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Is Cash Value Life Insurance (“whole life” insurance) a good idea for my future? | I am of the strong opinion that life insurance should be purchased as a term product and nothing more. The internal expense is usually high, the returns, poor and the product disclosure is often incomprehensible. The only purpose Cash Value Life Insurance serves, in my opinion, is to fund the retirement and college educations of those selling it. |
Switch from DINK to SIWK: How do people afford kids? | As this is anonymous, can you give us actual numbers? I can make guesses based on your percentages, but it would help. Lets assume you both make $35k (since you said child care would take up the bulk of your wife's income, it must be fairly low incomes) The answer usually isn't a simple "do this", but small adjustments in your lifestyle which add up. Church offering is 17%, the standard tithe is 10%. Lower it? It's the most obvious large non-required expense. Transportation is almost 10% of your income. If my numbers are right, that is somewhere around $500 per month? What kind of car/cars do you have? There are very cheap used cars which cost very little in upkeep / fuel. Is it possible your cars are more expensive than needed? My wife and I bought a used car for around $8k in cash a few years ago. Still running strong, only have done oil changes since then. Food is 12%, which would be perhaps $600 or $700 per month. That seems awfully high. Maybe I'm wrong about your salaries :) You said you were cheap, but now the numbers don't add up. Mortgage of 35% ($2k with escrow if I'm guessing on salaries right) seems reasonable. I'm assuming you don't want to downsize, particularly if you're going to have kids. Do you have a great mortgage rate? I assume you're on a 30 year fixed already? |
Is it better to pay an insurance deductible, or get an upgrade? | I think you have a few choices that cannot be described by math alone: Repair current phone: 149 Replace current phone with new model from carrier: 100 + cost of new phone Replace current phone with new model on payment plan from carrier: 100 + cost of new phone + finance charge (could be zero or cleverly hidden). You can also replace the current phone with either a used or new bought from a separate party. Quite recently I was selling some gently used IPhones 4S for around $140. So really you have to determine what is most important to you guys. Is it important to have the newest model phone with laying out the least amount of cash now? Then by all means go with the payment plan with your current carrier. Is it most important to be financially efficient, while having a good working phone? Then pay the deductible; or buy something gently used. In my opinion, having a phone payment is a losing game, akin to buying a new car every three years or so. You are buying something on time that quickly depreciates and hiding the true cost of the item in "painless" monthly payments. |
What happened to Home Depot's Stock in 1988? | So a major problem with looking at historical stock data on these graphs is that they set the stock price based off of current market volumn. If I was to say look at Majesco Entertainment (COOL) in june of 2016. It would say that the stock as trading between $5-6. In reality it was between .50-$1. But in august there was a 6:1 reverse split. So June's value based on todays current share count would be about $5-6 per one share. 1988 for home depot must have been a really bad year for them, and because of all the splits they've had over the years already screws that estimate of what one share is worth. There's a lot of variance in 1988, but you have to be looking at only 1988. 87 and 89 really screws the the chart's scale. |
Why are Rausch Coleman houses so cheap? Is it because they don't have gas? | Research the company that is all I can say this company has horrible reviews. They show on their Facebook page great reviews but if you really look through all reviews the high ratings are from past and current employees. All other reviews from actual home owners are bad. They make a lot of false promises and build very cheap homes that will not last without several costly problems within the near future. Most people that buy one of their houses sell it within a few years because they start having so many problems. They have outside vendors doing all the work and do not make these vendors very accountable. I know I was a manager with Rausch for several years. STAY AWAY! |
Covered calls: How to handle this trade? | I would expect that your position will be liquidated when the option expires, but not before. There's probably still some time value so it doesn't make sense for the buyer to exercise the option early and take your stock. Instead they could sell the option to someone else and collect the remaining time value. Occasionally there's a weird situation for whatever reason, where an option has near-zero or negative time value, and then you might get an early exercise. But in general if there's time value someone would want to sell rather than exercise. If the option hasn't expired, maybe the stock will even fall again and you'll keep it. If the option just expired, maybe the exercise just hasn't been processed yet, it may take overnight or so. |
How can I buy shares of oil? I'm told it's done through ETFs. How's that related to oil prices per barrel? | While we're not supposed to make direct recommendations, and I am in no way advising anything, USO an ETF that buys light sweet crude oil futures with the intention of mirroring the price movements of oil. |
I've tracked my spending and have created a budget, now what do I do with it? | Whether you use a professional financial planner or not, the basic steps are the same. It seems like you have done some detailed work on step 1, perhaps less detail (but not necessarily insufficient detail) on step 2, and concluded that you don't need to change anything in step 3. That's fine - if you concluded that you don't need to change anything, then you don't need to change anything! What you need to do from now on is There is nothing complicated or difficult about any of this. To paraphrase Charles Dickens, "Income greater than expenditure - result, happiness. Income less than expenditure - result misery." Talking to a financial planner might encourage you to spend less (though of course you just acquired a new expense, "buying financial planning advice"), just like joining to Weight Watchers might encourage you to eat less or exercise more. But in the end, it's you who have to take the action - other people can't do it for you. |
