally understood terms, but are not as precise as you might believe. There are dozens/hundreds of different characteristics that could be written into share classes in the company's articles of incorporation [as long as those characteristics are legal in corporate law in the company's jurisdiction]. So in answering your question there's a bit of an assumption that things are working 'as usual'. Note that private companies often have odd quirks to their share classes, things like weird small classes of shares that have most of the voting rights, or shares with 'shotgun buyback clauses'. As long as they are legal clauses, they can be used to help control how the business is run between various shareholders with competing interests. Things like parents anticipating future family infighting and trying to prevent familial struggle. You are unlikely to see such weird quirks in public companies, where the company will have additional regulatory requirements and where the public won't want any shock at unexpected share clauses. In your case, you suggested having a non-cumulative preferred share [with no voting rights, but that doesn't impact dividend payment]: There are two salient points left related to payout that the articles of incorporation will need to define for the share classes: (1) What is the redemption value for the shares? [This is usually equal to the cost of subscribing for the shares in the first place; it represents how much the business will need to pay the shareholder in the event of redemption / recall] (2) What is the stated dividend amount? This is usually defined at a rate that's at or a little above a reasonable interest rate at the time the shares are created, but defined as $ / share. For example, the shares could have $1 / share dividend payment, where the shares originally cost $50 each to subscribe [this would reflect a rate of payment of about 2%]. Typically by corporate law, dividends must be paid to preferred shares, to the extent required based on the characteristics of the share class [some preferred shares may not have any required dividends at all], before any dividends can be paid to common shares. So if $10k in dividends is to be paid, and total preferred shares require $15k of non-cumulative dividends each year, then $0 will be paid to the common shares. The following year, $15k of dividends will once again need to be paid to the preferred shares, before any can be paid to the common shares. |
How can I find/compare custodians for my HSA in the United States? | In general, things to look for are: Things to look out for: I'd recommend two places: I'd recommend reading up on HSA's in this related question here. |
How to learn about doing technical analysis? Any suggested programs or tools that teach it? | A lot of investors prefer to start jumping into tools and figuring out from there, but I've always said that you should learn the theory before you go around applying it, so you can understand its shortcomings. A great starting point is Investopedia's Introduction to Technical Analysis. There you can read about the "idea" of technical analysis, how it compares to other strategies, what some of the big ideas are, and quite a bit about various chart patterns (cup and handle, flags, pennants, triangles, head & shoulders, etc). You'll also cover ideas like moving averages and trendlines. After that, Charting and Technical Analysis by Fred McAllen should be your next stop. The material in the book overlaps with what you've read on Investopedia, but McAllen's book is great for learning from examples and seeing the concepts applied in action. The book is for new comers and does a good job explaining how to utilize all these charts and patterns, and after finishing it, you should be ready to invest on your own. If you make it this far, feel free to jump into Fidelity's tools now and start applying what you've learned. You always want to make the connection between theory and practice, so start figuring out how you can use your new knowledge to generate good returns. Eventually, you should read the excellent reference text Technical Analysis of the Financial Markets by John Murphy. This book is like a toolbox - Murphy covers almost all the major techniques of technical analysts and helps you intuitively understand the reasoning behind them. I'd like to quote a part of a review here to show my point: What I like about Mr. Murphy is his way of showing and proving a point. Let me digress here to show you what I mean: Say you had a daughter and wanted to show her how to figure out the area of an Isosceles triangle. Well, you could tell her to memorize that it is base*height/2. Or if you really wanted her to learn it thoroughly you can show her how to draw a parallel line to the height, then join the ends to make a nice rectangle. Then to compute the area of a rectangle just multiply the two sides, one being the height, the other being half the base. She will then "derive" this and "understand" how they got the formula. You see, then she can compute the area under a hexagon or a tetrahedron or any complex object. Well, Mr. Murphy will show us the same way and "derive" for us concepts such as how a resistance line later becomes a support line! The reson for this is so amusing that after one reads about it we just go "wow..."" Now I understand why this occurs". Murphy's book is not about strategy or which tools to use. He takes an objective approach to describing the basics about various tools and techniques, and leaves it up to the reader to decide which tools to apply and when. That's why it's 576 pages and a great reference whenever you're working. If you make it through and understand Murphy, then you'll be golden. Again, understand the theory first, but make sure to see how it's applied as well - otherwise you're just reading without any practical knowledge. To quote Richard Feynman: It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong. Personally, I think technical analysis is all BS and a waste of time, and most of the top investors would agree, but at the end of the day, ignore everyone and stick to what works for you. Best of luck! |
Why will the bank only loan us 80% of the value of our fully paid for home? | The banks figure that they'll get 80% of the value of the property at a sheriff's sale. So, they're lending you what they think they can recover if you default. |
Townhouse or stand-alone house for a first home? | I very much agree with what @Grade 'Eh' Bacon said about townhouses, but wanted to add a bit about HOA's, renting after moving on, and appreciation: HOA's HOA's can be restrictive, but they can also help protect property values, not all HOA's are created equal, some mean you have zero exterior maintenance, some don't. You'll be able to review the HOA financials to see where the money goes (and if they have healthy reserves). You'll see how much they spend on administration, I think ~10% is typical, and administration can be offset by the savings associated with doing everything in bulk. A well-run HOA should actually save you money over paying for all the things separately, but many people are happy to do some things themselves rather than pay for it, and would come out ahead if they didn't have an HOA. And of course, not all HOA's are well-run. Just do your best to get informed Transitioning to Rental If you are interested in trying your hand being a landlord after living there for a while, a townhouse typically exposes you to less rental risk than a single-family home, because the cost is typically lower and