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Will there always be somebody selling/buying in every stock? | Will there be a scenario in which I want to sell, but nobody wants to buy from me and I'm stuck at the brokerage website? Similarly, if nobody wants to sell their stocks, I will not be able to buy at all? You're thinking of this as a normal purchase, but that's not really how US stock markets operate. First, just because there are shares of stock purchased, it doesn't mean that there was real investor buyer and seller demand for that instrument (at that point in time). Markets have dedicated middlemen called Market Makers (NASDAQ) or Specialists (NYSE), who are responsible to make sure that there is always someone to buy or sell; this ensures that all instruments have sufficient liquidity. Market Makers and specialists may decide to lower their bid on a stock based on a high number of sellers, or raise their ask for a high number of buyers. During an investor rush to buy or sell an instrument (perhaps in response to a news release), it's possible for the Market Maker / specialist to accumulate or distribute a large number of shares, without end-investors like you or I being involved on both sides of the same transaction. |
Is it better to buy put options or buy an inverse leveraged ETF? | Depends on how far down the market is heading, how certain you are that it is going that way, when you think it will fall, and how risk-averse you are. By "better" I will assume you are trying to make the most money with this information that you can given your available capital. If you are very certain, the way that makes the most money for the least investment from the options you provided is a put. If you can borrow some money to buy even more puts, you will make even more. Use your knowledge of how far and when the market will fall to determine which put is optimal at today's prices. But remember that if the market stays flat or goes up you lose everything you put in and may owe extra to your creditor. A short position in a futures contract is also an easy way to get extreme leverage. The extremity of the leverage will depend on how much margin is required. Futures trade in large denominations, so think about how much you are able to put to risk. The inverse ETFs are less risky and offer less reward than the derivative contracts above. The levered one has twice the risk and something like twice the reward. You can buy those without a margin account in a regular cash brokerage, so they are easier in that respect and the transactions cost will likely be lower. Directly short selling an ETF or stock is another option that is reasonably accessible and only moderately risky. On par with the inverse ETFs. |
Is Weiss Research, Inc. a legitimate financial research company? | Weiss Ratings is an independent company providing data and analysis for the bank and insurance industries. We’ve published the Weiss Financial Strength Ratings for banking institutions and insurance companies since 1989 and continue to use the methodology praised by the GAO back in 1994. Weiss Ratings has consistently graded failed institutions in the lowest Weiss Rating tier at the time of failure. We invite you to look at the Weiss Ratings' track record. |
I have made all the payments on a car I cosigned. Do I have to fight for possession of the vehicle? | Ordinarily a cosigner does not appear on the car's title (thus, no ownership at all in the vehicle), but they are guaranteeing payment of the loan if the primary borrower does not make the payment. You have essentially two options: Stop making payments for him. If he does not make them, the car will be repossessed and the default will appear on both his and your credit. You will have a credit ding to live with, but he will to and he won't have the car. Continue to make payments if he does not, to preserve your credit, and sue him for the money you have paid. In your suit you could request repayment of the money or have him sign over the title (ownership) to you, if you would be happy with either option. I suspect that he will object to both, so the judge is going to have to decide if he finds your case has merit. If you go with option 1 and he picks up the payments so the car isn't repossessed, you can then still take option 2 to recover the money you have paid. Be prepared to provide documentation to the court of the payments you have made (bank statements showing the out-go, or other form of evidence you made the payment - the finance company's statements aren't going to show who made them). |
Is housing provided by a university as employer reported on 1040? | You should ask a CPA or tax lawyer to what extent living in specific housing provided by the employer as a job requirement is exempt from taxation. You might find a nice surprise. Your tax professional can also help you to report the items properly if mis-reported. Much of this is in the article you cite in the question, but perhaps a look at some of the original sources is warranted and will show why some expert advice might be useful. I would argue that an RA who is required to police and counsel undergrads in a college dorm in exchange for a room or a flat is closer to a worker with quarters on a ship or at an oil well than a full professor who receives a rental home in a neighborhood near the university as a benefit. In the first case living at the provided premises is necessary to do the job, but in the second case it is merely a benefit of the job. The IRS Publication 15-B guidance on employer provided housing is not entirely clear, so you might want to get some additional advice: Lodging on Your Business Premises You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests. It is furnished on your business premises. It is furnished for your convenience. The employee must accept it as a condition of employment. Different tests may apply to lodging furnished by educational institutions. See section 119(d) of the Internal Revenue Code for details. If you allow your employee to choose to receive additional pay instead of lodging, then the lodging, if chosen, isn’t excluded. The exclusion also doesn't apply to cash allowances for lodging. On your business premises. For this exclusion, your business premises is generally your employee's place of work. For example, if you're a household employer, then lodging furnished in your home to a household employee would be considered lodging furnished on your business premises. For special rules that apply to lodging furnished in a camp located in a foreign country, see section 119(c) of the Internal Revenue Code and its regulations. For your convenience. Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. This is true even if a law or an employment contract provides that the lodging is furnished as pay. However, a written statement that the lodging is furnished for your convenience isn't sufficient. Condition of employment. Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Examples include employees who must be available at all times and employees who couldn't perform their required duties without being furnished the lodging. It doesn't matter whether you must furnish the lodging as pay under the terms of an employment contract or a law fixing the terms of employment. Example of qualifying lodging. You employ Sam at a construction project at a remote job site in Alaska. Due to the inaccessibility of facilities for the employees who are working at the job site to obtain lodging and the prevailing weather conditions, you furnish lodging to your employees at the construction site in order to carry on the construction project. You require that your employees accept the lodging as a condition of their employment. You may exclude the lodging that you provide from Sam's wages. Additionally, since sufficient eating facilities aren’t available near your place of employment, you may also exclude meals you provide to Sam from his wages, as discussed under Meals on Your Business Premises , later in this section. Example of nonqualifying lodging. A hospital gives Joan, an employee of the hospital, the choice of living at the hospital free of charge or living elsewhere and receiving a cash allowance in addition to her regular salary. If Joan chooses to live at the hospital, the hospital can't exclude the value of the lodging from her wages because she isn't required to live at the hospital to properly perform the duties of her employment. One question would be how the conflict with IRC 119(d) is resolved for someone who must live in the dorm to watch over the dorm and its undergrads. Here's 26USC119(d) from LII: (d) Lodging furnished by certain educational institutions to employees (1) In general In the case of an employee of an educational institution, gross income shall not include the value of qualified campus lodging furnished to such employee during the taxable year. (2) Exception in cases of inadequate rent Paragraph (1) shall not apply to the extent of the excess of— (A) the lesser of— (i) 5 percent of the appraised value of the qualified campus lodging, or (ii) the average of the rentals paid by individuals (other than employees or students of the educational institution) during such calendar year for lodging provided by the educational institution which is comparable to the qualified campus lodging provided to the employee, over (B) the rent paid by the employee for the qualified campus lodging during such calendar year. The appraised value under subparagraph (A)(i) shall be determined as of the close of the calendar year in which the taxable year begins, or, in the case of a rental period not greater than 1 year, at any time during the calendar year in which such period begins. (3) Qualified campus lodging For purposes of this subsection, the term “qualified campus lodging” means lodging to which subsection (a) does not apply and which is— (A) located on, or in the proximity of, a campus of the educational institution, and (B) furnished to the employee, his spouse, and any of his dependents by or on behalf of such institution for use as a residence. (4) Educational institution, etc. For purposes of this subsection— (A) In generalThe term “educational institution” means— (i) an institution described in section 170(b)(1)(A)(ii) (or an entity organized under State law and composed of public institutions so described), or (ii) an academic health center. (B) Academic health centerFor purposes of subparagraph (A), the term “academic health center” means an entity— (i) which is described in section 170(b)(1)(A)(iii), (ii) which receives (during the calendar year in which the taxable year of the taxpayer begins) payments under subsection (d)(5)(B) or (h) of section 1886 of the Social Security Act (relating to graduate medical education), and (iii) which has as one of its principal purposes or functions the providing and teaching of basic and clinical medical science and research with the entity’s own faculty. |
Does it make any sense to directly contribute to reducing the US national debt? | It doesn't make any financial sense for you personally, because the impact on the debt would be so little it would have no significant benefit to you, and you'd be out the money you donated. |
Capital gains on no-dividend stocks - a theoretical question | A stock, at its most basic, is worth exactly what someone else will pay to buy it right now (or in the near future), just like anything else of value. However, what someone's willing to pay for it is typically based on what the person can get from it. There are a couple of ways to value a stock. The first way is on expected earnings per share, most of would normally (but not always) be paid in dividends. This is a metric that can be calculated based on the most recently reported earnings, and can be estimated based on news about the company or the industry its in (or those of suppliers, likely buyers, etc) to predict future earnings. Let's say the stock price is exactly $100 right now, and you buy one share. In one quarter, the company is expected to pay out $2 per share in dividends. That is a 2% ROI realized in 3 months. If you took that $2 and blew it on... coffee, maybe, or you stuffed it in your mattress, you'd realize a total gain of $8 in one year, or in ROI terms an annual rate of 8%. However, if you reinvested the money, you'd be making money on that money, and would have a little more. You can calculate the exact percentage using the "future value" formula. Conversely, if you wanted to know what you should pay, given this level of earnings per share, to realize a given rate of return, you can use the "present value" formula. If you wanted a 9% return on your money, you'd pay less for the stock than its current value, all other things being equal. Vice-versa if you were happy with a lesser rate of return. The current rate of return based on stock price and current earnings is what the market as a whole is willing to tolerate. This is how bonds are valued, based on a desired rate of return by the market, and it also works for stocks, with the caveat that the dividends, and what you'll get back at the "end", are no longer constant as they are with a bond. Now, in your case, the company doesn't pay dividends. Ever. It simply retains all the earnings it's ever made, reinvesting them into doing new things or more things. By the above method, the rate of return from dividends alone is zero, and so the future value of your investment is whatever you paid for it. People don't like it when the best case for their money is that it just sits there. However, there's another way to think of the stock's value, which is it's more core definition; a share of the company itself. If the company is profitable, and keeps all this profit, then a share of the company equals, in part, a share of that retained earnings. This is very simplistic, but if the company's assets are worth 1 billion dollars, and it has one hundred million shares of stock, each share of stock is worth $10, because that's the value of that fraction of the company as divided up among all outstanding shares. If the company then reports earnings of $100 million, the value of the company is now 1.1 billion, and its stock should go up to $11 per share, because that's the new value of one ten-millionth of the company's value. Your ROI on this stock is $1, in whatever time period the reporting happens (typically quarterly, giving this stock a roughly 4% APY). This is a totally valid way to value stocks and to shop for them; it's very similar to how commodities, for instance gold, are bought and sold. Gold never pays you dividends. Doesn't give you voting rights either. Its value at any given time is solely what someone else will pay to have it. That's just fine with a lot of people right now; gold's currently trading at around $1,700 an ounce, and it's been the biggest moneymaker in our economy since the bottom fell out of the housing market (if you'd bought gold in 2008, you would have more than doubled your money in 4 years; I challenge you to find anything else that's done nearly as well over the same time). In reality, a combination of both of these valuation methods are used to value stocks. If a stock pays dividends, then each person gets money now, but because there's less retained earnings and thus less change in the total asset value of the company, the actual share price doesn't move (much). If a stock doesn't pay dividends, then people only get money when they cash out the actual stock, but if the company is profitable (Apple, BH, etc) then one share should grow in value as the value of that small fraction of the company continues to grow. Both of these are sources of ROI, and both are seen in a company that will both retain some earnings and pay out dividends on the rest. |
