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Do developed country equities have a higher return than emerging market equities, when measured in the latter currency? | First of all, the answer to your question depends on your starting dates and ending dates. So developed markets returns are higher over one period, and emerging markets returns over other periods. So far, there does not appear to be a systematic tilt in favor of one or the other. The reasons are as you said. Emerging markets tend to have higher returns in nominal terms, but developed markets currency movements (sometimes) cancel this out. So watch out for periods of strong and weak developed markets (e.g. U.S) currencies. In "strong" currency periods (such as those of the past five years or so), you want U.S. market exposure, and in "weak" currency periods, the larger nominal local returns will be fully reflected in dollar terms as well. |
What is the benefit of investing in retirement plan versus investing directly in stocks yourself? | In the US, the key to understanding the benefits of retirement accounts is to understand capital gains taxes and how they work. Retirement accounts are designed for making investments throughout your career, then after several decades of contributions, withdrawing that money to pay for your needs when your full-time employment has concluded. Normally when you invest money in a brokerage account, if the value of your investment increases, and you sell in less than a year, those investments are considered short-term gains and taxed as ordinary income. If you hold that same investment for over a year, the same investment is taxed at a lower capital gains rate (depending on which tax bracket you are in during that year, the amount due could be up to 20%, but much lower than your regular income tax rate). When you place your money in a retirement account, you are choosing to either pay the tax due on the income when you put it in the account, or put the money in tax free and pay the tax when you withdraw (these are called tax-deferred accounts). When you have money invested several decades, the raw dollar amount increases greatly, but inflation is also reducing the value of those dollars. Imagine you bought some bonds that payed 4% over 40 years, but inflation was 2% during those same years. When you sell those bonds 40 years later, you will owe capital gains on the entire gain even though half of the gain came from inflation. Retirement accounts allow you to buy and sell according to your investment needs and goals without any consideration about whether the gains are short-term or long-term, and they also allow you to pay taxes just once, either when you put it in, or when you take it out, with no worries about whether you're paying taxes on inflated gains. |
How does one value Facebook stock as a potential investment? | You could try this experiment: pay for an Ad/banner on Facebook for 1 month. The Ad/banner should link to your ecommerce site. Then see if the Ad/banner does or does not convert into ecommerce orders ("converting" means that people coming to your eccomerce site from Facebook after having clicked on your Ad/banner really buy something on your site). If it does convert, you will go on paying for Ads/banners and other people will do the same for their sites, so FB might make cash in next years. But if it does NOT convert you and everybody else will soon discover and stop paying for Ads/banners, thus it will be hard for Facebook to make money with Advertising, thus Facebook might be just a big bubble (unless they find other ways of making money). I did the experiment I suggested above and the conversion rate was an absoulte ZERO!!! (Instead Google Adwords converted well for the same site). So IMHO I would stay away from FB. But remember that stock market is emotional (at least on short periods of time), so it might be that even if FB wil never become a cash cow, for the 1st few months people (expecially small investors tempeted by the brand) might go crazy for the stocks and buy buy buy, making the price go up up up. EDIT in reply to some comments below arguing that my answer was boiled down to one single experiment: General Motors said Tuesday that it will stop paid advertising on Facebook...the social media paid ads simply weren't delivering the hoped-for buyers... (CNN May/15/2012) A donkey can not fly either when it's me (with a single experiment) trying to make it fly or the entire GM workforce. |
As an employer, how do I start a 401k or traditional IRA plan? | Here is a nice overview from Vanguard on some options for a small business owner to offer retirement accounts. https://investor.vanguard.com/what-we-offer/small-business/compare-plans I would look over the chart and decide which avenue is best for you and then call around to investment companies (Vanguard, Fidelity, etc. etc.) asking for pricing information. |
Short term parking of a large inheritance? | I am sorry for your loss, this person blessed you greatly. For now I would put it in a savings account. I'd use a high yield account like EverBank or Personal Savings from Amex. There are others it is pretty easy to do your own research. Expect to earn around 2200 if you keep it there a year. As you grieve, I'd ask myself what this person would want me to do with the money. I'd arrive at a plan that involved me investing some, giving some, and spending some. I have a feeling, knowing that you have done pretty well for yourself financially, that this person would want you to spend some money on yourself. It is important to honor their memory. Giving is an important part of building wealth, and so is investing. Perhaps you can give/purchase a bench or part of a walkway at one of your favorite locations like a zoo. This will help you remember this person fondly. For the investing part, I would recommend contacting a company like Fidelity or Vanguard. The can guide you into mutual funds that suit your needs and will help you understand the workings of them. As far as Fidelity, they will tend to guide you toward their company funds, but they are no load. Once you learn how to use the website, it is pretty easy to pick your own funds. And always, you can come back here with more questions. |
How can I find out what factors are making a stock's price rise? | A few days ago they launched Fannie Mae Guaranteed Multifamily Structures (link) but who knows? It's a penny stock now. Google Finance is pretty good at marking news right on the chart for a particular stock. That's how I tracked that piece of news down. Can't say that it precipitated a lot of people buying the stock, but Google Finance isn't a bad place to start looking. |
Do property taxes get deducted 100% from the Annual Tax Return or only a fraction of them? | Any deductable expense will reduce your taxable income not your tax payable. Your Example 1 above is correct and gives you 100% deduction. It is like having a business where your sales are $100,000 and your expenses in making the sales is $40,000. The expenses are your tax deductions and reduce your profits on which you pay tax on to $60,000. If your Example 2 was correct then the situation above would change that you would pay say $30,000 tax on $100,000 sales, then apply your deductions (or expenses) of $40,000 so that you would pay no tax at all and in fact get $10,000 back in your return. In this case the government would not be collecting any taxes but paying out returns to everyone. Your Example 2 is absolutly incorrect. |
How to get rid of someone else's debt collector? | Suing is a legitimate option as well as screening your calls but here's another idea which has personally worked and relates to the collections I did for awhile. Talk with the collector. Outstanding debt gets sold many times and each time a new collector gets their hands on an account they do their due diligence which means calling every single number multiple times. Collectors a looking for consumers who actively evade collections calls for years. My recommendation is to use logic and explain the situation. Give your first name and describe when you received the phone number and then ask a simple question. When in the last 3 1/2 years have you or any collector had a successful hit from this number. They'll respond never in 3 1/2 years. The collector notes the account for themselves and future collectors. Debt collectors are about about making money, not wasting time and they do review all notes pertaining to an account. Will it work? Maybe not but hopefully it will stop the calls with a short conversation. Good luck. |
Am I considered in debt if I pay a mortgage? | The statistic you cited comes from the Federal Reserve Board's Survey of Consumer Finances, a survey that they do every three years, most recently in 2013. This was reported in the September 2014 issue of the Federal Reserve Bulletin. They list the percentage of Americans with any type of debt as 74.5 in 2013, down slightly from 74.9 in 2010. The Bulletin also has a table with a breakdown of the types of debt that people have, and primary residence mortgages are at the top of the list. So the answer is yes, the 75% statistic includes Americans with home mortgages.* The bigger question is, are you really "in debt" if you have a home mortgage? The answer to that is also yes. When you take out a mortgage, you really do own the house. You decide who lives there, you decide what changes you are going to make to it, and you are responsible for the upkeep. But the mortgage debt you have is secured by the house. This means that if you refuse to pay, the bank is allowed to take possession of the house. They don't even get the "whole" house, though; they will sell it to recoup their losses, and give you back whatever equity you had in the house after the loan is satisfied. Is it good debt? Many people think that if you are borrowing money to purchase an appreciating asset, the debt is acceptable. With this definition, a car loan is bad, credit card debt is very bad, and a home mortgage might be okay. Even Dave Ramsey, radio host and champion of the debt-free lifestyle, is not opposed to home mortgages. Home mortgages allow people to purchase a home that they would otherwise be unable to afford. * Interestingly, according to the bulletin appendix, credit card balances were only included as debt for the survey purposes if there was a balance after the most recent bill was paid, not including purchases made after the bill. So people that do not carry a balance on their credit card were not considered "in debt" in this statistic. |
Saving for retirement without employer sponsored plan | Variable Annuities would be one option though there are SEC warnings about them, for an option that is tax-deferred and intended to be used for long-term investing such as retirement. There is a bit of a cost to gain the tax-deferral which may not always make them worthwhile. |
What do do with traditional IRA if I'm maxing out contributions to employer 401k and want to open a Roth | You have many options, and there is no one-size-fits-all recommendation. You can contribute to your IRA in addition to your 401(k), but because you have that 401(k), it is not tax-deductable. So there is little advantage in putting money in the IRA compared to saving it in a personal investment account, where you keep full control over it. It does, however, open the option to do a backdoor-rollover from that IRA to a Roth IRA, which is a good idea to have; you will not pay any taxes if you do that conversion, if the money in the IRA was not tax deducted (which it isn't as you have the 401(k)). You can also contribute to a Roth IRA directly, if you are under the income limits for that (193k$ for married, I think, not sure for single). If this is the case, you don't need to take the detour through the IRA with the backdoor-rollover. Main advantage for Roth is that gains are tax free. There are many other answers here that give details on where to save if you have more money to save. In a nutshell, In between is 'pay off all high-interest debt', I think right after 1. - if you have any. 'High-Interest' means anything that costs more interest than you can expect when investing. |
How Long Can It Take For a Check I Write to Clear on My Account? | There's nothing you can do. If he has indeed deposited the check, it would appear on your account fairly quickly - I've never seen it taking more than 2-3 business days. However, a check is a debt instrument, and you cannot close the account until it clears, or until the "unclaimed property" laws of your state kick in. If he claims that he deposited the check, ask it in writing and have your bank (or the bank where it was deposited) investigate why it takes so long to clear. If he's not willing to give it to you in writing - he's likely not deposited it. Whatever the reason may be, even just to cause you nuisance. Lesson learned. Next time - cashier's check with a signed receipt. Re closing the LLC: if you're the only two partners - you can just withdraw yourself from the LLC, take out your share, and drop it on him leaving him the only partner. Check with your local attorney for details. |
