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Buying shares in employer's company during IPO | So the key factor here, IMHO, is the amount we are talking about. $2K is just not a lot of money. If you lose every penny, you can recover. On the other hand it is unlikely to make you wealthy. So if I was you I would buy in, more for the fun of it all. Now if it was a large amount of money that we were talking about it would be about a percentage of my net worth. For example, lets say the minimum was 20K, and you really believed in the company. If I had a net worth of less than 200K, I would not do it. If I had a larger net worth, I would consider it unless I was near retirement. So if I was 30, hand a net worth of 300K, I would probably invest as even if I did lose it all, I could recover. Having said all that it does not sound like you completely agree that the company will be profitable. So in that case, don't buy. Also, I have the opportunity to buy my own company's stock at a discount. However, I do not for two reasons. The first is I don't like investing in the company I work for. Secondly, they require you to hold the stock for a year. |
Is my wash sale being calculated incorrectly? | You add the wash sale loss to your cost basis for the other transaction so you would have two entries in your schedule d reporting 1.) Listing the $2000 loss as a wash 2.) The cost basis for your second transaction is thus $1000+$2000 = $3000 so when it was sold for $2000 you now have a reportable loss of $1000. For more information see here.... http://www.ehow.com/how_5313540_calculate-wash-sale.html |
What is the US Fair Tax? | The fair tax is a proposal to replace the US income tax with a sales tax. Pros of Fair Tax: It's a large change to the way the United States currently does things. The "Fair Tax Act of 2011" is H.R.25 in the US House and S.13 in the Senate. The full text of the bill is available at the links provided. There are some fairly large consequences of implementing a fair tax. For example, 401ks and Roth IRAs serve no benefit over non-retirement investments. Mortgages would no longer have a tax advantage. Luxury items would get far more expensive. |
Pay online: credit card or debit card? | In the UK it is almost always better to purchase with a credit card for transactions above £100 but below £30,000. This is due to Section 75 of the Consumer Credit Act 1974 which makes your credit card company jointly liable if something goes wrong. In other words, if you buy something worth £1000 with your credit card, the company fails to deliver for any reason and you cannot get a refund from them directly, you are entitled to make a claim from your credit card company for the full amount. |
If I put in a limit order for the same price and size as someone else, which order goes through? | The one whose order gets to the exchange first. The exchange receives the orders and arranges them in First-In-First-Out order, by which they're then executed. At some point it is synchronized and put into a list. Whoever gets to that point first - gets the deal. |
Why do some companies (like this company) have such a huge per share price? | Simple answer is because the stocks don't split. Most stocks would have a similar high price per share if they didn't split occasionally. Why don't they split? A better way to ask this is probably, why DO most stocks split? The standard answer is that it gives the appearance that stocks are "cheap" again and encourages investors to buy them. Some people, Warren Buffett (of Berkshire Hathaway) don't want any part of these shenanigans and refuse to split their stocks. Buffett also has commented that he thinks splitting a stock also adds unnecessary volatility. |
Does a bond etf drop by the amount of the dividend just like an equity etf | Most bond ETFs have switched to monthly dividends paid on the first of each month, in an attempt to standardize across the market. For ETFs (but perhaps not bond mutual funds, as suggested in the above answer) interest does accrue in the NAV, so the price of the fund does drop on ex-date by an amount equal to the dividend paid. A great example of this dynamic can be seen in FLOT, a bond ETF holding floating rate corporate bonds. As you can see in this screenshot, the NAV has followed a sharp up and down pattern, almost like the teeth of a saw. This is explained by interest accruing in the NAV over the course of each month, until it is paid out in a dividend, dropping the NAV sharply in one day. The effect has been particularly pronounced recently because the floating coupon payments have increased significantly (benchmark interest rates are higher) and mark-to-market changes in credit spreads of the constituent bonds have been very muted. |
Should I sell my stocks when the stock hits a 52-week high in order to “Buy Low, Sell High”? | Though it seems unintuitive, you should rationally ignore the past performance of this stock (including the fact that it's at its 52-week high) and focus exclusively on factors that you believe should affect it moving forward. If you think it's going to go up even further, more than the return on your other options for where to put the money, keep the stock. If you think it's peaked and will be going down, now's a good time to sell. To put it another way: if you didn't already have this stock, would you buy it today? Your choice is just about the same: you can choose between a sum of cash equal to the present market value of the shares, OR the shares. Which do you think is worth more? You also mentioned that you only have 10 stocks in the portfolio. Some are probably a larger percentage than others, and this distribution may be different than what you want in your portfolio. It may be time to do some rebalancing, which could involve selling some shares where your position is too large (as a % of your portfolio) and using the proceeds toward one or more categories you're not as invested in as you would like to be. This might be a good opportunity to increase the diversity in your portfolio. If part of your reward and motivation for trading is emotional, not purely financial, you could sell now, mark it as a "win," and move on to another opportunity. Trading based on emotions is not likely to optimize your future balance, but not everybody is into trading or money for money's sake. What's going to help you sleep better at night and help boost your quality of life? If holding the stock will make you stress and regret a missed opportunity if it goes down, and selling it will make you feel happy and confident even if it still goes up more (e.g. you interpret that as further confirming that you made a good pick in the first place), you might decide that the risk of suboptimal financial returns (from emotion-based trading) is acceptable. As CQM points out, you could also set a trailing sell order to activate only when the stock is a certain percentage or dollar amount below whatever it peaks at between the time you set the order and the time it fires/expires; the activation price will rise with the stock and hold as it falls. |
MasterCard won't disclose who leaked my credit card details | File a John Doe lawsuit, "plaintiff to be determined", and then subpoena the relevant information from Mastercard. John Doe doesn't countersue, so you're pretty safe doing this. But it probably won't work. Mastercard would quash your subpoena. They will claim that you lack standing to sue anyone because you did not take a loss (which is a fair point). They are after the people doing the hacking, and the security gaps which make the hacking possible. And how those gaps arise among businesses just trying to do their best. It's a hard problem. And I've done the abuse wars professionally. OpSec is a big deal. You simply cannot reveal your methods or even much of your findings, because that will expose too much of your detection method. The ugly fact is, the bad guys are not that far from winning, and catching them depends on them unwisely using the same known techniques over and over. When you get a truly novel technique, it costs a fortune in engineering time to unravel what they did and build defenses against it. If maybe 1% of attacks are this, it is manageable, but if it were 10%, you simply cannot staff an enforcement arm big enough - the trained staff don't exist to hire (unless you steal them from Visa, Amex, etc.) So as much as you'd like to tell the public, believe me, I'd like to get some credit for what I've done -- they just can't say much or they educate the bad guys, and then have a much tougher problem later. Sorry! I know how frustrating it is! The credit card companies hammered out PCI-DSS (Payment Card Industry Data Security Standards). This is a basic set of security rules and practices which should make hacking unlikely. Compliance is achievable (not easy), and if you do it, you're off the hook. That is one way Amy can be entirely not at fault. Example deleted for length, but as a small business, you just can't be a PCI security expert. You rely on the commitments of others to do a good job, like your bank and merchant account salesman. There are so many ways this can go wrong that just aren't your fault. As to the notion of saying "it affected Amy's customers but it was Doofus the contractor's fault", that doesn't work, the Internet lynch mob won't hear the details and will kill Amy's business. Then she's suing Mastercard for false light, a type of defamtion there the facts are true but are framed falsely. And defamation has much more serious consequences in Europe. Anyway, even a business not at fault has to pay for a PCI-DSS audit. A business at fault has lots more problems, at the very least paying $50-90 per customer to replace their cards. The simple fact is 80% of businesses in this situation go bankrupt at this point. Usually fraudsters make automated attacks using scripts they got from others. Only a few dozen attacks (on sites) succeed, and then they use other scripts to intercept payment data, which is all they want. They are cookie cutter scripts, and aren't customized for each site, and can't go after whatever personal data is particular to that site. So in most cases all they get is payment data. It's also likely that primary data, like a cloud drive, photo collection or medical records, are kept in completely separate systems with separate security, unlikely to hack both at once even if the hacker is willing to put lots and lots of engineering effort into it. Most hackers are script kiddies, able to run scripts others provided but unable to hack on their own. So it's likely that "none was leaked" is the reason they didn't give notification of private information leakage. Lastly, they can't get what you didn't upload. Site hacking is a well known phenomenon. A person who is concerned with privacy is cautious to not put things online that are too risky. It's also possible that this is blind guesswork on the part of Visa/MC, and they haven't positively identified any particular merchant, but are replacing your cards out of an abundance of caution. |
Bait-and-switch on new car lease | I strongly discourage leasing (or loans, but at least you own the car at the end of it) in any situation. it's just a bad deal, but that doesn't answer your question. Most new cars are "loss leaders" for dealerships. It's too easy to know what their costs are these days, so they make most of their money though financing. They might make a less than $500 on the sale of a new car, but if it's financed though them then they might get $2,000 - $4,000 commission/sale on the financing contract. Yes, it is possible and entirely likely that the advertised rate will only go to the best qualified lessees (possibly with a credit score about 750 or 800 or so other high number, for example). If the lessee meets the requirements then they won't deny you, they really want your business, but it is more likely to start the process and do all the paperwork for them to come back and say, "Well, you don't qualify for the $99/month leasing program, but we can offer you the $199/month lease." (since that's the price you're giving from other dealerships). From there you just need to negotiate again. Note: Make sure you always do your research and negotiate the price of the car before talking about financing. |
Starting a new job. Help me with retirement/debt planning please! | Your initial plan (of minimizing your interest rate, and taking advantage of the 401(k) match) makes sense, except I would put the 401(k) money in a very low risk investment (such as a money market fund) while the stock market seems to be in a bear market. How to decide when the stock market is in a bear market is a separate question. You earn a 100% return immediately on money that receives the company match -- provided that you stay at the company long enough for the company match to "vest". This immediate 100% return far exceeds the 3.25% return by paying down debt. As long as it makes sense to keep your retirement funds in low-risk, low-return investments, it makes more sense to use your remaining free cash flow to pay down debts than to save extra money in retirement funds. After setting aside the 6% of your income that is eligible for the company match, you should be able to rapidly pay down your debts. This will make it far easier for you to qualify for a mortgage later on. Also, if you can pay off your debt in a couple years, you will minimize your risk from the proposed variable rate. First, there will be fewer chances for the rate to go up. Second, even if the rate does go up, you will not owe the money very long. |