How can a credit card company make any money off me? I have a no-fee card and pay my balance on time | Ever wonder why certain businesses won't accept certain credit cards? (The sign above the register saying "Sorry, we don't accept AmericanExpress"). It's because they don't want to pay that credit card company's transaction fees. One of the roles of the credit card company is to facilitate the transaction process between the customer (you) and the store. And now that using credit cards over cash or check is so ingrained in our culture, it creates extra work for the customer to make purchases at an establishment that is cash-only. Credit card companies know this, and so do businesses. So businesses will partner with credit card companies so that customers can use their cards. This way, everything is handled electronically (this can also benefit the business, since there's added security as they're not dealing with cash directly, and they don't have to manually count as much cash later). However a business may only budget a certain amount of their profits they want taken by credit card transactions. So if a company's fees are too high (say AmericanExpress, for example) and they are banking on you already having a Visa card, the company isn't going to go out of its way to provide the AmericanExpress option for you. If it were free for the business to use a credit card company's service at their stores, then they would all just provide the option for every card! So the credit card company making money is all contingent on you spending your money by using their credit card. You use the card, and the store pays the company for the transaction. |
Multi-user, non-US personal finance and budget software | My wife and I have been ridiculously happy with YNAB. It's not "online," but syncs across our phones & computers using Dropbox. It supposedly supports different locales and currencies, but I have never needed to try that out. |
Is it sensible to keep savings in a foreign currency? | Given that we live in a world rife with geopolitical risks such as Brexit and potential EU breakup, would you say it's advisable to keep some of cash savings in a foreign currency? Probably not. Primarily because you don't know what will happen in the fallout of these sorts of political shifts. You don't know what will happen to banking treaties between the various countries involved. If you can manage to place funds on deposit in a foreign bank/country in a currency other than your home currency and maintain the deposit insurance in that country and not spend too much exchanging your currency then there probably isn't a downside other than liquidity loss. If you're thinking I'll just wire some whatever currency to some bank in some foreign country in which you have no residency or citizenship consideration without considering deposit insurance just so you might protect some of your money from a possible future event I think you should stay away. |
Is an Income Mutual Fund a good alternative to a savings account? | Risk. Volatility. Liquidity. Etc. All exist on a spectrum, these are all comparative measures. To the general question, is a mutual fund a good alternative to a savings account? No, but that doesn't mean it is a bad idea for your to allocate some of your assets in to one right now. Mutual funds, even low volatility stock/bond blended mutual funds with low fees still experience some volatility which is infinitely more volatility than a savings account. The point of a savings account is knowing for certain that your money will be there. Certainty lets you plan. Very simplistically, you want to set yourself up with a checking account, a savings account, then investments. This is really about near term planning. You need to buy lunch today, you need to pay your electricity bill today etc, that's checking account activity. You want to sock away money for a vacation, you have an unexpected car repair, these are savings account activities. This is your foundation. How much of a foundation you need will scale with your income and spending. Beyond your basic financial foundation you invest. What you invest in will depend on your willingness to pay attention and learn, and your general risk tolerance. Sure, in this day and age, it is easy to get money back out of an investment account, but you don't want to get in the habit of taping investments for every little thing. Checking: No volatility, completely liquid, no risk Savings: No volatility, very liquid, no principal risk Investments: (Pick your poison) The point is you carefully arrange your near term foundation so you can push up the risk and volatility in your investment endeavors. Your savings account might be spread between a vanilla savings account and some CDs or a money market fund, but never stock (including ETF/Mutual Funds and blended Stock/Bond funds). Should you move your savings account to this mutual fund, no. Should you maybe look at your finances and allocate some of your assets to this mutual fund, sure. Just look at where you stand once a year and adjust your checking and savings to your existing spending. Savings accounts aren't sexy and the yields are awful at the moment but that doesn't mean you go chasing yield. The idea is you want to insulate your investing from your day to day life so you can make unemotional deliberate investment decisions. |
Is it advisable to go for an auto loan if I can make the full payment for a new car? | Without knowing the terms of the company leased car, it's hard to know if that would be preferable to purchasing a car yourself. So I'll concentrate on the two purchase options - getting a loan or paying in full from savings. If the goal is simply to minimize the amount paid for this car, then paying the full cost up-front is best, because it avoids the financing and interest charges associated with a loan. However, the money you would pay for this car would come out of somewhere (your savings). If your savings were in an investment earning a risk-adjusted return rate of, say, 5% APY and the loan cost 1% APY, you'd have more money in the long run by keeping as much money in your savings as possible, and paying the loan as slowly as possible, because the return rate on your savings is higher. Those numbers are theoretical, of course. You have to make a decision based on your expectation of the performance of your investments, and on the cost of the loan. But depending on your risk tolerance and the loan terms available to you, a loan may well make sense. This is especially true when loans costs are subsidized by manufacturers, who often offer favorable financing on new cars to drive demand. But even bank loans on cars can be pretty inexpensive because the car is a form of collateral with predictable future value. And finally, you should consider tax treatment -- not usually a consideration in purchases of cars by consumers in the US, but can vary due to business use and certainly may be different in India. See also: How smart is it to really be 100% debt free? |
Does this sound like a great idea regarding being a landlord and starting a real estate empire? | This can be done, and there have been many good suggestions on things to do and watch out for. But to my shock I don't see anyone offering any words of caution about property managers! Whatever you do, don't assume they have your best interests at heart. Do not assume that "no news is good news" and that if you aren't hearing of problems and are just collecting rent checks, everything must be fine. You can easily end up with tenants you would never have allowed yourself, or tenants with pets that you would not have allowed, etc. Especially if the manager doesn't want you to have a vacancy and potentially lose you as a client, they may very well lower their standards just to get the place occupied. And a year or two or three later, you may find yourself looking at a very large repair bill and wonder how on earth it could have happened when you supposedly had someone looking out for your property! There are quality, ethical property managers out there. They are not all bad to be certain. But whatever you do, check up on them. And with multiple properties - especially if in multiple areas/states etc. - this can be nearly a full time job in itself. As the saying goes, "Trust, but verify". I have never found this to apply more than with rental properties and property management. Don't leave anything significant to them 100%. You can't even assume that a rule like "all expenses over $50 must be cleared by me first", as that can simply mean that they don't bother to come to you for certain kinds of repairs that would cost more than that, or that they just get them "taken care of" by their own person (done poorly, illegally, etc.) and never tell you. Never trust their choice of tenants blindly. Visit the place yourself at least every few months - a quick driveby at a minimum or better if you can, arrange a reason to walk through the house personally. Check the back yard, never assume that the front yard is indicative of anything else. Never assume that a "no pets" rule will be followed, or that tenants wouldn't lie to the management about having pets. Never assume that the tenants won't move additional people into the property as well. Always expect a bare minimum of 1 month vacancy every year, and an additional minimum of 1 month's rental revenue in unexpected maintenance/repairs every year. This is at a minimum! You might do much better than this, and have a high quality tenant in place for years who costs next to nothing in extra maintenance. But do not count on it. Rental real estate investing looks so simple on paper, where it's just numbers. But reality has a very rude habit of surprising you when you least expect it. After all, no one expects the Spanish Inquisition! Good luck! |
Calculate investment's interest rate to break-even insurance cost [duplicate] | I believe the following formula provides a reasonable approximation. You need to fill in the following variables: The average annual return you need on investing the 15% = (((MP5 - MP20) * 12) + (.0326 * .95 * PP / Y)) / (PP *.15) Example assuming an interest rate of 4% on a 100K home: If you invest the $15K you'll break even if you make a 9.86% return per year on average. Here's the breakdown per year using these example numbers: Note this does not consider taxes. |
I am a contractor with revenue below UK's VAT threshold. Should I register for VAT? | I love the flat rate VAT scheme. It's where you pay a percentage based on your industry. An example might be Computer repair services, where you'll pay 10.5% of your total revenue to the HMRC. But you'll be invoicing for VAT at 20% still. Would definitely recommend registering for it since you're expecting to cross the threshold anyway. And like DumbCoder said, you also get a first year discount of 1%, so in the example above, you'd end up paying 9.5% VAT on your turnover. I personally found it a pain to invoice without VAT (my clients expected it), so registering made sense regardless of the fact I was over threshold. The tricky bit is keeping under the £150k turnover so you stay eligible for the flat rate. It does get more complex otherwise. |
15 year mortgage vs 30 year paid off in 15 | Besides the reason in @rhaskett's answer, it is important to consider that paying off a 30-year mortgage as if it was a 15-year is much more inconvenient than just paying the regular payments of a 15-year mortgage. When you pay extra on your mortgage, some lenders do not know what to do with the extra payment, and need to be told explicitly that the extra needs to be applied toward the principal. You might need to do this every month with every payment. In addition, some lenders won't allow you to set up an automatic payment for more than the mortgage payment, so you might need to explicitly submit your payment with instructions for the lender each month, and then follow up each month to make sure that your payment was credited properly. Some lenders are better about this type of thing than others, and you won't really know how much of a hassle it will be with your lender until you start making payments. If you intend to pay it off in 15 years, then just get the 15-year mortgage. |
Is 401k as good as it sounds given the way it is taxed? | when you contribute to a 401k, you get to invest pre-tax money. that means part of it (e.g. 25%) is money you would otherwise have to pay in taxes (deferred money) and the rest (e.g. 75%) is money you could otherwise invest (base money). growth in the 401k is essentially tax free because the taxes on the growth of the base money are paid for by the growth in the deferred portion. that is of course assuming the same marginal tax rate both now and when you withdraw the money. if your marginal tax rate is lower in retirement than it is now, you would save even more money using a traditional 401k or ira. an alternative is to invest in a roth account (401k or ira). in which case the money goes in after tax and the growth is untaxed. this would be advantageous if you expect to have a higher marginal tax rate during retirement. moreover, it reduces tax risk, which could give you peace of mind considering u.s. marginal tax rates were over 90% in the 1940's. a roth could also be advantageous if you hit the contribution limits since the contributions are after-tax and therefore more valuable. lastly, contributions to a roth account can be withdrawn at any time tax and penalty free. however, the growth in a roth account is basically stuck there until you turn 60. unlike a traditional ira/401k where you can take early retirement with a SEPP plan. another alternative is to invest the money in a normal taxed account. the advantage of this approach is that the money is available to you whenever you need it rather than waiting until you retire. also, investment losses can be deducted from earned income (e.g. 15-25%), while gains can be taxed at the long term capital gains rate (e.g. 0-15%). the upshot being that even if you make money over the course of several years, you can actually realize negative taxes by taking gains and losses in different tax years. finally, when you decide to retire you might end up paying 0% taxes on your long term capital gains if your income is low enough (currently ~50k$/yr for a single person). the biggest limitation of this strategy is that losses are limited to 3k$ per year. also, this strategy works best when you invest in individual stocks rather than mutual funds, increasing volatility (aka risk). lastly, this makes filing your taxes more complicated since you need to report every purchase and sale and watch out for the "wash sale" rules. side note: you should contribute enough to get all the 401k matching your employer offers. even if you cash out the whole account when you want the money, the matching (typically 50%-200%) should exceed the 10% early withdrawal penalty. |