What is a typical investment portfolio made up of? | Don't over think about your choices. The most important thing to start now and keep adjusting and tuning your portfolio as you move along in your life. Each individual's situation is unique. Start with something simple and straight forward, like 100 - your age, in Total Stock market Index fund and the remaining total bond market index fund. For your 401k, at least contribute so much as to get the maximum employer match. Its always good if you can contribute the yearly maximum in your 401k or IRA. Once you have built up a substantial amount of assets (~ $50k+) then its time to think more about asset allocation and start buying into more specific investments as needed. Remember to keep your investment expenses low by using index funds. Also remember to factor in tax implications on your investment decisions. eg. buying an REIT fund in a tax advantaged account like 40k is more tax efficient than buying it in a normal brokerage account. |
How is money actually made from the buying or selling of options? | Today SPY (The S&P ETF) trades at $128. The option to buy at $140 (this is a Jan '13 call) trades for $5. I buy the call, for $500 as they trade in 100 lots. The S&P skyrockets to 1500 and SPY to $150. The call trades for $11, as it still has a month or two before expiring, so I sell it, and get $1100. The S&P rose 17%, but I doubled my money. If it 'only' rose 9%, to less than $140, I'd lose my investment. No, I don't need to buy the SPY I can sell the call any time before expiration. In fact, most options are not exercised, they are sold between purchase and expiration date. |
Why are big companies like Apple or Google not included in the Dow Jones Industrial Average (DJIA) index? | That is a pretty exclusive club and for the most part they are not interested in highly volatile companies like Apple and Google. Sure, IBM is part of the DJIA, but that is about as stalwart as you can get these days. The typical profile for a DJIA stock would be one that pays fairly predictable dividends, has been around since money was invented, and are not going anywhere unless the apocalypse really happens this year. In summary, DJIA is the boring reliable company index. |
How much should I be contributing to my 401k given my employer's contribution? | You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account. So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split). |
Should I fund retirement with a static asset allocation or an age based glide path? | The thing about the glide path is that the closer you're to the retirement age, the less risk you should be taking with your investments. All investments carry risk, but if you invest in a volatile stock market at the age of 20 and lose all your retirement money - it will not have the same effect on your retirement as if you'd invest in a volatile stock market at the age of 65 and then lose all your retirement money. Static allocation throughout your life without changing the risk factor, will lead you to a very conservative investment path, which would mean you're not likely to lose your investments, but you're not likely to gain much either. The point of the glide path is to allow you taking more risks early with more chances of higher gains, but to limit your risks down the road, also limiting your potential gains. That is why it is always suggested to start your retirement funds early in your life, to make sure you have enough time to invest in potentially high return stocks (with high risk), but when you get close to your retirement age, it is advised to do exactly the opposite. The date-targeted funds do that for you, but you can do it on your own as well. As to the academic research - you don't need to go that far. Just look at the graphs to see that over long period investments in stocks give much better return than "conservative" bonds and treasuries (especially when averaging the investments, as it usually is with the retirement funds), but over a given short period, investments in stocks are much more likely to significantly lose in value. |
Market Making vs Market Taking (Quotes vs Orders) | Quote driven markets are the predecessors to the modern securities market. Before electronic trading and HFTs specifically, trading was thin and onerous. Today, the average investor can open up a web page, type in a security, and buy at the narrowest spread permitted by regulators with anyone else who wants to take the other side. Before the lines between market maker and speculator became blurred to indistinction, a market maker was one who was contractually obligated to an exchange to provide a bid and ask for a given security on said exchange even though at heart a market maker is still simply a trader despite the obligation. A market maker would simultaneously buy a large amount of securities privately and short the same amount to have no directional bias, exposure to the direction of the security, and commence to making the market. The market maker would estimate its cost basis for the security based upon those initial trades and provide a bid and ask appropriate for the given level of volume. If volumes were high, the spread would be low and vice versa. Market makers who survived crashes and spikes would forgo the potential profit in always providing a steady price and spread, ie increased volume otherwise known as revenue, to maintain no directional bias. In other words, if there were suddenly many buyers and no sellers, hitting the market maker's ask, the MM would raise the ask rapidly in proportion to the increased exposure while leaving the bid somewhere below the cost basis. Eventually, a