Best way to make most of savings with ISA and Offset mortgage | I am not a Financial Advisor, but I an tell you what I did in exactly this situation - which is pretty much what you are proposing. I put money into the offset savings account until I had only a small amount of mortgage "balance" left (less than a year's worth of mortgage payments), then I set it up so that each month I did the transfer from the offset savings pot into the mortgage itself. This depleted the offset savings in line with the mortgage debt, and the interest on the two balanced out almost to zero. This was self-sustaining and meant that I kept the same margin owing over time (i.e. if I was in this situation for 5 years, for the whole 5 years I would effectively have 1 year remaining on the mortgage). Meanwhile, since I now didn't have any mortgage outgoings from my regular income, I put any spare money into ISA savings. No need to withdraw money from the mortgage to move to the ISA. The benefits of this (as opposed to just paying off the damn mortgage already) were that I kept the full liquidity of the mortgage amount - I could withdraw all the offset savings pot if I wanted to, although I would then have to have funded the mortgage payments differently, and as that liquidity went down over time I was building up other savings in parallel. It worked well for me. It almost doesn't matter what the offset mortgage rate is since you are effectively paying it off by keeping the offset savings pot so high. |
Invest in (say, index funds) vs spending all money on home? | Here in the UK, the rule of thumb is to keep a lot of equity in your home if you can. I assume here that you have a lot of savings you're considering using. If you only have say 10% of the house price you wouldn't actually have a lot of choice in the matter, the mortgage lender will penalise you heavily for low deposits. The practical minimum is 5%, but for most people a 95% mortgage is just silly (albeit not as silly as the 100% or greater mortgages you could get pre-2008), and you should take serious individual advice before considering it. According to Which, the average in the UK for first-time buyers is 20% (not the best source for that data I confess, but a convenient one). Above 20% is not at all unusual. You'll do an affordability calculation to figure out how much you can borrow, which isn't at all the same as how much you should borrow, but does get you started. Basically you, decide how much a month you can spend on mortgage payments. The calculation will let you put every penny into this if you choose to, but in practice you'll want some discretionary income so don't do that. decide the term of the mortgage. For a young first-time buyer in the UK I think you'd typically take a 25-year term and consider early repayment options rather than committing to a shorter term, but you don't have to. Mortgage lenders will offer shorter terms as long as you can afford the payments. decide how much you're putting into a deposit make subtractions for cost of moving (stamp duty if applicable, fees, removals aka "people to lug your stuff"). receive back a number which is the house price you can pay under these constraints (and of course a breakdown of what the mortgage principle would be, and the interest rate you'll pay). This step requires access to lender information, since their rates depend on personal details, deposit percentage, phase of the moon, etc. Our mortgage advisor did multiple runs of the calculation for us for different scenarios, since we hadn't made up our minds entirely. Since you have not yet decided how much deposit to make, you can use multiple calculations to see the effect of different deposits you might make, up to a limit of your total savings. Putting up more deposit both increases the amount you can borrow for a given monthly payment (since mortgage rates are lower when the loan is a lower proportion of house value), and of course increases the house price you can afford. So unless you're getting a very high return on your savings, £1 of deposit gets you somewhat more than £1 of house, and the calculation will tell you how much more. Once you've chosen the house you want, the matter is even simpler: do you prefer to put your savings in the house and borrow less and make lower payments, or prefer to put your savings elsewhere and borrow more and make higher payments but perhaps have some additional income from the savings. Assuming you maintain a contingency fund, a lower mortgage is generally considered a good investment in the UK, but you need to check what's right for you and compare it to other investments you could make. The issue is complicated by the fact that residential property prices are rising quite quickly in most areas of the UK, and have been for a long time, meaning that highly-leveraged property investment appears to be a really good idea. This leads to the imprudent, but tempting, conclusion that you should buy the biggest house you can possibly afford and watch its value rises. I do not endorse this advice personally, but it's certainly true that in a sharply rising house market it's easier to get away with buying a bigger house than you need, than it is to get away with it in a flat or falling market. As Stephen says, an offset mortgage is a no-brainer good idea if the rate is the same. Unfortunately in the UK, the rate isn't the same (or anyway, it wasn't a couple of years ago). Offset mortgages are especially good for those who make a lot of savings from income and for any reason don't want to commit all of those savings to a traditional mortgage payment. Good reasons for not wanting to do that include uncertainty about your future income and a desire to have the flexibility to actually spend some of it if you fancy :-) |
Why do people invest in mutual fund rather than directly buying shares? | How on earth can you possibly know what is going on in individual company X? The sole exception is if it is your own company. The stock markets of the world are in fact a nest of sharks. The big sharks essentially make money out of the little sharks. Some little sharks manage not to be eaten, and grow bigger. Good luck with that. "Insider trading" is, when found out, a crime these days. But "insider knowledge", "insider hints", "knowledge of market sentiment" and indeed just rumours about a given company are the kinds of things you won't particularly get to hear of in the fog of disinformation, and don't particularly want to waste your time with for a very uncertain loss or gain at the end of the year. The thing I find annoying about mutual funds is that they can be very stupid, and I speculate that it may be the consequence of the marketing on the one hand, and the commission structure on the other. I started cashing in my funds in late 2007, following the collapse of Northern Rock here in the UK. The "2008" crisis was in fact the slowest economic car crash in history. But very very few mutual funds saw, or seemed to see, the way the wind was blowing, and switch massively to cash. If the punters had the courage to hang on, of course, mostly stocks bounced back in 2009 and 2010. Moral: remember you can cash your stuff in any time you want. |
Investment time horizon: When is it acceptable to withdraw money from investments? | To summarize your starting situation: You want to: Possible paths: No small business Get a job. Invest the 300K in safe liquid investments then move the maximum amount each year into your retirement accounts. Depending on which company you work for that could include 401K (Regular or Roth), deductible IRA, Roth IRA. The amount of money you can transfer is a function of the options they give you, how much they match, and the amount of income you earn. For the 401K you will invest from your paycheck, but pull an equal amount from the remainder of the 300K. If you are married you can use the same procedure for your spouse's account. You current income funds any vacations or splurges, because you will not need to put additional funds into your retirement plan. By your late 30's the 300K will now be fully invested in retirement account. Unfortunately you can't touch much of it without paying penalties until you are closer to age 60. Each year before semi-retirement, you will have to invest some of your salary into non-retirement accounts to cushion you between age 40 and age 60. Invest/start a business: Take a chunk of the 300K, and decide that in X years you will use it to start a small business. This chunk of money must be liquid and invested safely so that you can use it when you want to. You also don't want to invest it in investments that have a risk of loss. Take the remaining funds and invest it as described in the no small business section. You will completely convert funds to retirement funds earlier because of a smaller starting amount. Hopefully the small business creates enough income to allow you to continue to fund retirement or semi-retirement. But it might not. Comment regarding 5 year "rules": Roth IRA: you have to remain invested in the Roth IRA for 5 years otherwise your withdrawal is penalized. Investing in stocks: If your time horizon is short, then stocks are too volatile. If it drops just before you need the money, it might not recover in time. Final Advice: Get a financial adviser that will lay out a complete plan for a fixed fee. They will discuss investment options, types not particular funds. They will also explain the tax implications of investing in various retirement accounts, and how that will impact your semi-retirement plans. Review the plan every few years as tax laws change. |
Can Health-Releated Services be a Business Expense? | Chris, since you own your own company, nobody can stop you from charging your personal expenses to your business account. IRS is not a huge fan of mixing business and personal expenses and this practice might indicate to them that you are not treating your business seriously, and it should classify your business as a hobby. IRS defines deductible business expense as being both: ordinary AND necessary. Meditation is not an ordinary expense (other S-corps do not incur such expense.) It is not a necessary expense either. Therefore, you cannot deduct this expense. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses |
Want to buy above market price? | Buy and sell orders always include the price at which you buy/sell. That's how the market prices for stocks are determines. So if you want to place a buy order at 106, you can do that. When that order was fulfilled and you have the stock, you can place a sell order at 107. It will be processed as soon as someone places a buy order at 107. Theoretically you can even place sell orders for stocks you haven't even bought yet. That's called short selling. You do that when you expect a stock to go down in the future. But this is a very risky operation, because when you mispredict the market you might end up owing more money than you invested. No responsible banker will even discuss this with you when you can not prove you know what you are doing. |
What is the meaning of “short selling” or “going short” a stock? | The reason for selling a stock "short", is for when you believe the stock value will decrease in the near future. Here is an example: Today Exxon-Mobile stock is selling for $100 / share. You are expecting the price to decrease, so you want to short the stock, which means your broker (i.e. eTrade, etc) allows you to borrow shares without paying money, and those shares are transferred into your account, and then you sell them and receive money for the sale. But you didn't actually own those shares, you only borrowed them, so you need to return the shares to your broker sometime in the future. Let's say you borrow 10 shares @ $100, and you sell them at the market price of $100, you receive $1,000 in your account. But you owe your broker 10 shares, which you need to return sometime in the future. A few days later, the share price has decreased to $80. Now you can buy 10 shares from the market at a total cost of $800. You get 10 shares, and return those shares to your broker. Since you originally took in $1,000, and you just paid out $800, you keep a resulting profit of $200 |
