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Is the contribution towards Employment Insurance (EI) wasted if I never get fired, or are my premiums refunded? | I would suggest they are not wasted because your premiums fund unemployment insurance, which is a net to prevent people from going under if they lose their jobs. Unemployment insurance is in many ways an incubator for success because it allows an entrepreneur to take more risk in starting a business because failure won't mean devastation. Perhaps that person who took the risk because of the ability to fail started the business that you now work for. Society works better (in my opinion) by keeping the bottom closer to the top. Paying into the unemployment insurance fund indirectly provides you opportunity. |
Can LLC legally lend money to a friend? | The answer to your question is...it depends. Depending on the state you, your friend, and the LLC are located in, it can be very easy to run afoul of state banking laws, or to somehow violate some other statute pertaining to the legal activities an LLC may undertake by doing something like a loan. It is not unusual (or illegal) for officers or employees of a business entity to be loaned money by the company they work for, so something of this nature wouldn't be an issue with regulatory agencies. Having your LLC loan money to a friend who isn't an employee or officer of your LLC just might not be kosher though. The best advice I can give is that you should call the state banking commission or similar agency in your state and ask them whether what you want to do is alright. The LAST thing you want is to end up with auditors or regulators sniffing around your business, even if you haven't done anything wrong, and you certainly don't want to run the risk of accidentally "piercing the corporate veil", as someone else here astutely pointed out. Good luck! |
How do you choose which mortgage structure is appropriate when buying a home? | There are several factors that you need to consider: If you have already decided on the house. Did you prequalify for the mortgage loan - If so, did you lock in the rate. If you have not already done than your research is still valid. Consider two calculators first - Affordability + Mortgage calculator Advice : If you can afford to pay 20% down then please do, Lesser monthly mortgage payment, you can save approx 400 $ per month, the above calculator will give you an exact idea. If you can afford go for 15 years loan - Lower interest rate over 2-5 years period. Do not assume the average ROI will + 8-10%. It all depends on market and has variable factors like city, area and demand. In terms of Income your interest payment is Tax deductible at the end of the year. |
Why do banks insist on allowing transactions without sufficient funds? | This really should be a comment, but I can't yet. The question desperately needs a location tag. In at least some countries(New Zealand), the default action on all insufficient funds transactions is to refuse the transaction. Credit cards are the only common exception. Every bank operating in NZ that I know of acts this way. Sometimes there is a fee for bouncing a transaction, sometimes not, that depends on the bank. Any other option must be explicitly arranged in writing with the bank. Personally, coming from a country where declining transactions is the default, I'd be shocked and angry to be stuck with an automatic transfer from another account. Angry enough to change banks if they won't immediately cease and desist. |
Would extending my mortgage cause the terms to be re-negotiated? | Run the numbers in advance. Understand what are the current rates for an additional 2nd mortgage, what are the rates for a brand new mortgage that will cover the additional funds. Understand what they are for another lender. Estimate the amount of paperwork involved in each option (new first, new 2nd, and new lender). Ask the what are the options they can offer you. Because you have estimated the costs in money and time for the different options, you can evaluate the offer they make. What they offer you can range from everything you want to nothing you would accept. What they offer will depend on several factors: Do they care to keep you as a customer?; Do they expect you to walk away?; are they trying to get rid of mortgages like the one you have?; Can they make more money with the plan they are offering you? You will be interested in the upfront costs, the monthly costs, and the amount of time required for the process to be completed. |
Should I sell when my stocks are growing? | I reread your question. You are not asking about the validity of selling a particular stock after a bit of an increase but a group of stocks. We don't know how many. This is the S&P for the past 12 months. Trading at 1025-1200 or so means that 80-100 points is an 8% move. I count 4 such moves during this time. The philosophy of "you can't go wrong taking a gain" is tough for me to grasp as it offers no advice on when to get (back) in. Studies by firms such as Dalbar (you can google for some of their public material) show data that supports the fact that average investors lag the market by a huge amount. 20 years ending 12/31/08 the S&P returned 8.35%, investor equity returns showed 1.87%. I can only conclude that this is a result of buying high and selling low, not staying the course. The data also leads me to believe the best advice one can give to people we meet in these circumstances is to invest in index funds, keeping your expenses low as you can. I've said this since read Jack Bogle decades ago, and this advice would have yielded about 8.25% over the 20 years, beating the average investor by far, by guaranteeing lagging the average by 10 basis points or so. A summary of the more extensive report citing the numbers I referenced is available for down load - QAIB 2015 - Quantitative Analysis of Investor Behavior. It's quite an eye-opener and a worthy read. (The original report was dated 2009, but the link broke, so I've updated to the latest report, 2015) |
Does an Executed Limit Order Imply a Spot Price? | I can't say I know everything about the underlying details, but from what I understand, your limit buy adds to the bid side of open orders, and one possibility is that someone placed a market order to sell when the bid price for the stock fell to $10 which was matched to your open limit order. So using your terminology, I would say the spot bid price is what fell to $10, even if for a brief moment. Whether or not it is possible for your order to be filled when the limit buy price is deeper than the current bid price is beyond me. It may have something to do with lot sizes. |
What should I look at before investing in a start-up? | You seem to have all your financial bases covered, and others have given you good financial advice, so I will try to give you some non-financial ideas. The first and most important thing is that you are investing with a long time friend, so the dynamics are a lot different that if you had recently met a stranger with an "interesting" new idea. The first thing you need to ask yourself is if your friendship will survive if this thing doesn't go well? You've already said you can afford to lose the money so that's not a worry, but will there be any "recriminations?" The flip side is also true; if the venture succeeds, you should be able to go further with it because he's your friend. You know your friend better (back to grade school) than almost anyone else, so here are some things to ask yourself: What does your friend have that will give him a chance to succeed; tech savvy, a winning personality, a huge rolodex, general business savvy, something else? If your guardian angel had told you that one of your friends was planning to embark on an internet/advertising venture, is this the one you would have guessed? Conversely, knowing that your friend was planning to do a start up, is this the kind of venture you would have guessed? How does "internet" and "advertising" fit in with what you are doing? If this venture succeeds, could it be used to help your professional development and career, maybe as a supplier or customer? Can you see yourself leaving your current job and joining your friend's (now established) company as a vice president or acting as a member of its board of directors, the latter perhaps while pursuing your current career path? Are your other mutual friends investing? Are some of them more tech savvy than you and better able to judge the company's prospects of success? To a certain extent, there is "safety in numbers" and even if there isn't, "misery loves company." On the upside, would you feel left out if everyone in your crowd caught "the next Microsoft" except you? |
How can banks afford to offer credit card rewards? | One reason why some merchants in the US don't accept Discover is that the fee the store is charged is higher than the average. Generally a portion of transaction fee for the network and the issuing bank goes to the rewards program. In some cases a portion of the interest can also be used to fund these programs. Some cards will give you more points when you carry a balance from one month to the next. Therefore encouraging consumers to have interest charges. This portion of the program will be funded from the interest charges. Profits: Rewards: Some rewards are almost always redeemed: cash once the amount of charges gets above a minimum threshold. Some are almost never redeemed: miles with high requirements and tough blackout periods. Credit cards that don't understand how their customers will use their cards can run into problems. If they offer a great rewards program that encourages use, but pays too high a percentage of points earned can lead to problems. This is especially true when a great percentage of users pay in full each month. This hurt Citibank in the 1990's. They had a card with no annual fee forever, and a very high percentage never had to pay interest. People flocked to the card, and kept it as an emergency card, because they knew it would never have a annual fee. |
How do I account for 100 percent vendor discounts in GnuCash 2.6.5 | The answer was provided to me at the Gnucash chat by "warlord". The procedure is as follows: After doing this you will have: |
What's are the differences between “defined contribution” and “defined benefit” pension plans? | In short, defined contribution plans yield different amounts of return based on the market whereas defined benefit plans yield predetermined amounts defined based on factors such as salary and years of service. |
Do market shares exhaust? | Let's clarify some things. Companies allow for the public to purchase their shares through Initial Public Offering (IPO) (first-time) and Seasoned Public Offering (SPO) (all other times). They choose however many shares they want to issue depending on the amount of capital they want to raise. What this means is that the current owners give up some ownership % in exchange for cash (usually). In the course of IPOs and SPOs, it can happen that the public will not buy all shares if there is very little interest, but I would assume that the more probable scenario if very little interest is present is that the shares' value would take a big drop on their issuance date from the proposed IPO/SPO price. After those shares are bought by the public, they are traded on Exchanges which are a secondary and (mostly) do not affect the underlying company. The shares are exchanged from John Doe to Jane Doe as John Doe believes the market value for those shares will take a direction that Jane Doe believes in the opposite. Generally speaking, markets will find an equilibrium price where you can reasonably easily buy-sell securities as the price is not too far from what most participants in the market believe it should be. In cases where all participants agree on the direction (most often in case of a crash) it can be hard to find a party to make a trade with. Say a company just announced negative news with long-lasting effects on the business there will be a surge in sell orders with very few buyers. If you are willing to buy, you will likely very easily find a trading partner but if you are trying to sell instead then you will have to compete for the lowest price against all other sellers. All that to say that in such cases, while shares are technically sellable / purchasable, the end result can be that no shares are purchasable. |