Is it wise to sell company stock to pay down a mortgage? | If by "Company Stock" you mean "stock in the company I work for" then absolutely sell your stock. It is too big a risk to have your investments tied into the same company that is also providing your salary. If you mean stock as in general investments, I like to look at it this way. If you have $25,000 stock and a $100,000 mortgage you ask this question: If I had a $75,000 mortgage would I borrow an additional $25,000 against my house to invest in the stock market? If the answer is yes, then you are taking a risk consistent with your tolerance for risk. If you answer no, then your tolerance for risk says you'd be happier paying down your mortgage. |
What should I do with $4,000 cash and High Interest Debt? | With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund. I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the emergency one in the short term. Long term, once these high rate cards are paid off, you'll build your proper emergency fund, but the cost is too high right now. The $4000 is a nice start, but the most important thing is to get your budget under control. Only you can decide how much you can cut back, and go after this debt as if it were life or death. |
Why would I pick a specific ETF over an equivalent Mutual Fund? | In the case of VFIAX versus VOO, if you're a buy-and-hold investor, you're probably better off with the mutual fund because you can buy fractional shares. However, in general the expense ratio for ETFs will be lower than equivalent mutual funds (even passive index funds). They are the same in this case because the mutual fund is Admiral Class, which has a $10,000 minimum investment that not all people may be able to meet. Additionally, ETFs are useful when you don't have an account with the mutual fund company (i.e. Vanguard), and buying the mutual fund would incur heavy transaction fees. |
Is income from crypto-currencies taxed? | Mining is income at the value at time of earning, I would use an index like XBX to determine price. Asset appreciation is capital gains. These aspects of crypto-assets are not a gray area in the US financial sector, and have been addressed for almost half a decade now. |
What are the advantages and disadvantages of leasing out a property or part of a property (such as a basement apartment)? | Complexity has mentioned some good points. I'd also like to add on the downsides: It's not that easy to get rid of a tenant! Imagine if your tenant passed your background check with flying colors but then turned out to be the tenant from hell... How would you resolve the situation? If the thought of that kind of situation stresses you (it would stress me!), I would consider carefully whether you really want to be a landlord. |
Is gold subject to inflation? [duplicate] | The general argument put forward by gold lovers isn't that you get the same gold per dollar (or dollars per ounce of gold), but that you get the same consumable product per ounce of gold. In other words the claim is that the inflation-adjusted price of gold is more-or-less constant. See zerohedge.com link for a chart of gold in 2010 GBP all the way from 1265. ("In 2010 GBP" means its an inflation adjusted chart.) As you can see there is plenty of fluctuation in there, but it just so happens that gold is worth about the same now as it was in 1265. See caseyresearch.com link for a series of anecdotes of the buying power of gold and silver going back some 3000 years. What this means to you: If you think the stock market is volatile and want to de-risk your holdings for the next 2 years, gold is just as risky If you want to invest some wealth such that it will be worth more (in real terms) when you take it out in 40 years time than today, the stock market has historically given better returns than gold If you want to put money aside, and it to not lose value, for a few hundred years, then gold might be a sensible place to store your wealth (as per comment from @Michael Kjörling) It might be possible to use gold as a partial hedge against the stock market, as the two supposedly have very low correlation |
Is there a bank account that allows ACH deposits but not ACH withdrawals? | Nowadays, all checks you write will not be send to your bank anymore, but instead the bank where they get deposited does an ACH from your bank. That implies that not allowing this to happen, your bank would not be able to honor any checks you wrote (without enforcing paper check delivery in the mail, but the Check21 bill does not allow such enforcing anymore). Basically, your bank would not be able to do business with anyone. The obvious conclusion is that no such bank exists. |
When paying estimated quarterly taxes, can I prorate the amount based on the irregular payment due dates? | Varying the amount to reflect income during the quarter is entirely legitimate -- consider someone like a salesman whose income is partly driven by commissions, and who therefore can't predict the total. The payments are quarterly precisely so you can base them on actual results. Having said that, I suspect that as long as you show Good Intent they won't quibble if your estimate is off by a few percent. And they'll never complain if you overpay. So it may not be worth the effort to change the payment amount for that last quarter unless the income is very different. |
Trading large volumes with penny profits per share | How do you know the shares will go up after you buy? The ultimate risk in your scenario is that you buy at a peak, and then that peak is never reached again. Over time, stock markets go up [more or less because there is a net increase in the overall production of the economy as time goes on]. However, you won't experience much of that gain, because you will be selling only after tiny amounts of profit have been achieved. So your upside is low, your plan is capital-expensive [because it requires you to have significant amount of cash available to make the initial purchase], and your downside [though unlikely] has massive risk. |
How are option contracts enforced? | By their agreements with the central counterparty - in the US, the exchange or the Options Clearing Corporation, which interposes itself between the counterparties of each trade and guarantees that they settle. From the CCP article: A clearing house stands between two clearing firms (also known as member firms or participants). Its purpose is to reduce the risk a member firm failing to honor its trade settlement obligations. A CCP reduces the settlement risks by netting offsetting transactions between multiple counterparties, by requiring collateral deposits (also called "margin deposits"), by providing independent valuation of trades and collateral, by monitoring the credit worthiness of the member firms, and in many cases, by providing a guarantee fund that can be used to cover losses that exceed a defaulting member's collateral on deposit. Exercisers on most contracts are matched against random writers during the assignment process, and if the writer doesn't deliver/buy the stock, the OCC does so using its funds and goes after the defaulting party. |
Why does short selling require borrowing? | Selling short is simply by definition the selling, then later re-buying of stock you don't initially own. Say you tally your entire portfolio balance: the quantity of each stock you own, and your cash assets. Let's call this your "initial position". We define "profit" as any increase in assets, relative to this initial position. If you know a particular stock will go down, you can realize a profit by selling some of that stock, waiting for the price to go down, then buying it back. In the end you will have returned to your initial position, except you will have more cash. If you sell 10 shares of a stock valued at £1.50, then buy them back at £1.00, you will make a £5.00 profit while having otherwise returned to your previous position. If you do the same, but you initially owned 1000 shares, sold just 10 of those, then bought 10 back, that's still a profit of £5.00. Selling short is doing the same thing, but with an initial and ending balance of 0 shares. If you initially own 0 shares, sell 10, then buy 10 back, you return to your initial position (0 shares) plus a profit of £5.00. (And in practice you must also pay a borrowing fee to do this.) The advantage of selling short is it can be done with any stock, not just those currently owned. |
How to find historical stock price for a de-listed or defunct company? | Such data is typically only available from paid sources due to the amount of research involved in determining the identity of delisted securities, surviving entities in merger scenarios, company name changes, symbol changes, listing venue changes, research of all capital events such as splits, and to ensure that the data coverage is complete. Many stocks that are delisted from a major exchange due to financial difficulties are still publicly tradeable companies with their continuing to trade as "OTC" shares. Some large companies even have periods where they traded for a period of their history as OTC. This happened to NYSE:NAV (Navistar) from Feb 2007 to July 2008, where they were delisted due to accounting statement inaccuracies and auditor difficulties. In the case of Macromedia, it was listed on NASDAQ 13 Dec 1993 and had its final day of trading on 2 Dec 2005. It had one stock split (2:1) with ex-date of 16 Oct 1995 and no dividends were ever paid. Other companies are harder to find. For example, the bankrupt General Motors (was NYSE:GM) became Motoros Liquidation Corp (OTC:MTLQQ) and traded that way for almost 21 months before finally delisting. In mergers, there are in two (or more) entities - one surviving entity and one (or more) delisted entity. In demergers/spinoffs there are two (or more) entities - one that continues the capital structure of the original company and the other newly formed spun-off entity. Just using the names of the companies is no indication of its history. For example, due to monopoly considerations, AT&T were forced to spinoff multiple companies in 1984 and effectively became 75% smaller. One of the companies they spunoff was Southwestern Bell Corporation, which became SBC Communications in 1995. In 2005 SBC took over its former parent company and immediately changed its name to AT&T. So now we have two AT&Ts - one that was delisted in 2005 and another that exists to this day. Disclosure: I am a co-owner of Norgate Data (Premium Data), a data vendor in this area. |
Is there any reason not to put a 35% down payment on a car? | I suggest you to apply for a car loan in other banks like DCU or wells fargo, you might get the loan with not the best rate, but after a year you can refinance your loan with a better rate in a different bank since you are going to have a better credit as long as you make your payments in time. I bought a Jetta 2014 last year, my loan is from Wells Fargo. Like you, my credit was low before the loan because I didn't have too much credit history. They gave me the loan with a 8.9% of interest. |
Why does Charles Schwab have a Mandatory Settlement Period after selling stocks? | It's important to understand that, in general, security transactions involve you and a relatively unknown entity with your broker standing in the middle. When you sell through Schwab, Schwab needs to receive the funds from the other side of the transaction. If Schwab gave you access to the funds immediately, it would essentially be a loan until the transaction settles after funds and securities change hands. If Schwab made funds available to you as soon as they were received, it might still be two days until the money is received; because the other side also has three days. Guaranteed one day settlement would have to include receipt of funds from the buyer in one day and Schwab can't control that. You need to remember this transaction likely includes at least one party in addition to you and Schwab. Here's the SEC page related to the three day settlement period, About Settling Trades in Three Days: T+3 |
Is it common in the US not to pay medical bills? | Is it common in the US not to pay medical bills? Certainly not. What some might do, however, is not pay them immediately, with the intent to negotiate them down or get them written off. You can also see if there's a discount for paying immediately - I've had moderate success with this, but it was during a time where we couldn't pay them all immediately, so I was more trying to figure out which ones to pay first rather than just haggling. The obvious risk is that they go to a collections agency and get reported as unpaid debt to your credit. I'm with you, however - it's a service that you received and it should be paid. I must precise that they are wealthy upscale members, who can afford paying these bills. Are you certain that they have large medical bills? I suppose it's possible that they have resources that can negotiate these on their behalf, or they don't care about the impact to their credit score. But to say "no one is doing it here" seems ludicrous. |
Unmarried Couple Splitting up with Joint Ownership of Home | Despite the unmarried status, you need to see a lawyer. Essentially you have a business with this person owning a home as the asset, and a mortgage for which you are responsible for. A lawyer needs to examine any paperwork you have and with knowledge of your particular jurisdiction's laws can advise you on the proper course of action. You paint a really ugly picture of this guy. I bet you are correct that he is kind of a horrible person. "Tough love" time: You willingly entered into a long term contract with this person. Why would you do such a thing? Perhaps some self reflection and counseling is in order. This is probably more important than worrying about your credit. All that being said, it is good of you to want to break ties with this person. You can rebuild. All will be good if you concentrate on the right things. |