Tracking down forgotten brokerage account | A company as large as Home Depot will have a fairly robust Human Resources department and would probably be able to steer you in the right direction: odds are they know the name of the brokerage and other particulars. I did some googling around, their # is (1-866-698-4347). Different states have different rules about how long an institution can have assets abandoned before turning them over to the state. California, as an example, has an abandoned property search site that you can use. That being said, I had some penny stocks sitting in a brokerage account I never touched for about 20 years and when I finally logged back in there they were, still sitting there. |
Most common types of financial scams an individual investor should beware of? | If an offer "is only valid right now" and "if you don't act immediately, it will expire" that is almost always a scam. |
What low-fee & liquid exchange-traded index funds / ETFs should I consider holding in a retirement portfolio? | If liquidity and cost are your primary objectives, Vanguard is indeed a good bet. They are the walmart of finance and the absolute best at minimizing fees and other expenses. Your main portfolio holding should be VTI, the total stock market fund. Highly liquid and has the lowest fees out there at 0.05%. You can augment this with a world-minus-US fund if you want. No need to buy sector or specific geography funds when you can get the whole market for less. Add some bond funds and alternative investments (but not too much) if you want to be fully diversified. |
It's possible to short a stock without paying interest? | It is possible and it depends on your strategy. As short selling interest rates are annual and levied monthly at a prorated rate. Interest rates are also low in general, with the exception of hard to borrow stocks. Therefore you can maintain a short position for weeks on end and notice nothing. Months even, if the position itself has already gained in your favor. There is no additional fee for opening the short position. Although some brokers have a "locate" fee, if it is hard to borrow the stock and they need to go find some shares to short. So you can do it as much as you like. |
What does ES1 refer to in this picture? | ES1 is the Bloomberg symbol for the CME E-mini S&P 500 front-month continuous contract. ES2, ES3, etc. will likewise yield the 2nd and 3rd months. Which exact futures contract this symbol refers to will change about once a month. |
Long term saving: Shares, Savings Account or Fund | RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that "you believe these will continue" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market. In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this). Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits. Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous. |
Mortgage vs. Cash for U.S. home buy now | If you are investing in a mortgage strictly to avoid taxes, the answer is "pay cash now." A mortgage buys you flexibility, but at the cost of long term security, and in most cases, an overall decrease in wealth too. At a very basic level, I have to ask anyone why they would pay a bank a dollar in order to avoid paying the government 28 - 36 cents depending on your tax rate. After all, one can only deduct interest- not principal. Interest is like rent, it accrues strictly to the lender, not equity. In theory the recipient should be irrelevant. If you have a need to stiff the government, go ahead. Just realize you making a banker three times as happy. Additionally the peace of mind that comes from having a house that no banker can take away from you is, at least for me, compelling. If I have a $300,000 house with no mortgage, no payments, etc. I feel quite safe. Even if my money is tied up in equity, if a serious situation came along (say a huge doctors bill) I always have the option of a reverse mortgage later on. So, to directly counter other claims, yes, I'd rather have $300k in equity then $50k in equity and $225k in liquid assets. (Did you notice that the total net worth is $25k less? And that's even before one considers the cash flow implication of a continuing mortgage. I have no mortgage, and I'm 41. I have a lot of net worth, but the thing that I really like is that I have a roof over my head that no on e can take away from me, and sufficient savings to weather most crises). That said, a mortgage is not about total cost. It is about cash flow. To the extent that a mortgage makes your cash flow situation better, it provides a benefit- just not one that is quantifiable in dollars and cents. Rather, it is a risk/reward situation. By taking a mortgage even when you have the cash, you pay a premium (the interest rate) in order to have your funds available when you need it. A very simple strategy to calculate and/or minimize this risk would be to invest the funds in another investment. If your rate of return exceeds the interest rate minus any tax preference (e.g. 4% minus say a 25% deduction = 3%), your money is better off there, obviously. And, indeed, when interest rates are only 4%, it may may be possible to find that. That said, in most instances, a CD or an inflation protected bond or so won't give you that rate of return. There, you'd need to look at stocks- slightly more risky. When interest rates are back to normal- say 5 or 6%, it gets even harder. If you could, however, find a better return than the effective interest rate, it makes the most sense to do that investment, hold it as a hedge to pay off the mortgage (see, you get your security back if you decide not to work!), and pocket the difference. If you can't do that, your only real reason to hold the cash should be the cash flow situation. |
Buy index mutual fund or build my own? | You better buy an ETF that does the same, because it would be much cheaper than mutual fund (and probably much cheaper than doing it yourself and rebalancing to keep up with the index). Look at DIA for example. Neither buying the same amount of stocks nor buying for the same amount of money would be tracking the DJIE. The proportions are based on the market valuation of each of the companies in the index. |
Does the USA have a Gold reserve? | According to the US Mint, the Government does still have a gold reserve stored mostly in Fort Knox in Kentucky, but there is some in New York and Colorado too. Some facts from their site: That last point is an interesting one. They are basically saying, yes we have it, and no you can't see it. Some conspiracy buffs claim no one has been allowed in there to audit how much they have in over 50 years leading them to speculate that they are bluffing. Although the dollar is no longer tied to the gold standard, throwing that much gold into the market would definitely add fuel the volatility of the finance world, which already has it's share of volatility and isn't hungry for more.The impact on the price of the dollar would be quite complicated and hard to predict. |
What are the marks of poor investment advice? | Any investment advice that is not targeted to your situation should be avoided. |
Can I deduct “Non-Reimbursable Expenses”? | You can only deduct (with the 2% AGI threshold) expenses that: You've actually incurred. I.e.: you actually paid for equipment or services provided and can show receipts for the payment. At the request of the employer. I.e.: you didn't just decide on your own to buy a new book or take a class, your employer told you to. With business necessity. I.e.: it was in order for you to do your job. And you were not reimbursed by your employer. I.e.: you went somewhere and spent your after tax money on something employer explicitly told you to pay for, and you didn't get reimbursed for that. From your story - these conditions don't hold for you. As I said in the comments - I strongly suggest you talk to a lawyer. Your story just doesn't make any sense, and I suspect your employer is doing something very fishy here. |
Transfering money from NRE to saving account is taxable or not | Meagrely transferring money within your own accounts doesn't result in any tax, however legally once you are an NRI you cannot operate a savings account at all as per Reserve Bank Guidelines found here One option is for you to transfer to a joint account held by a close relative of yours with you and this would be tax free in India. |
Why do car rental companies prefer/require credit over debit cards? | A few reasons make sense: They have a defined process for rentals, risk assessment, and customer credit. Especially for a large corporation, making changes to that process is not trivial, adds risk/uncertainty, and will be costly. Such changes for a relatively small customer base might not makes sense. Many rental companies DO allow you to rent with a debit card. Why do some businesses take cash only? With a debit card, there is no third party guarantee. With a credit card, the cash is coming from a well-established third party who will pay (assuming no disputes) and has a well-established history of paying. Even if the merchant holds your account, it is still your cash under the control of you and your bank until the deposit clears the merchants bank. It is not surprising they view that as more risk and potentially not worth hassling with debit. |
Buy home and leverage roommates, or split rent? | what I should think about. If you decide to do this - get everything in writing. Get lease agreements to enforce the business side of the relationship. If they are not comfortable with that much formality, it's probably best not to do it, I'm not saying that you should not do this - but that you need to think about these type of scenarios before committing to a house purchase. |
Transfering money from NRE account in India to family member | I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide here and here for more details. There are some conditions; (iv) Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that - a) the loan is free of interest; b) the minimum maturity period of the loan is seven years; c) The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender; d) The loan is utilised for the borrower's personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending. Although it is mentioned as Seven years, this is revised to one year. Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account. A repatriate-able loan as above can be deposited into NRE Account. Is there any illegality here doing such transaction? No. Please ensure proper paper work to show this as loan and document the money trail. Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited? This question does not arise. |
Given advice “buy term insurance and invest the rest”, how should one “invest the rest”? | Buy term and invest the rest is in fact the easiest plan. Just buy the term insurance based on your current and expected needs. Review those needs every few years, or after a life event (marriage, divorce, kids, buying a house...) For the invest the rest part: invest in your 401K, IRA or the equivalent. There are index funds, or age based funds that can help the inexperienced. Those index funds have low costs; the age based funds change as you get older. The biggest issue with the whole life type products is that what your care about for the term insurance doesn't mean that the company has a good investment program. You also want to have the ability to decide to change insurance companies or investment companies without impacting the other. |
For a mortgage down-payment, what percentage is sensible? | A bigger down payment is good, because it insulates you from the swings in the real estate market. If you get FHA loan with 3% down and end up being forced to move during a down market, you'll be in a real bind, as you'll need to scrape up some cash or borrow funds to get out of your mortgage. |
What to make of historical stock market volatility? | The first thing to realize is that the type of chart you saw is not appropriate for long-term comparisons. The vertical axis uses a linear scale, where each unit occupies the same amount of space. This is visually misleading because the relevant information at any point in the chart is "how much is the value going up or down?" and "how much" change depends on how much the value of the investment is at that moment. For example, if you buy something at $10 and the price changes $1, that is significant, 10%. If you buy something at $1000 and the price changes $1, that is not so significant, only 0.1%. The problem in that chart is that 100 Dow points occupy the same space whether the Dow is at 870 or 10800. To get a better feel for the volatility, you should use a log (logarithmic) scale. Google has an option for this. Using it shows: In this chart you can see that the volatility appears much less extreme in recent years. True, the 2006-2009 change is the largest drop, and there might be slightly higher volatility generally, but it is not nearly as extreme-looking. The drops in 1974 and 1987 can be seen to be significant. |