Understanding the synthetic long put option | A long put - you have a small initial cost (the option premium) but profit as the stock goes down. You have no additional risk if the shock rises, even a lot. Short a stock - you gain if the stock drops, but have unlimited risk if it rises, the call mitigates this, by capping that rising stock risk. The profit/loss graph looks similar to the long put when you hold both the short position and the long call. You might consider producing a graph or spreadsheet to compare positions. You can easily sketch put, call, long stock, short stock, and study how combinations of positions can synthetically look like other positions. Often, when a stock has no shares to short, the synthetic short can help you put your stock position in place. |
When are equal-weighted index funds / ETFs preferable to market-cap-weighted funds? | Equal weighted indexes are not theoretically meant to be less volatile or less risky; they're just a different way to weigh stocks in an index. If you had a problem that hurt small caps more than large caps, an equal weighted index will be hurt more than a market-cap weighted one. On the other hand, if you consider that second rung companies have come up to replace the top layer, it makes sense to weigh them on par. History changes on a per-country basis - in India, for instance, the market's so small at the lower-cap end that big money chases only the large caps, which go up more in a liquidity driven move. But in a more secular period (like the last 18 months) we see that smaller caps have outperformed. |
Am I eligible for a student maintenance loan? | Looking at https://www.gov.uk/student-finance/who-qualifies, it says: You can only apply if: As you meet all three requirements I think you are counted as a English student in every respect. I would advise applying as soon as possible though to verify this. EDIT: also, getting a British passport anyway might not hurt; it makes sense as you've spent almost all your life here, and it would insulate you against any issues that might arise if Britain ends up leaving the EU. |
When do companies typically announce stock splits? | In 2005, Apple announced a split on Feb 11... CUPERTINO, California — February 11, 2005 — Apple® announced today that its Board of Directors has approved a two-for-one split of the Company’s common stock and a proportional increase in the number of Apple common shares authorized from 900 million to 1.8 billion. Each shareholder of record at the close of business on February 18, 2005 will receive one additional share for every outstanding share held on the record date, and trading will begin on a split-adjusted basis on February 28, 2005. ...one month after announcing earnings. CUPERTINO, California—January 12, 2005—Apple® today announced financial results for its fiscal 2005 first quarter ended December 25, 2004. For the quarter, the Company posted a net profit of $295 million, or $.70 per diluted share. These results compare to a net profit of $63 million, or $.17 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.49 billion, up 74 percent from the year-ago quarter. Gross margin was 28.5 percent, up from 26.7 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter’s revenue. I wouldn't expect Apple to offer another split, as it's become somewhat fashionable among tech companies to have high stock prices (see GOOG or NFLX or even BRK-A/BRK-B). Additionally, as a split does nothing to the underlying value of the company, it shouldn't affect your decision to purchase AAPL. (That said, it may change the perception of a stock as "cheap" or "expensive" per human psychology). So, to answer your question: companies will usually announce a stock split after releasing their financial results for the preceding fiscal year. Regardless of results, though, splits happen when the board decides it is advantageous to the company to split its stocks. |
classify investments in to different asset types | REITs can be classified as equity, mortgage, or hybrid. A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. Trades like equity but the underlying is a property ot mortgage. So you are investing in real estate but without directly dealing with it. So you wouldn't classify it as real estate. CD looks more like a bond.If you look at the terms and conditions they have many conditions as a bond i.e. callable, that is a very precious option for both the buyer and seller. Self occupied house - Yes an asset because it comes with liabilities. When you need to sell it you have to move out. You have to perform repairs to keep it in good condition. Foreign stock mutual fund - Classify it as Foreign stocks, for your own good. Investments in a foreign country aren't the same as in your own country. The foreign economy can go bust, the company may go bust and you would have limited options of recovering your money sitting at home and so on and so forth. |
Stock stopped trading, what does this mean? | It looks like JP Morgan can convert your holding to unsponsored ADRs until July.. In any event, you should not completely lose the equity. Volvo still exists as a public company, it's just not tradable on US exchanges. Q1: Yes, you'd need a JPM account. Your broker should have offered a similar service. If they didn't they are not a broker. Q2: You own 30 shares in Volvo. You need to get your broker to either sell them (off-exchange now) or tell you how to gain access to them. |
If I pay someone else's property taxes, can I use it as a deduction on my income tax return? | You cannot deduct. Even if you could, unless you also hold the mortgage, it's unlikely that you would have sufficient deductions to exceed the standard deduction for a married couple. |
Pay index fund expense ratios with cash instead of fund balance | Simply put, that's not allowed. Outside a retirement fund, they simply do not provide a mechanism to pay that expense ratio separately. Ergo, any effort to pay that expense ratio would be classified as a new/additional purchase of the fund. You now must deal with Inside a retirement fund, paying the expense ratio of the fund with cash would be treated as an additional contribution, which may then violate contribution rules (such as going over your contribution limit, or contributing past age 70-1/2). |
Should I buy a home or rent in my situation? | MY recommendation is simple. RENT The fact that you have to ask the question is a clear sign that you have no business buying a home. That's not to say that it's a bad question to ask though. Far more important then rather it's finically wise for you to buy a home, is the more important question of "are you emotionally ready for the responsibility and permanence" of a home. At best, you are tying your self to the same number of rooms, same location, and same set of circumstances for the next 5-7 years. In that time it will be very unlikely that you will be able to sell the house for a profit, get your minor equity back, or even get a second loan for any reason. You mentioned getting married soon, that means the possibility of more children, divorce, and who knows what else. You are in an emotionally and financially turblunt time in your life. Now is not the right time to buy anything large. Instead rent, and focus on improving your credit rating. In 5 years time you will have a much better credit rating, get much better rates and fees, and have a much better handle on where you want to be with your home/family situation. Buying a house is not something you do on a weekend. For most people it's the culmination of years of work, searching, researching, and preparation. Often times people that buy before they are ready, will end up in foreclosure, and generally have a crappy next 15 years, as they try to work themselves out of the issue. |
Why pay estimated taxes? | Your logic is not wrong. But the risk is more significant than you seem to assume. Essentially you are proposing taking a 2.6% loan to buy stocks. Is that a good strategy? On average, probably. But if your stocks crash you might have significant liabilities. In 1929, the Dow Jones dropped 89%. In 1989, >30%. In 2008-9, 54%. This is a huge risk if this is money that you owe in taxes. If you operate the same system year after year the chance of it going horribly wrong increases. |
How can my friend send $3K to me without using Paypal? | Have his bank put the money on a gift card or gift cards and have somebody send them to you in the mail. In fact, if you are going to spend the money online all you need is the numbers and codes from the card to spend the money. If you have more time have the bank send you a cashiers check or money order. |
Free service for automatic email stock alert when target price is met? | If you're a customer, TD Ameritrade has a really robust alerting system. |
How does Value get rounded in figuring out Bonds Value? | With the formula you are using you assume that the issued bond (bond A) is a perpetual. Given the provided information, you can't really do more than this, it's only an approximation. The difference could be explained by the repayment of the principal (which is not the case with a perpetual). I guess the author has calculated the bond value with principal repayment. You can get more insight in the calculation from the excel provided at this website: http://breakingdownfinance.com/finance-topics/bond-valuation/fixed-rate-bond-valuation/ |
How to compute for losses in an upside down trade-in of a financed car? | I'm going to ignore your numbers to avoid spending the time to understand them. I'm just going to go over the basic moving parts of trading an upside down car against another financed car because I think you're conflating price and value. I'm also going to ignore taxes, and fees, and depreciation. The car has an acquisition cost (price) then it has a value. You pay the price to obtain this thing, then in the future it is worth what someone else will pay you. When you finance a car you agree to your $10,000 price, then you call up Mr. Bank and agree to pay 10% per year for 5 years on that $10,000. Mr. Banker wires over $10,000 and you drive home in your car. Say in a year you want a different car. This new car has a price of $20,000, and wouldn't you know it they'll even buy your current car from you. They'll give you $7,000 to trade in your current car. Your current car has a value of $7,000. You've made 12 payments of $188.71. Of those payments about $460 was interest, you now owe about $8,195 to Mr. Banker. The new dealership needs to send payment to Mr. Banker to get the title for your current car. They'll send the $7,000 they agreed to pay for your car. Then they'll loan you the additional $1,195 ($8,195 owed on the car minus $7,000 trade in value). Your loan on the new car will be for $21,195, $20,000 for the new car and $1,195 for the amount you still owed on the old car after the dealership paid you $7,000 for your old car. It doesn't matter what your down-payment was on the old car, it doesn't matter what your payment was before, it doesn't matter what you bought your old car for. All that matters is how much you owe on it today and how much the buyer (the dealership) is willing to pay you for it. How much of this is "loss" is an extremely vague number to derive primarily because your utility of the car has a value. But it could be argued that the $1,195 added on to your new car loan to pay for the old car is lost. |
As an investing novice, what to do with my money? | I'm normally not a fan of partitioning investment money into buckets but your case may be the clearest case for it I've seen in awhile. Your income and saving is good and you have two clearly defined goals of retirement saving and saving for a house each with very different time frames ~30 years and 3-5 years respectively. For medium term money, like saving for a house, just building up cash is not actually a bad idea. This minimizes the chance that a market crash will happen at the same time you need to withdraw the money. However, given you have the means to take more risk a generally smarter scheme would be to invest much of the money in a broad liquid bond funds with a somewhat lower percentage in stocks and then reduce the amount of stock each year as you get closer even moving some into cash. This gives reasonable positive expected return while lowering the risk of having to sell during a crisis as the time to purchase gets shorter and shorter. The retirement money should be invested for the long term as usual. A majority in low-fee index stock funds/etfs is the standard advice for good reason. |