seller would arise and hit the MM's bid, bringing the market maker's inventory back into balance, and narrowing the spread that particular MM could provide since a responsible MM's ask could rise very high very quickly if a lack of its volume relative to its inventory made inventory too costly. This was temporarily extremely costly to the trader if there were few market makers on the security the trader was trading or already exposed to. Market makers prefer to profit from the spread, bidding below some predetermined price, based upon the cost basis of the market maker's inventory, while asking above that same predetermined cost basis. Traders profit from taking exposure to a security's direction or lack thereof in the case of some options traders. Because of electronic trading, liquidity rebates offered by exchanges not only to contractually obligated official market makers but also to any trader who posts a limit order that another trader hits, and algorithms that become better by the day, market making HFTs have supplanted the traditional market maker, and there are many HFTs where there previously were few official market makers. This speed and diversification of risk across many many algorithmically market making HFTs have kept spreads to the minimum on large equities and have reduced the same for the smallest equities on major exchanges. Orders and quotes are essentially identical. Both are double sided auction markets with impermenant bids and asks. The difference lies in that non-market makers, specialists, etc. orders are not shown to the rest of the market, providing an informational advantage to MMs and an informational disadvantage to the trader. Before electronic trading, this construct was of no consequence since trader orders were infrequent. With the prevalence of HFTs, the informational disadvantage has become more costly, so order driven markets now prevail with much lower spreads and accelerated volumes even though market share for the major exchanges has dropped rapidly and hyperaccelerated number of trades even though the size of individual trades have fallen. The worst aspect of the quote driven market was that traders could not directly trade with each other, so all trades had to go between a market maker, specialist, etc. While this may seem to have increased cost to a trader who could only trade with another trader by being arbitraged by a MM et al, paying more than what another trader was willing to sell, these costs were dwarfed by the potential absence of those market makers. Without a bid or ask at any given time, there could be no trade, so the costs were momentarily infinite. In essence, a quote driven market protects market makers from the competition of traders. While necessary in the days where paper receipts were carted from brokerage to brokerage, and the trader did not dedicate itself to round the clock trading, it has no place in a computerized market. It is more costly to the trader to use such a market, explaining quote driven markets' rapid exit. |
Why invest for the long-term rather than buy and sell for quick, big gains? | As an easy way to answer... look at an index, let's say the S&P 500. Look at the price this last October, and predict where it will move in November... easy right? It already happened, and you have the benefit of hindsight. The move looks like such a consistent, obvious continuation of the previous up and down pattern. It looks predictable, like you could have guessed that. Now, look at today's price, and predict where it will go next month. Not so easy now? The problem is, every point you're at, all the time, looks like a possible inflection point or turning point. If you're following an uptrend, you may think it'll continue, but you may also think that it zigged so far up already, that now it's ready for a zag down where you'll buy. So you wait... and it keeps rising, and you kick yourself for missing out. Next time, you see another uptrend and resolve to buy it regardless, thinking now it'll keep going, but it turns down the second you buy it, and keeps dropping. You kick yourself again. The market is amazing at doing this to you every time. In real time, every wiggle in the price looks simultaneously like a trend that could continue, and like a trend that has moved far enough and is ready to reverse. And more likely you'll guess the wrong one. The ONLY way with some little hope of succeeding is to study study study, and find and learn trading rules with just over 50/50 chances (like buying when a moving average is touched within an uptrend as an example, and setting a stop loss at -1%, and a sell limit at +2% or something), and then never ever deviate from that strategy, because your only hope is in the consistency of statistics and odds over time. You'll get many -1% losses, and hopefully enough 2% gains to compensate the losses, plus some profit. OR, to make it easier, just buy in on a dip, and hold and hold and collect dividends, and be content to match the market without effort. |
How does the futures market affect the stock market? | Can someone please explain how traders and investors use this price difference to trade? People use the price difference for small arbitrage between the futures and spot markets, where the larger spreads are reflected in the options markets. The spread in the options market dictates the VIX which many investors also use in their decision making process. And most importantly how the futures market affects subsequent moves in the stock market? The futures market effects the stock market where large contract holders move the entire futures price. This causes reactionary moves amongst all of the aforementioned arbitragers, who are hedged between the futures and spot markets. With the /ES this is reflected down to actual individual stocks based on their weightings in the S&P 500 index. Many of those stocks have smaller companies that are also linked to them, such as a widget manufacturer for a gigantic ACME corporation listed in the S&P 500. |