How do I use investments to lower my taxes [US]? | Consider the individual who pays $1,000,000 in taxes. His/her income must be substantial. That is what one should aim for. Investments for the most part, do not lower ones taxes. In one of John Grisham's novels, tax shelters are being discussed. Sorry, I do not remember which book. The discussion goes something like this: There are a few investments which can lower your taxes. Purchase a house. Mortgage interest on your principle residence is deductible (if you itemize deductions). If you don't itemize, focus on increasing income to the point where itemizing benefits you. In general, businesses have more deductions than individuals. Own a small business. You (or your accountant) will discover many deductions. Hint: the company should lease a car/truck, many meals are now deductible. This is not the reason to own a business. |
What's a Letter of Credit? Are funds held in my bank for the amount in question? | Wikipedia has a detailed article explaining this. A standard, commercial letter of credit (LC) is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking. So yes, they are primarily for use by businesses. If you will read the article stating the terms and conditions for payment and shipment you will realize that such model won't be of much value to and will create many hurdles for a typical consumer. Yes, you can cash a letter of credit but only once the conditions in the letter have been met (e.g., delivery/shipment of goods/services). An array of documents need to be presented as well. Whether it is easy or not is a very subjective question. A bank will issue a letter of credit only when it is reasonably sure that its risk is covered --either backed by a bank deposit or by conditions in the letter itself. Obviously derivatives on these letters have evolved as well. |
Where should I park my rainy-day / emergency fund? | First off, you generally want to park your emergency fund somewhere that is "safe", meaning something that is not subject to market fluctuations. Your emergency fund is something you need to be able to count on when times are tough! That rules out things like stock market investments. Secondly, you need to think about how quickly you will need access to the money. If you have an emergency, odds are you don't want to be waiting around for weeks/months/years for the money to become available. This rules out most fixed-term investments (Bonds, traditional CDs, etc). If you are concerned that you will need near-instant access to your emergency money, then you probably want to keep it in a Savings or Money Market Account at the same bank as your checking account. Most banks will let you transfer money between local accounts instantly. Unfortunately, your local bank probably has pitiful interest rates for the Savings/MMA, far below the inflation rate. This means your money will slowly lose value over time. Be prepared to keep contributing to it! For most people, being able to draw the cash from your fund within a few days (<1 week) is sufficient. Worst case, you charge something on your credit card, and then pay down the card when the emergency fund withdrawal arrives. If "money within a few days" is okay for you, there are a few options: Money Market (Mutual) Funds (not to be confused with a Money Market Account) - This is the traditional place to keep an emergency fund. These are investment funds you can buy with a brokerage account. An example of such a fund would be Fidelity Cash Reserves. MMFs are not FDIC insured, so they are not exactly zero risk. However, they are considered extremely safe. They almost never go down in value (only a few times in the past few decades), and when they have, the fund manager or the Federal Govt stepped in to restore the value. They usually offer slightly better return than a local savings account, and are available in taxable and non-taxable varieties. Online High-Yield Savings or Money Market Account - These are a relatively new invention. It's basically a the same thing as what your local bank offers, but it's online-only. No local branch means low overhead, so they offer higher interest rates (2.0% vs 0.5% for your local bank). Some of them used to be over 5% before the economy tanked. Like your local bank, it is FDIC insured. One bit of caution: Some of these accounts have become "gimmicky" lately. They have started to do things like promo rates for a few months, only offering the high interest rate on the first few $K deposited, limiting the amount that can be withdrawn, etc. Be sure to read the details before you open an account! No-Penalty CDs - Certificates of Deposit usually offer a better rate than a Savings Account, but your money is locked up until the CD term is up (e.g. 36 months). If you need to cash out before then, you pay a penalty. Some banks have begun to offer CDs that you can cash out with no penalty at all. These can offer better rates than the savings account. Make sure it really is no-penalty though. Also watch what your options are for slowly adding money over time. This can be an issue if you want to deposit $100 from every paycheck. Rewards Checking Accounts - These are checking accounts that will pay a relatively high interest rate (3% or more) provided you generate enough activity. Most of them will have requirements like you must have direct deposit setup with them, and you must do a minimum number of debit card transactions from the account per month. If you can stay on top of the requirements, these can be a great deal. If you don't stay on top of it, your interest rate usually drops back to something pitiful, though. Personally, we use the Online High-Yield Savings Account for our emergency fund. I'm not going to make a specific recommendation as to which bank to use. The best deal changes almost week to week. Instead, I will say to check out Bankrate.com for a list of savings accounts and CDs that you can sort. The Bank Deals blog is a good place to follow rate changes. |
What is the easiest way to back-test index funds and ETFs? | check pastsat-backtesting , backtesting tool, where one can can test on well known technical indicators without coding skills |
Buying a small amount (e.g. $50) of stock via eToro “Social Trading Network” using a “CFD”? | Is eToro legitimate? If you have any doubts about eToro or other CFD providers (or even Forex providers, which are kind of similar), just type eToro scam in Google and see the results. |
Calculate a weekly payment on a loan when payment is a month away | At time = 0, no interest has accrued. That's normal. And the first payment is due after a month, when there's a month's interest and a bit of principal due. Note - I missed weekly payments. You'd have to account for this manually, add a month's interest, then calculate based on weekly payments. |
Is it worth buying real estate just to safely invest money? | Investment is very uncertain, so I believe that unless you have loads of money, you should not play around with houses for the sole purpose of investing. Here are the questions which I would consider to judge the situation. Note that this is based on the current situation in The Netherlands Income: Your income is 1800 a month nett, which means your gross annual income should be somewhere below 28500. Allowed mortgage amount: Your maximum morgage amount is then roughly 135000 Is it expensive?: Given your maximum morgage, buying a 200k appartment would consume pretty much all your cash. There is some cost of buying the appartment, so basically if you buy it, you will not have much cash to decorate or deal with unforseen maintenance. If you are conservative, I would say that buying a 175k appartment is financially much more relaxing in your situation. What will be the monthly expense?: Monthly mortgage payments will be about 450~500. So your cashflow will suffer a bit. The amount you actually 'burn' on interest in the early months is about 180 nett (assuming an interest rate just below 2% and tax deductions). There will be additional costs (more heating, long term maintenance etc.) so overall the amount of money you burn will be close to the amount of money you burn on rent. Of course over time there will be less interest, so this should go down. Value change: The value may go up or down, in the very long term I would bet on it going up, but on the short or medium term it is quite uncertain. If you may live there for less than a decade, value change is more of a risk than a benefit. Break even point: As you mention that you will buy a house for 200k, I will assume it is not in the heart of a major city, and that renting it out may not be very attractive. However, I will also assume that it is not the middle of nowhere, and that it will only take a reasonable amount of time to sell the house. So if you want to move out, you will probably sell it at a reasonable price. In this case a rule of thumb is that living in an affordable house is usually a good idea when you live there for more than 5 years. (Is it likely that you will find a partner in this period of time, and will you live at your place then, or somewhere else?) Buying a 200k appartment would leave you completely cashless after you move in, something I would not recommend unless you can depend on your parents for instance to 'bridge the gap' when your cashflow dries up. From a monthly expense point of view you are probably going to be OK, as long as you survive the short run. And financially it only makes sense if you are going to live there for a while, and are fairly confident in your position in the labour market. I would personally recommend you to think hard on your family situation, and only buy a house if it leaves you with some cash in your pocket. |
What governs the shape of price history graphs? | Dividend-paying securities generally have predictable cash flows. A telecom, electric or gas utility is a great example. They collect a fairly predictable amount of money and sells goods at a fairly predictable or even regulated markup. It is easy for these companies to pay a consistent dividend since the business is "sticky" and insulated by cyclical factors. More cyclic investments like the Dow Jones Industrial Average, Gold, etc are more exposed to the crests and troughs of the economy. They swing with the economy, although not always on the same cycle. The DJIA is a basket of 30 large industrial stocks. Gold is a commodity that spikes when people are faced with uncertainty. The "Alpha" and "Beta" of a stock will give you some idea of the general behavior of a stock against the entire market, when the market is trending up and down respectively. |
Filing taxes on stocks | You need to talk to an accountant who practices tax accounting, preferaby someone who is an Enrolled Agent (EA) with the IRS, and possibly an attorney who specializes in tax law. There are multiple issues here, and the executor of your father's estate might need to be involved here too. Presumably you were a minor in 2007 since the transactions took place in a custodial account, and perhaps you were a dependent of your father in 2007. So, were the transactions reported on your father's 2007 income tax return? or did he file a separate income tax return in your name? You say you have a W2 for 2007. So you were earning some income in 2007? This complicates matters. It is necessary to determine who has the responsibility to file income tax returns for a minor with earned income. Above all, I urge you to not file income tax returns on your own or using a tax return preparation program, or after talking to a tax return preparation service (where you will likely get someone who works on a seasonal basis and is unlikely to be familiar with tax law as of 2007). |
static data for mutual funds/hedge funds | It's not really my field, but I believe it's all the information that doesn't change (i.e. isn't "real-time") about the business of hedge funds. For example, this site quotes: The product maintains comprehensive static data records including assets, depositories, accounts, settlement instructions and a wide range of supporting data... |
Purpose of having good credit when you are well-off? | I have never had a credit card and have been able to function perfectly well without one for 30 years. I borrowed money twice, once for a school loan that was countersigned, and once for my mortgage. In both cases my application was accepted. You only need to have "good credit" if you want to borrow money. Credit scores are usually only relevant for people with irregular income or a past history of delinquency. Assuming the debtor has no history of delinquency, the only thing the bank really cares about is the income level of the applicant. In the old days it could be difficult to rent a car without a credit car and this was the only major problem for me before about 2010. Usually I would have to make a cash deposit of $400 or something like that before a rental agency would rent me a car. This is no longer a problem and I never get asked for a deposit anymore to rent cars. Other than car rentals, I never had a problem not having a credit card. |
Why is it in a company’s interest to have high stock prices? [duplicate] | After the initial public offering, the company can raise money by selling more stock (equity financing) or selling debt (e.g. borrowing money). If a company's stock price is high, they can raise money with equity financing on more favorable terms. When companies raise money with equity financing, they create new shares and dilute the existing shareholders, so the number of shares outstanding is not fixed. Companies can also return money to shareholders by buying their own equity, and this is called a share repurchase. It's best for companies to repurchase their shared when their stock price is low, but "American companies have a terrible track record of buying their own shares high and selling them low." The management of a company typically likes a rising stock price, so their stock options are more valuable and they can justify bigger pay packages. |
Huge return on investment, I feel like im doing the math wrong | And now it is at about $3. Many times "skeletons" are bought and inflated for various reasons. Some are legitimate (for example a private business merging into a defunct but public corporation to avoid wasting resources on going public), some are not (mainly pump-and-dump scams that are using "skeletons"). I don't know what was the case here (probably speculation based on the new marijuana laws in the US), but clearly the inflated price was completely unjustified since it went crashing down. |