What to do when a job offer is made but with a salary less than what was asked for? | It depends on your situation. Take the job only if you really need the job and there's no job close to your experience and salary expectations. IMO $70K is not much in NYC given the cost of living there, even if you stay in Jersey City, NJ and take a train. However, it does depend on your lifestyle. Also, if HR is not willing to keep their commitment now, they generally won't keep any other commitments like negotiated perks as part of the job offer. However, sometimes you may have to compromise because of other factors that make the job desirable: the team, the work, and enthusiasm for the business. |
Non-EU student, living in Germany, working for a Swiss company - taxes? | Finally, I got response from finance center: "It doesn't matter where do you study, what does matter is where you live. So, once you live in Germany, you pay taxes in Germany. And it doesn't matter who you work for." So, there are two options to pay taxes: it's paid by an employer or an employee: If I would work for Swiss company, I need to show how much money I make every month (or year) to Finance Center. |
Is the very long-term growth of the stock market bound by aggregate net income? | I am a believer in that theory. My opinion is that over the long term, we can expect 25% of income to reflect the payment on one's mortgage, and if you drew a line over time reflecting the mortgage this represents plus the downpayment, you'd be very close to a median home price. The bubble that occurred was real, but not as dramatic as Schiller's chart implies. $1000 will support a $124K 30yr mortgage, but $209K at 4%. This is with no hype, and exact same supply/demand pressures. The market cap of all US companies adds to about $18T. The total wealth in the US, about $60T. Of course US stocks aren't just held by US citizens, it's a big world. Let me suggest two things - the world is poor in comparison to much of the US. A $100,000 net worth puts you in the top 8% in the world. The implication of this is that as the poorer 90% work their way up from poverty, money will seek investments, and there's room for growth. Even if you looked at a closed system, the US only, the limit, absent bubbles, would be one that would have to put a cap on productivity. In today's dollars we produce more than we did years ago, and less than we will in the future. We invent new things faster than the old ones are obsoleted. So any prognostication that our $18T market can grow to say, $30T, does not need to discuss P/Es or bubbles, but rather the creation of new products and businesses that will increase the total market. To summarize - Population growth (not really discussed), Productivity, and long term reduced Poverty will all keep that boundary to be a growing number. That said, this question may be economic, and not PF, in which case my analysis is bound for the Off-Topic barrel. Fascinating question. |
What are some ways to mitigate the risks of covered calls? | Two ways to mitigate this risk are to buy a put at a lower premium to the written call, or manage your trade by buying back your call if you see the underlying price going against you - a bit similar to having a stop loss. |
Buy and sell stock at specific earnings | Enjoy the free trades as long as they last, and take advantage of it since this is no longer functionally a tax on your potential profits. On a side note, RobinHood and others in the past have roped customers in with low-to-zero fee trades before changing the business paradigm completely or ceasing operations. All brokers could be charging LESS fees than they do, but they get charged fees by the exchanges, and will eventually pass this down to the customer in some way or go bankrupt. |
How to help a financially self destructive person? | Wow. Just ... wow. We all must start where we are, I guess. The past is the past. There almost certainly isn't a cheap way to fix this. You're already on the hook for $4k per month. Your money is enabling her behavior. You'd rather not enable her behavior, but the money is part of the consequences of your divorce, so into her bank account it goes. Those who control how much alimony your ex-wife receives might reach the conclusion she needs more. That's not a hard conclusion for them to make. It's not their money. The living conditions are hurting your kids, and that's unfortunate, but that's also part of the consequences of your divorce. If it's deemed that your kids are better off not visiting her, then you might be relieved of paying child support (since you're supporting them at that point) but you might still be supporting her until some trigger is met, which might be never. (You know those details better than I do, of course.) If she's already lost her house, filed for bankruptcy, borrowed money from people that she hasn't paid back, and gets a check from you each month and still has utilities shut off, she'll continue to deteriorate financially until she hits rock bottom. Then, and only then, will she see the need to fix her behavior. Now, the (possibly) million dollar question for you is, "Where is rock bottom?" Do what you can to make that happen sooner rather than later, because you'll likely be subsidizing her all the way down, and part of the way back up. You've lost most of the leverage you once had to change her behavior, but try every way you can. You might hit the jackpot. |
Can I default on my private student loans if I was an international student? | You signed a contract to pay the loan. You owe the money. Stories of people being arrested over defaulted student loans are usually based in contempt of court warrants when the person failed to appear in court when the collection agency filed suit against them. Explore student loan forgiveness program. Research collections and bankruptcy and how to deal with collection agencies. There are pitfalls in communicating with them which restart the clock on bad debt aging off the credit report, and which can be used to say that you agreed to pay a debt. For instance, if you make any sort of payment on any debt, a case can be made that you have assumed the debt. Once you are aware of the pitfalls, contact the collection agency (in writing) and dispute the debt. Force them to prove that it is your debt. Force them to prove that they have the right to collect it. Force them to prove the amount. Dispute the fairness of the amount. Doubling your principal in 6 years is a bit flagrant. So, work with the collectors, establish that the debt is valid and negotiate a settlement. Or let it stay in default. Your credit report in the US is shot. It will be a long time before the default ages off your report. This is important if you try to open a bank account, rent an apartment, or get a job in the US. These activities do not always require a credit report, but they often do. You will not be able to borrow money or establish a credit card in the US. Here's a decent informational site regarding what they can do to collect the loan. Pay special attention to Administrative Wage Garnishment. They can likely hit you with that one. You might be unreachable for a court summons, but AWG only requires that the collectors be able to confirm that you work for a company that is subject to US laws. Update: I am informed that federally funded student loans are not available to international students. AWG is only possible for debts to the federal government. Private companies must go through the courts to force settlement of debt. OP is safe from AWG. |
Why do people take out life insurance on their children? Should I take out a policy on my child? | If the child can take over the life insurance when they wish to get a mortgage or have their own children, there may be a case for buying insurance for the child in the event that your child's health is not good enough for them to get cover at that time. However I don’t think this type of insurance is worth having. |
Why do investors buy stock that had appreciated? | From an amateur: Prices aren't entirely rational - they float, and the day to day prices of stock are an excellent example of this. So how would you assign an appropriate value to it? There is a logical minimum, the scrap value of the assets and the cash on hand. However, that doesn't take into account the expectations for growth people have for that company. If everyone thought a $100 mil company was going to be worth $200 mil by the end of next year, they'd still be willing to pay at a $150 mil price point now. That said, the market is big enough that it's easy enough to find someone who has those growth expectations. They still expect it to be worth more in the future, and they'll buy it now. And if no one buys at that price point, that's when prices start to fall. |
Is there any reason not to buy points when re-financing with intent not to sell for a while? | In such a situation, is there any reason, financial or not, to NOT pay as many points as mortgage seller allows? I can think of a few reasons not to buy points, in the scenario you described: If interest rates decrease you could be better off refinancing to a lower rate than buying points now. If buying points reduced your down payment below 20% then the PMI would more than offset the benefit of having purchased points. Your situation changes and you aren't able to stay in the home as long as planned. That said, current interest rates are pretty low, so I'd probably gamble on them not getting too much lower anytime soon. I also assume that if you can afford as many points as they allow, that you wouldn't have to dip below 20% down payment even with points. Edit: Others have mentioned that it's important to note opportunity cost when calculating the benefit of purchasing points, I agree, you wouldn't want to buy points at a rate that saved you less than you could earn elsewhere. Personally, I've not seen a points scenario that didn't yield more benefit than market average returns, but that could be due to my market, or just coincidence, you should definitely calculate the benefit for your scenario and shop for a good lender. Don't forget that points are tax deductible in the year paid when calculating their benefit. |
401K - shift from agressive investment to Money Market | If you look at history, it shows that the more people predict corrections the less was the chance they came. That doesn't prove it stays so, though. 2017 is not any different than other years in the future: Independent of this, with less than ten years remaining until you need to draw from your money, it is a good idea to move away from high risk (and high gain); you will not have enough time to recover if it goes awry. There are different approaches, but you should slowly and continuously migrate your capital to less risky investments. Pick some good days and move 10% or 20% each time to low-risk, so that towards the end of the remaining time 90 or 100% are low or zero risk investments. Many investment banks and retirement funds offer dedicated funds for that, they are called 'Retirement 2020' or 'Retirement 2030'; they do exactly this 'slow and continuous moving over' for you; just pick the right one. |
Should I pay more than 20% down on a home? | The more you put down now, the less money you are borrowing. 30yrs of interest adds up. Even paying a small amount at the beginning of the mortgage can turn into a huge savings over the life of the loan. That's why you'll find advice to make extra mortgage payments in the beginning. The question is: Do you have a better use for that money? In particular, do you have any higher-interest debt (higher APR than your mortgage) that needs to be paid off? You generally want to take care of those first. Beyond that can you invest the extra down payment money elsewhere (eg stock market) and get a better return than your mortgage rate? (don't forget about taxes on investment profits). If so, that money will do more good there. |