Cashing a cheque on behalf of someone else | It's possible to cash cheques by post. When I did this, it involved filling out a "paying-in slip" (I had a book of these provided by the bank) and posting the cheque together with the slip to an address provided by the bank. You could also bring the paying-in slip and the cheque to a branch and deposit them there, and it wasn't necessary that you were the account holder, just that the details on the slip matched the account you were paying into. I Googled "paying-in slip" and found the instructions for HSBC as an example: Paying-In Slips. It explicitly mentions that you don't need to be the account holder to do this, and moreover there are even blank slips in the branch, which you just need to fill in with the correct account details. I think the procedure is much the same for other banks, but presumably you could check the relevant bank's website for specific guidance. |
How does start-up equity end up paying off? | Read the book, "Slicing Pie: Fund Your Company Without Funds". You can be given 5% over four years and in four years, they hire someone and give him twice as much as you, for working a month and not sacrificing his salary at all. Over the four years, the idiot who offered you the deal will waste investors money on obvious, stupid things because he doesn't know anything about how to build what he's asking you to build, causing the need for more investment and the dilution of your equity. I'm speaking from personal experience. Don't even do this. Start your own company if you're working for free, and tell the idiot who offered you 5% you'll offer him 2% for four years of him working for you for free. |
What will my taxes be as self employed? | Whether you're self-employed or not, knowing exactly how much tax you will pay is not always an easy task. Various actions you can take (e.g., charitable donations, IRA contributions, selling stocks) may increase or reduce your tax liability. One tool I've found useful for estimating federal taxes is the Excel 1040 spreadsheet. This is a spreadsheet version of the income tax return form. It is not official and is not created by the IRS, but is maintained as a labor of love by a private individual. In practice, however, it is pretty much an accurate implementation of the tax calculation algorithms encoded in the tax forms and instructions. The nice thing about it is that it's a spreadsheet. You can plug numbers into various slots in the spreadsheet and see how they affect your federal tax liability. (You may also owe state taxes depending on what state you live in.) Of course, the estimates you get by doing this are only (at most) as accurate as your estimates of the various numbers you plug in. Still, I think it's a free and useful way to get a ballpark estimate of your tax liability based on numbers that you can more easily estimate (e.g., how much money you expect to earn). |
Is there any US bank that does not charge for incoming wire transfers? | Schwab High Yield Investor Checking does not charge for incoming wires. |
How can I help others plan their finances, without being a “conventional” financial planner? | You need a license/registration to be a "conventional" financial planner. But as long as your work is limited to budgets, and cash flow analysis, it may be more like accounting. In your shoes, I would consult the local CPA association about what you need (if anything) to do what you're doing. |
Can I lose more on Forex than I deposit? | If you don't use leverage you can't lose more than you invested because you "play" with your own money. But even with leverage when you reach a certain limit (maintenance margin) you will receive a margin call from your broker to add more funds to your account. If you don't comply with this (meaning you don't add funds) the broker will liquidate some of the assets (in this case the currency) and it will restore the balance of the account to meet with his/her maintenance margin. At least, this is valid for assets like stocks and derivatives. Hope it helps! Edit: I should mention that |
Why don't institutions share stock recommendations like Wall Street analysts? | Institutions may be buying large quantities of the stock and would want the price to go up after they are done buying all that they have to buy. If the price jumps before they finish buying then they may not make as great a deal as they would otherwise. Consider buying tens of thousands of shares of a company and then how does one promote that? Also, what kind of PR system should those investment companies have to disclose whether or not they have holdings in these companies. This is just some of the stuff you may be missing here. The "Wall street analysts" are the investment banks that want the companies to do business through them and thus it is a win/win relationship as the bank gets some fees for all the transactions done for the company while the company gets another cheerleader to try to play up the stock. |
Is it advisable to go for an auto loan if I can make the full payment for a new car? | What percentage of your savings is the full car payment? If it's a significant chunk, then I'd finance some of the cost of the car in order to maintain liquidity. |
How to invest in gold at market value, i.e. without paying a markup? | ETF's are great products for investing in GOLD. Depending on where you are there are also leveraged products such as CFD's (Contracts For Difference) which may be more suitable for your budget. I would stick with the big CFD providers as they offer very liquid products with tight spreads. Some CFD providers are MarketMakers whilst others provide DMA products. Futures contracts are great leveraged products but can be very volatile and like any leveraged product (such as some ETF's and most CFD's), you must be aware of the risks involved in controlling such a large position for such a small outlay. There also ETN's (Exchange Traded Notes) which are debt products issued by banks (or an underwriter), but these are subject to fees when the note matures. You will also find pooled (unallocated to physical bullion) certificates sold through many gold institutions although you will often pay a small premium for their services (some are very attractive, others have a markup worse than the example of your gold coin). (Note from JoeT - CFDs are not authorized for trading in the US) |