Can I negotiate a credit card settlement by stopping payments? | This would be on your credit for ~8 years. If it goes according to your plan, it will take 6 months to a year to do the settlement by getting behind enough to let it go to collections and then settling. The write-off will then be on your credit record for 7 years before it "falls off". Your cash out refinance would have to cover you for at least the next 8 years to be valuable. And you have a lot of assumptions to get there: In short, there's one way (or only a few ways) this works out well in your favor. There are many ways that this has the chance to hurt you. I don't like "investments" with those kind of odds. |
What IT form to use in India? | As you have income from Business / Profession, you would need to use form ITR4S |
How to hedge against specific asset classes at low cost | The essence of hedging is to find an investment that performs well under the conditions that you're concerned about. If you're concerned about China stock dropping, then find something that goes up in value if that asset class goes down. Maybe put options on a Chinese index fund, or selling short one of those funds? Or, if you're already "in the money" on your Chinese stock position, set a stop loss: instruct your broker to sell if that stock hits X or lower. That way you keep some gains or limit your losses. That involves liquidating your position, but if you've had a nice run-up, it may be time to consider selling if you feel that the prospects are dimming. |
Is it common in the US not to pay medical bills? | Is it common in the US not to pay medical bills? Certainly not. What some might do, however, is not pay them immediately, with the intent to negotiate them down or get them written off. You can also see if there's a discount for paying immediately - I've had moderate success with this, but it was during a time where we couldn't pay them all immediately, so I was more trying to figure out which ones to pay first rather than just haggling. The obvious risk is that they go to a collections agency and get reported as unpaid debt to your credit. I'm with you, however - it's a service that you received and it should be paid. I must precise that they are wealthy upscale members, who can afford paying these bills. Are you certain that they have large medical bills? I suppose it's possible that they have resources that can negotiate these on their behalf, or they don't care about the impact to their credit score. But to say "no one is doing it here" seems ludicrous. |
Is it possible to physically own a share certificate in a company? | There is a company that will sell you single paper shares of stock for many companies and handle framing. But you pay a large premium over the stock price. Disney stopped doing paper share certificates a while ago, but you should be able to buy some of the old ones on eBay if you want. |
Is buying a home a good idea? | Once you paid it off, you don't pay rent anymore. That is the major advantage. Also, you can do any change you want to it. Many people consider it an investment - if you ever sell it, it could be worth more than what you paid (although this is not for sure) |
Need help with the psychology of investing: past failures and future fears | You're being too hard on yourself. You've managed to save quite a bit, which is more than most people ever do. You're in a wonderful position, actually -- you have savings and time! You don't mention how long you want/need to continue working, but I'll assume 20 years or so? You don't have to invest it all at once. Like Pete B says, index funds (just read what Mr. Buffett said in recent news: he'd tell his widow to invest in the S&P 500 Index and not Berkshire Hathaway!) should be a decent percentage. You can also pick a target fund from any of the major investment firms (fees are higher than an Index, but it will take care of any asset allocation decisions). Put some in each. Also look at retirement accounts to take advantage of tax-deferred or tax-free growth, but that's another question and country-specific. In any case, don't even blink when the market goes down. And it will go down. If you're still working, earning, and saving, it'll just be another opportunity to buy more at lower prices. As for the house, no reason you can't invest and save for a house. Invest some for the long term and set aside the rest for the house in 1-5 years. If you don't think you'll ever really buy the house, though, invest the majority of it for the long-term: I have a feeling from the tone of your question that you tend to put off the big financial decisions. So if you won't really buy the house, just admit it to yourself now! |
Choosing which ESPP stocks to sell? | the difference would be taxes... Lets say you have two lots, one with a 10 dollar gain, and one with a 20 dollar gain. And lets say you decide to sell one lot this year, and the other lot in 10 years. AND, lets say that it turns out the stock price is exactly the same in ten years as it is when you sell the first lot. In all likelyhood, you'll have more income, and therefore you are likely to be in a different marginal tax rate. If you believe that you're more likely to pay more taxes in 10 years, then sell the lot with the higher gain now. If you believe you're more likely to pay more taxes now, then sell the lot with the lower gain now. |
How do I adjust to a new social class? | Under what conditions did you move? My favourite method of judging prices objectively comes from concepts written in Your Money or Your Life by Joe Dominguez. Essentially it normalizes money spent by making you figure out how much an item costs with respect to the number of hours you needed to work to afford it. I prefer that method versus comparing with others since it is objective for yourself and looks beyond just the bare prices. |
Is it OK to use a credit card on zero-interest to pay some other credit cards with higher-interest? | The short answer is: it depends. The longer answer is that balance transfers are tricky, and often a bait-and-switch; they'll offer 0% interest, but charge a 3-4% "fee" (which isn't interest and is perfectly legal) on the amount transferred. If you transfer $5000, you now owe the new card company $5,200. Now, that could be fine with you; at an 18-20% APR on your old card you may have been charged that much in just one or two months, and by capitalizing this fee up front you lock in 0% for a year. However, there are other possible machinations behind the scenes. For instance, you may incur retroactive interest on the full balance if not paid off in the year (at 20% APR on $5000, that's an extra grand you will owe if there's even one dollar of the original transferred balance left in the account). Paying off the balance and thus avoiding these penalties has actually been made harder by the CARD Act, which required creditors to apply any payment made to the highest-interest portion of the balance first. As balance transfers are 0% they are the last on the list, so if you transfer a balance and then carry an additional balance you are setting yourself up for failure. You MUST have a zero-dollar balance for one month sometime during the year in order to be sure the balance transfer is paid off and no penalties will be incurred. That can be hard, because 5 grand is a lot to pay off. To pay off a $5000 balance in 12 months requires payments of $417. Miss one and you'll have to make it up over the remaining months. If you transferred a balance, you probably didn't have $420/mo to pay to the card in the first place. In summary, balance transfers can work, but you have to understand all of the terms and conditions, and what will happen should you violate any of them. If you don't understand what you're getting into, you could very well end up worse than you started. |
What options do I have at 26 years old, with 1.2 million USD? | The amount of money you have should be enough for you to live a safe but somewhat restricted life if you never worked again - but it could set you up for just about any sort of financial goal (short of island buying) if you do just about any amount of work. The basic math for some financial rules of thumb to keep in mind: If your money is invested in very low-risk ways, such as a money market fund, you might earn, say, 3% in interest every year. That's $36k. But, if you withdraw that $36k every year, then every year you have the same principal amount invested. And a dollar tomorrow can't buy as much as a dollar today, because of inflation. If we assume for simplicity that inflation is 1% every year, then you need to contribute an additional $12k to your principal balance every year, just so that it has the same buying power next year. This leaves you with a net $24k of interest income that you can freely spend every year, for the rest of your life, without ever touching your principal balance. If your money is invested more broadly, including equity investments [stocks], you might earn, say, 7% every year. Some years you might lose money on your investments, and would need to draw down your principal balance to pay your bills. Some years you might do quite well - but would need to remain conservative and not withdraw your 'excess' earnings every year, because you will need that 'excess' to make up for the bad years. This would leave you with about $74k of income every year before inflation, and about $62k after inflation. But, you would be taking on more risk by doing this. If you work enough to pay your daily bills, and leave your investments alone to earn 7% on average annually, then in just 10 years your money would have doubled to ~ $2.4 Million dollars. This assumes that you never save another penny, and spend everything you make. It's a level of financial security that means you could retire at a drop of the hat. And if don't start working for 20 years [which you might need to do if you spend in excess of your means and your money dries up], then the same will not be true - starting work at 45 with no savings would put you at a much greater disadvantage for financial security. Every year that you work enough to pay your bills before 'retirement' could increase your nest egg by 7% [though again, there is risk here], but only if you do it now, while you have a nest egg to invest. Now in terms of what you should do with that money, you need to ask yourself: what are your financial goals? You should think about this long and hard (and renew that discussion with yourself periodically, as your goals will change over time). You say university isn't an option - but what other ways might you want to 'invest in yourself'? Would you want to go on 'sabbatical'-type learning trips? Take a trade or learn a skill? Start a business? Do you want to live in the same place for 30 years [and thus maybe you should lock-down your housing costs by buying a house] or do you want to travel around the world, never staying in the same place twice [in which case you will need to figure out how to live cheaply and flexibly, without signing unnecessary leases]. If you want to live in the middle of nowhere eating ramen noodles and watching tv, you could do that without lifting a finger ever again. But every other financial goal you might have should be factored into your budget and work plan. And because you do have such a large degree of financial security, you have a lot of options that could be very appealing - every low paying but desirable/hard-to-get job is open to you. You can pursue your interests, even if they barely pay minimum wage, and doing so may help you ease into your new life easier than simply retiring at such a young age [when most of your peers will be heavy into their careers]. So, that is my strongest piece of advice - work now, while you're young and have motivation, so that you can dial back later. This will be much easier than the other way around. As for where you should invest your money in, look on this site for investing questions, and ultimately with that amount of money - I suggest you hire a paid advisor, who works based on an hourly consultation fee, rather than a % management fee. They can give you much more directed advice than the internet (though you should learn it yourself as well, because that will give you the best piece of mind that you aren't being taken advantage of). |