In Canada, how bad must your credit be for a denial of a Secured Credit Card? | A bank or credit card agency can deny your application for pretty much any reason. That said, it's extremely unlikely they'd do so for a secured credit card. This is because the credit is secured. If your sister is to get a card with, say, a $1000 limit, she will have to provide $1000 in security. This means the banks risk practically nothing. That said, I have found one reference that claims you need a score of above 600 to qualify for a secured credit card, though this is hard to believe. Secured credit cards are a reasonable way of building your credit back up. Just about the only other way for her credit rating to improve is for her history of bad debt to fall off the credit report, but that's going to take quite some time. She should be working hard to provide positive credit history to replace the old negative history, assuming her credit rating is important to her. It may not be; it's only important if she plans on taking on debt in the future. Honestly, a credit rating of around 500 is so bad that I wouldn't even worry much about lowering it. It's already low enough as to make it all but impossible to qualify for (unsecured) credit or loans. A single denial is unlikely to significantly affect the score, except in the very short term. With two bankruptcies, I encourage credit counselling for your sister. There are a number of good books available, too. Credit counselling should go into detail on credit scores, unsecured credit, proper budgeting, and all that sort of useful information. |
One of my stocks dropped 40% in 2 days, how should I mentally approach this? | There are 2 approaches. One of them is already mentioned by @Afforess. If the approach by @Afforess is not feasible, and you can not see yourself making an unbiased decision, close the position. By closing the position you will not get the best price. But by removing a distraction you will reduce amount of mistakes you make in the other stocks. |
What publicly available software do professional stock traders use for stock analysis? | Bloomberg is very popular, especially for researching individual companies. Market QA and Factset are popular for analyzing data. Microsoft Excel and Matlab are very common for analyzing the data. Lots of time traders will take data from Bloomberg, Market QA, Factset or where ever, and then actually preform their analytics in Excel or Matlab. A lot of the brokers provide their own software to traders using their platform, and that software can also contain different tools to help the traders as well. |
What does it mean to a life insurance policy holder to convert from a stock to mutual insurance company? | A stock insurance company is structured like a “normal” company. It has shareholders (that are the company's investors), who elect a board of directors, who select the senior executive(s), who manage the people who run the actual company. The directors (and thus the executives and employees) have a legal responsibility to manage the company in a way which is beneficial for the shareholders, since the shareholders are the ultimate owner of the company. A mutual insurance company is similar, except that the people holding policies are also the shareholders. That is, the policyholders are the ultimate owners of the company, and there generally aren't separate shareholders who are just “investing” in the company. These policyholder-shareholders elect the board of directors, who select the senior executive(s), who manage the people who run the actual company. In practice, it probably doesn't really make a whole lot of difference, since even if you're just a "customer" and not an "owner" of the company, the company is still going to want to attract customers and act in a reasonable way toward them. Also, insurance companies are generally pretty heavily regulated in terms of what they can do, because governments really like them to remain solvent. It may be comforting to know that in a mutual insurance company the higher-ups are explicitly supposed to be working in your best interest, though, rather than in the interest of some random investors. Some might object that being a shareholder may not give you a whole lot more rights than you had before. See, for example, this article from the Boston Globe, “At mutual insurance firms, big money for insiders but no say for ‘owners’ — policyholders”: It has grown into something else entirely: an opaque, poorly understood, and often immensely profitable world in which some executives and insiders operate with minimal scrutiny and, no coincidence, often reap maximum personal rewards. Policyholders, despite their status as owners, have no meaningful oversight of how mutual companies spend their money — whether to lower rates, pay dividends, or fund executive salaries and perks — and few avenues to challenge such decisions. Another reason that one might not like the conversion is the specific details of how the current investor-shareholders are being paid back for their investment in the process of the conversion to mutual ownership, and what that might do to the funds on hand that are supposed to be there to keep the firm solvent for the policyholders. From another Boston Globe article on the conversion of SBLI to a mutual company, “Insurer SBLI wants to get banks out of its business,” professor Robert Wright is cautiously optimistic but wants to ensure the prior shareholders aren't overpaid: Robert Wright, a professor in South Dakota who has studied insurance companies and owns an SBLI policy, said he would prefer the insurer to be a mutual company that doesn’t have to worry about the short-term needs of shareholders. But he wants to ensure that SBLI doesn’t overpay the banks for their shares. “It’s fine, as long as it’s a fair price,” he said. That article also gives SBLI's president's statement as to why they think it's a good thing for policyholders: If the banks remained shareholders, they would be likely to demand a greater share of the profits and eat into the dividends the insurance company currently pays to the 536,000 policyholders, about half of whom live in Massachusetts, said Jim Morgan, president of Woburn-based SBLI. “We’re trying to protect the policyholders from having the dividends diluted,” Morgan said. I'm not sure there's an obvious pros/cons list for either way, but I'd think that I'd prefer the mutual approach, just on the principle that the policyholders “ought” to be the owners, because the directors (and thus the executives and employees) are then legally required to manage the company in the best interest of the policyholders. I did cast a Yes vote in my proxy on whether SBLI ought to become a mutual company (I'm a SBLI term-life policyholder.) But policy terms aren't changing, and it'd be hard to tell for sure how it'd impact any dividends (I assume the whole-life policies must be the ones to pay dividends) or company solvency either way, since it's not like we'll get to run a scientific experiment trying it out both ways. I doubt you'd have a lot of regrets either way, whether it becomes a mutual company and you wish it hadn't or it doesn't become one and you wish it had. |
When are stock trade fees deducted? | As others have said, it depends on the brokerage firm. My broker is Scottrade. With Scottrade the commission is assessed and applied the moment the order is filled. If I buy 100 shares of XYZ at $10 a share then Scottrade will immediately deduct $1007.02 out of my account. They add the commission and fees to the buy transaction. On a sale transaction they subtract the commission and fees from the resulting money. So if I sell 100 shares of XYZ at $11 a share I will get 1,092.98 put into my account, which I can use three business days later. |
What implications does having the highest household debt to disposable income ratio have on Australia? | Stock market Tends to follow the DJIA and FTSE, so unlikely to see an Australia-only crash, especially while resources are doing so well. If China's growth slows before other ailing sectors improve, a downturn becomes more likely and the potential severity of the downturn increases. Economy A huge question to which I would refer you to Steve Keen: http://www.debtdeflation.com/blogs/ See A Fork in the Road. Housing Market It's a bubble, stupid! Seriously, it's as though the Aussies waited for the US to get done and then simply borrowed the copy book. There are a multitude of articles out there about likely outcomes from where the housing market is and where it's going. See this for a sample of what's out there: http://blogs.forbes.com/greatspeculations/2010/07/26/aussie-housing-bubble-gets-popped-with-chinese-credit-crash/ Note: All three of the areas you raise - economy, stock mkt, housing - are so intertwined that it's tricky separating them out. A lot of reading on Steve Keen's site can help. |
In general, is it financially better to buy or to rent a house? | Which is generally the better option (financially)? Invest. If you can return 7-8% (less than the historical return of the S&P 500) on your money over the course of 25 years this will outperform purchasing personal property. If you WANT to own a house for other reason apart from the financial benefits then buy a house. Will you earn 7-8% on your money, there is a pretty good chance this is no because investors are prone to act emotionally. |
High-risk investing is better for the young? Why? | If you spent your whole life earning the same portfolio that amounts $20,000, the variance and volatility of watching your life savings drop to $10,000 overnight has a greater consequence than for someone who is young. This is why riskier portfolios aren't advised for older people closer to or within retirement age, the obvious complementary group being younger people who could lose more with lesser permanent consequence. Your high risk investment choices have nothing to do with your ability to manage other people's money, unless you fail to make a noteworthy investment return, then your high risk approach will be the death knell to your fund managing aspirations. |
Is there any online personal finance software without online banking? | CashBase has a web app, an iPhone app and an Android app, all sync'ed up. It doesn't integrate with banks automatically, but you can import bank statements as CSV. Disclosure: Filip is CashBase's founder. |
How do annual risks translate into long-term risks? | The short answer is the annualised volatility over twenty years should be pretty much the same as the annualised volatility over five years. For independent, identically distributed returns the volatility scales proportionally. So for any number of monthly returns T, setting the annualization factor m = 12 annualises the volatility. It should be the same for all time scales. However, note the discussion here: https://quant.stackexchange.com/a/7496/7178 Scaling volatility [like this] only is mathematically correct when the underlying price model is driven by Geometric Brownian motion which implies that prices are log normally distributed and returns are normally distributed. Particularly the comment: "its a well known fact that volatility is overestimated when scaled over long periods of time without a change of model to estimate such "long-term" volatility." Now, a demonstration. I have modelled 12,000 monthly returns with mean = 3% and standard deviation = 2, so the annualised volatility should be Sqrt(12) * 2 = 6.9282. Calculating annualised volatility for return sequences of various lengths (3, 6, 12, 60 months etc.) reveals an inaccuracy for shorter sequences. The five-year sequence average got closest to the theoretically expected figure (6.9282), and, as the commenter noted "volatility is [slightly] overestimated when scaled over long periods of time". Annualised volatility for varying return sequence lengths Edit re. comment Reinvesting returns does not affect the volatility much. For instance, comparing some data I have handy, the Dow Jones Industrial Average Capital Returns (CR) versus Net Returns (NR). The return differences are somewhat smoothed, 0.1% each month, 0.25% every third month. More erratic dividend reinvestment would increase the volatility. |