Dividend vs Growth Stocks for young investors | In financial theory, there is no reason for a difference in investor return to exist between dividend paying and non-dividend paying stocks, except for tax consequences. This is because in theory, a company can either pay dividends to investors [who can reinvest the funds themselves], or reinvest its capital and earn the same return on that reinvestment [and the shareholder still has the choice to sell a fraction of their holdings, if they prefer to have cash]. That theory may not match reality, because often companies pay or don't pay dividends based on their stage of life. For example, early-stage mining companies often have no free cashflow to pay dividends [they are capital intensive until the mines are operational]. On the other side, longstanding companies may have no projects left that would be a good fit for further investment, and so they pay out dividends instead, effectively allowing the shareholder to decide where to reinvest the money. Therefore, saying "dividend paying"/"growth stock" can be a proxy for talking about the stage of life + risk and return of a company. Saying dividend paying implies "long-standing blue chip company with relatively low capital requirements and a stable business". Likewise "growth stocks" [/ non-dividend paying] implies "new startup company that still needs capital and thus is somewhat unproven, with a chance for good return to match the higher risk". So in theory, dividend payment policy makes no difference. In practice, it makes a difference for two reasons: (1) You will most likely be taxed differently on selling stock vs receiving dividends [Which one is better for you is a specific question relying on your jurisdiction, your current income, and things like what type of stock / how long you hold it]. For example in Canada, if you earn ~ < $40k, your dividends are very likely to have a preferential tax treatment to selling shares for capital gains [but your province and specific other numbers would influence this]. In the United States, I believe capital gains are usually preferential as long as you hold the shares for a long time [but I am not 100% on this without looking it up]. (2) Dividend policy implies differences in the stage of life / risk level of a stock. This implication is not guaranteed, so be sure you are using other considerations to determine whether this is the case. Therefore which dividend policy suits you better depends on your tax position and your risk tolerance. |
How can I find out how much a currency is traded? | This is actually a fairly hard question to answer well as much of the currency trading that is done in financial markets is actually done directly with banks and other financial institutions instead of on a centralized market and the banks are understandably not always excited to part with information on how exactly they do their business. Other methods of currency exchange have much, much less volume though so it is important to understand the trading through markets as best as possible. Some banks do give information on how much is traded so surveys can give a reasonable indication of relative volume by currency. Note the U.S. Dollar is by far the largest volume of currency traded partially because people often covert one currency to another in the markets by trading "through" the Dollar. Wikipedia has a good explanation and a nicely formatted table of information as well. |
Tax Write-offs and knowing how much I need to spend before the end of the year | (I'm assuming USA tax code as this is untagged) As the comments above suggest there is no "right" answer or easy formula. The main issue is that you likely got into business to make money and if you make money consistently you will pay taxes. Reinvesting generally should be a business decision where the main concern is revenue growth and taxes are an important but secondary concern. Taxes can be complicated, but for a small LLC shouldn't be that bad. I highly recommend that you take some time closely analyze your business and personal taxes for the previous year. Once you understand the problem better, you can optimize around it. If it is a big concern, some companies buy software so they can estimate their taxes periodically through the year and make better decisions. |
Can heavy demand for options drive up or down a stock price? | You will tend to find as options get closer to expiry (within 2 months of expiry) they tend to be traded more. Also the closer they are to being in the money they more they are traded. So there tends to be more demand for these options than long dated ones that are far out of the money. When there is this higher demand there is less need for a market maker to step in to assure liquidity, thus there should be no effect on the underlying stock price due to the high demand for options. I would say that market makers would mainly get involved in providing liquidity for options way out of the money and with long periods until expiry (6+ months), where there is little demand to start with and open interest is usually quite low. |
What are some examples of unsecured loans | Unsecured loans are loans that have not been “secured” with any kind of collateral. For example, the bank does not have the ability to take your property or automobile if you stop making payments on an unsecured loan. These loans are sometimes referred “signature loans” due to the face your signature on the loan agreement is all that you deliver to the table. Unsecured loans are available in a variety of flavors. |
Good book-keeping software? | You can try Wave Accounting. Its a free software for Small Business and web-based. http://waveaccounting.com/ |
How would I use Google Finance to find financial data about LinkedIn & its stock? | Remember that "earned" means "earned in profit." A company like LinkedIn may not be trying to earn any profit, because they believe that they are at the stage in their development where the best thing to do with excess cash is to reinvest it in growing the business. Therefore, profit may not be the best metric at this stage in the company's life cycle. |
How to determine how much to charge your business for rent (in your house)? | To be confident in your solution, and get the best solution for you, consult a local accountant, preferably one who is specialized in taxes for businesses. Or muddle through the code and figure it out for yourself. The primary advantage in consulting with an accountant is that you can ask them to point out ways you can restructure your expenses, debts and income in order to minimize your tax burden. They can help you run the numbers for the various options and choose the one that is right, numerically. |
Does this sound like a great idea regarding being a landlord and starting a real estate empire? | BEFORE you invest in a house, make sure you account for all the returns, risks and costs, and compare them to returns, risks and costs of other investments. If you invest 20% of a house's value in another investment, you would also expect a return. You also probably will not have the cost interest for the balance (80% of ???). I have heard people say "If I have a rental property, I'm just throwing away money - I'll have nothing at the end" - if you get an interest-only loan, the same will apply, if you pay off your mortgage, you're paying a lot more - you could save/invest the extra, and then you WILL have something at the end (+interest). If you want to compare renting and owning, count the interest against the rental incoming against lost revenue (for however much actual money you've invested so far) + interest. I've done the sums here (renting vs. owning, which IS slightly different - e.g. my house will never be empty, I pay extra if I want a different house/location). Not counting for the up-front costs (real estate, mortgage establishment etc), and not accounting for house price fluctuations, I get about the same "return" on buying as investing at the bank. Houses do, of course, fluctuate, both up and down (risk!), usually up in the long term. On the other hand, many people do lose out big time - some friends of mine invested when the market was high (everyone was investing in houses), they paid off as much as they could, then the price dropped, and they panicked and sold for even less than they bought for. The same applies if, in your example, house prices drop too much, so you owe more than the house is worth - the bank may force you to sell (or offer your own house as collateral). Don't forget about the hidden costs - lawn mowing and snow shoveling were mentioned, insurance, maintenance, etc - and risks like fluctuating rental prices, bad tenants, tenants moving on (loss of incoming, cleaning expenses, tidying up the place etc).... |
Is it worth trying to find a better minimum down payment for a first time home buyer? | If you are putting down less than 20% expect to need to pay PMI. When you first applied they should have described you a group of options ranging from minimal to 20% down. The monthly amounts would have varied based on PMI, down payment, and interest rate. The maximum monthly payment for principal, interest, taxes, and insurance will determine the maximum loan you can get. The down payment determines the price of the house above the mortgage amount. During the most recent real estate bubble, lenders created exotic mortgage options to cover buyers who didn't have cash for a down-payment; or not enough income for the principal and interest, or ways to sidestep PMI. Many of these options have disappeared or are harder to get. You need to go back to the bank and get more information on your different options, or find a lender broker who will help you. |
Income and taxes with subcontracting? | Since you say 1099, I'll assume it's in the US. :) Think of your consulting operation as a small business. Businesses are only taxed on their profits, not their revenues. So you should only be paying tax on the $700 in the example you gave. Note, though, that you need to be sure the IRS thinks you're a small business. Having a separate bank account for the business, filing for a business license with your local city/state, etc are all things that help make the case that you're running a business. Of course, the costs of doing all those things are business expenses, and thus things you can deduct from that $1000 in revenue at tax time. |
Cheapest way to wire or withdraw money from US account while living in Europe | I use xoom.com to transfer money to India. I've been using them for over 2 years now, they are the fastest and the cheapest for me (the funds are usually available the same day). They seem to have added a lot of European countries to their list. Definitely worth a shot. |
May 6, 2010 stock market decline/plunge: Why did it drop 9% in a few minutes? | I hate attributing an event like this to a single cause. That implies that the market is an orderly system where everything operates smoothly. I prefer to see it as much chaotic. When I see a drop like that happen, I'd say that there were a lot of sellers of stocks and all the buyers were bidding less and less for those few minutes. Perhaps the catalyst for that was a typo or a strange order. But in the end all the participants in the market responded by bidding down stocks, not just one person. It takes sides to complete a trade. I know my model is a bit simplistic... I'd be happy if someone corrected me :-) |
Is it a good practice to keep salary account and savings account separate? | My wife and I do this. We have one account for income and one for expenditures (and around 7 others for dedicated savings.) Doing this we are forcing ourselves to keep track of all expenditures as we have to manually transfer funds from one to the other, we try to do this periodically (every Wednesday) and then keep the expenditures within what is actually on the account. It is a really good way to keep track of everything. Bear in mind that our bank provides a fast handy smartphone app where we both can check our account as well as transfer funds in less than 10 seconds. (Fingerprint authentication, instant funds transfer as well as zero fees for transfers.) Right now we have a credit card each attached to the expenditures account, but earlier we only had a debit card each and no credit cards. Meaning that when the weekly funds ran out we where simply not able to pay. We did this to mimic living only on cash and when the cash runs out you simply have to stop buying stuff. And at the same time we could accrue quite a bit of savings. I would definitely recommend this if you have problems with over expenditures. |
Must ETF companies match an investor's amount invested in an ETF? | The point here is actually about banks, or is in reference to banks. They expect you know how a savings account at a bank works, but not mutual funds, and so are trying to dispel an erroneous notion that you might have -- that the CBIC will insure your investment in the fund. Banks work by taking in deposits and lending that money out via mortgages. The mortgages can last up to 30 years, but the deposits are "on demand". Which means you can pull your money out at any time. See the problem? They're maintaining a fiction that that money is there, safe and sound in the bank vault, ready to be returned whenever you want it, when in fact it's been loaned out. And can't be called back quickly, either. They know only a little bit of that money will be "demanded" by depositors at any given time, so they keep a percentage called a "reserve" to satisfy that, er, demand. The rest, again, is loaned out. Gone. And usually that works out just fine. Except sometimes it doesn't, when people get scared they might not get their money back, and they all go to the bank at the same time to demand their on-demand deposits back. This is called a "run on the bank", and when that happens, the bank "fails". 'Cause it ain't got the money. What's failing, in fact, is the fiction that your money is there whenever you want it. And that's really bad, because when that happens to you at your bank, your friends the customers of other banks start worrying about their money, and run on their banks, which fail, which cause more people to worry and try to get their cash out, lather, rinse repeat, until the whole economy crashes. See -- The Great Depression. So, various governments introduced "Deposit Insurance", where the government will step in with the cash, so when you panic and pull all your money out of the bank, you can go home happy, cash in hand, and don't freak all your friends out. Therefore, the fear that your money might not really be there is assuaged, and it doesn't spread like a mental contagion. Everyone can comfortably go back to believing the fiction, and the economy goes back to merrily chugging along. Meanwhile, with mutual funds & ETFs, everyone understands the money you put in them is invested and not sitting in a gigantic vault, and so there's no need for government insurance to maintain the fiction. And that's the point they're trying to make. Poorly, I might add, where their wording is concerned. |