How can foreign investor (residing outside US) invest in US company stocks? | As other people have said they should register with a broker in the country they reside in that can deal in US stocks, then fill out a W8-BEN form. I have personally done this as I am from the Uk, it's not a very complicated process. I would assume that most US brokers don't allow foreign customers due to the person having to pay tax where they reside and the US brokers don't want to have to keep approximately 200 different tax codes in track. |
How could USA defaulting on its public debt influence the stock/bond market? | This is a speculative question and there's no "correct" answer, but there are definitely some highly likely outcomes. Let's assume that the United States defaults on it's debt. It can be guaranteed that it will lose its AAA rating. Although we don't know what it will drop to, we know it WILL be AA or lower. A triple-A rating implies that the issuer will never default, so it can offer lower rates since there is a guarantee of safety there.People will demand a higher yield for the lower perceived security, so treasury yield will go up. The US dollar, or at least forex rates, will almost certainly fall. Since US treasuries will no longer be a safe haven, the dollar will no longer be the safe currency it once was, and so the dollar will fall. The US stock market (and international markets) will also have a strong fall because so many institutions, financial or otherwise, invest in treasuries so when treasuries tumble and the US loses triple-A, investments will be hurt and the tendency is for investors to overreact so it is almost guaranteed that the market will drop sharply. Financial stocks and companies that invest in treasuries will be hurt the most. A notable exception is nations themselves. For example, China holds over $1 trillion in treasuries and a US default will hurt their value, but the Yuan will also appreciate with respect to the dollar. Thus, other nations will benefit and be hurt from a US default. Now many people expect a double-dip recession - worse than the 08/09 crisis - if the US defaults. I count myself a member of this crowd. Nonetheless, we cannot say with certainty whether or not there will be another recession or even a depression - we can only say that a recession is a strong possibility. So basically, let's pray that Washington gets its act together and raises the ceiling, or else we're in for bad times. And lastly, a funny quote :) I could end the deficit in 5 minutes. You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection. - Warren Buffett |
As co-founder, does Steve Jobs still own enough Apple shares to control Apple Inc.? | Everyone that owns a share of stock in a company is part owner. Some just own more than others. According to Apple's latest proxy statement he owns 5.5 million shares of the 914 million shares outstanding. So he owns approximately 0.6% of the company. If he owned more than 50% of the company's outstanding stock he would effectively control the board of directors by being able to pick whoever he wanted. Then he would control the company. Very few publicly traded companies are that way. Most have sold off parts of the company to the public in order to raise cash for the company and make their investment more liquid. |
How does giving to charity work? | I'll answer your second question: it depends what your charity is for. There are two types: i) Emergency (i.e. to respond to environmental or social disasters where it acts a bit like an insurance policy); ii) Development (i.e. where the intention is to subsidise something missing in the local economy); A lack of insurance is certainly a problem for people who lose their homes and livelihoods to disaster. Your donations can go far. As for development aid: "We find little evidence of a robust positive correlation between aid and growth," write two ex-IMF economists, Raghuram Rajan, who stepped down as IMF chief economist at the end of 2006, and Arvind Subramanian, who left the IMF this year. "One of the most enduring and important questions in economics is whether foreign aid helps countries grow ... There is a moral imperative to this question: it is a travesty for so many countries to remain poor if a relatively small transfer of resources from rich countries could set them on the path to growth ... But if there is no clear evidence that aid boosts growth, then handing out more money makes little sense," they conclude. I do somewhat further in declaring that charity is equivalent to trade dumping. By artificially lowering the real cost of a particular good it ensures that there will be no local investment in that good. Free clothes to Africa has destroyed the local textiles industry. Free doctors has resulted in more African doctors in New York than in the whole of Africa. So decide where your charity is going: emergencies or development? Then decide what you can afford. But your first investment should always be in yourself. If by making use of that investment you can benefit the economy and keep others around you employed and productive you will achieve far more. |
Over the long term, why invest in bonds? | I can think of a few reasons for this. First, bonds are not as correlated with the stock market so having some in your portfolio will reduce volatility by a bit. This is nice because it makes you panic less about the value changes in your portfolio when the stock market is acting up, and I'm sure that fund managers would rather you make less money consistently then more money in a more volatile way. Secondly, you never know when you might need that money, and since stock market crashes tend to be correlated with people losing their jobs, it would be really unfortunate to have to sell off stocks when they are under-priced due to market shenanigans. The bond portion of your portfolio would be more likely to be stable and easier to sell to help you get through a rough patch. I have some investment money I don't plan to touch for 20 years and I have the bond portion set to 5-10% since I might as well go for a "high growth" position, but if you're more conservative, and might make withdrawals, it's better to have more in bonds... I definitely will switch over more into bonds when I get ready to retire-- I'd rather have slow consistent payments for my retirement than lose a lot in an unexpected crash at a bad time! |