Will there always be somebody selling/buying in every stock? | No, Mark is right, if you place a market order there will always be someone to buy or sell at the market price. Only if you place a limit order on the price can it not sell or be bought. Just research on your computer and you will find your answer. You must be specify about open order or limit order when asking. |
Best Time to buy a stock in a day | The best thing to do is not worry about what time is best to buy but put in a conditional order before the market opens. If your conditions are met during the trading day your order will go through and you will buy the shares. This keeps your emotions out of your trading and will stop you from either chasing the market or buying when you consider the wrong time. As you have already done your analysis and made your decision before market open, thus you should place your conditional orders and stop losses before market opens as well. |
Computer vendor not honoring warranty. What's the next step? | You're probably best off going to a different store to fix the computer. Right now you don't have "damages." You could sue him but, there's no thing to sue for. If you sue for your original costs, you'd have to return the computer and probably only receive a portion of your original costs, less court filing fees. If you have someone else fix your computer you can sue him for the cost to fix your computer. You'll take him to small claims court, win or lose you probably won't get anything from him. If you win, you'll have a piece of paper (judgement) that says, "Yep, that guy owes you money" if you lose you won't even have that. You could report him to the BBB or some other business agency but that doesn't help you fix the computer. |
If a stock doesn't pay dividends, then why is the stock worth anything? | Stocks represent partial ownership of the company. So, if you owned 51% of the stock of the company (and therefore 51% of the company itself), you could decide to liquidate all the assets of the company, and you would be entitled to 51% of the proceeds from that sale. In the example above, it would have to be Common Stock, as preferred stock does not confer ownership. *In a situation where it is not possible to buy 51% or more of the company (for example, it's not for sale), this is not possible, so the value of the stock could be much less. |
(Theoretical) Paying credit cards with other credit cards | A "balance transfer" is paying one credit card with another. You probably get offers in the mail to do this all of the time. As other posters have noted, however, this usually comes with finance fees rather than the rewards that you get for normal purchases because it's written into your credit card agreement as a different class of transaction with different rules. I'm not sure if it's urban legend or true, but I have heard stories that suggest there were some "loop holes" in the earliest credit card reward plans that allowed for something like what you want. I doubt that any plan ever allowed exactly what you've written, but I've heard stories about people buying gift cards from merchants and then using the gift cards to pay their bill. This loop hole (if it ever existed) is closed now, but it would have allowed for essentially infinite generation of rewards at no cost to the cardholder. The banks and credit card companies have a lot of years of experience at this sort of thing now, so the threshold for you finding something that works and conforms with the cardholder agreement is pretty small. |
Typical return for an IRA? How can I assess if my returns were decent? | There is no typical return for an IRA. Understand that an IRA is not an investment type, it is just an account that gets special tax treatment by the Federal Government. The money in the IRA could be invested in almost anything including Gold, Stocks, Bonds, Cash, CDs, etc. So the question as phrased isn't exactly meaningful. It is kind of like asking what is the typical price of things if I use $10 bills. As for a 10.6% annualized return on your portfolio. That's not a bad return. At that rate you will double your investment (with compounding) every 7.2 years. Again, however, some context is needed. You can really only evaluate investment returns with your risk profile in mind. If you are invested in super safe investments like CDs, that is an absolutely incredible return. You compare it to several indexes, which is a good way to do it if you are investing in the types of investments tracked by those indexes. |
Safe method of paying for a Gym Membership? | The safest way is to not sign contracts with terms that are onerous to you. |
Why does Yahoo miss some mutual fund dividends/capital gains? | This looks more like an aggregation problem. The Dividends and Capital Gains are on quite a few occassions not on same day and hence the way Yahoo is aggregating could be an issue. There is a seperate page with Dividends and capital gains are shown seperately, however as these funds have not given payouts every year, it seems there is some bug in aggregating this info at yahoo's end. For FBMPX http://uk.finance.yahoo.com/q/hp?s=FBMPX&b=2&a=00&c=1987&e=17&d=01&f=2014&g=v https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/316390681 http://uk.finance.yahoo.com/q/pr?s=FBMPX |
Pay down on second mortage when underwater? | There are programs out there which will let you refinance even when underwater, under the Government's HARP program. You are overpaying by nearly $7,000 per year compared to a refinance to 4.5%. A classic example of how the bubble hurt people who overextended themselves a bit as housing shot up. The bank risks a $50K loss if you default or short sell this property. I'd go in and sit down with a branch manager and ask what they can do to recast the loan to a lower rate as you are ready, wiling and able to keep the house and make your payments. Good luck. |
When is the right time to buy a car and/or a house? | Obviously, the best thing financially would be to continue using your present car, unless it impacts you financially on a regular basis. For example, maintenance or breakdowns impacting your ability to work. An unreliable car also impacts your freedom, for example preventing you from taking road-trips you might want to take or taking up free time with maintenance. Give thought to what it is about your present car that you dislike, both to determine the value you gain from a new car and what's most important to you. Anytime you buy a car, you generally lose thousands of dollars simply driving it off the lot. This is the profit which goes to dealers, salespeople, etc... and not part of the actual value of the car. Cars also depreciate over time, with most of the depreciation happening in the first few years of operation. Many of the newer model cars have additional expenses. (For example, replacement $200 keys or electronic systems that can only be repaired at special facilities.) In addition, if you have insurance (other than the minimum third-party required by law), consider the rate increases and add up the long-term impact of that. Imagine you had invested that money instead at 8% interest over the lifetime of the car. If you don't have insurance, consider what you would do in the unfortunate situation where you were at fault in a collision. Could you afford to lose your investment? Even with safe responsible driving, there is always the potential for road/weather conditions or mechanical failures. If you determine there is sufficient value to be gained from changing vehicles, I would recommend that you buy a vehicle with history from someone privately, doing appropriate background checks and consulting friends or family who know about vehicles and can provide feedback. Do research into the models which interest you ahead of time, read online reviews. Every vehicle generally has known advantages and disadvantages which can take years to discover, so buying an older vehicle gives you the advantage of knowing what to expect. I would say there is probably a reasonable middle ground between using a 1991 vehicle you don't like (that's as old as you are) and getting a relatively new model. Look at what you value in the vehicle, consider all the costs, and find the balance that works best for you. Vehicles from 2000-2005 years are quite affordable and still 10-15 years newer than your car. |
Efficient markets hypothesis and performance of IPO shares after lock-up period | Who's to say it wasn't priced into the markets, at least to some degree? Without any information on the behaviour of holders pre-expiry, no one can know if they've been shorting the stock in advance of selling on expiry day. And with the float being such a small proportion of the total issuance, there's always the risk of sudden fluctuations picking up big momentum - which could easily explain the 7% drop on expiry day. Add into all this uncertainty, the usual risks of shorting (e.g. limited upside, unlimited downside), and the observed phenomena aren't by any means killer blows of the Efficient Market Hypothesis. That's not to say that such evidence doesn't necessarily exist - just that this isn't it. |
Where can I find a good online fundamental data provider for Hong Kong stocks? | If you check out China Stock Markets Web provides details on all things that trade on there. It covers the Hang Seng Index, SSE Index, and SSE Component Index. There is also tons of information for investors on the exchange website here. |
What determines a tax resident in Florida | I think the 60 days/year come from the IRS tax residency determination, which isn't a Florida law but applies to all the states. Have a look at the "substantial presence" paragraph to see where the 60 days are coming from. |
In what cases can a business refuse to take cash? | Apartment complexes have had a long history of not accepting cash for payment of rent. This eliminates the problem of robbery and strongly reduces the risks of embezzlement. THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE Article 1, Section 10 of the US Constitution states: No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts Previous editions of banknotes stated that the notes were redeemable in gold or in lawful money. The Mint Act of 1792 set gold and silver as legal currency (and that one did not have to accept "base metal coins" for more than $10 which is why coin rolls only go up to $10). The Coinage Act of 1873 dropped silver and made gold the legal standard for currency. In 1933, the "redeemable in gold" was changed by federal statute and the legend you mention was added. Prior to 1933, someone could demand that you pay them in gold and not with a bank note. Legislation in 1933 ended that. This clause in the Constitution leads some political groups to wish to return to a gold standard. I recommend reading the book Greenback as it describes how our currency got the way it did and why that clause appears on currency. |
At what interest rate should debt be used as a tool? | This post has a great discussion on the topic. Basically, there is no single interest rate above which you should pay off and below which you should keep. You have to keep in mind factors such as |
Do Square credit card readers allow for personal use? | I used square in the past for personal yard sale and they did not transfer balance to my bank acct because they told me it was against their policy and I had to have a business license that they could either refund the credit cards i process or keep the money. So they kept it I never got it back. I don't recommend anybody to use square. |