Do Square credit card readers allow for personal use? | My husband used this device at work in an organization/club that collects dues for fundraisers. The fundraisers are only for the club. So I think that is not business at all. They have no business tax id#, etc? and they use it for personal reasons when collecting money via Cc#'s if this helps you. |
Is there such a thing as a non-FDIC savings account, which earns better interest? | Everyone would like a savings/checking account that has the same liquidity as others but pays multiple times as much, but such a thing would break the laws of finance. The thing keeping savings and checking accounts cheap isn't particularly the FDIC insurance but the high liquidity and near certainty that you will not lose money. In all of finance you are compensated for the risk (and perhaps illiquidity) you bear. If you insist on a risk-free and highly liquid investment, you will get the risk-free and highly liquid rate, which is currently around 1%. Doesn't matter what type of investment it is (savings, money market, treasuries, etc.). Money market funds, in particular, were designed to be a replacement for savings accounts. They have decent liquidity and almost no risk (and no FDIC insurance). But they earn about what good savings accounts do, because that's what risk-free investments earn. If you wish to earn more you must decide what you will give up: Decide on one (or both) of those to sacrifice and you will find yourself with options. |
What percentage of my company should I have if I only put money? | There is no universal answer here; it depends on how much risk each person is taking, how you want to define the value of the business now and in the future, how much each person's contribution is essential to creating and sustaining the business, how hard it would be to get those resources elsewhere and what they would cost... What is fair is whatever you folks agree is fair. Just make sure to get it nailed down in writing and signed by all the parties, so you don't risk someone changing their minds later. |
Why would a company issue a scrip dividend and how will this issue affect me? | Yes. Instead of paying a cash dividend to shareholders, the company grants existing shareholders new shares at a previously determined price. I'm sorry, but scrip issues are free (for all ordinary shareholders) and are in proportion to existing share holding. No payment is required from shareholders. So instead of having 10 $1 shares, the shareholder (if accepts) now could have 20 50p shares, if it was a one-for-one scrip issue. |
Boyfriend is coowner of a house with his sister, he wants to sell but she doesn't | He doesn't have to follow through on this, but he could tell this sister that he will stop making mortgage payments, which will result in foreclosure and sale at lower price than might be realized by a voluntary sale. Translation: the house will sold, sis. Do you want to maximize your share of the proceeds? And, as I said in a comment above: I hope that he is keeping careful records of mortgage an utility payments, as he might (should) be entitled to a refund from the proceeds of an eventual sale (possibly adjusted by the fair rent value of the time which he spent living there) |
Do governments support their own bonds when their value goes down? | who issued stock typically support it when the stock price go down. No, not many company do that as it is uneconomical for them to do so. Money used up in buying back equity is a wasteful use of a firm's capital, unless it is doing a buyback to return money to shareholders. Does the same thing happen with government bonds? Not necessarily again here. Bond trading is very different from equities trading. There are conditions specified in the offer document on when an issuer can recall bonds(to jack up the price of an oversold bond), even government bonds have them. The actions of the government has a bigger ripple effect as compared to a firm. The government can start buying back bonds to increase it's price, but it will stoke inflation because of the increase in the supply of money in the market, which may or mayn't be desirable. Then again people holding the bond would have to incentivized to sell the bond. Even during the Greek fiasco, the Greek government wasn't buying Greek bonds as it had no capital to buy. Printing more euros wasn't an option as no assets to back the newly printed money and the ECB would have stopped them from being accepted. And generally buying back isn't useful, because they have to return the principal(which might run into billions, invested in long term projects by the government and cannot be liquidated immediately) while servicing a bond is cheaper and investing the proceeds from the bond sale is more useful while being invested in long term projects. The government can just roll over the bonds with a new issue and refrain from returning the capital till it is in a position to do so. |
Finding a good small business CPA? | I have had better experiences with accountants in smaller towns. It seems they are used to working with small businesses and their reputation is very important to them. |
What should I be aware of as a young investor? | Disclaimer - I am 51. Not sure how that happened, because I remember being in my late teens like it was yesterday. I've learned that picking individual stocks is tough. Very tough. For every Apple, there are dozens that go sideways for years or go under. You don't mention how much you have to invest, but I suggest (A) if you have any income at all, open a Roth IRA. You are probably in the zero or 10% bracket, and now is the time to do this. Then, invest in ETFs or Index Mutual Funds. If one can get S&P minus .05% over their investing life, they will beat most investors. |
Are there special exceptions to the rule that (US) capital gains taxes are owed only when the gain materializes? | Normally, you don't pay capital gains tax until you actually realize a capital gain. However, there are some exceptions. The exception that affected Eduardo Saverin is the expatriation tax, or exit tax. If you leave a country and are no longer a tax resident, your former country taxes you on your unrealized capital gains from the period that you were a tax resident of that country. There are several countries that have an expatriation tax, including the United States. Saverin left the U.S. before the Facebook IPO. Saverin was perhaps already planning on leaving the U.S. (he is originally from Brazil and has investments in Asia), so leaving before the IPO limited the amount of capital gains tax he had to pay upon his exit. (Source: Wall Street Journal: So How Much Did He Really Save?) Another situation that might be considered an exception and affects a lot of us is capital gain distributions inside a mutual fund. When mutual fund managers sell investments inside the fund and realize gains, they have to distribute those gains among all the mutual fund investors. This often takes the form of additional shares of the mutual fund that you are given, and you have to pay capital gains tax on these distributions. As a result, you can invest in a mutual fund, leave your money there and not sell, but have to pay capital gains tax anyway. In fact, you could owe capital gains tax on the distributions even if the value of your mutual fund investment has gone down. |
Should I open a credit card when I turn 18 just to start a credit score? | This is a good idea, but it will barely affect your credit score at all. Credit cards, while a good tool to use for giving a minor boost to your credit score and for purchasing things while also building up rewards with those purchases, aren't very good for building credit. This is because when banks calculate your credit report, they look at your long-term credit history, and weigh larger, longer-term debt much higher than short-term debt that you pay off right away. While having your credit card is better than nothing, it's a relatively small drop in the pond when it comes to credit. I would still recommend getting a credit card though - it will, if you haven't already started paying off a debt like a student or car loan, give you a credit identity and rewards depending on the credit card you choose. But if you do, do not ever let yourself fall into delinquency. Failing to pay off loans will damage your credit score. So if you do plan to get a credit card, it is much better to do as you've said and pay it all off as soon as possible. Edit: In addition to the above, using a credit card has the added benefit of having greater security over Debit cards, and ensures that your own money won't be stolen (though you will still have to report a fraudulent charge). |
How Warren Buffett made his money | There is actually a recent paper that attempted to decompose Buffett's outperformance. I've quoted the abstract below: "Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors." |
Reinvesting dividends and capital gains | I have found The DRiP Investing Resource Center to be a useful resource for more information about DRIP investing. Moneypaper.com offers a list of companies offering both direct purchase options and dividend reinvestment plans. For those offering dividend reinvestment plans, but not direct purchase, you have the option of using a service to purchase your first shares to enroll in the DRIP program. The tax paperwork for DRIPs is a pain due to the partial shares purchased over time when you have to figure out your own cost basis upon sale of shares , but a spreadsheet and a FIFO (first in first out) approach makes it not too much of a headache. -MU |
How does historical data get adjusted for dividends, exactly? | Various types of corporate actions will precipitate a price adjustment. In the case of dividends, the cash that will be paid out as a dividend to share holders forms part of a company's equity. Once the company pays a dividend, that cash is no longer part of the company's equity and the share price is adjusted accordingly. For example, if Apple is trading at $101 per share at the close of business on the day prior to going ex-dividend, and a dividend of $1 per share has been declared, then the closing price will be adjusted by $1 to give a closing quote of $100. Although the dividend is not paid out until the dividend pay date, the share price is adjusted at the close of business on the day prior to the ex-dividend date since any new purchases on or after the ex-dividend date are not entitled to receive the dividend distribution, so in effect new purchases are buying on the basis of a reduced equity. It will be the exchange providing the quote that performs the price adjustment, not Google or Yahoo. The exchange will perform the adjustment at the close prior to each ex-dividend date, so when you are looking at historical data you are looking at price data that includes each adjustment. |
Why are there many small banks and more banks in the U.S.? | First, is population density. You didn't say where exactly, but for example here in Tampa, Wells Fargo has 25 branches in the area (though that is a bit larger then what I would think of the Tampa area as a local) Second, we can mix in service expectation. I expect that in addition to "good" online service, "great" phone service, "great" email service, that when I have a problem, don't understand something, or want to talk about my options for investing or choosing account types, that I am able to go into a branch. That I can "walk in" and see someone quickly, or schedule an appointment and see some one right away (at my appointment time). Together, these two options means that on a busy day, the nearest Wells Fargo Branch to me has at any one time, 50 - 60 people in it. Smaller branches, of course have less, and larger branches exist. So it just takes that many branches to address the number of people and their expected needs. As to why there are so many different brands/banks Well that's just the USA. We believe in capitalism. We have believed in it much stronger in the past, but banks are the central to capitalism so why shouldn't they serve as an example. At it's core (a very simplistic look) Capitalism and a free market means that we as customers are better served by having lots of different brands fighting for our business. It should drive more consumer desired features (like lower prices, higher interest rates, better fee schedules, etc.) while forcing those brands to operate "better". (Just ignore the bail out, that's a loaded topic) So for some of us, we want a big bank like Wells Fargo, because we want the rates, structure, and service they can provide as a "big bank". For others they want the more personal touch of a "small bank". There are benefits both ways. For example there may be a bank that only allows people with excellent credit to open accounts. That allows they to have lower over all mortgage rates, but means their checking accounts have higher minimums. While the next bank may be more inclusive, and have smaller minimum balances, but as a result charge more for loans. We like our options, and rest assured all those "brands" offer products that have differences that attract customers. |
Do rental car agencies sell their cars at a time when it is risky for the purchaser? | The rental industry is seasonal. They purchase additional inventory (vehicles) for their busy seasons and sell the extra inventory afterwards. |
How does a bank make money on an interest free secured loan? | A "true" 0% loan is a losing proposition for the bank, that's true. However when you look at actual "0%" loans they usually have some catches: There might also be late payment fees, prepayment penalties, and other clauses that make it a good deal on average to the bank. Individual borrowers might be able to get away with "free money", but the bank does not look to make money on each loan, they look to make money on thousands of loans overall. For a retailer (including new car sellers). the actual financing costs will be baked into the sales price. They will add, say, 10% to the sales price in exchange for an interest-free loan. They can also sell these loans to an investment bank or other entity, but they would be sold at a deep discount, so the difference will be made up in the sales price or other "fees". It's possible that they would just chalk it up to promotional discounts or customer acquisition costs, but it would not be a good practice on a large scale. |