Ongoing things to do and read to improve knowledge of finance? | The best learning technique for me is not to dredge through books in order to gain a better understanding of finance. This is tedious and causes me to lose interest. I'm not sure of your tolerance for this type of learning. I tend to learn in small pieces. Something piques my interest and I go off reading about that particular topic. May I suggest some alternate methods: |
Financially Shielded Entity Separating Individuals Behind It From Risks | You are describing a corporation. You can set up a corporation to perform business, but if you were using the money for any personal reasons the courts could Pierce the corporate veil and hold you personally liable. Also, setting up a corporation for purely personal reasons is fraud. |
Buy home and leverage roommates, or split rent? | ...instead of all of us draining our money into a landlord... Instead, you are suggesting that still everyone (except you) will drain their money into a landlord, just that now the landlord is you. I guess what that really means is that you will need to have landlord tenant agreements between you and your roommates. When things break or need replacing you'll have to foot the bill and as your tenants, your "roomies" might not be too forgiving when things need fixing. When the fridge breaks down, you'll have to buy a new one immediately. Yard work is your sole responsibility, unless you offer discounted rent or other perks. What about service bills: energy, water, sewage, internet, television, etc? |
Why do 10 year-old luxury cars lose so much value? | The answer is very simple. Part of the luxury is having the cutting edge technology with the very latest features. The price premium is not just from increased build quality; it's simply a perception. Additionally, 10 years takes its toll on a car. The smooth suspension gets rougher over time, and all the little features start to break down. Part of the price of that car factors in the expense of expected repairs. That's true of every car, but the repairs are more expensive when there are lots of gadgets to break down, especially on imports. |
What is the difference between speculating and investing? | In my opinion the difference is semantic. A professional, or someone wanting to present an air of competence, is more likely to talk about investing in shares, as the word investment carries with it connotations of effort, energy and a worthwhile result. Whereas, the word speculation implies the hope of gain but with the risk of loss. |
Where to Park Proceeds from House Sale for 2-5 Years? | With 100K, I would dump the first 95K into something lame like a tax advantaged bond or do as the others here suggested. My alternative would be to take the remaining 5K and put into something leveraged. For instance, 5K would be more than enough to buy long term LEAPS options on the SPY ETF. @ Time of post, you could get 4 contracts on the DEC 2017 leaps at the $225 strike (roughly 10% out of the money) for under $1200 apiece. Possibly $1100 if you scalp them. 4 * $1200 = $4800 at risk. 4 * $22500 = $90,000 = amount of SPY stock you control with your $4800. If the market drops, SPY never reaches $225 in the next 3 years and you are out the $4800, but can use that to reduce capital gains and still have the $95K on the sidelines earning $950 or so per year. Basically you'd be guaranteed to have $97K in the bank after two years. If the market goes up significantly before 2018, you'll still have 95K in the bank earning a measly 1%, but you've also got 4 contracts which are equal to $90K shares of S&P 500. Almost as if every single dollar was invested. Bad news, if SPY goes up 20% or more from current levels over the next three years you'll unfortunately have earned some taxable income. Boo freaking hoo. https://money.stackexchange.com/a/48958/13043 |
Investing $50k + Real Estate | Get rid of the lease and buy a used car. A good buy is an Audi because they are popular, high-quality cars. A 2007 Audi A4 costs about $7000. You will save a lot of money by dumping the lease and owning. Go for quality. Stay away from fad cars and SUVs which are overpriced for their value. Full sized sedans are the safest cars. The maintenance on a high-quality old car is way cheaper than the costs of a newer car. Sell the overseas property. It is a strong real estate market now, good time to sell. It is never good to have property far away from where you are. You need to have a timeline to plan investments. Are you going to medical school in one year, three years, five years? You need to make a plan. Every investment is a BUY and a SELL and you should plan for both. If your business is software, look for a revenue-generating asset in that area. An example of a revenue-generating asset is a license. For example, some software like ANSYS has license costs in the region of $30,000 annually. If you broker the license, or buy and re-sell the license you can make a good profit. This is just one example. Use your expertise to find the right vehicle. Make sure it is a REVENUE-GENERATING ASSET. |
How to diversify IRA portfolio given fund minimum investments and IRA contribution limits? | There are fund of funds,e.g. life cycle funds or target retirement funds, that could cover a lot of these with an initial investment that one could invest into for a few years and then after building up a balance large enough, then it may make sense to switch to having more control. |
How to incentivize a real-estate broker to find me a cheap house | From your profile, I see you are in Israel. The process is probably different from in the US. In the US, an agent is usually happy to work with a buyer. After all, When I list a house, there are potential buyers all over my state and elsewhere. The best thing you can do is first, have your financing in order. A bank will be able to tell you how much you can afford and how much they'll lend you. If you approach an agent and tell them the exact range of price, area you're interested in, and other specifics such as number of bedrooms, etc, that agent should be happy to find houses to fit your request. Obviously, an agent listing million dollar homes, busy with those all day, is not going to want to handle a buyer looking for a $200K home. But in the end, the real estate agents aren't all listing high end, and someone is moving the smaller houses as well. Often, an office will have a call center where agents who are less busy will answer the phone hoping to get a client that will bring a sale. That's one way to go. The other is word of mouth. Just ask others who you work with or socialize with if they know a good agent. In my case, I'd be happy to get such a referral. |
Should I pay off a 0% car loan? | Here's my take: 1) Having a car loan and paying it on time helps build credit. Not as much as having credit cards (and keeping them paid or carrying balance just enough to be reported and then paying it), but it counts. 2) Can't you set in your bank, not the lender, something to pay the car automagically for you? Then you will be paying it on time without having to think on it. 3) As others said, do read the fine print. |
Like a Roth IRA for intellectual property, offshore assignment? | One can have a self-directed IRA. This is not like a Schwab, eTrade, etc IRA. It has a special type of custodian that knows how to manage it. I became aware of such an account as a way to purchase a rental property. There were two issues. The type of property I looked at wasn't anything a bank was willing to finance. And the rules regarding self dealing added a potential layer of expense as I technically could not perform the simplest of things for the property. For you, the obstacle looks like self-dealing. Any IRA can only be funded with cash or transfer/conversion from another IRA/401(k). I don't know how you would get the intelligent property into the IRA in the first place. Once you own a patent, or anything else, you can't sell it into the IRA. It's at times like this that member littleadv would suggest this is the time to talk to a pro before you do anything hazardous to your wealth. |
How are Canada Universal Child Care Benefit (UCCB) & related tax measures changing in 2015? | The Child Care Expense Deduction (line 214) dollar limits will each increase by $1000, to new amounts of $8000 for children under 7 and $5000 for children age 7–16. Notes: As a tax deduction, your tax liability gets reduced at your marginal income tax rate, not the lowest tax rate (as would be the case for a tax credit). Yes, you still need receipts from your child care provider to support any claim. The non-refundable child tax credit a.k.a. amount for children under age 18 (line 367) introduced in 2007 is being eliminated starting in tax year 2015 coincident with the UCCB enhancement above. The credit could previously reduce tax liability by ~$340. The Family Tax Cut is being introduced and will be effective for tax year 2014. That is, when you file your 2014 income tax return in early 2015, you may be able to take advantage of this measure for income already earned in 2014. Provided a couple has at least one child under the age of 18, the Family Tax Cut will permit the transfer of up to $50,000 of taxable income from the higher income spouse's income tax return to the lower income spouse's return. While the potential transfer of $50,000 of taxable income to lower tax brackets sounds like a really big deal, the maximum tax relief is capped at $2000. |
Can rent be added to your salary when applying for a mortgage? | I can answer Scenario #3. If you are purchasing a property with buy-to-let intentions […] can you use the rental income exclusively to fund the mortgage repayments? Yes – this is exactly how buy-to-let mortgage applications are evaluated. Lenders generally expect you to fund the mortgage payments with rent. They look for the anticipated monthly rent income to cover a minimum of 125% of the monthly mortgage payment. This is to make sure you can allow for vacant periods, maintenance, compliance with rules and regulations, and still be in profit (i.e. generate a positive yield on your investment). However, buy-to-let (BTL) mortgage lenders also generally expect you to own your own home to begin with. It's up to them, but rare is the lender who will provide a buy-to-let mortgage to a non-owner-occupier. This is because of point 2 above. The lender doesn't want you to end up living in the property because then you'll need to repay the loan capital, since you'll always need somewhere to live. This makes the economics of BTL unfavourable. They look at your application as a business proposal: quite different to a residential mortgage application, which is what your question seems to be addressing. Bottom line: You're right about scenario #3 but it sounds like you're trying to afford a home first, whereas BTL is best viewed as an investment for someone who already has their main residence under ownership (mortgaged or otherwise). As for Scenarios #1 and #2 I can't offer first hand answers but I think Aakash M. and Steve Melnikoff have covered it. |
How to model fees from trades on online platforms? | where A1 is the number of trades. you may have to change the number 100 to 99 depending on how the 100th trade is charged. The idea is to use the if statement to determine the price of the trades. Once you are over the threshold the price is 14*number over threshold. |
When should I start an LLC for my side work? | Not all of the reason to start an LLC is liability (although that is implicit). There are two main reasons as far as I have experienced it: I always recommend that people set things up properly from the beginning. If you do start to grow, or if you need to cut your losses, it can be very difficult to separate yourself from the company if it isn't set up entirely apart from you. I was once told, "Run your small company as you would wish it to be." Don't get into bad habits at the beginning. They become bad habits in big companies later on. |
Allocating IRA money, clarification needed | You'll likely see several more scary market events before your autumn years. Ahhh, everyone has an opinion on this so here is mine :) If you are constrained to picking canned mutual fund products then I would target something with decent yield for two points. The third is to keep some in cash for an 'event'. I would say 65/35 at this point so invest 65% and have some liquidity for an 'opportunity'. Because the next crisis is right around the corner. But stay invested. |