Is there a significant danger to market orders as opposed to limit orders? | The risk of market orders depends heavily on the size of the market and the exchange. On big exchange and a security which is traded in hue numbers you're likely that there are enough participants to give you a "fair" price. Doing a market order on a security which is hardly dealed you might make a bad deal. In Germany Tradegate Exchange and the sister company the bank Tradegate AG are known to play a bit dirty: Their market is open longer than Frankfurt (Xetra) and has way lower liquidity. So it can happen that not all sell or buy orders can be processes on the Exchange and open orders are kept. Then Tradegate AG steps in with a new offer to full-fill these trades selling high or buying low. There is a German article going in details on wiwo.de either German or via Google Translate |
One of my stocks dropped 40% in 2 days, how should I mentally approach this? | Don't throw good money after bad. If you bought on the peak of an event like news/earnings hoping for more and ignored its value than you might be doomed. Determine the stocks value and see it as a buying opportunity if it's still sweet. If not buy more carefully. Those kinds of moves in that range you must have been involved in micro-small caps like biotechs. Thats where money goes to talk to itself and chew on its arm. You win big by finding an alien chip under your skin to reverse engineer or far more likely just wind up eating yourself. If your not holding inside info or at the higher levels of a pyramid for a pump/dump you really shouldn't let your greed take you there. I can expect and stomach w/o worry being wrong at my buy time as much as 10-15% and live with it for a year or more because I see I'm buying a quarter for a dime and will continue to buy into it without staking everything though). I bought in heavy when netflix (prior to split) was $50 or so hoping for a quick bounce and it sunk to like 20 something. No I didn't buy more, I felt like I just got my own .com bubble experience. I stopped looking at it,helpless to do anything other than eat a huge loss I adopted an out of sight out of mind thinking. I no longer wished to be in it, I felt like an ass for getting myself into it, it did NOT look good at the time and I risked a huge amount of capital for what I felt wrongly was a nice quick trade to make some thousands off. Checked it one day, must have wanted to hurt myself, and it was near $300 a share. My extreme loss had turned into something wonderful. A big tax bomb. Netflix eventually split and rose even more meteorically. I held on and only exited a while back and my worst mistake became my best success. Yet still, you trade like that, on unsound things, don't rely on getting the winning ticket because they are few and all others are losers. If your in for a penny you need to be in for the pound and help yourself immensely by sticking to sound stocks and currencies. You trade on news you may find yourself in Zimbabwe dollars with Enron stock. Bad footing, no matter the news or excitement is bad footing. |
Should I pay off my 50K of student loans as quickly as possible, or steadily? Why? | The definitive answer is: It Depends. What are your goals? First and foremost, you need to have at least 3 months expenses in cash or equivalent. (i.e. an investment that you can withdraw from quickly, and without penalty). The good news is that you don't have to come up with it instantly. Set a time frame - one year - for creating this safety net, and pay towards that goal. This is the single most important piece of financial advice you will receive. Now determine what you need to do. For example, you may need a car. Compare interest rates on your student loan and the car loan. Put your cash towards whichever is higher. If you don't need a car or other big ticket item, then you may consider sticking your surplus into the student loans. 50k at $1650 a month will be paid down in about 3 years, which might be a bit long to live the monastic lifestyle. I'd look at paying down the smallest loan first (assuming relatively similar rates), and freeing up that payment for yourself. So if you can pay off 1650 a month, and free up $100 of that in six months, then you can reward yourself with half that surplus, and apply the other half to the next loan. (This is different than some would suggest because you're talking about entering severe spartan mode, which is not sustainable.) Remember that life happens. You'll meet someone. You'll have an accident, your brother will get sick and you'll give him some money to help out. You've got to be prepared for these events, and for these reasons, I don't recommend living that close to the edge. Remember, you're not in default, and you do have the option of continuing to pay the minimum for a long time. |
Options for dummies. Can you explain how puts & calls work, simply? | An Xbox currently sells for $200 but you don't have the money right now to buy it. You think the price of the xbox is going up to $250 next month. Your friend works at BestBuy and says he has a "raincheck" that allows you to buy the Xbox for $200 but the raincheck expires next month. He offers to sell you the "raincheck" for $5. When you buy his raincheck for $5 you are locking in the right to buy the Xbox for $200. It is like an option because it locks in the purchase price, it has an expiration date, it locks in a purchase price, and it is not mandatory that you redeem it. That's an explanation for a call option in kids terms. For more easy answers to the question what is a call option click now. A put can be answered in a similar way. Suppose you bought the Xbox for $250 and then the price drops back to $200. If you keep your receipt, you have the right to return (sell the Xbox back) for $250 even though the current price is only $200. Bestbuy has a 30 day return policy so your receipt is like a put option in that you can sell the Xbox back for a price higher than the current market price. That's a simple example of a put option in kids terms. For more easy answers to the question what is a put click now. |
Wash sale rule impact on different scenarios between different types of accounts | Brokerage->Brokerage 13-16 The loss from the previous purchase will be added to the cost basis of the security for the second purchase. Since you sold it at a loss again it would increase your losses. Your loss from the first sale will be disallowed. Your loss will be added to the cost basis of the next purchase. Your gains will be taxed on the total of the cost basis which will reduce your gains. Which you will taxed 'less'. Your gains will be taxed. Your loss is allowed. You will be taxed on both. Wash Sales really only applies to losses. If you sell for gain, the tax man will be happy to take his share. From my understanding, it does not matter if it is IRA or Brokerage, the wash sale rule affects them all. Check this link: http://www.marketwatch.com/story/understanding-the-wash-sale-rules-2015-03-02 |
Growth of unrealized gains in tax-managed index funds | I don't know that I can answer the question fully, but 2 points. The percent that represent capital gains certainly can't exceed 100. Did you mean 50% but the 500% is a typo? More important, funds held in retirement accounts have no issue with this, Cap Gains are meaningless within tax deferred accounts. I don't know the ratio of stocks held in these accounts vs outside, just that the 2011 year end total retirement account worth was $17 trillion. (That's 12 zeros) This strikes me as a high ratio, although more numbers digging is in order. |
What should I do with $4,000 cash and High Interest Debt? | Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year. Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year. Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year. Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit cards, you should consider paying off as much of it as possible. In your case you may want to keep only some small amount (maybe $500, maybe $1000, maybe $100) in cash for emergencies. Paying off your high interest debt should be a top priority for you. You may want to look on this site for help with budgeting, also. Typically, being in debt to credit card companies is a sign of living beyond your means. It costs you a lot of money in the long run. |
First job: Renting vs get my parents to buy me a house | Seriously. I can't tell you how many times I hear this scenario: Kid graduates college; kid runs out and signs lease on apartment "because that's what you do"**; kid complains that he's in financial trouble and can't make ends meet. Housemate sharing is most famously displayed in hit shows like Big Bang Theory or New Girl. They get a much nicer place with better furnishings for way less money. (However don't hook up with close neighbors or friends of other housemates, they do it for awkward laughs but it really results in awkward departure.) It's more financially responsible. It means the rest of your financial life will have more slack. And when you move, obviously, it's no big deal, you just give all the notice you can, and go to the next town and find another housemate share. ** I suspect a very significant factor is bringing home dates. Well, there's nothing sexy about taking your date to McDonalds because you can't afford anything more. See those shows... it works fine, you just have to be sensible about housemate choices. Pick housemates who view things the same way, and who themselves are invested in making the shared space attractive, and aren't going to mind some ...activities... once in awhile. |
How to save money for future expenses | My answer will suck but it comes from someone who has been married: You can't control another person or convince them to do something. What you can do is identify what they value and show how saving money increases their opportunities in what they value, but understand that the person could see what you're saying as invalid too. If you're single and reading this, this is why you verify that the person has similar values to you. Think of it like someone who wants good gas mileage: you show them a car that gets 60MPG, and immediately they say, "Well, but that's not a cool car." So their value isn't the miles per gallon, and you may find the same is true with your spouse. India is paying more interest than the US and Europe in their savings accounts (I believe the benchmark interest rate is 7.5%), so - assuming your spouse values more money - showing him how to use money in savings to passively earn money might be a technique that works. But it may mean nothing to him because it's (1) not his actual value or (2) isn't enough to matter in his mind. In other words, this is all sales and whatever you do (and this is regardless of gender), don't manipulate, as in the long run that tends to build resentment. If there is a specific problem that you know he sees as a major issue and saving money can help, I'd recommend showing how savings would help with that problem. People generally like solutions to problems; just remember, what you think he sees as a problem may not be what he sees as a problem. This is why I chuckle when I see single people give married people advice; you can't just "convince the person enough" because you are not that person; we have to speak their language and we should be careful to avoid creating resentment. The part that sucks (or doesn't depending on who you ask) is that if we can't convince others to do it, we should do it ourselves. Either (1) earn money independently yourself when applicable (realizing that you are about to have a child and may be limited), or (2) save the money that you and your spouse have agreed that you're allotted, if this applies to your situation (a few spouses divide income even when one is an earner). |