Can someone explain how government bonds work? | The short of it is that bonds are valued based on a fundamental concept of finance called the "time value of money". Stated simply, $100 one year from now is not the same as $100 now. If you had $100 now, you could use it to make more money and have more than $100 in a year. Conversely, if you didn't invest it, the $100 would not buy as much in a year as it would now, and so it would lose real value. Therefore, for these two benefits to be worth the same, the money received a year from now must be more than $100, in the amount of what you could make with $100 if you had it now, or at least the rate of inflation. Or, the amount received now could be less than the amount recieved a year from now, such that if you invested this lesser amount you'd expect to have $100 in a year. The simplest bonds simply pay their face value at maturity, and are sold for less than their face value, the difference being the cost to borrow the cash; "interest". These are called "zero-coupon bonds" and they're around, if maybe uncommon. The price people will pay for these bonds is their "present value", and the difference between the present value and face value determines a "yield"; a rate of return, similar to the interest rate on a CD. Now, zero-coupon bonds are uncommon because they cost a lot. If I buy a zero-coupon bond, I'm basically tying up my money until maturity; I see nothing until the full bond is paid. As such, I would expect the bond issuer to sell me the bond at a rate that makes it worth my while to keep the money tied up. So basically, the bond issuer is paying me compound interest on the loan. The future value of an investment now at a given rate is given by FV = PV(1+r)t. To gain $1 million in new cash today, and pay a 5% yield over 10 years, a company or municipality would have to issue $1.629 million in bonds. You see the effects of the compounding there; the company is paying 5% a year on the principal each year, plus 5% of each 5% already accrued, adding up to an additional 12% of the principal owed as interest. Instead, bond issuers can offer a "coupon bond". A coupon bond has a coupon rate, which is a percentage of the face value of the bond that is paid periodically (often annually, sometimes semi-annually or even quarterly). A coupon rate helps a company in two ways. First, the calculation is very straightforward; if you need a million dollars and are willing to pay 5% over 10 years, then that's exactly how you issue the bonds; $1million worth with a 5% coupon rate and a maturity date 10 years out. A $100 5% coupon bond with a 10-year maturity, if sold at face value, would cost only $150 over its lifetime, making the total cost of capital only 50% of the principal instead of 62%. Now, that sounds like a bad deal; if the company's paying less, then you're getting less, right? Well yes, but you also get money sooner. Remember the fundamental principle here; money now is worth more than money later, because of what you can do with money between now and later. You do realize a lower overall yield from this investment, but you get returns from it quickly which you can turn around and reinvest to make more money. As such, you're usually willing to tolerate a lower rate of return, because of the faster turnaround and thus the higher present value. The "Income Yield %" from your table is also referred to as the "Flat Yield". It is a very crude measure, a simple function of the coupon rate, the current quote price and the face value (R/P * V). For the first bond in your list, the flat yield is (.04/114.63 * 100) = 3.4895%. This is a very simple measure that is roughly analogous to what you would expect to make on the bond if you held it for one year, collected the coupon payment, and then sold the bond for the same price; you'd earn one coupon payment at the end of that year and then recoup the principal. The actual present value calculation for a period of 1 year is PV = FV/(1+r), which rearranges to r = FV/PV - 1; plug in the values (present value 114.63, future value 118.63) and you get exactly the same result. This is crude and inaccurate because in one year, the bond will be a year closer to maturity and will return one less coupon payment; therefore at the same rate of return the present value of the remaining payout of the bond will only be $110.99 (which makes a lot of sense if you think about it; the bond will only pay out $112 if you bought it a year from now, so why would you pay $114 for it?). Another measure, not seen in the list, is the "simple APY". Quite simply, it is the yield that will be realized from all cash flows from the bond (all coupon payments plus the face value of the bond), as if all those cash flows happened at maturity. This is calculated using the future value formula: FV = PV (1+r/n)nt, where FV is the future value (the sum of the face value and all coupon payments to be made before maturity), PV is present value (the current purchase price), r is the annual rate (which we're solving for), n is the number of times interest accrues and/or is paid (for an annual coupon that's 1), and t is the number of years to maturity. For the first bond in the list, the simple APY is 0.2974%. This is the effective compound interest rate you would realize if you bought the bond and then took all the returns and stuffed them in a mattress until maturity. Since nobody does this with investment returns, it's not very useful, but it can be used to compare the yield on a zero-coupon bond to the yield on a coupon bond if you treated both the same way, or to compare a coupon bond to a CD or other compound-interest-bearing account that you planned to buy into and not touch for its lifetime. The Yield to Maturity, which IS seen, is the true yield percentage of the bond in time-valued terms, assuming you buy the bond now, hold it to maturity and all coupon payments are made on time and reinvested at a similar yield. This calculation is based on the simple APY, but takes into account the fact that most of the coupon payments will be made prior to maturity; the present value of these will be higher because they happen sooner. The YTM is calculated by summing the present values of all payments based on when they'll occur; so, you'll get one $4 payment a year from now, then another $4 in two years, then $4 in 3 years, and $104 at maturity. The present value of each of those payments is calculated by flipping around the future value formula: PV = FV/(1+r)t. The present value of the entire bond (its current price) is the sum of the present value of each payment: 114.63 = 4/(1+r) + 4/(1+r)2 + 4/(1+r)3 + 104/(1+r)4. You now have to solve for r, which is difficult to isolate; the easiest way to find the rate with a computer is to "goal seek" (intelligently guess and check). Based on the formula above, I calculated a YTM of .314% for the first bond if you bought on Sept 7, 2012 (and thus missed the upcoming coupon payment). Buying today, you'd also be entitled to about 5 weeks' worth of the coupon payment that is due on Sept 07 2012, which is close enough to the present day that the discounted value is a rounding error, putting the YTM of the bond right at .40%. This is the rate of return you'll get off of your investment if you are able to take all the returns from it, when you receive them, and reinvest them at a similar rate (similar to having a savings account at that rate, or being able to buy fractional shares of a mutual fund giving you that rate). |
What are some good, easy to use personal finance software? [UK] | I'm a big fan of Mint. I tried Wesabe prior to mint and at the time (about a year ago) it was lacking the integration of many of my accounts, so I had to go with Mint by necessity. Since then, Mint has gotten better almost monthly. I can do almost everything I want, and the budgeting tools (which would address your "6 months out" forecast desires) and deal alerts (basically tells you if you can get a better interest rate on savings/credit card/etc) are really helpful. Highly recommended! |
Would it make sense to take a loan from a relative to pay off student loans? | I struggle to see the value to this risk from the standpoint of your mother-in-law. This is not a small amount of money for a single person to lend to a single person ignoring your personal relationship. Right now, using a blended rate of about 8% and a 5 year payment period, your cost on that $50,000 is somewhere in the neighborhood of $11,000 with a monthly payment around $1,014. Using the same monthly payment but paying your MIL at 5% you'll complete the loan about 3.5 months sooner and save about $5,000, she will make about $6,000 in interest over 5 years against a $50,000 outlay. Alternatively, you can just prioritize payments to the more expensive loans. It's difficult to work out a total cost comparison without your expected payoff timelines and amount(s) you're currently paying toward all the loans. I'm sure a couple hours with a couple of spreadsheets could yield a plan that would net you a savings substantially close to the $5,000 you'd save by risking your mother in law's money. A lot of people think personal lending risk is about the relationship between the people involved, but there's more to it than that. It's not about you and your wife separating, it's not about the awkward dinner and conversations if you lose your job. Something might physically happen to you, you could become disabled or die. Right now, that's an extremely diversified and calculated risk taken by a gigantic lender. Unless your mother in law is very wealthy, this is not nearly enough reward to assume this sort of risk (in my opinion). Her risk FAR outpaces your potential five year savings. IF you wanted to pursue this as a means of paying interest to a family member rather than the bank, I'd only borrow an amount I budgeted and intended to pay within this single year. Say $10,000 against the highest interest loan. |
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. |
Is it a good practice to keep salary account and savings account separate? | There are a lot of good answers, but I will share my experience. First, a savings account needs to be for savings. If your in the US you have "Regulation D" to deal with and that will bite you on the rear if you go over those limits. Specially easy to do if your purchasing from a savings account. Next having an "Income" account and a "Spending" account can be a very good tool to build a nest egg. So for example you get $1500 into your income account and then move $1000 to your spending account then budget based on that $1000. This is an amazing thing to do, so long as you have the discipline to never transfer that extra $500, and pretend your broke when you run out of the $1000. That being said there is no reason that you can't do that in one account. It's all preference. My wife and I use YNAB (an envelope budgeting system) to do just that. We don't need the separate accounts. We are no more likely to "not spend" in one account then we are to "not spend" in two accounts. It's all just self discipline and what you need to do. This does lead to the situation we call YNAB broke. It's when we have to start choosing between "going hungry" or getting that new DVD, even though our bank account has $5,000 in it. It's even harder when you choose "go hungry" and have to follow through with it, even though you have enough to buy a used car in your bank account. But rather it's "YNAB broke" or your spending account is empty and your income account it full, the result is the same. It's up to "you" to have the self discipline not to spend. Rather that's in one account or two makes little difference. |
Why can't house prices be out of tune with salaries | Here's another way to think about. Let's assume it is 2011 and we have a married couple who are 25 and make a combined salary of $50,000/yr net. A suitable first house in their area is $300,000, six times their annual net salary. Assuming they could scrimp so that 1/2 of take-home went toward saving for their home, they could save enough to buy the house using cash in 12 years, at the age of 37. Onerous, but they could do it. But now let's allow salaries to increase by 3% a year and homes at 10%/yr, as in your question, and let's run things out for 20 years. Now a 25 year old couple at the same sort of jobs would be making $87,675/yr. But the houses in that town would be worth not $300k but $1,834,772. Instead of six times their salary, a house is now nearly 21 times their salary. This means that if they saved 1/2 of take-home to save up for a house, they could afford to buy the house using cash when they were 67 years old. It gets worse quickly. If you run it out for just ten more years, to 30 years, a couple would be able to buy the house -- at $4.8 million or 40x a year's salary -- in cash when they were 105 years old. (Let's hope they ate brown rice). Mortgages can't save them, since even if they could put down ten years' worth of savings on the 2041 house (that'd be 14% down), they'd still carry a $4.1 million mortgage with a $118k annual net salary. |