Is house swapping possible? | You would have to find someone in the other state who wanted to swap. This is conceivable but difficult if you want the houses to be the same value. How do you find the one person who lives in the right place now and wants to move to the right area? The normal way this situation is handled is to simply put your house on the market. At the same time, you find a new house in the new location. You arrange for a new mortgage for the new house and make purchase contingent on selling the old house. Your buyer pays off your mortgage and gives you a bit left over that you use as a downpayment on the new house. Note that you take a loss on closing costs when you do this. This is why if you are in the position where you move frequently, you may be better off renting. Sometimes an employer will help with this, paying for a long term hotel or short term rental. This can give you more room to sell and buy the houses. If you have to move right now, immediately, not in a few months when your housing situation is fixed, consider double renting. You rent out your mortgaged house to someone and pay rent on a new place. You may put some of your stuff in storage until you get into your permanent place. The downside is that it can be harder to sell a house with a tenant until you are close to the end of the lease. And of course, you are probably not in the best position to get or pay good rent. Your situation restricts your options. You might get stuck in this situation for a year so as to get the time that you need to line up a buyer. Of course, you may get lucky and find someone who wants your old house as an investment property. Such a person won't be bothered by a tenant. But they usually want a good price. After all, they want to make money off it. There are those operations that advertise that they buy ugly houses. They want a good deal. You'll probably take a bath. But they can buy quickly, so you can move on quickly. No waiting until they find a buyer. And I'm not saying that you can't do a swap like you want. I'm just saying that you may find it difficult to find a swapping partner. Perhaps an investment person would be up for it. They take your house in trade for their house, letting you stay in their house until they can fix up your old house and either rent it or sell it. The problem is that it may be hard to find such an investor who can handle a house where you are and has a house where you need to be. I don't have a good suggestion for finding a swapping partner other than calling a lot of realtors and asking for suggestions. Maybe a bit of online checking for properties where the owner's business is managing the sale. |
Can a shareholder be liable in case of bankruptcy of one of the companies he invested in? | The answer depends on whether the company involved has 'limited liability'. Most, but not all public and listed companies and corporations have this, but not all so it is worth checking and understanding what you are getting involved with. The expression 'limited liability' means that the owners (shareholders) of a company have a liability up to the amount of the face value of the shares they hold which they have not yet paid for. The difference is usually minor but basically it means that if you buy $10 of shares you have no liability, but if the company gives you $10 of shares, and you pay them (in cash or kind) $5, then you still have a liability of $5. If the company fails, the debtors can come after you for that liability. An 'unlimited liability' company is a different animal altogether. Lloyds insurance is probably the most famous example. Lloyds worked by putting together consortiums to underwrite risk. If the risk doesn't happen, the consortium keeps the premiums, if it does, they cover the loss. Most of the time they are very profitable but not always. For example, the consortiums which covered asbestos caused the bankruptcies of a great many very wealthy people. |
Are traders 100% responsible for a stock's price changes? | When people talk about "the price" of a stock, they usually mean one of the following: Last price: The price at which a trade most recently took place. If someone sold (and someone else bought) shares of XYZ for $20 each, then until another trade occurs, the last price of the stock will be quoted at $20. Bid price: The highest price at which someone is currently offering to buy the stock. Ask price: The lowest price at which someone is currently offering to sell the stock. As you can see, all of these are completely determined by the people buying and selling the stock. |
What can make a stock price rise without good news or results? | As a general principle the stock price on the stock market is controlled by an agreement between buyers and sellers. Some initial observations on this stock So, my take on this is one/more of the following My suspicion is the latter. |
How to invest with a low net worth | You most definitely can invest such an amount profitably, but it makes it even more important to avoid fees, um, at all costs, because fees tend to have a fixed component that will be much worse for you than for someone investing €200k. So: Edit: The above assumes that you actually want to invest in the long run, for modest but relatively certain gains (maybe 5% above inflation) while accepting temporary downswings of up to 30%. If those €2000 are "funny money" that you don't mind losing but would be really excited about maybe getting 100% return in less than 5 years, well, feel free to put them into an individual stock of an obscure small company, but be aware that you'd be gambling, not investing, and you can probably get better quotes playing Roulette. |
Why can't house prices be out of tune with salaries | The three basic needs are food, clothing, and shelter. Housing falls into the third category. Because it is "basic," housing takes up a large part of one's disposable income. The rule of thumb is that you shouldn't spend more than 25% of your income on rent or mortgages. And that is income BEFORE taxes. Anything much more than that takes up too much of one's budget. You simply CAN'T double housing's share of the budget from 25% to 50%. Whereas, it's easy to go from 1% to 2% for say, a cellphone upgrade. In the long run, housing prices are constrained by the size of people's housing budgets, which in turn are tied to incomes. Nowadays, that includes FOREIGN buyers. So there may be a case where west coast housing prices are driven up by Asian buyers, or Florida housing by buyers from Latin America, driving Americans out of local markets. |
Is my employee stock purchase plan a risk free investment? | There would be small generic risk that the company stock goes down real fast by more than 15% in a specific event to the company [fraud, segment company operates suffers a shock, etc] or a generic event to the stock market like recent events of Greece etc. |
Making higher payments on primary residence mortgage or rental? | You're in the same situation I'm in (bought new house, didn't sell old house, now renting out old house). Assuming that everything is stable, right now I'd do something besides pay down your new mortgage. If you pay down the mortgage at your old house, that mortgage payment will go away faster than if you paid down the one on the new house. Then, things start to get fun. You then have a lot more free cash flow available to do whatever you like. I'd tend to do that before searching for other investments. Then, once you have the free cash flow, you can look for other investments (probably a wise risk) or retire the mortgage on your residence earlier. |
How do you measure the value of gold? | 1) Get some gold. 2) Walk around, yelling, "Hey, I have some gold, who wants to buy it?" 3) Once you have enough interested parties, hold an auction and see who will give you the most dollars for it. 4) Trade the gold for that many dollars. 5) You have just measured the value of your gold. |
Personal finance web service with account syncing in Germany | I don't think there is a law against it. For example comdirect offers multi banking so you can access your accounts from other banks through the comdirect website. My guess would be: Germans are very conservative when it comes to their money (preferring cash above cards, using "safe" low interest saving accounts instead of stocks) so there just might be no market for such a tool. There are desktop apps with bank syncing that offer different levels of personal finance management. Some I know are MoneyMoney, outbank, numbrs, GNUCash and StarMoney. |
Highest market cap for a company from historical data | Adjustments can be for splits as well as for dividends. From Investopedia.com: Historical prices stored on some public websites, such as Yahoo! Finance, also adjust the past prices of the stock downward by the dividend amount. Thus, that could also be a possible factor in looking at the old prices. |
Is it cheaper to use car Insurance or pay out of pocket? | There's not a single answer here, as the premium you pay for car insurance depends on multiple factors, including (but not limited to): All these factors contribute to the likelihood of getting into an accident, and the expected damage from an accident. So just having an accident and making a claim will likely raise your premium (all else being equal), but whether or not it will be cheaper in the long run depends (obviously) on how much your premium goes up, which cannot determined without all of the facts. Your agent could tell you how much it would go up, but even making such an inquiry would likely be noted on your insurance record, and may cause your premium to go up (although probably not by as much). However, the point of insurance is to reduce the out-of-pocket expenses from future accidents, so the question to ask is: How likely am I to have another accident, and if I do, can I pay cash for it or will I need to offset some cost with an insurance claim. Do you risk making a claim and having your rates go up by more than $700 over the next 3-4 years (the rough time it takes for a "surcharge" to expire)? Or do you just pay for the repair out-of-pocket and keep your premiums lower? |
Using credit card points to pay for tax deductible business expenses | For simplicity, let's start by just considering cash back. In general, cash back from credit cards for personal use is not taxable, but for business use it is taxable (sort of, I'll explain later). The reason is most personal purchases are made with after tax dollars; you typically aren't deducting the cost of what you purchased from your personal income, so if you purchase something that costs $100 and you receive $2 back from the CC company, effectively you have paid $98 for that item but that wouldn't affect your tax bill. However, since businesses typically deduct most expenses, that same $100 deduction would have only been a $98 deduction for business tax purposes, so in this case the $2 should be accounted for. Note, you should not consider that $2 as income though; that would artificially inflate your revenue. It should be treated as a negative expense, similar to how you would handle returning an item you purchased and receiving a CC refund. Now for your specific questions: Part 1: As a small business owner, I wish to attend an annual seminar to improve my business. I have enough credit card reward points to cover the airfare, hotel, and rental car. Will those expenses still be deductible at the value displayed on the receipt? Effectively no, these expenses are not deductible. If you deduct them they will be completely counter-acted by the "refund" you receive for the payments. Part 2: Does it matter if those points are accrued on my personal credit card, rather than a business credit card? This is where it gets hairy. Suppose your company policy is that employees make purchases with their own personal credit cards and submit receipts for reimbursement. In this case the employer can simply reimburse and would not know or care if the employee is racking up rewards/points/cashback. The trick is, as the employee, you must always purchase business related items normally so you have receipts to show, and if you receive cashback on the side there seems to be a "don't ask, don't tell" rule that the IRS is OK with. It works the same way with heavy business travelers and airline miles- the free vacations those users get as perks are not treated as taxable income. However, I would not go out of my way to abuse this "loophole". Typically, things like travel (airfare, hotel, car rental, meals) are expected. But I wouldn't go purchase 100 company laptops on your personal card and ask the company to reimburse you. The company should purchase those 100 laptops on a company card and effectively reduce the sale price by the cashback received. (Or more realistically, negotiate a better discount with your account rep and just cut them a check.) Part 3: Would there be any difference between credit card points and brand-loyalty points? If the rental car were paid for with points earned directly on the rental car company's loyalty system (not a CC), would that yield a different result? There is no difference. Perhaps the simplest way to think about this is you can only deduct an expense that you actually incur. In other words, the expense should show up on a bank or CC statement. This is why when you volunteer and work 10 hours for a charity, you can't call that a "donation" of any amount of money because there is no actual payment made that would show up on a bank statement. Instead you could have billed the charity for your 10 hours of work, and then turned around and donated that same amount back to them, but it ends up being a wash. |