Would it be considered appropriate to use a market order for my very first stock trade? | If you want to make sure you pay at or below a specific price per share, use a limit order. If you want to buy the stock close to the current price, but aren't price sensitive, use a market order. Market orders are typically not a great idea because if you're buying thousands or tens of thousands of shares this can mean a large swing in cost if the market suddenly changes direction. |
How much lump sum investment in stocks would be needed to yield a target stable monthly income? | If your requirements are hard (must have $1000/month, must have the same or bigger in capital at the end), stocks are a poor choice of investment. However, in many cases, people are willing to tolerate some level of risk to achieve the expected returns. You also do not mention inflation, which can take quite a lot out of your portfolio over the course of ten years. If we make some simplifying assumptions, you want to generate $12,000 a year. You can realistically expect the (whole) stock market, long term (i.e. over time periods substantially longer than 10 years), to return approximately 4 - 5% after factoring in inflation. That means an investment of $240,000 - $300,000 (the math is simplified somewhat here). If you don't care about inflation, you can up the percentage rather somewhat. According to this article, the S&P 500 returned an average of 11.31% from 1928 through 2010 (not factoring in inflation), which would require an investment of approximately $106,100. But! This opens you up to substantial risk. The stock market may go down 30% this year! According to the above article, the S&P returned only 3.54% from 2001 to 2010. Long-term, it goes up, but your investment case is really unsuited to investing in an index to the entire stock market given your requirements. You may be better suited investing primarily in stable bonds, or perhaps a mix of bonds and stocks. Alternatively, you may want to consider even more stable investments such as treasury notes. Treasury notes are all but guaranteed, but with a lousy rate of return. Heck, you could consider a GIC (that may be Canada-only) or even a savings account. There's also the possibility of purchasing an annuity, though almost everyone will advise against such. Personally, I'd go for a mutual fund which invested approximately 70% bonds and the rest in stocks over such a time period. Something like ING Direct's Streetwise Balanced Income Portfolio, if you were in Canada. It substantially lowers your expected return but also lowers your risk. I can't honestly say what the expected return there is; at this point, it's returned 4% per year (before inflation), but has been around only since the beginning of 2008. And to be clear, this is absolutely not free of risk. |
Is it common for a new car of about $16k to be worth only $4-6k after three years? | It depends completely on the car. Some cars retain their value much better, and others drop in value like a rock (no pun intended). The mileage and condition on a car also has a huge impact on value. According to this site, cars on average lose 46% of their value in three years, so seeing one that drops 62% in roughly 3 years does not seem impossible. That value could also have been trade-in value, which is significantly lower than what you could get with a private party sale (or what you'd pay to get that same car from a dealer) One example: a new Ford Taurus (lowest model) has a Kelly Blue Book value of $28,000. A 2014 Taurus (lowest model) with average mileage and in fair condition has a private party value of about $12,000, for a 57% drop in value. Note: I picked Taurus because it's a car that should not have exceptional resale value (unlike BMW, trucks, SUVs), not to make any kind of judgement of the quality or resellability of the car) |
Does being on the board of a bankruptcy-declaring company affect my credit rating? | The answer to your question is governed by the structure of the company and your ownership or lack thereof in the business. Australian business can be structured the same way U.S. ones are, as a sole proprietorship, partnership, LLC, or company. If you are only on the board and have no equity, you cannot be affected. You must have some amount of equity in the business to have any chance of being affected. If the business is a sole proprietorship, then the single individual running the business is personally responsible for all debt and the inability to pay obligations would result in personal bankruptcy which would in all likelihood affect your credit score (it would in the U.S.). If it is a partnership, then anyone holding stock in the company is likewise personally responsible for a portion of the debt, and can be subject to bankruptcy and credit score implications. If the business is structured as a limited liability company or a corporation, a stakeholder's personal finances are separate from the business's and their credit score cannot be affected. |
Cost is (maybe) part of basis for two assets | For accounting purposes, consider the costs of acquisition as part of the cost of the asset as opposed to expensing. This will be important to consider if you need to amortise the asset for reporting or tax purposes. Dr. Land $250,000 Dr. Building: $250,000 Cr. Cash $500,000 The acquisition of the land from previous owners. And Dr. Land $12,500 Dr. Building $12,500 Cr. Cash $25,000 Fees paid to auctioneer who helped acquire the land. The basis for dividing the cost should be done at appraised prices. These appraised prices will appear in the first entry and should help you along. |