Formula to determine readiness to retire based on age, networth and annual expense | The standard interpretation of "can I afford to retire" is "can I live on just the income from my savings, never touching the principal." To estimate that, you need to make reasonable guesses about the return you expect, the rate of inflation, your real costs -- remember to allow for medical emergencies, major house repairs, and the like when determining you average needs, not to mention taxes if this isn't all tax-sheltered! -- and then build in a safety factor. You said liquid assets, and that's correct; you don't want to be forced into a reverse mortgage by anything short of a disaster. An old rule of thumb was that -- properly invested -- you could expect about 4% real return after subtracting inflation. That may or may not still be correct, but it makes an easy starting point. If we take your number of $50k/year (today's dollars) and assume you've included all the tax and contingency amounts, that means your nest egg needs to be 50k/.04, or $1,250,000. (I'm figuring I need at least $1.8M liquid assets to retire.) The $1.5M you gave would, under this set of assumptions, allow drawing up to $60k/year, which gives you some hope that your holdings would mot just maintain themselves but grow, giving you additional buffer against emergencies later. Having said that: some folks have suggested that, given what the market is currently doing, it might be wiser to assume smaller average returns. Or you may make different assumptions about inflation, or want a larger emergency buffer. That's all judgement calls, based on your best guesses about the economy in general and your investments in particular. A good financial advisor (not a broker) will have access to better tools for exploring this, using techniques like monte-carlo simulation to try to estimate both best and worst cases, and can thus give you a somewhat more reliable answer than this rule-of-thumb approach. But that's still probabilities, not promises. Another way to test it: Find out how much an insurance company would want as the price of an open-ended inflation-adjusted $50k-a-year annuity. Making these estimates is their business; if they can't make a good guess, nobody can. Admittedly they're also factoring the odds of your dying early into the mix, but on the other hand they're also planning on making a profit from the deal, so their number might be a reasonable one for "self-insuring" too. Or might not. Or you might decide that it's worth buying an annuity for part or all of this, paying them to absorb the risk. In the end, "ya pays yer money and takes yer cherce." |
Why do Americans have to file taxes, even if their only source of income is from a regular job? | you either tell your financial department about them (e.g. I used to get a student's tax discount), or you file them separately. But you don't have to file anything by default. That is a comment connected to the question. In the united states you can almost achieve this. 90% of the numbers on my tax form are automated. The W-2s are sent to the IRS, the 1099-s for my non retirement accounts are also sent. The two biggest items that take time are charities, and the educational benefits. Nobody has to claim every deduction they are entitled to. They must claim all the income, and decide to take the standard deduction. It would probably take less than an hour to finish the families taxes: both federal and state. |
Does exposure to financials in corporate bond funds make sense? | One reason a lot of bond ETFs like Financials are because of how financial companies work. They usually have amazing cash flows due to deposits and fees and therefore have little risk associated with paying their debts in the short term. The rest of VCSH contains companies with low default risk and good cash flow generation as well: This is of course the objective of VCSH: Banks themselves issue a lot of bonds to raise cash to lend for other purposes. Banks are intermediary and help make funds liquid for investors and spenders. Hope that helped answer your question. If not comment below and I'll try to adjust the answer to be more complete. |
Should I pay more than 20% down on a home? | The more you put down now, the less money you are borrowing. 30yrs of interest adds up. Even paying a small amount at the beginning of the mortgage can turn into a huge savings over the life of the loan. That's why you'll find advice to make extra mortgage payments in the beginning. The question is: Do you have a better use for that money? In particular, do you have any higher-interest debt (higher APR than your mortgage) that needs to be paid off? You generally want to take care of those first. Beyond that can you invest the extra down payment money elsewhere (eg stock market) and get a better return than your mortgage rate? (don't forget about taxes on investment profits). If so, that money will do more good there. |
Why does gold have value? | A lot of people probably don't agree with him, but Warren Buffett has some great quotes on why he doesn't invest in gold: I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. And his classic quote: [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. |
Paying extra on a mortgage. How much can I save? [duplicate] | Can I pay $12,000 extra once a year or $1000 every month - which option is better? Depends when. If you mean 12K now vs 1K a month over the next 12 months, repeating this each year, now wins. If you mean saving 1K a month for 12 months then doing a lumpsum, the 1K a month wins. Basically, a sooner payment saves you more money than a later payment. The first option does sound better, but for a 30 year mortgage, is it that significant? Your number one issue is that you have a thirty year mortgage. The interest you pay on it is monstrous. For the 30 year term, you pay around 500K in interest. A 15-year mortgage is 300K cheaper (only 200K in interest will be paid). The monthly payment would be 1250 more. How much money and years on a mortgage can I save? When is the best time to pay? At the end of each year? You can knock off about a dozen years. Save I think ~250K. You can find mortgage calculators online or talk to your mortgage advisor to play around with the numbers. |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | If you really want to help your friend buy a house, make a counter-offer to buy the house yourself and lease it to your friend, with the option to buy for original purchase cost, plus all interest paid so far to the bank, plus closing costs and other expenses incurred by you, minus payments made so far by the friend. Otherwise, just no. The other answers already detail why. |
What is KIRCHSTRASSE on my statement bill? | POS stands for Point of Sale (like a specific store location) which indicates that the purchase occurred by using your debit card, but it can also be the on-line transaction done via 3-D Secure. Checking with bank, they said that Kirchstrasse transaction could be related to direct marketing subscription service ordered on-line. Investigating further what I've found these kind of transactions are performed by 2BuySafe company registered at Kirchstrasse in Liechtenstein with went through the MultiCards on-line cashier which can be used for paying different variety of services (e.g. in this case it was polish on-line storage service called Chomikuj). These kind of transactions can be tracked by checking the e-mail (e.g. in gmail by the following query: after:2014/09/02 before:2014/09/02 Order). Remember, that if you still don't recognise your transaction, you should call your bank. I have found also some other people concerns about that kind of transactions who ask: Is 2BuySafe.com and www.multicards.com some sort of Scam? Provided answer says: MultiCards Internet Billing is a provider of online credit card and debit card processing and payment solutions to many retailers worldwide. MultiCards was one of the pioneer companies offering this type of service since 1995 and is a PCI / DSS certified Internet Payment Service Provider (IPSP) providing service to hundreds of retail websites worldwide MultiCards is a registered Internet Payment Service Provider and has implemented various fraud protection tools including, but not limited to, MultiCards Fraud Score Tool and 'Verified by Visa' and 'MasterCard SecureCode' to protect card holder's card details. 2BuySafe.com Is also Secured and Verified By GeoTrust The certificate should be trusted by all major web browsers (all the correct intermediate certificates are installed). The certificate was issued by GeoTrust. Entering Incorrect information can lead to a card being rejected as @ TOS 2BuySafe.com is hosted on the Multicards Server site |
Is candlestick charting an effective trading tool in timing the markets? | Your questions In the world of technical analysis, is candlestick charting an effective trading tool in timing the markets? It depends on how you define effective. But as a standalone and systematic strategy, it tends not to be profitable. See for example Market Timing with Candlestick Technical Analysis: Using robust statistical techniques, we find that candlestick trading rules are not profitable when applied to DJIA component stocks over 1/1/1992 – 31/12/2002 period. Neither bullish or bearish candlestick single lines or patterns provide market timing signals that are any better than what would be expected by chance. Basing ones trading decisions solely on these techniques does not seem sensible but we cannot rule out the possibility that they compliment some other market timing techniques. There are many other papers that come to the same conclusion. If used correctly, how accurate can they be in picking turning points in the market? Technical analysts generally fall into two camps: (i) those that argue that TA can't be fully automated and that interpretation is part of the game; (ii) those that use TA as part of a systematic investment model (automatically executed by a machine) but generally use a combination of indicators to build a working model. Both groups would argue (for different reasons) that the conclusions of the paper I quoted above should be disregarded and that TA can be applied profitably with the proper framework. Psychological biases It is very easy to get impressed by technical analysis because we all suffer from "confirmation bias" whereby we tend to acknowledge things that confirm our beliefs more than those that contradict them. When looking at a chart, it is very easy to see all the occurences when a certain pattern worked and "miss" the occurences when it did not work (and not missing those is much harder than it sounds). Conclusions |
Debit cards as bad as credit cards? | This sounds more like a behavioral than a debit card issue to me TBH. Did you put the money you're putting away into a separate savings account that you (mentally) labelled 'for investment'? That's pretty much what I do (and I have a couple of savings accounts for exactly that reason) and even though I know I've got $x in the savings accounts, the debit card I carry only lets me spend money from my main bank account. By the time I've transferred the money, the urge to spend has usually gone away, even though it often only takes seconds to make the transfer. |
Is CFD a viable option for long-term trading? | Something really does seem seedy that if I invest $2500, that I'll make above 50k if the stock doubles. Is it really that easy? You only buy or sell on margin. Think of when the stock moves in the opposite direction. You will loose 50k. You probably didn't look into that. Investment will vanish and then you will have debt to repay. Holding for long term in CFD accounts are charged per day. Charges depends on different service providers. CFD isn't and should not be used for long term. It is primarily for trading in the short term, maybe a week at the maximum. Have a look at the wikipedia entry and educate yourself. |
Should we invest some of our savings to protect against inflation? | If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.) Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each). I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund. To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six. You could place that six month emergency fund in ING Direct as littleadv suggested. That's where we have our emergency funds and long term savings. This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use). You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it. Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing. Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education. The money grows tax free and is only taxed when used for non-education expenses. You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast. |
How can you possibly lose on investments in stocks? | For whatever it's worth. Judging from the comments in the other answers, I think everyone is addressing your question, "How can you possibly lose money," there are a lot of ways to possibly lose money in the stock market. Here are my thoughts. This is a chart of the S&P 500 from about 1996 to about 2012. At the top from the first arrow the entire S&P500 index fell about 45%. From the top of the second arrow the entire S&P500 index fell about 52%. It is really easy to look at our sustained bull market and feel invincible. And while I'll concede that not every company in the index fell over these two periods, bear in mind that the S&P500 index is a collection of the 500 largest companies in the United States, and the entire index lost half it's value twice. As the companies contained in the index shrink in value, they were replaced by companies that are the new biggest 500 in the country, then those fell too, and so on and so forth until the entire index lost half. Value is a funny thing because it isn't necessarily tied to the performance of the business (look at the current rosy valuations of all these non-earnings tech-companies). It could be that a company is still performing very well but there are just no buyers for the stock. So, how can you lose money in the stock market? Very easily. In A practical sense, it's when you need the money and can no longer weather the storm. People who went out for retirement around 2000 couldn't sit around and wait until 2007 for their account values to be replenished. This is why you roll off your stock exposure as you age. As you get older you don't have time and if you stop having income you can find yourself selling your assets at the least opportune time. |