Buying a car and learning to drive versus paying up study loans | Welcome to Money.SE. It appears there's public transportation to get you to work? And the area by your house is walkable? i.e. you and your wife can get groceries and other needs by walking. If it will take 5 years to pay the loans even without a car, how long if you get one? Will you even be able to afford the payments? There's not enough detail here except to say that all purchases aside from true needs have a cost/reward to consider. Whatever the car's total cost is, will it add that much pleasure to your life? People in cities with great transportation save quite a bit on the expenses a car brings. Personal anecdote - Mom lives in a city. She never drives out of the city. Ever. Between insurance, maintenance, and gas, even with low miles, she spends $3000/yr. Once per week, she drives 1500 ft (.3mi) each way to the grocery store. Once every month or 2 to a mall 6 miles away. She can walk and groceries delivered for free. In the end, she spends $250/mo for the feeling of freedom. I get that. When I am 70+, as she is, I will gladly pay car service the $20 to drive me around. You are young, and need to sit with your partner (your wife is your partner in the business of running the family finances, or so I hope) and decide if the benefit is worth the cost. How does she take the kids to a doctor? How do you go out to dinner? |
How to decide on split between large/mid/small cap on 401(k) and how often rebalance | There many asset allocation strategies to chose from that beat lifestyle funds. For example: Relative Strength Asset Allocation keeps your money in Stocks when stocks perform well, bonds when they outperform stocks, and cash when both bonds and stocks are under-performing. The re-allocation happens on a monthly basis. |
Paid cash for a car, but dealer wants to change price | Let me get this straight. I would stand my ground. Your son negotiated in good faith. Either they messed up, or they are dishonest. Either way your son wasn't the one supposed to know all the internal rules. I don't think it matters if they cashed the check or not. I would tell them if they have cashed it, that is even more evidence the deal was finalized. But even if they they didn't cash it, it only proves they are very disorganized. If for some reason your son feels forced to redo the deal, have him start the negotiations way below the price that was agreed to. If the deal for some strange reason gets voided don't let him agree to some sort of restocking fee. |
Are cashiers required to check a credit card for a signature in the U.S.? | I'm not sure if they're required to do so, but I have been neglecting to sign my cards for some time now. If they do check, that triggers an ID check, where they'll find my signature. I know of at least one person that writes "see ID" instead of signing their cards. He began that practice over 10 years ago. |
Are American Eagle $20 gold coins considered “securities”, requiring dealers to be licensed to sell them as such? | No. Securities brokers/dealers in the United States are licensed to broker debt and equity in corporations. (There are additional, commodities licenses to broker derivatives.) $20 American Eagle coins, or any other type of physical currency or physical precious metals can be traded or brokered by anyone without a specific license (except maybe a sales tax registration). The only situation where a securities license would be required is if a legal entity is holding the coins and you deal/broker an interest in that legal entity. For example, dealing in SPDR Gold Shares or a similar structure holding either physical assets or the right to purchase those assets (like a commodity pool) would require a securities and/or commodities dealing license. |
I was given a 1099-misc instead of a w-2 what are my next steps? | I agree that you should have received both a 1099 and a W2 from your employer. They may be reluctant to do that because some people believe that could trigger an IRS audit. The reason is that independent contractor vs employee is supposed to be defined by your job function, not by your choice. If you were a contractor and then switched to be an employee without changing your job description, then the IRS could claim that you should have always been an employee the entire time, and so should every one of the other contractors that work for that company with a similar job function. It's a hornet's nest that the employer may not want to poke. But that's not your problem; what should you do about it? When you say "he added my Federal and FICA W/H together", do you mean that total appears in box 4 of your 1099? If so, it sounds like the employer is expecting you to re-pay the employer portion of FICA. Can you ask them if they actually paid it? If they did, then I don't see them having a choice but to issue a W2, since the IRS would be expecting one. If they didn't pay your FICA, then the amount this will cost you is 7.65% of what would have been your W2 wages. IMHO it would be reasonable for you to request that they send you a check for that extra amount. Note: even though that amount will be less than $600 and you won't receive a 1099 in 2017 for it, legally you'll still have to pay tax on that amount so I think a good estimate would be to call it 10% instead. Depending on your personality and your relationship with the employer, if they choose not to "make you whole", you could threaten to fill out form SS-8. Additional Info: (Thank you Bobson for bringing this up.) The situation you find yourself in is similar to the concept of "Contract-to-Hire". You start off as a contractor, and later convert to an employee. In order to avoid issuing a 1099 and W2 to the same person in a single tax year, companies typically utilize one of the following strategies: Your particular situation is closest to situation 2, but the reverse. Instead of retroactively calling you a W2 employee the entire time, your employer is cheating and attempting to classify you as a 1099 contractor the entire time. This is frowned upon by the IRS, as well as the employee since as you discovered it costs you more money in the form of employer FICA. From your description it sounds like your employer was trying to do you a favor and didn't quite follow through with it. What they should have done was never switch you to W2 in the first place (if you really should have been a contractor), or they should have done the conversion properly without stringing you along. |
devastated with our retirement money that we have left | The answers you've received already are very good. I truly sympathize with your situation. In general, it makes sense to try to build off of existing relationships. Here are a few ideas: I don't know if you work for a small or large company, or local/state government. But if there is any kind of retirement planning through your workplace, make sure to investigate that. Those people are usually already paid something for their services by your employer, so they should have less of an interest in making money off you directly. One more thought: A no-fee brokerage company e.g. Charles Schwab. They offer a free one hour phone call with an investment adviser if you invest at least $25K. I personally had very good experiences with them. This answer may be too anecdotal and not specifically address the annuity dilemma you mentioned. That annunity dilemma is why you need to find someone you can trust, who is competent (see the credentials for financial advisers mentioned in the other answers), and will work the numbers out with you. |
Recommended education path for a future individual investor? | It depends on whether you want a career as a fund manager/ analyst or if you want to be an investor/ trader. A fund manager will have many constraints that a private investor doesn’t have, as they are managing other people’s money. If they do invest their own money as well they usually would invest it differently from how they invest the fund's money. Many would just get someone else to invest their money for them, just as a surgeon would get another surgeon to operate on a family member. My suggestion to you is to find a job you like doing and build up your savings. Whilst you are building up your savings read some books. You said you don’t know much about the financial markets, then learn about them. Get yourself a working knowledge about both fundamental and technical analysis. Work out which method of analysis (if not both) suits you best and you would like to know more about. As you read you will get a better idea if you prefer to be a long term investor or a short term trader or somewhere in-between or a combination of various methods. Now you will start to get an idea of what type of books and areas of analysis you would like to concentrate on. Once you have a better idea of what you would like to do and have gained some knowledge, then you can develop your investment/trading plan and start paper trading. Once you are happy with you plan and your paper trading you can start trading with a small account balance (not more than $10,000 and preferably under $5,000). No matter how well you did with paper trading you will always do worse with real money at first due to your emotions being in it now. So always start off small. If you want to become good at something it takes time and a lot of hard work. You can’t go from knowing nothing to making a million dollars per year without putting in the hard yards first. |
Dormant company, never paid taxes, never traded in UK - should I have notified the HMRC? | You don't have to register for corporation tax until you start doing business: After you’ve registered your company with Companies House, you’ll need to register it for Corporation Tax. You’ll need to do this within 3 months of starting to do business. Since you haven't needed to do that yet, there also shouldn't be any need to tell HMRC you've stopped trading. So it should just be a question of telling Companies House - I guess it's possible they'll first want you to provide the missing accounts. |
What is the opposite of a hedge? | The opposite of a hedge is nothing. Because if you don't want to hedge you bets, you don't, therefore you merely have the original bet. The opposite state of being hedged, is being unhedged. |
Shouldn't a Roth IRA accumulate more than 1 cent of interest per month? | There are a couple of misconceptions I think are present here: Firstly, when people say "interest", usually that implies a lower-risk investment, like a government bond or a money market fund. Some interest-earning investments can be higher risk (like junk bonds offered by near-bankrupt companies), but for the most part, stocks are higher risk. With higher risk comes higher reward, but obviously also the chance for a bad year. A "bad year" can mean your fund actually goes down in value, because the companies you are invested in do poorly. So calling all value increases "interest" is not the correct way to think about things. Secondly, remember that "Roth IRA fund" doesn't really tell you what's "inside" it. You could set up your fund to include only low-risk interest earning investments, or higher risk foreign stocks. From what you've said, your fund is a "target retirement date"-type fund. This typically means that it is a mix of stocks and bonds, weighted higher to bonds if you are older (on the theory of minimizing risk near retirement), and higher to stocks if you are younger (on the theory of accepting risk for higher average returns when you have time to overcome losses). What this means is that assuming you're young and the fund you have is typical, you probably have ~50%+ of your money invested in stocks. Stocks don't pay interest, they give you value in two ways: they pay you dividends, and the companies that they are a share of increase in value (remember that a stock is literally a small % ownership of the company). So the value increase you see as the increase due to the increase in the mutual fund's share price, is part of the total "interest" amount you were expecting. Finally, if you are reading about "standard growth" of an account using a given amount of contributions, someone somewhere is making an assumption about how much "growth" actually happens. Either you entered a number in the calculator ("How much do you expect growth to be per year?") or it made an assumption by default (probably something like 7% growth per year - I haven't checked the math on your number to see what the growth rate they used was). These types of assumptions can be helpful for general retirement planning, but they are not "rules" that your investments are required by law to follow. If you invest in something with risk, your return may be less than expected. |