How much money should I lock up in my savings account? | No, don't bother. You need to decide what you are saving for, and how much risk you are prepared to take. It would make sense if you wanted the money only in x years, and couldn't afford to lose say 20% or more if the stock market crashed the day before you needed the cash. Typically if you are about to retire and buy an annuity, you want to protect your capital. This isn't you. At 28, you might be saving for a wedding, a deposit on a house, possibly for school fees, or for eventual retirement. It doesn't sound like you need to get back exactly 24k in July 2022. Keep the 6 months expenses in accounts that you can withdraw from at short notice. Some of this in a current account, some might be in a savings account that doesn't pay interest if you make withdrawals. After that, I'd stick most of the rest in stock market tracker funds, but you might go for actively managed funds instead (ask another question and take professional advice, there will presumably be local tax considerations too), and add in most of your monthly savings too. These should beat the 2.3% over the 5 years, and you can liquidate them easily if you want to buy a house. If there is a recession and a stock market dip, you presumably have the flexibility to hold on to them longer for the economy to recover. And if you are intending to buy a house, then a recession will probably also involve a fall in house prices, so the loss in your savings will be somewhat balanced by the drop in the purchase price of your house. Of course, the worst case scenario is a severe downturn where you lose your job, are unemployed for a considerable period of time, burn through your emergency fund, and need to sell shares at a considerable loss to meet your expenses. You might have family or dependents that you can borrow from or would need to support, which would change your tolerance for risk. Having money locked away for 5 years in this scenario is even worse. So if you don't want to put all your non-emergency savings into the stock market, you still want to choose something that is accessible at a slightly lower interest rate. But ultimately it sounds like you can afford to lose some of your savings, and the probability is that you will be rewarded with much better returns than 2.3% over 5 years. |
If a mutual fund did really well last year, then statistically speaking, is it likely going to do bad this year? | From a mathematical point of view the stats do not change depending on past performance. Just because a fund is lucky one year doesn't mean that it will be unlucky the next. Consider tossing a coin, the chance of heads is 50%. If you have just thrown 3 heads, the chance of heads is still 50%. It doesn't go down. If you throw 10 heads in a row the chance of a heads is still 50%, in fact you many suspect there is something odd about the coin, if it was an unfair coin then the chance of a heads would be higher than 50%. It could be the fund is better run, but there could be other reasons, including random chance. Some funds will randomly do better and some will randomly do worse What you do know is that if they did better than average other funds have done worse, at least for last year. |
Living in my own rental property | When you live in your own rental property, it no longer counts as your 'rental property'. It becomes your own living property and legally you cannot get tax benefits. |
Can't the account information on my checks be easily used for fraud? | When an someone as esteemed and smart as Donald Knuth tells you the chequing system is busted it's time to close your cheque account, or I guess live with the associated risk. Answer to question, yes your account information can be used to commit fraud on you via your bank. |
Is building a corporation a good option? | Compared with a Sole Proprietorship, the main disadvantages of an S-Corporation or an LLC are that it adds a lot of management overhead (time, and possibly money if you don't do it all yourself), and there are fees you must pay to incorporate, as well as additional yearly maintenance fees which vary by state. You should be able to weigh the tax savings and liability protection against the extra costs and hassle, and see which way the scales tip. As a rule of thumb, the bigger your business gets or the more income you make, the more attractive incorporating becomes. Note there are some additional taxes that certain jurisdictions impose on business income. For example, IL and CA charge 1.5% tax, NY is less, but NYC is 8.85%! In NYC specifically, you could actually end up paying slightly more tax as an S-Corp than you would as a Sole Proprietorship. In most places though, the nominal local taxes will still be less than the FICA taxes you could potentially save. |
Why does selling and then rebuying stock not lead to free money? | There are a few people that do this for a living. They are called "market makers" or "specialists" in a particular stock. First of all, this requires a lot of capital. You can get burned on a few trades, a process known as "gambler's ruin," but if you have enough capital to weather the storm, you can make money. Second, you have to be "licensed" by the stock market authorities, because you need to have stock market trading experience and other credentials. Third, you are not allowed to buy and sell at will. In order to do your job, you have to "balance the boat," that is buy, when others are selling, and sell, when others are buying, in order to keep the market moving in two directions. It's a tough job that requires a lot of experience, plus a license, but a few people can make a living doing this. |
A calculator that takes into account portfolio rebalancing? | My answer is Microsoft Excel. Google "VBA for dummies" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could be the third column, it'll tell you how much to buy or sell to rebalance them. then to iterate the rebalance, set both a2 and b2 to =C1 and drag the formula through row 25, one row for each year. It'll probably be a little more work than that, but you get the idea. |
renter's insurance for causing property damage | Renters' Insurance should also have some level of liability coverage. I.e.: if you caused a flooding because you went on and broke the pipe, or a fire because you smoked in the bed - there should be some level of coverage for that. However, most of the damage the tenant can do is probably not accidental. If you broke the pipe - you probably did something wrong. If you caused fire by smoking in bed - you obviously did something wrong. While seemingly accidental, you're deeply at fault. Insurance companies are not in business for rewarding risky behavior. Accidents where the tenant has nothing to do with what happened (earthquakes, fires because of, say, wiring, flooding because it rained too much, or bird flying into a window and shattering it) - are covered by the homeowner's insurance. In any case, talk to your insurance agent about your specific policy and concerns. |
A deferred capital gains tax similar to the real estate 1031 Exchange but for securities reinvestment? | Sale of a stock creates a capital gain. It can be offset with losses, up to $3000 more than the gains. It can be deferred when held within a retirement account. When you gift appreciated stock, the basis follows. So when I gifted my daughter's trust shares, there was still tax due upon sale. The kiddy tax helped reduce but not eliminate it. And there was no quotes around ownership. The money is gone, her account is for college. No 1031 exchange exists for stock. |
Effect of company issued options on share price | A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1. What country is this related to? I ask because, in the US, most people I know associate a "call" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has. I don't know if that means you pulled the numbers out of thin air, or whether it means you're thinking of a different type of option? Perhaps you meant incentive stock options meant to be given to employees? Each one of those is equivalent to a single share. They just aren't called "call options". In the rest of my answer, I'm going to assume you meant stock options. I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution? I don't think the company can just create stock options without creating the underlying shares in the first place. Said another way, a more likely scenario is that company creates 200,000 shares and agrees to float 50% of them while reserving the other 50% as the pool for incentive employee stock. They then choose to give the employees options on the stock in the incentive pool, rather than outright grants of the stock, for various reasons. (One of which is being nice to the employees in regards to taxes since there is no US tax due at grant time if the strike price is the current price of the underlying stock.) An alternative scenario when the company shares are liquidly traded is that the company simply plans to buy back shares from the market in order to give employees their shares when options are exercised. In this case, the company needs the cash on hand, or cash flow to take money from, to buy those shares at current prices. Anyway, in either case, there is no dilution happening WHEN the options get exercised. Any dilution happened before or at the time the options were created. Meaning, the total number of shares in the company was already pre-set at an earlier time. As a result, the fact that the options exist in themselves will not slow price changes on the stock. However, price changes will be impacted by the total float of shares in the company, or the impact to cash flow if the company has to buy shares to redeem its option commitments. This is almost the same thing you're asking about, but it is technically different as to timing. If this is the case, can this be factored into any option pricing models like black-scholes? You're including the effect just by considering the total float of shares and net profits from cash flow when doing your modelling. |
How can foreign investor (residing outside US) invest in US company stocks? | As other people have said they should register with a broker in the country they reside in that can deal in US stocks, then fill out a W8-BEN form. I have personally done this as I am from the Uk, it's not a very complicated process. I would assume that most US brokers don't allow foreign customers due to the person having to pay tax where they reside and the US brokers don't want to have to keep approximately 200 different tax codes in track. |
Taxes, Puts and the Wash Rule | There are different schools of thought. You can ask the IRS - and it would not surprise me if you got different answers on different phone calls. One interpretation is that a put is not "substantially identical" to the disposed stock, therefore no wash is triggered by that sale. However if that put is exercised, then you automatically purchase the security, and that is identical. As to whether the IRS (or your brokerage firm) recognizes the identical security when it falls out of an option, I can't say; but technically they could enforce it because the rule is based on 30 days and a "substantially identical" stock or security. In this interpretation (your investor) would probably at least want to stay out of the money in choosing a strike price, to avoid exercise; however, options are normally either held or sold, rather than be exercised, until at or very close to the expiration date (because time value is left on the table otherwise). So the key driver in this interpretation would be expiration date, which should be at least 31 days out from the stock sale; and it would be prudent to sell an out of the money put as well, in order to avoid the wash sale trigger. However there is also a more unfavorable opinion - see fairmark.com/capgain/wash/wsoption.htm where they hold that a "deep in the money" option is an immediate trigger (regardless of exercise). This article is sage, in that they say that the Treasury (IRS) may interpret an option transaction as a wash if it's ballpark to being exercisable. And, if the IRS throws paper, it always beats each of paper, rock and scissors :( A Schwab article ("A Primer on Wash Sales") says, if the CUSIPs match, bang, wash. This is the one that they may interpret unfavorably on in any case, supporting Schwab's "play it safe" position: "3. Acquire a contract or option to buy substantially identical stock or securities..." . This certainly nails buying a call. As to selling a put, well, it is at least conceivable that an IRS official would call that a contract to buy! SO it's simply not a slam dunk; there are varying opinions that you might describe as ranging from "hell no" to "only if blatant." If you can get an "official" predetermination, or you like to go aggressive in your tax strategy, there's that; they may act adversely, so Caveat Taxfiler! |