Pensions, why bother? | Your gut feeling is absolutely spot on - you shouldn't be worrying about pension now, not at the age of 25. Assuming that you're not a footballer in the middle of the most productive part of your career and already have a fat wad of crunchy banknotes under your pillow that you're looking to set aside for a rainy day when you won't be able to play at your prime any longer. That doesn't mean you shouldn't invest, nor that means that you mustn't save. There are several factors at play here. First of all as a young person you are likely to have a high tolerance for risk, there is still plenty of time to recover should expected returns not materialise. Even a pension fund with the most aggressive risk / return strategy might just not quite do it for you. You could invest into education instead, improve health, obtain a profitable skill, create social capital by building connections, pay for experience, buy a house, start a family or even a business. Next, as a young professional you're unlikely to have reached your full earning potential yet and due to the law of diminishing marginal utility a hundred pounds per month now have greater utility (i.e. positive impact on your lifestyle) than a seven hundred pounds will in 7-10 years time once your earnings plateaued. That is to say it's easier to save £700 month from £3000 and maintain a reasonable level of personal comfort than carve £100 from £1300 monthly income. And last, but not the least, lets face it from a human point of view - forty years is a very long investment horizon and many things might and will change. One of the downsides of UK pensions is that you have very little control over the money until you reach a certain age. Tactically I suggest saving up to build a cushion consisting of cash or near cash assets; the size of the stash should be such that it is enough to cover all of your expenses from a minimum of 2 months to a maximum of a year. The exact size will depend on your personal comfort level, whatever social net you have (parents, wife, partner) and how hard it will be to find a new source of income should the current cease to produce cash. On a strategic level you can start looking into investing any surplus cash into the foundation of what will bring joy and happiness into the next 40 years of your life. Your or your partners training and education is one of the most sensible choices whilst you're young. Starting a family is another one. Both might help you reach you full earning potential much quicker. Finding what you love to do and learning how to do it really well - cash can accelerate this process bringing you quicker there you want to be. If you were a start-up business in front of a huge uncaptured market would you rather use cash to pay dividends or finance growth? |
Why would my job recruiter want me to form an LLC? | There are a few sites out there that can give you some reasoning behind the request. LegalZoom, for instance. To quote the LZ doc in case the link dies: Employee vs. Independent Contractor If a worker is an employee, the employer is responsible for paying Social Security, unemployment insurance, Medicare, and possibly other costs like workers' compensation insurance for the employee; at the end of the tax year, the employer is responsible for compiling all necessary payroll reports, including W-2 forms. If a worker is an independent contractor, the employer is not responsible for any of the above taxes or payments, and the only added paperwork is the issuing of a 1099 to the independent contractor at the end of the tax year, if he or she has made more than $600 with the employer. As Kent suggested, you should speak with an attorney (really you need one if setting up an LLC). There are a lot of companies out there these days that try to classify people as contractors rather than full-time employees as it gets them out of paying benefits and dealing with taxes. This is being heavily cracked down on, and several "contractor" employees are winning lawsuits to get full-time status. If you are truly acting as a contractor, then setting up an LLC can help with a few items such as taxes and protection on certain business aspects (see comments below regarding this). It's easy and relatively cheap (cost me about $250 with extra legal advice tacked on). If you are reporting directly to a manager with the company, or really working in any way that isn't consistent with the definition of a contractor, then I'd turn down the offer and ask to be made a FT employee. Additional information: https://www.sba.gov/content/hire-contractor-or-employee |
Is an interest-only mortgage a bad idea? | If you took a fixed loan, but paid it off at the accelerated rate, you would ultimately pay less total dollars in interest. So compare the actual amount paid in interest over the course of the loan rather than the interest rate itself. That should be your answer. Also, plan on failing in your plan to pay it off and see how that will affect you. |
Annuities question - Equations of value | These are the steps I'd follow: $200 today times (1.04)^10 = Cost in year 10. The 6 deposits of $20 will be one time value calculation with a resulting year 7 final value. You then must apply 10% for 3 years (1.1)^3 to get the 10th year result. You now have the shortfall. Divide that by the same (1.1)^3 to shift the present value to start of year 7. (this step might confuse you?) You are left with a problem needing 3 same deposits, a known rate, and desired FV. Solve from there. (Also, welcome from quant.SE. This site doesn't support LATEX, so I edited the image above.) |
Why is there such disparity of max contribution limits between 401K accounts and regular IRA accounts? | IRAs were invented to help individuals save for retirement. 401(k)s were invented to help corporations provide more compensation to highly valued employees. |
Is a “total stock market” index fund diverse enough alone? | and seems to do better than the S&P 500 too. No, that's not true. In fact, this fund is somewhere between S&P500 and the NASDAQ Composite indexes wrt to performance. From my experience (I have it too), it seems to fall almost in the middle between SPY and QQQ in daily moves. So it does provide diversification, but you're basically diversifying between various indexes. The cost is the higher expense ratios (compare VTI to VOO). |
If I pay someone else's property taxes, can I use it as a deduction on my income tax return? | According to page 107 of the instructions for schedule A for form 1040 : Include taxes (state, local, or foreign) paid on real estate you own that was not used for business. ... If you want to make a business out of her property and be her agent in the management, you might be able to work with an accountant on this, but it won't be a valid personal deduction. |
What is the best way to stay risk neutral when buying a house with a mortgage? | How can one offset exposure created by real-estate purchase? provides a similar discussion. Even if such a product were available in the precise increments you need, the pricing would make it a loser for you. "There's no free lunch" in this case, and the cost to insure against the downside would be disproportional to the true risk. Say you bought a $100K home. At today's valuations, the downside over a given year might be, say, 20%. It might cost you $5000 to 'insure' against that $20K risk. Let me offer an example - The SPY (S&P ETF) is now at $177. A $160 (Dec '14) put costs $7.50. So, if you fear a crash, you can pay 4%, but only get a return if the market falls by over 14%. If it falls 'just' 10%, you lose your premium. With only 5% down, you will get a far better risk-adjusted return by paying down the mortgage to <78% LTV, and requesting PMI, if any, be removed. Even if no PMI, in 5 years, you'll have 20% more equity than otherwise. Over the long term, 5 year's housing inflation would be ~ 15% or so. This process would help insure you are not underwater in that time. Not guarantee, but help. |
Filing Taxes for Two Separate Jobs Being Worked at the Same Time? | Welcome to the wonderful but oft confusing world of self-employment. Your regular job will withhold income for you and give you a W2, which tells you and the government how much is withheld. At the end of the year uber will give you and the government a 1099-misc, which will tell you how much they paid you, but nothing will be withheld, which means you will owe the government some taxes. When it comes to taxes, you will file a 1040 (the big one, not a 1040EZ nor 1040A). In addition you will file a schedule C (self-employed income), where you will report the gross paid to you, deduct your expenses, and come up with your profit, which will be taxable. That profit goes into a line in the 1040. You need to file schedule SE. This says how much self-employment tax you will pay on your 1099 income, and it will be more than you expect. Self employment tax is SS/Medicare. There's a line for this on the 1040 as well. You can also deduct half of your self-employment tax on the 1040, there's a line for it. Now, you can pay quarterly taxes on your 1099 income by filing 1040-ES. That avoids a penalty (which usually isn't that large) for not withholding enough. As an alternative, you can have your regular W2 job withhold extra. As long as you don't owe a bunch at tax time, you won't be a fined. When you are self-employed your taxes aren't as simple. Sorry. You can either spend some time becoming an expert by studying the instructions for the 1040, pay for the expensive version of tax programs, or hire someone to do it for you. Self-employed taxes are painful, but take advantage of the upsides as well. You can start a solo 401(k) or SEP IRA, for example. Make sure you are careful to deduct every relevant business expense and keep good records in case you get audited. |
Should I wait a few days to sell ESPP Stock? | It depends on how the program is run. If the company runs the program out of treasury stock (shares that are authorized, but not issued), then there aren't any shares being purchased on the open market. Because of that, the share price wouldn't be affected. If you look in your employer's annual report, you will probably find how the program is run and how many shares are issued annually under that program. By comparing that to the daily trading volume of the company's stock you can gauge whether there's any likelihood of the share price being affected by the employee purchases. That is, of course, if shares are being purchased on the open market. For example, here is Books-A-Million's program, as described in their 2011 annual report: Employee Stock Purchase Plan The Company maintains an employee stock purchase plan under which shares of the Company’s common stock are reserved for purchase by employees at 85% of the fair market value of the common stock at the lower of the market value for the Company’s stock as of the beginning of the fiscal year or the end of the fiscal year. On May 20, 2010, the stockholders of the Company approved an additional 200,000 shares available for issuance under the plan, bringing the aggregate number of shares that may be awarded to 600,000. Of the total reserved shares, 391,987, 373,432 and 289,031 shares have been purchased as of January 29, 2011, January 30, 2010 and January 31, 2009, respectively. This describes an instance of the employee purchase program being run from unissued stock, not open market purchases. From it, we can tell 18,555 shares were issued during the past fiscal year. As their average daily volume is ~40,000 shares, if the program were run from a single open market purchase, it would have potential to "move the market". One would think, though, that a company running it from open market purchases would spread the purchases over a period of time to avoid running up the price on themselves. |
Snowball debt or pay off a large amount? | You've already received good advice here, pay off the highest rate card first, in this case the Best Buy card. I completely agree. To answer your question about the minimum payment, I can't guarantee that this is how Citi does it on your particular card, but several online calculators seem to use the following formula. Minimum Payment = Fees + (APR / 12) x Balance + 1% x Balance. I plugged in your numbers and got really close to the minimum payment you mentioned. I ran calculations for balances of 8,500 and 6,500 and got payments of $184 and $141. You can use this calculator to plug in some numbers for yourself. I found the formula on this page along with a reference stating that Citi uses the formula. Edited to Add: As Bruce Alderman mentioned in his answer, it's probably not a good idea to just pay the minimum. That calculator I linked to shows the difference between paying the minimum and even a small amount ($50 or so) more than the minimum every month. Something like the difference between 3 and 10 years. |
I earn $75K, have $30K in savings, no debt, rent from my parents who are losing their home. Should I buy a home now or save? | The biggest red flag is the fact that your parents may lose their house. There are multiple parts of the decision. The red flag comes in because you are stretching your finances to the max to afford the house you are interested in. Buying down the interest rate makes some sense depending on how long you plan on staying, but not a a way to afford house X. Of course a bigger down payment will also influence the size of the house. You are also buying something in case your parents need a place to live. What happens if that never occurs? You now have something bigger than you need. You are mixing investments and housing. There is no guarantee that you will even break-even on the house as a investment. It can take several years to make back the closing costs involved in buying and selling a house, based solely on stable price and your monthly payments. If the price drops you might never make the money back. You might be better off renting what you need now or waiting until the current house is lost and then renting what you need then. |
Can someone explain a stock's “bid” vs. “ask” price relative to “current” price? | Both prices are quotes on a single share of stock. The bid price is what buyers are willing to pay for it. The ask price is what sellers are willing to take for it. If you are selling a stock, you are going to get the bid price, if you are buying a stock you are going to get the ask price. The difference (or "spread") goes to the broker/specialist that handles the transaction. |