Is inflation a good or bad thing? Why do governments want some inflation? | Inflation, like trade deficits or surpluses, have winners and losers in an economy. Clear losers are people who are on a fixed income, as they often have a fixed income and a prices keep on going up, meaning they can afford less. Numerous articles on the internet discuss the inflation of the 1970s, here are Google's results. I'm not so sure that governments want "some inflation" as much as they desperately want to avoid deflation. Deflation means that the price for today's product, like a car, will decrease in price tomorrow (or a month from now) which creates a powerful incentive for people to put off a purchase until later, which brings consumer demand down in a country's economy. |
Optimal pricing of close to zero marginal cost content | With near zero marginal cost, and infinite supply, your prices are going to be decided by entry cost, competition, and what the market will bear. Generally speaking, though, there are no accurate models for getting these kinds of optimal prices in advance - your best bet is to test, experiment, and then build a business and market specific model based on what you observe. Look at the Steam network, as an example. They are in the business of selling 0 marginal cost software (games), in a market with a significant but quickly decreasing entry cost, and with solid competition. Despite being around for years in a mature market, they're still discovering unexpected optimal price points when testing how their customers behave. |
Strategies for putting away money for a child's future (college, etc.)? | Others have given some good answers. I'd just like to chime in with one more option: treasury I-series bonds. They're linked to an inflation component, so they won't lose value (in theory). You can file tax returns for your children "paying" taxes (usually 0) on the interest while they're minors, so they appreciate tax-free until they're 18. Some of my relatives have given my children money, and I've invested it this way. Alternatively, you can buy the I-bonds in your own name. Then if you cash them out for your kids' education, the interest is tax-free; but if you cash them out for your own use, you do have to pay taxes on the interest. |
How much more than my mortgage should I charge for rent? | Agree with the previous posts the question is poorly worded. -but- Clark Howard does say you really need to be getting 90% back in the mortgage payment. Remember that what ever your paying in principle a month is adding to your net worth and every month that gets you a little more money than the last payment. Also this is a good hedge on inflation and at some point within a few years you will be at break even. |
Do I have to pay a capital gains tax if I rebuy different stocks? | Yes (most likely). If you are exchanging investments for cash, you will have to pay tax on that - disregarding capital losses, capital loss carryovers, AGI thresholds, and other special rules (which there is no indication of in your question). You will have to calculate the gain on Schedule D, and report that as income on your 1040. This is the case whether you buy different or same stocks. |
Why do stocks track the price of Oil? | Anthony Russell - I agree with JohnFx. Petroleum is used in making many things such as asphalt, road oil, plastic, jet fuel, etc. It's also used in some forms of electricity generation, and some electric cars use gasoline as a backup form of energy, petrol is also used in electricity generation outside of cars. Source can be found here. But to answer your question of why shares of electric car companies are not always negatively related to one another deals with supply and demand. If investors feel positively about petroleum and petroleum related prospects, then they are going to buy or attempt to buy shares of "X" petrol company. This will cause the price of "X", petrol company to rise, ceteris paribus. Just because the price of petroleum is high doesn't mean investors are going to buy shares of an electric car company. Petrol prices could be high, but numerous electric car companies could be doing poorly, now, with that being said you could argue that sales of electric cars may go up when petrol prices are high, but there are numerous factors that come into play here. I think it would be a good idea to do some more research if you are planning on investing. Also, remember, after a company goes public they no longer set the price of the shares of their stock. The price of company "X" shares are determined by supply and demand, which is inherently determined by investors attitudes and expectations, ultimately defined by past company performance, expectations of future performance, earnings, etc.. It could be that when the market is doing well - it's a good sign of other macroeconomic variables (employment, GDP, incomes, etc) and all these factors power how often individuals travel, vacation, etc. It also has to deal with the economy of the country producing the oil, when you have OPEC countries selling petrol to the U.S. it is likely much cheaper per barrel than domestic produced and refined petrol because of the labor laws, etc. So a strong economy may be somewhat correlated with oil prices and a strong market, but it's not necessarily the case that strong oil prices drive the economy..I think this is a great research topic that cannot be answered in one post.. Check this article here. From here you can track down what research the Fed of Cleveland has done concerning this. My advice to you is to not believe everything your peers tell you, but to research everything your peers tell you. With just a few clicks you can figure out the legitimacy of many things to at least some degree. |
Are there any viable alternatives to Paypal for a small site? | I found out about Google checkout today, it looks like it may meet my needs, but I'd still be interested to find out about other options. |