Are Index Funds really as good as “experts” claim? | Two main points to answer this in my opinion. First, most people don't start with say half a million dollar to buy all the stocks they need in one shot but rather they accumulate this money gradually. So they must make many Buys in their lifetime. Similarly, most people don't need to withdraw all their investment in one day (and shouldn't do this anyway as it cuts the time of investment). So there will be many Sells. Performing a single buy or sell per year is not efficient since it means you have lots of cash sitting doing nothing. So in this sense, low cost indexing lets you quickly invest your money (and withdraw it when needed after say you retire) without worrying about commission costs each time. The second and most important point to me to answer this is that we should make a very clear distinction between strategy and outcome. Today's stock prices and all the ups and downs of the market are just one possible outcome that materialized from a virtually uncountable number of possible outcomes. It's not too hard to imagine that tomorrow we hear all iPhones explode and Apple stock comes crashing down. Or that in a parallel universe Amazon never takes off and somehow Sears is the king of online commerce. Another item in the "outcome" category is your decisions as a human being of when to buy and sell. If that exploding iPhone event does occur, would you hold on to your stocks? Would you sell and cut your losses? Does the average person make the same decision if they had $1000 invested in Apple alone vs $1M? Index investing offers a low cost strategy that mitigates these uncertainties for the average person. Again here the key is the word "average". Picking a handful of the heavyweight stocks as you mention might give you better returns in 30 years, but it could just as easily give you worse. And the current data suggest the latter is more likely. "Heavyweights" come and go (who were they 30 years ago?) and just like how the other 450 companies may seem right now as dragging down the portfolio, just as easily a handful of them can emerge as the new heavyweights. Guaranteed? No. Possible? Yes. Jack Bogle is simply saying low cost indexing is one of the better strategies for the average person, given the data. But nowhere is it guaranteed that in this lifetime (e.g. next 30 years) will provide the best outcome. Berkshire on the other hand are in the business of chasing maximum outcomes (mid or short term returns). It's two different concepts that shouldn't be mixed together in my opinion. |
Investment property refinance following a low appraisal? | Definitely don't borrow from your 401K. If you quit or get laid off, you have to repay the whole amount back immediately, plus you are borrowing from your opportunity cost. The stock market should be good at least through the end of this year. As one of the commentators already stated, have you calculated your net savings by reducing the interest rate? You will be paying closing costs and not all of these are deductible (only the points are). When calculating the savings, you have to ask yourself how long you will be hanging on the property? Are you likely to be long term landlords, or do you have any ideas on selling in the near future? You can reduce the cost and principal by throwing the equivalent of one to two extra mortgage payments a year to get the repayment period down significantly (by years). In this way, you are not married to a higher payment (as you would be if you refinanced to a 15 year term). I would tend to go with a) eat the appraisal cost, not refinance, and b) throw extra money towards principal to get the term of the loan to be reduced. |
What actions can I take against a bank for lack of customer service? | I don't think the verbal confirmation from the branch manager is worth anything, unless you got it in writing it basically never happened. That said, what did you sign exactly? An application? I'd think they would be well within their rights to deny that, no matter what the branch manager said. If you actually signed a binding contract between you and the bank, things would be different but the fact that 'approval' was mentioned suggests that all you and the bank signed was an application and the bank manager made some unreasonable promises he or she doesn't want to be reminded of now. If the complaints department can't get off their collective backsides, a firm but polite letter to the CEO's office might help, or it might end up in the round filing cabinet. But it's worth a try. Other than that, if you are unhappy enough to go through the pain, you can try to remortgage with another bank and end the business relationship with your current bank. |
Vanguard Target Retirement Fund vs. Similar ETF Distribution (w/ REIT) | Your approach sounds solid to me. Alternatively, if (as appears to be the case) then you might want to consider devoting your tax-advantaged accounts to tax-inefficient investments, such as REITs and high-yield bond funds. That way your investments that generate non-capital-gain (i.e. tax-expensive) income are safe from the IRS until retirement (or forever). And your investments that generate only capital gains income are safe until you sell them (and then they're tax-cheap anyway). Of course, since there aren't really that many tax-expensive investment vehicles (especially not for a young person), you may still have room in your retirement accounts after allocating all the money you feel comfortable putting into REITs and junk bonds. In that case, the article I linked above ranks investment types by tax-efficiency so you can figure out the next best thing to put into your IRA, then the next, etc. |
In what order should I save? | This is a bit of an open-ended answer as certain assumptions must be covered. Hope it helps though. My concern is that you have 1 year of university left - is there a chance that this money will be needed to fund this year of uni? And might it be needed for the period between uni and starting your first job? If the answer is 'yes' to either of these, keep any money you have as liquid as possible - ie. cash in an instant access Cash ISA. If the answer is 'no', let's move on... Are you likely to touch this money in the next 5 years? I'm thinking house & flat deposits - whether you rent or buy, cars, etc, etc. If yes, again keep it liquid in a Cash ISA but this time, perhaps look to get a slightly better interest rate by fixing for a 1 year or 2 year at a time. Something like MoneySavingExpert will show you best buy Cash ISAs. If this money is not going to be touched for more than 5 years, then things like bonds and equities come into play. Ultimately your appetite for risk determines your options. If you are uncomfortable with swings in value, then fixed-income products with fixed-term (ie. buy a bond, hold the bond, when the bond finishes, you get your money back plus the yield [interest]) may suit you better than equity-based investments. Equity-based means alot of things - stocks in just one company, an index tracker of a well-known stock market (eg. FTSE100 tracker), actively managed growth funds, passive ETFs of high-dividend stocks... And each of these has different volatility (price swings) and long-term performance - as well as different charges and risks. The only way to understand this is to learn. So that's my ultimate advice. Learn about bonds. Learn about equities. Learn about gilts, corporate bonds, bond funds, index trackers, ETFs, dividends, active v passive management. In the meantime, keep the money in a Cash ISA - where £1 stays £1 plus interest. Once you want to lock the money away into a long-term investment, then you can look at Stocks ISAs to protect the investment against taxation. You may also put just enough into a pension get the company 'match' for contributions. It's not uncommon to split your long-term saving between the two routes. Then come back and ask where to go next... but chances are you'll know yourself by then - because you self-educated. If you want an alternative to the US-based generic advice, check out my Simple Steps concept here (sspf.co.uk/seven-simple-steps) and my free posts on this framework at sspf.co.uk/blog. I also host a free weekly podcast at sspf.co.uk/podcast (also on iTunes, Miro, Mixcloud, and others...) They were designed to offer exactly that kind of guidance to the UK for free. |
How would I use Google Finance to find financial data about LinkedIn & its stock? | When fundamentals such as P/E make a stock look overpriced, analysts often point to other metrics. The PEG ratio, for example, can be applied to cast growth companies in a better light. Fundamental analysis is highly subjective. For further discussion on the pitfalls of fundamentals, I suggest A Random Walk Down Wall Street by Burton Malkiel. |
US taxes and refunding/returning payment | Get the worker put it in writing, and deduct it in December under constructive receipt rules. The fact that you're getting the actual cash in January isn't significant as long as you've secured the payment. Verify this with a tax adviser, but that's what I would do. |
What foreign exchange rate is used for foreign credit card and bank transactions? | On Credit Cards [I am assuming you have a Visa or Master card], the RBI does not decide the rate. The rate is decided by Visa or Master. The standard Sheet rate for the day is used. Additionally SBI would mark it up by few paise [FX mark-up spread]. This is shown as mark-up fee. The rate of USD Vs INR changes frequently. On large value [say 1 million] trades even a paise off makes a huge difference and hence the rate is constantly changing [going up or down]. The rates offered to individuals are constant through out the day. They change from day to day and can go up for down. Recently in the past 6 months if you read the papers, Rupee has been going down and is at historic low. On a give day there are 2 rates; - Bank Buy Rate, ie the rate at which Bank will BUY USD from you. Say 61. So it will buy 100 USD and give you Rupees 6100. - Bank Sell rate, ie the rate at which Bank will SELL USD to you. Say 62. So if you want 100 USD, you need to give Bank 6200. The difference between this is the profit to bank. |
What is the different between 2 :1 split and 1:1 split | I'm guessing you're conflating bonus share issuance with stock split. That seems very common to me, from a quick search; there's even some issues of terminology between the US and Europe, I think - it seems some Europeans may use Bonus Shares to mean Stock Split, as opposed to the more common meaning in the US of Stock Dividend. Sometimes a bonus share issuance is (incorrectly) called a stock split, like in this public announcement from STADA in 2004. It is a 1:1 bonus share issuance (meaning they issue one bonus share to everyone who has one share now), but it is in essence the same thing as a stock split (a 2:1 stock split, namely). They combined the 1:1 from bonus share with the wording 'split', causing the confusion. Bonus share issuance, also known as a stock dividend, is covered well in this question/answer on this site, or from a search online. It has no obvious effect initially - both involve doubling shares out there and halving the price - but it has a substantially different treatment in terms of accounting, both to the company and to your tax accountant. |
How to work around the Owner Occupancy Affidavit to buy another home in less than a year? | In your particular condition could buy the condo with cash, then get your mortgage on your next house with "less than 20%" down (i.e. with mortgage insurance) but it would still be an owner occupied loan. If you hate the mortgage insurance, you could save up and refi it when you have 20% available, including the initial down payment you made (i.e. 80% LTV ratio total). Or perhaps during the time you live in the condo, you can save up to reach the 20% down for the new house (?). Or perhaps you can just rent somewhere, then get into the house for 20% down, and while there save up and eventually buy a condo "in cash" later. Or perhaps buy the condo for 50% down non owner occupied mortgage... IANAL, but some things that may come in handy: you don't have to occupy your second residence (owner occupied mortgage) for 60 days after closing on it. So could purchase it at month 10 I suppose. In terms of locking down mortgage rates, you could do that up to 3 months before that even, so I've heard. It's not immediately clear if "rent backs" could extend the 60 day intent to occupy, or if so by how long (1 month might be ok, but 2? dunno) Also you could just buy one (or the other, or both) of your mortgages as a 20% down conventional "non owner occupied" mortgage and generate leeway there (ex: buy the home as non owner occupied, and rent it out until your year is up, though non owner occupied mortgage have worse interest rates so that's not as appealing). Or buy one as a "secondary residency" mortgage? Consult your loan officer there, they like to see like "geographic distance" between primary and secondary residences I've heard. If it's HUD (FHA) mortgage, the owner occupancy agreement you will sign is that you "will continue to occupy the property as my primary residence for at least one year after the date of occupancy, unless extenuating circumstances arise which are beyond my control" (ref), i.e. you plan on living in it for a year, so you're kind of stuck in your case. Maybe you'd want to occupy it as quickly as possible initially to make the year up more quickly :) Apparently you can also request the lender to agree to arbitrarily rescind the owner occupancy aspect of the mortgage, half way through, though I'd imagine you need some sort of excuse to convince them. Might not hurt to ask. |