Buying from an aggressive salesperson | If something in any transaction in life—financial or otherwise—doesn’t make you feel comfortable and the choice is between saving money with one thing versus another, don’t sell your personal needs short. Pay more elsewhere that treats you the way you expect to be treated. In the long run the $$$ you “save” in a cheaper transaction might cost you more in the headaches and annoyance you have to swallow in dealing with this “bargain” in the future. Your question is this: “Do his sales tactics indicate other underlying problems? How can I deal effectively with those tactics?” And you state this as well: “To make a long story short, the dealer's aggressive sales tactics have made me somewhat uncomfortable.” And finally ask: “How can I deal effectively with those tactics?” Okay, first and foremost if you feel discomfort in anything in life—not just a financial situation—just walk away. You might have to say “No…” when doing this but it’s not always the case you will have to counter aggression with aggression. And specifically in the case of a purchase like this, you need to also ask yourself: “Is this discount being offered me worth the headache I am getting?” At the end of the day money is meaningless and has it’s main worth as an economic motivator/stimulator: Someone has a need and someone else has something that can solve that need. What would it take for the side of need to connect to the side of solution to that need? This is the basic concept surrounding all economics. So that said, I have personally avoided buying things for less money and paid slightly more elsewhere for a service experience that made me feel comfortable. At the end of the day, if you feel happy in the transaction it helps in the long run more than—let’s say—the $20 to $40 you “save” by buying from someone else. Also—on the side of customer service—this person’s sales techniques sound like something out of a very old fashioned sales playbook. Nowadays it’s all about relationships and service: The immediate sale is not as important for competent and reputable businesses because they know a better customer service experience will bring people back. So it doesn’t matter how long this guy has been in business: It could be that he’s been in business a long time just because he has been in business a long time. That said—and in the case of musical instruments—maybe this guy is really good at care and upkeep of instruments but has crappy sales techniques. Keep that in mind as well and just push back on their sales methods. For things like musical instruments, people might be jerks on the sales side but in the maintenance and repair side they are great. Will you need to go to them if/when your instrument needs repair? Or you don’t care? At the end of the day, go with your gut. And if your gut says, “No…” then just go somewhere else and spend your money on an item you like from a place that treats you the way you need. |
How can we determine how much income our savings could generate if we purchase an annuity? | Note that it isn't always clear that "turning it all into an annuity" is the right answer. Annuities are essentially insurance policies -- you're paying them a share of your income to guarantee a specific payout. If you outlive the actuarial tables, that may be a win. If the market crashes, that may be a win. But I'm increasingly hearing the advice that staying in investments (albeit in a very conservative position) may pay better longer. There are tools which will do monte-carlo modelling based on what the market has done in the past. You give them your estimate of how much in today's dollars would be needed to "maintain your lifestyle", and they'll tell you how much savings you need -- and what form you might want to keep those savings in -- to have good odds of being able to live entirely off the earnings and never touch the capital My employer makes such a tool available to us, and in fact Quicken has a simpler version built into it; it's nice that the two agree. |
What is the P/E ratio for a company with negative earnings? | Usually their PE ratio will just be listed as 0 or blank. Though I've always wondered why they don't just list the negative PE as from a straight math standpoint it makes sense. PE while it can be a useful barometer for a company, but certainly does not tell you everything. A company could have negative earnings for a lot of reasons, some good and some bad. The company could just be a bad company and could be losing money hand over fist, or the company could have had a one time occurrence such as a big acquisition or some other event that just affected this years earnings, or they could be an awesome high growth company that is heavily investing for their future and forgoing locking in profits now for much bigger profits in the future. Generally IPO company's fall into that last category as they are going public usually because they want an influx of cash that they are going to use to grow the company much more rapidly. So they are likely already taking all incoming $$ and taking on debt to grow the company and have exceeded all of those options and that's when they turn to the stock market for the additional influx of cash, so it is very common for these companies not to have earnings. Now you just have to decide if that company is investing that money wisely and will in the future translate to actual earnings. |
What are some factors I should consider when choosing between a CPA and tax software | Largely it comes down to the complexity of your return (likely relatively simple if it's your first time filing) and your comfort level with using software. More complex returns would include filing business claims, handling stocks and investments, special return forms, etc. One benefit to most of the software options out there such as TurboTax, HR Block, and Tax Slayer, are that they are free to use and you only pay when you're ready to file. You could give them a shot to see how easy/difficult they are and if you feel overwhelmed, then contact a CPA (whose time won't be free). Also remember that those HR Block seasonal places that open up are not CPA's, but are temps hired and trained to use the software that you would find online. You didn't indicate they were an option, but I like to point that out to those who might not know otherwise. My opinion would be to use one of the online options because of cost and their ease of use. They also allow you to take your time and save your progress, so you can start using it and go ask questions/do research on your own time. |
Do I need a business credit card? | I finally got one to separate my business and personal expenses. It will make accounting at the end of the year a lot easier. |
Can I rollover an “individual retirement annuity” to an IRA? | Annuities, like life insurance, are sold rather than bought. Once upon a time, IRAs inherited from a non-spouse required the beneficiary to (a) take all the money out within 5 years, or (b) choose to receive the value of the IRA at the time of the IRA owner's death in equal installments over the expected lifetime of the beneficiary. If the latter option was chosen, the IRA custodian issued the fixed-term annuity in return for the IRA assets. If the IRA was invested in (say) 15000 shares of IBM stock, that stock would then belong to the IRA custodian who was obligated to pay $x per year to the beneficiary for the next 23 years (say). There was no investment any more that could be transferred to another broker, or be sold and the proceeds invested in Facebook stock (say). Nor was the custodian under any obligation to do anything except pay $x per year to the beneficiary for the 23 years. Financial planners loved to get at this money under the old IRA rules by suggesting that if all the IRA money were taken out and invested in stocks or mutual funds through their company, the company would pay a guaranteed $y per year, would pay more than $y in each year that the investments did well, would continue payment until the beneficiary died (or till the death of the beneficiary or beneficiary's spouse - whoever died later), and would return the entire sum invested (less payouts already made, of course) in case of premature death. $y typically would be a little larger than $x too, because it factored in some earnings of the investment over the years. So what was not to like? Of course, the commissions earned by the planner and the lousy mutual funds and the huge surrender charges were always glossed over. |
Need help with the psychology of investing: past failures and future fears | As an investor you must remember to forgive yourself. However, you must not only forgive but make it up to yourself by putting in the hours of study necessary to ensure that what you are forgiving yourself for will not happen again. Studying (finance, fundamental analysis, statistics, etc.)will also help you to worry less. Once you have put in the hours of study necessary, you can turn to any of a number of still relatively conservative strategies, such as seeking out undervalued blue-chip stocks to purchase or selling covered call options. Good luck. |
Resources to begin trading from home? | A good place to start is to read, such as : Robert T. Kiyosaki : poor dad rich dad. It is quite simple but it gives the good mindset to start. But moreover it is stated in the book : "the best investement you can make is educate yourself". You current situation is quite difficcult, but don't give up on your study. From your post i didn't understand : do you have a master degree? If you love math, learn coding and find a job in banking or else. People that know how to code AND have a good level in math worth a lot. |
How do historically low interest rates affect real estate prices? | Interest rates do generally affect house prices but other factors do too, especially the unemployment rate. However, everything else being equal, when interest rates drop, it makes the borrowing of money cheaper so tends to stimulate the economy and the housing market, increasing the demand for houses and generally causes house prices to increase (especially if the supply of new housing doesn't increase with the demand). When interest rates go up the opposite happens. Usually interest rates go down in order to stimulate a slowing economy and interest rates go up to slow down an overheated economy. Regarding your situation you are able to get a 30 year fixed rate at today’s interest rates (in Australia the longest fixed rate you can get is for 10 years and the rate is usually 1 or 2 percent higher than the standard variable rate. Most people here go for the variable rate or a fixed rate of between 1 to 3 years). This means that even if rates do go up in the future you won't be paying a higher rate, which is a positive for you. You are buying the house to live in so as long as you can keep making the repayments you should not be too worried if the price of the house drops sometime in the future, because if your house has dropped and you want to sell to buy another house to live in, then that house would have also dropped relative to yours (give or take). So your main worry is that rates will go up causing both house prices to fall and unemployment to rise, and you yourself losing your job and eventually your house. It is a risk, but what you need to consider is if you can manage that risk. Firstly, I believe rates won't be going up in the US for a number of years, and if and when they do start going up they will most probably start going up slowly. So you have some time on your side. Secondly, what can you do between now and when interest rates do start going up in a few years: Try to put more saving away to increase your safety net from 6 months to 12 months or more, or make extra repayments into your home loan so that you are ahead if things do go wrong. If you are worried that you could lose your job, what can you do to reduce your chances of losing your job or increasing your chances of getting a new job quickly if you do lose it? Improve your current skills, get new skills, become an invaluable employee, or look at possible opportunities to start your own business. Do your own research on the types of houses you are looking at buying, the more houses you look at the better prepared you will be when the right house at the right price comes along, and the less chance that you will be rushed into buying what might be an overpriced house. So to sum it up; do as much research as you can, have an understanding of what your risks are and how you are going to manage those risks. |
Why does selling and then rebuying stock not lead to free money? | There are a few people that do this for a living. They are called "market makers" or "specialists" in a particular stock. First of all, this requires a lot of capital. You can get burned on a few trades, a process known as "gambler's ruin," but if you have enough capital to weather the storm, you can make money. Second, you have to be "licensed" by the stock market authorities, because you need to have stock market trading experience and other credentials. Third, you are not allowed to buy and sell at will. In order to do your job, you have to "balance the boat," that is buy, when others are selling, and sell, when others are buying, in order to keep the market moving in two directions. It's a tough job that requires a lot of experience, plus a license, but a few people can make a living doing this. |
How to spend more? (AKA, how to avoid being a miser) | Hehe, I feel your pain.. well, 'pain' isn't really the feeling though is it. I was unemployed for several years when I was younger, and I loved it. It taught me 2 things: you need to be careful with your money, and you don't need money to be happy. I loved the freedom, the carefree attitude I had to the world, the ability to do many things not constrained by having to spend all day in an office, to be with my mates a lot. If your problem is that you are being too miserly ($3 researching better product... we all do that, though not for $3 except on ebay sometimes) then put a cost on your time. If it took you 3 hours to research the $3 saving, and your time is worth even just $10 an hour to you, then you've not saved anything. You've wasted 'money'. If, on the other hand, you're more worried about hoarding money and being unproductive and a bad social citizen, get involved in investing it instead. Let someone else put it to good use, whilst giving you some return. |