When is it better to rent and when is better buy in a certain property market? | The first question is low long will you wish to stray there? It costs of lot in legal changes other changes plus taxes to buy and sell, so if you are not going to wish to live somewhere for at least 5 years, then I would say that renting was better. Do you wish to be able to make changes? When you rent, you can’t change anything without getting permission that can be a pain. Can you cope with unexpected building bills? If you own a home, you have to get it fixed when it breaks, but you don’t know when it will break or how much it will cost to get fixed. Would you rather do a bit of DIY instead of phone up a agent many times to get a small problem fixed? When you rent, it can often take many phone calls to get the agent / landlord to sort out a problem, if own your home, out can do yourself. Then there are the questions of money that other people have covered. |
What percentage of my portfolio should be in individual stocks? | How much should a rational investor have in individual stocks? Probably none. An additional dollar invested in a ETF or low cost index fund comprised of many stocks will be far less risky than a specific stock. And you'd need a lot more capital to make buying, voting, and selling in individual stocks as if you were running your own personal index fund worthwhile. I think in index funds use weightings to make it easier to track the index without constantly trading. So my advice here is to allocate based not on some financial principal but just loss aversion. Don't gamble with more than you can afford to lose. Figure out how much of that 320k you need. It doesn't sound like you can actually afford to lose it all. So I'd say 5 percent and make sure that's funded from other equity holdings or you'll end up overweight in stocks. |
Is inflation a good or bad thing? Why do governments want some inflation? | Inflation is an increase in the money supply. Increases in consumer prices follow from inflation. It's not the same as inflation. Some inflation is necessary for a growing economy. If your gross national product is only $1,000, then you can get away with having less money than if your gross national product is $1 trillion. Inflation beyond this, though, is used to allow governments to live beyond their means. If there is more money chasing the same amount of goods, prices will rise. There is truth in what azcoastal says about this kind of inflation. It's theft. Governments like inflation because it allows them to pay off their debts with cheaper money. |
What should I do with my money? | Edit: I a in the United States, seek advice from someone who is also in Australia. I am getting about 5.5% per year by investing in a fund (ticker:PGF) that, in turn, buys preferred stock in banks. Preferred stock acts a bit like a bond and a bit like a stock. The price is very stable. However, a bank account is FDIC insured (in the USA) and an investment is not. I use the Reinvestment program at Scottrade so that the monthly dividends are automatically reinvested with no commission. However I do not know if this is available outside of the United States. Investing yealds greater returns but exposes you to greater risk. You have to know your risk tolerance. |
Should I participate in a 401k if there is no company match? | I believe @Dilip addressed your question alread, I am going to focus on your second question: What are the criteria one should use for estimating the worth of the situation? The criteria are: I hope this helps. |
The Purpose of Change Machines | I think you're talking about two types of machines, at least in the United States. The term change machine usually refers to a machine that accepts large denominations of currency and returns an equal amount of currency in smaller bills or coins. Typically these machines are used to provide coins in exchange for paper currency, in which case they are also often known as bill changers. Exactly what bills or coins these machines return depends on the machine. Read the instructions on the machine to get the details (they're usually right on the machine). For example my apartment building has a machine that converts small bills like ones and fives to quarters, since the laundry machines only took quarters. The other type of machine are coin-cashing machines, like the Coinstar machines you might see at a grocery store. Many banks used to have these machines as well although in my area they're few and far between now. These machines perform the opposite function of the traditional change machine and convert smaller denominations (mostly coins) into bill form. For example if you dump all your accumulated pennies into the machine, it will probably give you bills and larger coins like quarters, dimes, nickels in exchange, after subtracting a small fee. I've heard that now, some of these machines may give you a gift card of some kind instead of bills, although they'll still subtract a fee from your original amount, usually. Once again just read the instructions and they should tell you. When my bank had one of these machines, they didn't charge a fee as long as you were a customer at the bank. I'm sure that varies from place to place and bank to bank though. Wikipedia's article has this to say (see the article for references): In some sections of the U.S., regional banks have begun offering free coin-counting services in the amount of a gift card. Refunds are often given in cash rather than in the form of a gift card. In some cases, it is not even necessary for the customer to have an account at the bank; the free service is offered as a way to attract new business from individuals who are not current account holders. TD Bank's "Penny Arcade" coin counters were free and available to both customers and non-customers in many branches, but as of November 2010, the bank charges a 6% fee for non-customers to use the machine. |
Should I continue to invest in an S&P 500 index fund? | You shouldn't. The Dow has gained 7% annually on average since October 1915(inflation-adjusted). It has also lost 73% of its inflation-adjusted value from 1966 to 1982 meaning that it would have lost you 4.5% annually for 16 years. Furthermore, past performance is not indicative of future results. If stock markets keep performing like they have for the past 100 years, you can expect there will be a point within the next 60-or-so years your stocks will be higher in value than they were when you bought them. With funds you are paying the people managing them which means you are guaranteed to have pyramiding losses that your gains will have to offset. In your case, you are betting with no fundamental knowledge that S&P will be higher than now whenever you need the money which is not even supported by the above assumption. Dollar averaging just means you will be placing many bets which will reduce your expected losses(and your expected gains) when compared to just buying $100K worth of S&P right now. Whatever you invest in, and whatever your time-frame, don't gamble. If you can't say this company(ies) will be $X more valuable than now in X months with probability > Y, then you shouldn't be investing in it. Nobody ever made money by losing money. There are also safer investments than the stock market, like treasury bonds, even if the returns are lousy. |
Stocks given by company vest if I quit? | Vesting typically stops after you quit. So, if your plan vests 20% per year for 5 years, and you received a one-time stock grant as part of this plan (i.e., ignoring the fact that these often involve new grants each year that vest separately), and you were hired in 2014 and leave at the end of 2016, then you vested 20% in 2015 and 20% in 2016, so would have 40% of the stock vested when you quit, and would never have more than that. |
Do governments support their own bonds when their value goes down? | who issued stock typically support it when the stock price go down. No, not many company do that as it is uneconomical for them to do so. Money used up in buying back equity is a wasteful use of a firm's capital, unless it is doing a buyback to return money to shareholders. Does the same thing happen with government bonds? Not necessarily again here. Bond trading is very different from equities trading. There are conditions specified in the offer document on when an issuer can recall bonds(to jack up the price of an oversold bond), even government bonds have them. The actions of the government has a bigger ripple effect as compared to a firm. The government can start buying back bonds to increase it's price, but it will stoke inflation because of the increase in the supply of money in the market, which may or mayn't be desirable. Then again people holding the bond would have to incentivized to sell the bond. Even during the Greek fiasco, the Greek government wasn't buying Greek bonds as it had no capital to buy. Printing more euros wasn't an option as no assets to back the newly printed money and the ECB would have stopped them from being accepted. And generally buying back isn't useful, because they have to return the principal(which might run into billions, invested in long term projects by the government and cannot be liquidated immediately) while servicing a bond is cheaper and investing the proceeds from the bond sale is more useful while being invested in long term projects. The government can just roll over the bonds with a new issue and refrain from returning the capital till it is in a position to do so. |
How to start investing/thinking about money as a young person? | I think "Rich Dad Poor Dad" is a good read for understanding the basics of personal finance in a non-technical format before actually starting investing. |
Stock sale cost basis calculations for 2013, now that rules changed, is FIFO or another method the smartest financially? | You have to calculate the total value of all shares and then ask yourself "Would I invest that amount of money in this stock?" If the answer is yes, then only sell what you need to sell. Take the $3k loss against your income, if you have no other gains. If you would not invest that amount of cash in that stock, then sell it all right now and carry forward the excess loss every year. Note at any point you have capital gains you can offset all of them with your loss carryover (not just $3k). |
What fiscal scrutiny can be expected from IRS in early retirement? | IRS Pub 554 states (click to read full IRS doc): "Do not file a federal income tax return if you do not meet the filing requirements and are not due a refund. ... If you are a U.S. citizen or resident alien, you must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1-1 below. " You may not have wage income, but you will probably have interest, dividend, capital gains, or proceeds from sale of a house (and there is a special note that you must file in this case, even if you enjoy the exclusion for primary residence) |
What market conditions favor small cap stocks over medium cap stocks? | In general, small cap stocks are exposed to more downside during recessions and when credit is tight, because it is more difficult for small companies to raise capital, and minor variations in cash flow have a bigger impact. Coming out of recessions or when credit is cheap, small companies generally perform better than larger companies. In the depths of recession, small companies with good cash flow are often great value investments, as analysts and institutional investors "punish" the entire class of smallcap companies. |
Advice on preserving wealth in a volatile economic/political country | US Treasury securities are the safest investment. You can buy short term by buying T-Bills. You buy T-bills at a discount to face. For example, to buy a four week T-bill the treasury will take $99.98 out of your account. In four weeks the treasury will deposit $100 into your account. The $0.02 difference is your Intrest on the loan. Compounded over a year (13 four week periods) you get a 0.24% interest. But (presumably) more importantly (to you) you get your original $99.98 back. Your government cannot nationalize money that you have on loan to the United States Government. Edit : oops, I dropped a decimal position in my original calculation of compounded rate of interest. It is now corrected. |
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