Assessed value of my house | You said the tax assessor gave you an appraised value, but I think you mean assessed value. This article YOUR HOME; Market vs. Appraisal: What's the Real Value? explains the differences pretty well. |
In the event of a corporate spin-off, how can I calculate the correct cost basis for each company's shares? | From my understanding: Original Holding: Siemens - 10,000 units at 80 Euros/unit Cost = 800,000 euros Spin-off: Every 10 Siemens get 1 OSRAM On July 5th, 2013: Siemens closing - 78 Euros On Monday, July 8th: Ex-date (opening) - 75 Euros Hence: Market value for:- 1. Siemens: 75 * 10,000 = 750,000 euros 2. OSRAM: (10,000 / 10) * (78 - 75) = 3,000 euros Total Market value = 780,000 + 3,000 = 753,000 euros Ratio for: 1. Siemens = 750,000 / 753,000 = 0.996015936 2. OSRAM = 3,000 / 753,000 = 0.003984063 Cost for: 1. Siemens = 800,000 * 0.996015936 = 796,812.75 2. OSRAM = 3,187.25 |
What are the advantages and disadvantages of leasing out a property or part of a property (such as a basement apartment)? | It doesn't make a lot of sense to buy a house/condo and rent it out now. On the other hand, I think finishing your basement and then renting it out is an excellent idea. The ROR is excellent as long as you can deal with the "strangers" in the basement, have the extra driveway space and negative association with renting out your basement. HTH |
Why does an option lose time value faster as it approaches expiry | This is because volatility is cumulative and with less time there is less cumulative volatility. The time value and option value are tied to the value of the underlying. The value of the underlying (stock) is quite influenced by volatility, the possible price movement in a given span of time. Thirty days of volatility has a much broader spread of values than two days, since each day benefits from the possible price change of the prior days. So if a stock could move up to +/- 1% in a day, then compounded after 5 days it could be +5%, +0%, or -5%. In other words, this is compounded volatility. Less time means far less volatility, which is geometric and not linear. Less volatility lowers the value of the underlying. See Black-Scholes for more technical discussion of this concept. A shorter timeframe until option expiration means there are fewer days of compounded volatility. So the expected change in the underlying will decrease geometrically. The odds are good that the price at T-5 days will be close to the price at T-0, much more so than the prices at T-30 or T-90. Additionally, the time value of an American option is the implicit put value (or implicit call). While an "American" option lets you exercise prior to expiry (unlike a "European" option, exercised only at expiry), there's an implicit put option in a call (or an implicit call in a put option). If you have an American call option of 60 days and it goes into the money at 30 days, you could exercise early. By contract, that stock is yours if you pay for it (or, in a put, you can sell whenever you decide). In some cases, this may make sense (if you want an immediate payoff or you expect this is the best price situation), but you may prefer to watch the price. If the price moves further, your gain when you use the call may be even better. If the price goes back out of the money, then you benefited from an implicit put. It's as though you exercised the option when it went in the money, then sold the stock and got back your cash when the stock went out of the money, even though no actual transaction took place and this is all just implicit. So the time value of an American option includes the implicit option to not use it early. The value of the implicit option also decreases in a nonlinear fashion, since the value of the implicit option is subject to the same valuation principles. But the larger principle for both is the compounded volatility, which drops geometrically. |
What is an exercise price in regards to restricted stock awards? | It's still the purchase price or the price at which the shares are purchased or granted. This Investopedia article describes how the price is used for tax purposes: The amount that must be declared [for tax purposes] is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested. Restricted stock awards are similar to stock options. The employer promises to grant the employee a certain number of shares upon the completion of the vesting schedule. The price at which the shares are purchased (or granted, if the price is zero) is the exercise price. |
Does a market maker sell (buy) at a bid or ask price? | EVERYONE buys at the ask price and sells at the bid price (no matter who you are). There are a few important things you need to understand. Example: EVE bid: 16.00 EVE ask: 16.25 So if your selling EVE at "market price" you are entering an ask equal to the highest bid ($16.00). If you buy EVE at "market price" you are entering a bid equal to the lowest ask price ($16.25). Its key to understand this rule: "An order executes ONLY when both bid and ask meet. (bid = ask)." So a market maker puts in a bid when he wants to buy but the trade only executes when an ASK price meets his BID price. When you see a quote for a stock it is the price of the last trade. So it is possible to have a quote higher or lower then both the bid and the ask. |
What is the difference between “good debt” vs. “bad debt”? | From what I've heard in the past, debt can be differentiated between secured debt and unsecured debt. Secured debt is a debt for which something stands good such as a mortgage on your house. You have a debt, but that debt is covered by the value of an asset and if you needed to free yourself of the debt, then you could by selling that asset. This is what is known as "good" debt. Unsecured debt is debt that is incurred where the only thing that is available to pay it back is your income. An example of this is credit card debt where you purchase something that couldn't be sold again to pay off the debt. This is know as "bad" debt. You have to be careful about thinking that house debt is always "good" debt because the house stands good for it though. The problem with that is that the house could go down in value and then suddenly your "good" debt is "bad" debt (or no longer secured). Cars are very risky this way because they go down in value. It is really easy to get a car loan where before long you are upside down. This is the problem with the term "good" debt. The label makes it sound like it is a good idea to have that debt, and the risk associated with having the debt is trivialized and allows yourself to feel good about your financial plan. Perhaps this is why so many houses are in foreclosure right now, people believed the "good" debt myth and thought that it was ok to borrow MORE than the home was worth to get into a house. Thus they turned a secured debt into an unsecured debt and put their residence at risk by levels of debt they couldn't afford. Other advice I've heard and tend to agree with, is that you should only borrow for a house, an education and maybe a car (danger on that last one), being careful to buy a modest house, car etc that is well within your means to repay. So if you do have to borrow for a car, go for basic transportation instead of the $40,000 BMW. Keep you house payment less than 1/4th of your take home pay. Pay off the school loans as quickly as possible. Regardless of the label, "good" "bad" "unsecured" "secured", I think that less debt is better than more debt. There is definitely such a thing as too much "good" debt! |
Can an ETF perform differently than its holdings? | The Creation/Redemption mechanism is how shares of an ETF are created or redeemed as needed and thus is where there can be differences in what the value of the holdings can be versus the trading price. If the ETF is thinly traded, then the difference could be big as more volume would be where the mechanism could kick in as generally there are blocks required so the mechanism usually created or redeemed in lots of 50,000 shares I believe. From the link where AP=Authorized Participant: With ETFs, APs do most of the buying and selling. When APs sense demand for additional shares of an ETF—which manifests itself when the ETF share price trades at a premium to its NAV—they go into the market and create new shares. When the APs sense demand from investors looking to redeem—which manifests itself when the ETF share price trades at a discount—they process redemptions. So, suppose the NAV of the ETF is $20/share and the trading price is $30/share. The AP can buy the underlying securities for $20/share in a bulk order that equates to 50,000 shares of the ETF and exchange the underlying shares for new shares in the ETF. Then the AP can turn around and sell those new ETF shares for $30/share and pocket the gain. If you switch the prices around, the AP would then take the ETF shares and exchange them for the underlying securities in the same way and make a profit on the difference. SEC also notes this same process. |
Why is the breakdown of a loan repayment into principal and interest of any importance? | The other answers have touched on amortization, early payment, computation of interest, etc, which are all very important, but I think there's another way to understand the importance of knowing the P/I breakdown. The question mentions the loan payment as "cash outflow". That is true, but from an accounting perspective (disclaimer: I am not an accountant, but I know enough of the basics to be dangerous), the outflow needs to be directed to different accounts. The loan principal appears as a liability on your personal balance sheet, which you could use, for example, in determining net worth. The principal amount in your payment should be applied to reduce the liability account. The interest payment goes into the expense account. Another way to look at it is that the principal, while it does reduce your cash account, can be thought of as an internal transfer to the liability account, thus reducing the size of the liability. The interest payment cannot. Aside: From this perspective, the value of the home is an asset, and the difference between the asset account and the loan liability account is the equity in the house (as pointed out in different language by the accepted answer). Of course, precisely determining the value of an illiquid asset like a house at any given moment pretty much requires you to actually sell it, so those accounts are hard to maintain in real-time (the liability of the loan is much easier to track). |
Is it possible to make money by getting a mortgage? | This answer is based on Australian tax, which is significantly different. I only offer it in case others want to compare situations. In Australia, a popular tax reduction technique is "Negative Gearing". Borrow from a bank, buy an investment property. If the income frome the new property is not enough to cover interest payments (plus maintenance etc) then the excess each year is a capital loss - which you claim each year, as an offset to your income (ie. pay less tax). By the time you reach retirement, the idea is to have paid off the mortgage. You then live off the revenue stream in retirement, or sell the property for a (taxed) lump sum. |
How much percent of my salary should I use to invest in company stock? | I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain. |
Can I actually get a share of stock issued with a piece of paper anymore? | Yes you can. One additional "advantage" of getting the physical certificate is you can use it to transfer your account from one brokerage to another. You get the certificates in the mail and then just send them to the new broker. Why anyone would want to go through this extra work (and usually added expense) rather than a direct transfer is beyond me but it is one additional "advantage" of physical certificates. |
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