Most effective Fundamental Analysis indicators for market entry | I think by definition there aren't, generally speaking, any indicators (as in chart indicators, I assume you mean) for fundamental analysis. Off the top of my head I can't think of one chart indicator that I wouldn't call 'technical', even though a couple could possibly go either way and I'm sure someone will help prove me wrong. But the point I want to make is that to do fundamental analysis, it is most certainly more time consuming. Depending on what instrument you're investing in, you need to have a micro perspective (company specific details) and a macro perspective (about the industry it's in). If you're investing in sector ETFs or the like, you'd be more reliant on the macro analysis. If you're investing in commodities, you'll need to consider macro analysis in multiple countries who are big producers/consumers of the item. There's no cut and dried way to do it, however I personally opt for a macro analysis of sector ETFs and then use technical analysis to determine my entry and/or exit. |
As an employer, how do I start a 401k or traditional IRA plan? | OK, so first of all, employers don't set up IRAs. IRA stands for Individual Retirement Account. You can set up a personal IRA for yourself, but not for employees. If that is what you're after, then just set one up for yourself - no special rules there for self employment. As far as setting up a 401(k), I'd suggest checking with benefits management companies. If you're small, you probably don't have an HR department, so managing a 401(k) yourself would likely be overly burdensome. Outsourcing this to a company which handles HR for you (maybe running payroll, etc. also), would be the best option. Barring that, I'd try calling a large financial institution (Schwab, Fidelity, etc.) for clear guidance. |
How does compounding of annual interest work? | The general concept is that your money will grow at an accelerating rate because you start getting interest paid on your returns in addition to the original investment. As a simple example, assume you invest $100 and get 10% interest per year paid annually. -At the end of the first year you have your $100 + $10 interest for a total of $110. -So you start the second year with $110 and so 10% would be $11 for a total of $121. -The third year you start with $121 so 10% would be $12.10 for a total of $133.10 See how the amount it goes up each year increases? If we were talking a higher initial amount or a larger number of years that can really add up. That is essence is compound interest. Most of the complicated looking formulas you see out there for compound interest are just shortcuts so you don't have to iteratively go through the above exercise a bunch of times to find out how much you would have after some number of years. This formula tells you how much you would have(A) after a certain number of years(t) at a given interest rate(r) assuming they pay interest n times per year, for example you would use 12 for n if it paid interest monthly instead of yearly. P represents the amount you started out with. If you keep investing monthly (as shown in your example) instead of just depositing it and letting it sit, you have to use a more complicated formula. Finance people refer to this as calculating the future value of an annuity. That formula looks like this: A = PMT [((1 + r)N - 1) / r] x (1+r) A : Is the amount you would have at the end of the time period. N : The number of compounding periods (months if you get interest calculated monthly) PMT : The total amount you are putting in each period (N) r: Just like before, the interest rate you are getting paid. Be sure to adjust this to a monthly number if N represents months (divide APR by 12)* *Most interest rates are quoted as APR, which is the annualized interest rate not counting compounding. Don't confuse this with APY, which has compounding built into it and is not appropriate for use in this formula. Inserting your example: r (monthly interest rate) = 15% APR / 12 = .0125 n = 30 years * 12 months/year = 360 months A = $150 x [((1 + .0125)360 - 1) / .0125] x (1+.0125) A = $1,051,473.09 (rounded) |
How do I adjust to a new social class? | The prices reflect what the market will bear. People have more money, things will likely cost more. Think of it in terms of percentages and you can start to justify the higher housing costs. My father likes to tell me that his first mortgage cost him $75 a month, and he had no idea how he was going to pay it each month. He also earned $3/hr at his job. So his housing costs were 15% of his gross income. My dear father almost passed out when he learned that my mortgage was $1000 a month, but since I earn $4000/month gross, I am really only paying 25% of my salary. (Numbers made up) So if he complains I pay 10% more, so be it, but complaining I pay $925 more isn't worrying to me because of my increased salary. So if your complaint is the amounts, you must take ratios, percentages and relative comparisons. However if you are baffled by people having money and wasting it on silly or foolish purchases, I am with you. I still don't understand why people will use the closest ATM and just pay the $2 fee. Do right by yourself and don't mind what others are up to. |
Dispute credit card transaction with merchant or credit card company? | As a rule of thumb, go in the order of proximity to the transaction. This would typically mean: Side note: I own a website that provides an online service that accepts PayPal and credit cards (via PayPal), and I personally have experience with all 3 of the above options. I can tell you from the merchant's point of view that I would also prefer the same order. I've had people contact my customer service department asking for a refund and we always immediately comply. Some people never contact us and just file a dispute directly with PayPal, and although refunding through the PayPal dispute is just as easy as refunding directly, it always makes me ask, "Why didn't they just contact us first?" One time we had a customer skip us and PayPal, and filed a dispute directly with their Credit Card. The CC company contacted PayPal and PayPal contacted us. The process was the same from my point of view, I just clicked a button saying issue refund. But my $5 refund cost me an additional $20 due to the CC dispute. Now that I know this I will never approve a CC dispute again. Anytime one happens I would just issue a refund directly, and then notify the dispute that their CC has already been refunded, which should end the dispute. |
Cash out 401k for house downpayment | Absolutely never.Even in a hot market, it's like picking up dimes in front of a bulldozer. It's just plain stupid. If you can't afford a 20% down payment and a 15 year mortgage, just rent. |
gnucash share fractions | As BrenBarn stated, tracking fractional transactions beyond 8 decimal places makes no sense in the context of standard stock and mutual fund transactions. This is because even for the most expensive equities, those fractional shares would still not be worth whole cent amounts, even for account balances in the hundreds of thousands of dollars. One important thing to remember is that when dealing with equities the total cost, number of shares, and share price are all 3 components of the same value. Thus if you take 2 of those values, you can always calculate the third: (price * shares = cost, cost / price = shares, etc). What you're seeing in your account (9 decimal places) is probably the result of dividing uneven values (such as $9.37 invested in a commodity which trades for $235.11, results in 0.03985368550891072264046616477394 shares). Most brokerages will round this value off somewhere, yours just happens to include more decimal places than your financial software allows. Since your brokerage is the one who has the definitive total for your account balance, the only real solution is to round up or down, whichever keeps your total balance in the software in line with the balance shown online. |
how late can i put money into an IRA and still have it count for 2015? | The IRA contribution for the year are allowed until the tax day of that year. I.e.: you can contribute for 2015 until April 15th, 2016 (or whatever the first business day is after that, if the 15th is a holiday). You'll have to explicitly designate your contribution for 2015, since some of the IRA providers may automatically designate the current year unless you explicitly say otherwise. If that happens - it will be very hard to fix later, so pay attention when you're making the contribution. You get a couple of things from your IRA provider: Form 5498 - details your contributions for the year, account FMV, and RMD details. You can see the actual form here. You don't always get this form, if you didn't contribute anything and no RMD is required for you. Since the last day to contribute is April 15th, these forms are usually being sent out around mid-May. But you should know how much you've contributed by the tax day without it, obviously, so this is only for the IRS matching and your record-tracking. Form 1099-R includes information about distributions (including withdrawals and roll-overs). You may not get this form if you didn't take any money out of your IRA. These come out around end of January. |
Are cashiers required to check a credit card for a signature in the U.S.? | Working retail myself, I do not accept an unsigned card without verification. If I received one I would ask for ID and verify the photo with the Name. I would also let the buyer know it was unsigned and remind them that anyone finding it can sign it and use the card without issue. Putting on the back of the card "SEE ID" is the way buyers have protected themselves from thieves as long as people are actually looking at the cards. How does this protect? 1- a lost card cant be signed by a complete stranger as there is already writing on the card. 2- It provides a photo identification for use. I know with today's technology that this is going away and fewer people are actually checking but shame on those companies who handle the cards and don't look. Obviously this process does not apply to self checks, but safety protocols there require a pin of some form that only the authorized user should know. |
How do I calculate what percentage of my portfolio is large-, mid- or small- cap? | All mutual funds disclose their investments, funds are large cap only or midcsp etc. So it depends on what funds you choose. |
Was this bill forgotten by a medical provider, and do notices need to be sent before collections? | Sometimes I think a question like this is one of moral versus legal. The reality is that you know you owe the money because you received the services. You're right that the bill should have been sent to you, and the natural urge for many people is to just count it in the win column when things like this happen and there's the chance to avoid paying. I suppose my question for you is, are you comfortable with the notion that you are not paying something that your heart of hearts tells you should be paid? If roles were reversed and you, as a business owner, had forgotten to bill something for which you were rightfully due payment, wouldn't you hope they'd have the integrity to pay you anyway? The legal side of this can be a bit trickier, and much depends on the state you're in (assuming you're in the U.S.) because some have stiffer consumer collection and protection laws than others. The rehab center could, when doing an audit of its accounts, discover that you didn't pay for these. They could take the polite course of action and call you with a gentle reminder or send a bill, or they could be not so nice about it. Either way, they can't send anything to collections for which you haven't been presented a bill and demonstrated an unwillingness to pay. There's a process in place, regardless of the state, so they can't just automatically put it into collections. I will close with this question for you: did the rehab center help you with what you needed, and are you healthier and better because of their care? If so, pay the bill. That's my advice. Keep in mind that unpaid medical costs just raise the prices for everyone else, because these providers will make up for the loss somewhere. I hope this helps. Good luck! |
Is 0% credit card utilization worse than 1-20% credit card utilization for any reason other than pure statistics? | Credit Scores / Rates are based on sometimes simple and sometimes quite complex Statistical Models (Generalised Linear Models, Neural Networks, Regression and Classification Trees, Mixture Models, etc).This depends on whether it is something more general like FICO or what large banks develop in-house. In any case, there are many legislation-dependent factors (Qualitative such as education, occupation security, sex, etc, payment history; or Quantitative such as age, liquidity and leverage ratios, etc). Now, most model that are used today are propriety and closely held trade secrets. The most important reason for this is actually because of the databases that feed the models. More better quality data is what makes the real difference ... although at the cutting-edge, the mathematicians/statisticians/computer scientists that design the algorithms will make a huge difference. Now, back to the main thing: The Credit Score/Rate is meant to be used only as an indicator for representing the Probability of Default ("How likely you are to default on your obligation towards me?" is what it means and that is largely based upon "Has company/he/she honoured his financial obligations?") of a certain consumer. In more sophisticated models, they may also use your industry sector or occupational and financial security to predict the future behaviour. However, this "Credit Score" has meaning only in relation to a "Credit Limit" ("Can you pay back my $X?"). The credit limit on the other hand is defined by your income level, debt/asset, etc). As a credit risk analyst, whether we are dealing with large corporate loans, mortgages, personal loans, etc), the principles are the same: One thing to consider is that factors considered in determining a credit score usually do not have a simple linear relationship. Consumer Profile types such as utilisation rate are a lot more about EFFECT than CAUSE: The most important thing is to honour your obligations, whether you pay before or after you spend makes little difference, so long as you pay in full and prior to maturity, your rate/score will improve with time. Financial Institutions have many ways to make money of everyone. Some, such as interest rates and fees are directly charged to you and some are charged to your goods-and-services providers. That has no bearing on your score. Sometimes it even makes sense to take on customers with rock-bottom ratings, lend them lots of money, and charge them to dirt. As you may well know, the recent financial crisis - with ongoing after-shocks and tremors - was the result of such practices. |
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