How do I add my income to my personal finance balance? | Create an account called, say, "Paycheck". When you get paid, create an entry with your gross income as a deposit. For each deduction in your paycheck, create a minus (or expense) entry. After doing that, what will be left in the Paycheck account will be your net income. Simply transfer this amount to the real account your paycheck goes into (your checking account, probably). Almost all the time, the value of your Paycheck account will be 0. It will be nonzero only for a moment every two weeks (or however often you get paid). I don't know if this is the standard way of doing it (in the professional accounting world). It's a way I developed on my own and it works well, I think. I think it's better than just adding a deposit entry in your checking account for your net income as it lets you keep track of all your deductions. (I use Quicken for the Mac. Before they added a Paycheck feature, I used this method. Then they removed the Paycheck feature from the latest version of Quicken for the Mac and I now use this method again.) |
Specifically when do options expire? | 4PM is the market close in NYC, so yes, time looks good. If "out of the money," they expire worthless. If "in the money," it depends on your broker's rules, they can exercise the option, and you'll need to have the money to cover on Monday or they can do an exercise/sell, in which case, you'd have two commissions but get your profit. The broker will need to tell you their exact procedure, I don't believe it's universal. |
Why deep in the money options have very low liquidity | One reason might be the 100% margin requirement on long options. Suppose I want to go long AAPL. I could get a deep ITM call or buy shares. $12,700 for 100 shares, with it's 25% margin requirement is like around $3200 locked up cash. Combine with a deep OTM Jan 2017 $70 strike put for $188, would give a $3400 margin requirement to enter the trade. or I could be in the JAN 2017 $70 strike for nearer $5800, but with a 100% margin requirement due to being a long call. So (3400/5800) = 59% increase in margin requirement for Deep ITM calls. Plus long term the shares will pay dividends, while a LEAP CALL does not. |
Is it prudent to sell a stock on a 40% rise in 2 months | Depends entirely on the stock and your perception of it. Would you buy it at the current price? If so, keep it. Would you buy something else? If so, sell it and buy that. |
Treatment of donations of appreciated stock to a IRC §501(c)(7) Social Club? | If cash donations are not deductable, stock contributions aren't either and I believe the same rules apply as for a private party. |
UK: Personal finance book for a twenty-something | I will definitely recommend the following books The above books will open lot of eyes to exactly know what you are doing with your personal finances in a day to day basis.These books will surely be in the top of my list which I will be giving away to my kins in my later stage. The concepts are universally the same, feel free to skip the chapters which were US based. I live in UK and I read most of the above books in late twenties, it surely made lot of changes and also drastically improved my personal finance acumen. I wish I have read these books in my early twenties. |
What is the difference between shares and ETF? | A mutual fund has several classes of shares that are charged different fees. Some shares are sold through brokers and carry a sales charge (called load) that compensates the broker in lieu of a fee that the broker would charge the client for the service. Vanguard does not have sales charge on its funds and you don't need to go through a broker to buy its shares; you can buy directly from them. Admiral shares of Vanguard funds are charged lower annual expenses than regular shares (yes, all mutual funds charge expenses for fund adninistration that reduce the return that you get, and Vanguard has some of the lowest expense ratios) but Admiral shares are available only for large investments, typically $50K or so. If you have invested in a Vanguard mutual fund, your shares can be set to automatically convert to Admiral shares when the investment reaches the right level. A mutual fund manager can buy and sell stocks to achieve the objectives of the fund, so what stockes you are invested in as a share holder in a mutual fund will typically be unknown to you on a day-to-day basis. On the other hand, Exchange-traded funds (ETFs) are fixed baskets of stocks, and you can buy shares in the ETF. These shares are bought and sold through a broker (so you pay a transaction fee each time) but expenses are lower since there is no manager to buy and sell stocks: the basket is fixed. Many ETFs follow specific market indexes (e.g. S&P 500). Another difference between ETFs and mutual funds is that you can buy and sell ETFs at any time of the day just as if you could if you held stocks. With mutual funds, any buy and sell requests made during the day are processed at the end of the day and the value of the shares that you buy or sell is determined by the closing price of the stocks held by the mutual fund. With ETFs, you are getting the intra-day price at the time the buy or sell order is executed by your broker. |
Why ever use a market order? | I don't think you're missing anything. Many modern trading systems actually warn you when trying to enter a market order, asking if you are sure that you wouldn't prefer to set a limit. I fully agree with you that it is usually just better to define a limit even 20% higher than just doing a market trade. Let me give you some examples when you still might prefer to use a market order instead of a limit: But even in those two examples a (wide) limit order might just be the safer thing to do. So, what it really comes down to is speed: A market order has no other criterias to be defined, is thus entered faster and saves you a few seconds that might be crucial. |
Can saving/investing 15% of your income starting age 25, likely make you a millionaire? | It depends on how much you save, how much your savings earns each year. You can model it with a very simple spreadsheet: Formula view: You can change this simple model with any other assumptions you wish to make and model. This spreadsheet presumes that you only make $50,000/year, never get a raise, that your savings earns 6% per year and that the market never has a crash like 2008. The article never states the assumptions that the author has made, and therefore we can't honestly determine how truthful the author is. I recommend the book Engineering Your Retirement as it has more detailed models and goes into more details about what you should expect. I wrote a slightly more detailed post that showed a spreadsheet that is basically what I use at home to track my retirement savings. |
Dispute credit card transaction with merchant or credit card company? | Most merchants (also in Europe) are reasonable, and typically are willing to work with you. credit card companies ask if you tried to work with the merchant first, so although they do not enforce it, it should be the first try. I recommend to give it a try and contact them first. If it doesn't work, you can always go to the credit card company and have the charge reversed. None of this has any effect on your credit score (except if you do nothing and then don't pay your credit card bill). For the future: when a transaction supposedly 'doesn't go through', have them write this on the receipt and give it to you. Only then pay cash. I am travelling 100+ days a year in Europe, using my US credit cards all the time, and there were never any issues - this is not a common problem. |
Withholding for unexpected Short-Term Capital Gains and Penalties | The safe harbor provision is based on the tax you or the prior year. So in 2016 this helped you as your tax was substantially increased from 2015. However, by the same token in 2017 your safe harbor amount is going to be very high. Therefore if 2017 is similar you will owe penalties. The solution here is to make estimated tax payments in the quarters that you realize large gains. This is exactly what the estimated tax payments are for. Your estimate tax payments do not have to be the same. In fact if you have a sudden boost in earnings in quarter 3, then the IRS expects that quarter 3 estimated tax payment to be boosted. |
Using a Roth IRA instead of a college savings account | One problem with this plan is that the individual must have earned income to contribute to a Roth IRA. If you have an infant, unless she is the new Gerber baby or something like that, there is probably no legitimate way for her to earn income. If you own a business and have kids who are older, you can employ them to do work for you, but they must really do work and earn around the market rate for that work. Otherwise, it is unlikely that they will be able to earn enough to fund an IRA until they are teenagers. When they are old enough to work, you can "match" their earnings by contributing the same amount to a Roth IRA on their behalf, but this will not give you the amount of contributions and growth time that you were counting on. |
Debit card for minor (< 8 y.o.) | GreenLight offers a paid service for $5 per month that requires an adult primary account holder, and then unlimited accounts, including minors, as part of that service. I saw no minimum age requirement (see section "Minors as Sub-Account Cardholders"). https://www.greenlightcard.com/index.html Disclaimer: I haven't tried this service |
What are some good ways to control costs for groceries? | All excellent answers. Scott W. already mentioned to look out for sales and many other answers are ways to be smart with portions: don't overbuy, or be smart with bulk buys. But, I'm surprised nobody mentioned one of the things I'd consider obvious about saving money on groceries: coupons! Coupons can save cash. We'll sometimes use coupons for brands we'd be buying anyway, or other comparably-priced brands that we're willing to try. The thing to be careful of with coupons is when the manufacturer is attempting to up-sell you to a premium brand, or trying to get you to buy a product you'd never have bought anyway. Anyway, we especially like the coupons that Costco sends in the mail once in a while, or those they hand out at the warehouse entrance. What better way to save than to: All the better if the items aren't perishable. When we have the space and those grocery savings stars are all in alignment, we load up on such items as paper towels, oatmeal/cereal bars, soap, etc. |
Paypal website donations without being a charity | An answer from PayPal stated that donations may be turned on only for Business PayPal accounts that are verified for its non-profit status. Such PayPal Business account must be opened in the name of non-profit organization (not a single person) and go through verification process. One must provide the following information: That would mean that one cannot ask for donations as a private person, at least in Croatia, and probably in Europe. |
Capital Gains in an S Corp | These are all factually correct claims. S-Corporation is a pass-through entity, so whatever gain you have on the corporate level - is passed to the shareholders. If your S-Corp has capital gains - you'll get your pro-rata share of the capital gains. Interest? The same. Dividends? You get it on your K-1. Earned income? Taxed as such to you. I.e.: whether you earn income as a S-Corp or as a sole proprietor - matters not. That's the answer to your bottom line question. The big issue, however, is this: you cannot have more than 25% passive income in your S-Corp. You pass that limit (three consecutive years, one-off is ok) - your S-Corp automatically converts to C-Corp, and you're taxed at the corporate level at the corporate rates (you then lose the capital gains rates, personal brackets, etc). This means that an S-Corp cannot be an investment company. Most (75%+) of its income has to be earned, not passive. Another problem with S-Corp is that people who work as self-proprietors incorporated as S-Corp try to abuse it and claim that the income they earned by the virtue of their own personal performance shouldn't be taxed as self-employed income. IRS frowns upon such a position, and if considerable amounts are at stake will take you all the way up to the Tax Court to prove you wrong. This has happened before, numerously. You should talk to a licensed tax adviser (EA/CPA/Attorney licensed in your state) to educate you about what S-Corp is and how it is taxed, and whether or not it is appropriate for you. |
Should I keep most of my banking, credit, and investment accounts at the same bank? | I've had all my account with the same bank for all my life. Generally, the disadvantage is that if I want some kind of product like a credit extension or a mortgage, I have the one bank to go to and if they don't want to help me I'm out of luck. However, occasionally there are also perks like the bank spontaneously offering you increased credit or even a whole line of credit. They can do this because they have your whole history and trust you. |
In the stock market, why is the “open” price value never the same as previous day's “close”? | Quoted from money.howstuffworks.com: NASDAQ has come up with an auction approach called the opening cross. Here's how it works. In the morning, a computer program looks at all the orders that have come in overnight in each different stock. Based on those orders, the program picks a price level that would be the best opening price. However, it also looks to see if there's a trade imbalance. For example, if a company announced bad news after the market closed, there might be 10 times more sell orders than buy orders. NASDAQ then broadcasts the price and imbalance information to its network of dealers with the goal of offsetting the imbalance. It then lets dealers place orders. This all happens very quickly, in a time window of two minutes or so, right before the market opens. Dealers can place orders, and those orders are factored into the opening price. Further reading here: Opening Price calculation |