if the HOA maintains everything outside the house then you don't have to worry as much about tenants keeping a lawn in good shape, for example. Appreciation Appreciation varies wildly by market, some research by Trulia suggests in general condo's have outperformed single-family houses over the last 5 years by 10.5%. The same article notes that others disagree with Trulia's assessment and put condo's below single-family houses by 1.3% annually. My first townhouse has appreciated 41% over the last 3 years, while houses in the area are closer to 30% over the same period, but I believe that's a function of my local market more than a nationwide trend. I wouldn't plan around any appreciation forecasts. Source: Condos may be appreciating faster than single-family houses My adviceYou have to do your research on each potential property regardless of whether it's a condo/townhouse/single-family to find out what restrictions there are and what services are provided by the HOA (if any), your agent should be provided with most of the pertinent info, and you may not get to see HOA financials until you're under contract. Most importantly in my view, I wouldn't buy anywhere near the top of your budget. Being "house-poor" is no fun and will limit your options, don't count on appreciation or better income in the future to justify stretching yourself thin in the short-term. |
Which practice to keep finances after getting married: joint, or separate? | We've had everything in one pot almost from day one of marriage. The key ingredients to making that arrangement work is to communicate about the money, and realize that you're in it together. Everything one person does affects the other. Separating finances compartmentalizes the "affecting one another" part and makes it a little clearer perhaps, but I can also see it creating a sense of entitlement: "This is my money." There should be a place for individual discretionary spending, of course, but I'm not sure that roping off that money is the best way to do it. It's less likely to be viable if there's one main breadwinner in the house. In our house, this is me. If we separated the finances like this, it would amount to giving my wife an allowance. Since she works harder at home than I do at work most of the time (she keeps the house, does meals and shopping, raises and schools our daughter, etc.) but just doesn't get paid for it, it would border on insult to her to treat the finances this way. |
Retirement Options for Income | If you withdraw all (or most) of your pension 25% is tax free but the rest is treated as income upon which you will pay income tax at the usual UK rates. Withdrawing a lump sum to buy property is therefore unlikely to be 10% per annum as you'll spend years making up lost ground on the initial capital investment. If your pension is a self invested personal pension (a SIPP) you could buy property within the pension wrapper itself which would avoid the income tax hit. if you don't have a SIPP you may be able to convert your pension to a SIPP but you would be wise to seek professional advice about that. The UK government is also introducing an additional 3% stamp duty on properties which are not your first home so this may further impact your returns. This would apply whether you withdraw your pension as cash or buy the property within a SIPP. One other alternative to an annuity in the UK is called drawdown where you keep the money invested in your pension as it is now and withdraw an annual income. This means your tax bill is reduced as you get to use your annual allowance each year and will also pay less higher rate tax. The government provides more details on its website. |
Where can I find open source portfolio management software? | I've just recently launched an open source wealth management platform - wealthbot.io ... "Webo" is mostly targeted at RIA's to help the manage multiple portfolios, etc. Take a look at the demo at demo.wealthbot.io, you'll also find links to github, etc. there. It's a rather involved project, but if you are looking for use cases of rebalancing, portfolio accounting, custodian integration, tax loss harvesting, and many other features available at some of the popular robo-advisors, you might find it interesting. |
What happens to an options contract during an all stock acquisition? | Depends on your contract, cash or shares delivered? If shares, then you get 5 BIG shares. Theres no longer any options. If you sell instantly, theoretically you will net the $10 difference + profit above strike. If cash, same thing just that you get cash $50 less strike. Applies to cash and stock deals Options are binary, never pro-rated. if converted, basically you end up with BIG shares. |
What are the options for a 19-year-old college student who only has about $1000? | Kid, you need to start thinking in thresholds. There are several monetary thresholds that separate your class from a more well funded class. 1) You cannot use margin with less than $2000 dollars Brokers require that you have at least $2000 before they will lend to you 2) In 2010, Congress banned under 21 year olds from getting access to credit. UNLESS they get cosigned. This means that even if you have $2000, no broker will give you margin unless you have a (good) credit history already. There was a good reason for this, but its based on the assumption that everyone is stupid, not the assumption that some people are objective thinkers. 3) The brokers that will open an account for you have high commissions. The commissions are so high that it will destroy any capital gains you may make with your $1000. For the most part. 4) The pattern day trader rule. You cannot employ sophisticated risk management while being subject to the pattern day trader rule. It basically limits you from trading 3 times a day (its more complicated than that read it yourself) if you have less than $25,000 in one account. 5) Non-trade or stock related investments: Buy municipal or treasury bonds. They will give you more than a savings account would, and municipals are tax free. This isn't exactly what I would call liquid though - ie. if you wanted to access your money to invest in something else on a whim. 6) What are you studying? If its anything technical then you might get a good idea that you could risk your money on to create value. But I would stick to high growth stocks before blowing your $1000 on an idea. Thats not exactly what I would call "access to capital". 7) Arbitrage. Lets say you know a friend that buys the trendy collectors shoes at discount and sells them for a profit. He might do this with one $200 pair of tennis shoes, and then use the $60 profit different to go buy video games for himself. If he wanted to scale up, he couldn't because he never has more than $200 to play with. In comparison, you could do 5 pairs ($200 x 5) and immediately have a larger operation than him, making a larger profit ($60 x 5 = $300, now you have $1300 and could do it again with 6 pairs to make an even great er profit) not because you are better or worked at it, but solely because you have more capital to start with. Keep an eye out for arbitrage opportunities, usually there is a good reason they exist if you notice it: the market is too small and illiquid to scale up with, or the entire market will be saturated the next day. (Efficient Market Theory, learn about it) 8) Take everything I just taught you, and make a "small investor newsletter" website with subscribers. Online sites have low overhead costs. |
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