What happens to my stocks when broker goes bankrupt? | +1 to YosefWeiner. Let me add: Legally, technically, or at least theoretically, when you buy stock through a broker, you own the stock, not the broker. The broker is just holding it for you. If the broker goes bankrupt, that has nothing to do with the value of your stock. That said, if the broker fails to transfer your shares to another broker before ceasing operation, it could be difficult to get your assets. Suppose you take your shoes to a shoe repair shop. Before you can pick them up, the shop goes bankrupt. The shoes are still rightfully yours. If the shop owner was a nice guy he would have called you and told you to pick up your shoes before he closed the shop. But if he didn't, you may have to go through legal gyrations to get your shoes back. If as his business failed the shop owner quit caring and got sloppy about his records, you might have to prove that those shoes are yours and not someone else's, etc. |
Steps/Procedures to open an online stock trading account in the US | Since you are not starting with a lot of cash the commissions may eat into your account. So go with somebody that has no inactivity fee and low/free commission. I think there are number of sites and the ING sharebuilder.com comes to mind. Scottrade also one of the cheaper ones that i used. |
Are the “debt reduction” company useful? | Many of the services are scams, and those that are not are just doing something you can do yourself - as Jack points out. |
How do rich people guarantee the safety of their money, when savings exceed the FDIC limit? | The FDIC has been pretty good at recovery lost money from failed banks. The problem is the temporary loss from immediate needs. The best thing for anyone to do is diversify in investments and banks with adequate covered insurance for all accounts. Immediate access to available cash is always a priority that should be governed by the money manager in this case yourself. |
What does it mean that stocks are “memoryless”? | With my current, limited knowledge (see end), I understand it the following way: Are share prices really described as "memoryless"? Yes. Is there a technical meaning of the term? What does it really mean? The meaning comes from Markov Models: Think of the behavior of the stock market over time as a Markov Chain, i.e. a probabilistic model with states and probabilistic transitions. A state is the current price of all stocks of the market, a transition is a step in time. Memoryless means that transitions that the stock market might make can be modelled by a relation from one state to another, i.e. it only depends on the current state. The model is a Markov Chain, as opposed to a more general Stochastic Process where the next state depends on more than the current state. So in a Markov Chain, all the history of one stock is "encoded" already in its current price (more precisely in all stock's prices). The memorylessness of stocks is the main statement of the Efficient Market Theory (EMT). If a company's circumstances don't change, then a drop in its share price is going to be followed by a rise later. So if the EMT holds, your statement above is not necessarily true. I personally belief the EMT is a good approximation - only large corporations (e.g. Renaissance Technologies) have enough ressources (hundreds of mathematicians, billions of $) to be able to leverage tiny non-random movements that stem from a not completely random, mostly chaotic market. The prices can of course change when the company's circumstances change, but they aren't "memoryless" either. A company's future state is influenced by its past. In the EMT, a stock's future state is only influenced by its past as much as is encoded in its current price (more precisely, the complete market's current state). Whether that price was reached by a drop or a rise makes no difference. The above is my believe, but I'm by far no finance expert. I am working professionally with probabilistic models, but have only read one book on finance: Kommer's "Souverän investieren mit Indexfonds und ETFs". It's supposed to contain many statements of Malkiel's "A Random Walk Down Wall Street". |
Debit cards as bad as credit cards? | If it is one of those debit cards you use just like a credit card without a PIN, I'd cancel it regardless of whatever you are trying to do with your finances. They just seem too dangerous to me. Unlike a credit card, if someone makes fraudulent purchases on a debit card the money is gone from your bank account until you resolve the issue with the issue. With a credit card, the BANK is out the money until it gets worked out. My brother once had his credit card number (not the card) stolen and the criminals emptied his bank account. Eventually the bank put the money back after an investigation, but it had two really nasty side effects: 1) Dozens of checks bounced. The bank refunded the bounced check fees, but not all of the stores would. 2) He had no money in his account until it was resolved. Luckily in his case they resolved it in a few days, but he was already making preparations to borrow money to pay his rent/bills. |
What is value investing? What are the key principles of value investing? | Value investing is an investment approach that relies on buying securities below their intrinsic values. There are two main concepts; one is the Intrinsic Value and the other is Margin of Safety. Intrinsic value is the value of the underlying business - if we are talking about stocks - that can be calculated through carefully analyzing the business looking at all aspects of it. If there is an intrinsic value exists for a company then there is a price tag we can put on its shares as well. Value investing is looking to buy shares well below its intrinsic value. It is important to know that there is no correct intrinsic value exists for a company and two people can come up with different figures, if they were presented the same data. Calculating the intrinsic value for a business is the hardest part of value investing. Margin of Safety is the difference between the buying price of a stock and its intrinsic value. Value investors are insisting on buying stocks well below their intrinsic value, where the margin of safety is 20%-30% or even more. This concepts is protecting them from poor decisions and market downturns. It is also providing a room for error, when calculating the intrinsic value. The approach was introduced by Benjamin Graham and David Dodd in a book called Security Analysis in 1934. Other famous investor using this approach is Warren Buffet Books to read: I would start to read the first two book first. |
T-mobile stock: difference between TMUSP vs TMUS | The difference between TMUSP and TMUS is that the "with P" ticker is for a TMobile Preferred Stock offering. The "without P" ticker is for TMobile common stock. The difference between the apparent percentage yields is due to Yahoo! Stock misreporting the dividend on the preferred stock for the common stock, which has not paid a dividend (thanks Brick for pointing this out!) Preferred stock holders get paid first in the event of liquidation, in most scenarios they get paid first. They sometimes get better returns. They typically lack voting rights, and after a grace period, they may be recalled by the company at a fixed price (set when they were issued). Common stock holders can vote to alter the board of directors, and are the epitome of the typical "I own a trivial fraction of the company" model that most people think of when owning stocks. As the common stock is valued at much less, it appears that the percent yield is much higher, but in reality, it's 0%. |
How many days does Bank of America need to clear a bill pay check | We have a local bank that changed to a bill pay service. The money is held as "processing" when the check is supposed to be cut and shows as cleared on the date the check is supposed to be received. Because our business checking is with the same bank, we discovered recently that the although the check shows cleared from our account, the recipient has not received the paper check yet - and may not for 2-3 days. We discovered this because the payroll checks we write this way (to ourselves) never arrive on the due date but clear the business account. It appears to be a new way for banks to ride the "float" and draw interest on the money. It happens with every check processed through the bill pay system and not with electronic transfers. |
Why is gold not a good investment? | Gold is not really an investment at all, because it doesn't generate an income. It's only worth money because people think it's worth money (it has some industrial uses, but most gold is used as a store of value and not for industrial purposes), not because of its income stream. |
Should I stockpile nickels? | Stockpile? No. Keep a few around? Sure, if you are a collector. I used to collect pennies and I thought the steel pennies from WWII were neat. I do believe I paid about $0.01 for them at the coin shop. They might be worth $0.15 if in great condition today. No harm in finding $20 worth of really nice nickels, maybe in chronological order and from the different mints. Put them in a collector case so they stay nice and chuck them in your fireproof safe with your house deed and insurance policies. But I don't think you are going to hit it particularly big, but it might be a nice thing to pass along as an inheritance. |
What should I do with my money? | Edit: I a in the United States, seek advice from someone who is also in Australia. I am getting about 5.5% per year by investing in a fund (ticker:PGF) that, in turn, buys preferred stock in banks. Preferred stock acts a bit like a bond and a bit like a stock. The price is very stable. However, a bank account is FDIC insured (in the USA) and an investment is not. I use the Reinvestment program at Scottrade so that the monthly dividends are automatically reinvested with no commission. However I do not know if this is available outside of the United States. Investing yealds greater returns but exposes you to greater risk. You have to know your risk tolerance. |
Am I understanding buying options on stock correctly | Options have legitimate uses as a way of hedging a bet, but in the hands of anyone but an expert they're gambling, not investing. They are EXTREMELY volatile compared to normal stocks, and are one of the best ways to lose your shirt in the stock market yet invented. How options actually work is that you're negotiating a promise that, at some future date or range of dates, they will let you purchase some specific number of shares (call), or they will let you sell them that number of shares (put), at a price specified in the option contract. The price you pay (or are paid) to obtain that contract depends on what the option's seller thinks the stock is likely to be worth when it reaches that date. (Note that if you don't already own the shares needed to back up a put option, you're promising to pay whatever it takes to buy those shares so you can sell them at the agreed upon price.) Note that by definition you're betting directly against experts, as opposed to a normal investment where you're usually trying to ride along with the experts. You are claiming that you can predict the future value of the stock better than they can, and that you will make a profit (on the difference between the value locked in by the option and the actual value at that time) which exceeds the cost of purchasing the option in the first place. Let me say that again: the option's price will have been set based on an expert's opinion of what the stock is likely to do in that time. If they think that it's really likely to be up $10 per share when the option comes due (really unlikely for a $20 stock!!!), they will try to charge you almost $10 per share to purchase the option at the current price. "Almost" because you're giving them a guaranteed profit now and assuming all the risk. If they're less sure it will go up that much, you'll pay less for the option -- but again, you're giving them hard money now and betting that you can predict the probabilities better than they can. Unless you have information that the experts don't have -- in which case you're probably committing insider trading -- this is a very hard bet to win. And it can be extremely misleading, since the price during the option period may cross back and forth over the "enough that you'll make a profit" line many times. Until you actually commit to exercising the option or not, that's all imaginary money which may vanish the next minute. Unless you are willing and able to invest pro-level resources in this, you'd probably get better odds in Atlantic City, and definitely get better odds in Las Vegas. If you don't see the sucker at the poker table, he's sitting in your seat. And betting against the guy who designed and is running the game is usually Not a Good Idea. |
Debt collector has wrong person and is contacting my employer | Request verification in writing of the debt. They are required to provide this by law. Keep this for your records. Send them a notice by certified mail stating that this is not your debt and not to contact you again. Indicate that you will take legal action if they continue to try and collect. Keep a log of if/when they continue to call or harass you. Contact counsel about your rights under the fair debt collection laws, but if they keep harassing you after being provided proof of your identity, they are liable. You could win a judgement in court if you have proof of bad behavior. If your identity is stolen, you are not legally responsible for the charges. However it is a mess to clean up, so pull your credit reports and review your accounts to be sure. |
Is trading stocks easier than trading commodities? | I would not argue if its more difficult, its different, and it much depends what kind of stocks you refer to, i take large caps as example. The players are different. Companies and even govts may hedge in the commodities (futures) market while in big caps this and other entities mainly invest. (Of course there’s HFT in large caps too). Futures often come with way higher leverage, lower spread and less commissions than stocks attracting retail and institutional speculators/HFT. Another big difference is that commodity prices react to all kind of news events (Stocks do too, but not that much and frequent), this kind of reactions big caps only do on earnings or on news directly affecting the company. Commodities are much more volatile on geo economic / political news events. This combined with higher leverage & HFT produces astounding moves. To sum it up, the players are different and act different than in large stocks, liquidity may be another thing. |
Why do people buy new cars they can not afford? | Two reasons: Many people make lots of financial decisions (and other kinds of decisions) without actually running any numbers to see what is best (or even possible). They just go with their gut and buy things they feel like buying, without making a thoroughgoing attempt to assess the impact on their finances. I share your bafflement at this, but it is true. A sobering example that has stuck with me can be found in this Los Angeles Times story from a few years ago, which describes a family spending $1000 more than their income every month, while defaulting on their mortgage and dipping into their 7-year-old daughter's savings account to cover the bills --- but still spending $275 a month on "beauty products and services" and $200 a month on pet expenses. Even to the extent that people do take finances into account, finances are not the only thing they take into account. For many people, driving a car that is new, looks nice and fresh, has the latest features, etc., is something they are willing to pay money for. Your question "why don't people view a car solely as a means of transportation" is not a financial question but a psychological one. The answer to "why do people buy new cars" is "because people do not view cars solely as a means of transportation". I recently bought a used car, and while looking around at different ones I visited a car lot. When the dealer heard which car I was interested in, he said, "So, I guess you're looking for a transportation car." I thought to myself, "Duh. Is there any other kind?" But the fact that someone can say something like that indicates that there are many people who are looking for something other than a "transportation car". |
APR for a Loan Paid Off Monthly | If your APR is quoted as nominal rate compounded monthly, the APR is 108.6 %. Here is the calculation, (done in Mathematica ). The sum of the discounted future payments (p) are set equal to the present value (pv) of the loan, and solved for the periodic interest rate (r). Details of the effective interest rate calculation can be found here. http://en.wikipedia.org/wiki/Effective_interest_rate#Calculation |
What is the effect of dividends on the futures price of an index | A futures contract is based upon a particular delivery date. In the case of a stock index futures contract is a cash settled futures contract based upon the stock index value at a particular point in time (i.e. this is when the final settlement is determined). In your example, the S&P 500 (SPX) is a price return index - that is, it is not affected by dividends and therefore dividends are not incorporated into the index value. Dividends will affect the price of the constituent stocks (not necessarily by the same amount as the dividend) so they do have influence on the stock index value. Since the dividends are known ahead of time (or at least can be estimated), this has already been factored into the futures price by the market. In terms of the impact of a dividend by AAPL, AAPL is approximaetely 3.6% of the index. Apple pays out dividends 4 times a year (currently paying out $0.52 dividends). Assuming the market is otherwise steady and AAPL drops by $0.52 due to the dividend and Apple is priced at around $105, this would result in a drop in the index of 0.0178% or around 0.35 points. Interesting fact: There are some futures contracts that are based upon Total Return indexes, such as the German DAX and the above logic would need to be reversed. |
Capital gains on no-dividend stocks - a theoretical question | You are overlooking the fact that it is not only supply & demand from investors that determines the share price: The company itself can buy and sell its own shares. If company X is profitable over the long haul but pays 0 dividends then either Option (2) is pretty ridiculous, so (1) will hold except in an extreme "man bites dog" kind of fluke. This is connected with the well-known "dividend paradox", which I discussed already in another answer. |
Explanation on Warren Buffett's famous quote | I think he was trying to say that in the long term the company's fundamental intrinsic value will drive the price of a company's stock, but in the short term stocks move on emotion and publicity that are not necessarily a reflection of their true underlying value. |
Facebook buying WhatsApp for 19 Billion. How are existing shareholders affected? | Of course it is a dilution of existing shareholders. When you buy milk in the supermarket - don't you feel your wallet diluted a little? You give some $$$ you get milk in return. You give some shares, you get Watsapp in return. That's why such purchases must go through certain process of approval - board of directors (shareholders' representatives) must approve it, and in some cases (don't know if in this particular) - the whole body of the shareholders vote on the deal. |
What do “cake and underwear” stocks refer to? | I interpret that to mean "vice" stocks and necessities. "Cake" may just be a nicer way of saying "sin" (see The Virtues of Vice Stocks) and includes "lesser sins" like sweets and soda in the group. "Underwear" likely means things that people are going to buy regardless of the economy - daily staples, which are generally safer stocks. |
Is accident insurance worth it for my kids who play sports | The general answer to any "is it worth it" insurance question is "no," because the insurance company is making a profit on the insurance.* To decide if you want the insurance, you need to figure out how much you can afford to pay if something happens, how much they cover, and how badly you want to transfer your risk to them. If you won't have trouble coming up with the $4000 deductible should you need to, then don't get this extra insurance. * I did not mean to imply that insurance is always a bad idea or that insurance companies are cheating their customers. Please let me explain further. When you buy any product from a business, that business is making a profit. And there is nothing wrong with that at all. They are providing a service and should be compensated for their efforts. Insurance companies also provide a service, but unlike other types of businesses, their product is monetary. You pay them money now, and they might pay you money later. If they pay you more money then you spent, you came out ahead, and if you spend more money then they give you, it was a loss for you. In order for the insurance company to make a profit, they need to bring in more money than they pay out. In fact, they need to bring in a lot more money then they pay out, because in addition to their profit, they have all the overhead of running a business. As a result, on average, you will come out behind when you purchase insurance. This means that when you are on the fence about whether or not to purchase any insurance product, the default choice should be "no." On average, you are financially better off without insurance. Now, that doesn't mean you should never buy insurance. As mentioned by commenter @xiaomy, insurance companies spread risk across all of their customers. If I am in a situation where I have a risk of financial ruin in a certain circumstance, I can eliminate that risk by purchasing insurance. For example, I have term life insurance, because if I were to pass away, it would be financially catastrophic for my family. (I'm hoping that the insurance company makes 100% profit on that deal!) I also continue to buy expensive health insurance because an unexpected medical event would be financially devastating. However, I always decline the extended warranty when I buy a $300 appliance, because I don't have any trouble coming up with another $300 in the unlikely event that it breaks, and I would rather keep the money than contribute to the profits of an insurance company unnecessarily. In my original answer above, I pointed out how you would determine whether or not to purchase this particular insurance product. This product pays out a bunch of relatively small amounts for certain events, up to a limit of $4000. Would this $4000 be hard for you to come up with if you needed to? If so, get the insurance. But if you are like me and have an emergency fund in place to handle things like this, then you are financially better off declining this policy. |
If a company's assets are worth more than its market cap, can one say the shares must be undervalued? | You haven't mentioned how much debt your example company has. Rarely does a company not carry any kind of debt (credit facilities, outstanding bonds or debentures, accounts payable, etc.) Might it owe, for instance, $1B in outstanding loans or bonds? Looking at debt too is critically important if you want to conduct the kind of analysis you're talking about. Consider that the fundamental accounting equation says: or, But in your example you're assuming the assets and equity ought to be equal, discounting the possibility of debt. Debt changes everything. You need to look at the value of the net assets of the company (i.e. subtracting the debt), not just the value of its assets alone. Shareholders are residual claimants on the assets of the company, i.e. after all debt claims have been satisfied. This means the government (taxes owed), the bank (loans to repay), and bondholders are due their payback before determining what is leftover for the shareholders. |
In a competitive market, why is movie theater popcorn expensive? | People have moods, that mean they don't have the same level of demand for luxuries every day. There might be some days when I'm feeling a bit poor, or feel like I need to save money, and the price I'm prepared to pay for a box of popcorn might be 50c. There might be other days, for example, the day after I receive my wages, when I feel rich and I don't care how much I spend on things. On such a day, the price I'm prepared to pay for a box of popcorn might be $10. Now, when a supermarket sells popcorn, they're not really able to price discriminate between these two groups. People come through their doors in all kinds of mood, so the profit-maximising price for popcorn is going to be somewhere in the middle. But the only people who go to a movie theatre are people who are already in the right mood to spend money on needless luxuries. So the very fact of being in a movie theatre means that a popcorn stall, whether affiliated to the theatre or not, is open only to the high-spending end of the market. They have already caught me when I'm in the mood to spend, so their profit-maximising price will be much higher than that of the supermarket. |
What's the benefit of opening a Certificate of Deposit (CD) Account? | The benefit, as other answers have mentioned, is higher interest rates than are available compared to other comparable options. My bank keeps spamming me with offers for a sub 1% APR savings account that only requires a $10,000 balance, for example. While CDs and similar safe investments don't seem like they offer much value now (or in the recent past), that's because they strongly correlate to the federal funds rate, which is near historic lows. See the graph of CD rates and the federal funds rate, here. You may have felt differently in July of 1984, when you could get a 5 year CD with an APR above 12%. As you can see in this graph of historical CD yields, it hasn't always been the case that CDs offered such small returns. That being said, CDs are safe investments, being FDIC insured (up to the FDIC insurance limits), so you're not going to get great rates from one, because there's basically no risk in this particular type of investment. If you want better rates, you get those by investing in riskier instruments that have the possibility of losing value. |
Capitalize on a falling INR | By no means is this a comprehensive list, but a few items to consider: |
My friend wants to put my name down for a house he's buying. What risks would I be taking? | This is not a full answer and I have no personal finance experience. But I have a personal story as I did this. As Vicky stated Another point: there are various schemes available to help first time buyers. By signing up for this, you would exclude yourself from any of those schemes in the future. I did this for my dad when I was 16 or so. I am in Canada and lost $5,000 first time buyers tax rebate. As long as many other bonuses like using your rsps for your first home. I also am having a fair amount of trouble getting a credit card, because even though I am only a part member of the mortgage they expect you to be able to cover the whole thing. So when the banks look at my income of say $3000 a month they say "3000 - rent(500) - mortgage(3000)" You make $-500 a month. I then explain that I do not actually pay the mortage so it is not coming out of my paycheck. They do not care. I am responsible for full payments and they consider it used. |
GnuCash register reimbursements | You should be recording the reimbursement as a negative expense on the original account the expense was recorded. Let's assume you have a $100 expense and $100 salary. Total $200 paycheck. You will have something like this In the reports, it will show that the expense account will have $0 ($100 + ($100)), while income account will have $100 (salary). |
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