does interest payment on loan stay the same if I pay early | It depends on the type of loan. Fully amortized loans have a schedule of payments don't recalculate as you pay. If you want to make an additional payment you need to contact the lender to apply your payment toward principle and reamortize the loan. Otherwise all your additional payment will do is change the amount due on your next payment, or push out your next payment due date. Regarding interest calculation, you owe interest on the principle outstanding. Say you have a 10 year loan (120 Months), at 5% APR, and a $1,000 payment (this means you borrowed roughly $94,000) Each month the amount of interest owed reduces because there is less principle outstanding. The reason loans are amortized like this is so the borrower has a predictable, known, monthly amount due. |
Why can low volume move a stock price drastically? | In a sense, yes. There's a view in Yahoo Finance that looks like this For this particular stock, a market order for 3000 shares (not even $4000, this is a reasonably small figure) will move the stock past $1.34, more than a 3% move. Say, on the Ask side there are 100,000 shares, all with $10 ask. It would take a lot of orders to purchase all these shares, so for a while, the price may stay right at $10, or a bit lower if there are those willing to sell lower. But, say that side showed $10 1000, $10.25 500, $10.50 1000. Now, the volume is so low that if I decided I wanted shares at any price, my order, a market order will actually drive the market price right up to $10.50 if I buy 2500 shares "market". You see, however, even though I'm a small trader, I drove the price up. But now that the price is $10.50 when I go to sell all 2500 at $10.50, there are no bids to pay that much, so the price the next trade will occur at isn't known yet. There may be bids at $10, with asking (me) at $10.50. No trades will happen until a seller takes the $10 bid or other buyers and sellers come in. |
Owning REIT vs owning real estate - which has a better hypothetical ROI? | REIT's usually invest in larger properties (apartment complexes), individuals usually invest in small properties (single units, duplexes, fourplexes, etc). REIT's also invest in a lot of commercial properties - malls, commercial and business office buildings, etc. These are very different markets. Not to mention the risk spread, geographical spread, research, management and maintenance that someone has to do for REIT and it comes out of the earnings (while your own rentals you can manage yourself, if you want), etc. |
Bid-Ask at market open, which comes first? [duplicate] | The options market requires much more attention to avoid the situation you're describing. An overnight $10 ask will remain on the books most likely as Good-Til-Canceled. The first to bid the low order gets it. If traders are paying attention, which they probably are then they will bid at $10. If not, they will bid immediately at $20. If they crossed the order, it would be filled at their higher than $10 bid. This is all governed by the exchange where the ask is posted, and most implement price-time priority. |
ISA - intra year profits and switching process | You're overthinking it. The ISA limit applies to the amount you invest into the ISA. In your example, £10,000. Whether that then fluctuates with performance is irrelevant. Even if you realise aprofit or a loss, nobody is watching it. You merely count the amount you originally contributed into the ISA wrapper. When they add up to £15,000; that's the limit reached. (And by the way, remember that only money going into the ISA is counted. It doesn't matter if you -let's say - put £15k in, then remove 10k. You've reached the limit. You don't again have the chance to put £10k 'back in'. |
Does a larger down payment make an offer stronger? | There is a lot of your financial information that the selling agent handles in the course of a real estate transaction, including but not limited to your pre-approval letter which states what maximum purchase price might be. Closing costs and interest rate are not details they would know unless you shared that with them, given that that is done after you go binding. I agree with xiaomy in that, while in absolute monetary terms the higher amount should always be more attractive, the selling agent wants to ensure the transaction goes as smoothly as possible. With contracts falling through due to first-time buyers not making it through mortgage underwriting, it is in the seller's interest - and thus the seller's agent's concern - that the buyer not present such hurdles. Insofar as a higher down payment is a signal for that, then I can understand why it would be more attractive. |
How do I figure out if I will owe taxes | Do you have a regular job, where you work for somebody else and they pay you a salary? If so, they should be deducting estimated taxes from your paychecks and sending them in to the government. How much they deduct depends on your salary and what you put down on your W-4. Assuming you filled that out accurately, they will withhold an amount that should closely match the taxes you would owe if you took the standard deduction, have no income besides this job, and no unusual deductions. If that's the case, come next April 15 you will probably get a small refund. If you own a small business or are an independent contractor, then you have to estimate the taxes you will owe and make quarterly payments. If you're worried that the amount they're withholding doesn't sound right, then as GradeEhBacon says, get a copy of last year's tax forms (or this year's if they're out by now) -- paper or electronic -- fill them out by estimating what your total income will be for the year, etc, and see what the tax comes out to be. |
Book Value vs Market Value of PWT.TO | Have you looked at what is in that book value? Are the assets easily liquidated to get that value or could there be trouble getting the fair market value as some assets may not be as easy to sell as you may think. The Motley Fool a few weeks ago noted a book value of $10 per share. I could wonder what is behind that which could be mispriced as some things may have fallen in value that aren't in updated financials yet. Another point from that link: After suffering through the last few months of constant cries from naysayers about the company’s impending bankruptcy, shareholders of Penn West Petroleum Ltd. (TSX:PWT)(NYSE:PWE) can finally look toward the future with a little optimism. Thus, I'd be inclined to double check what is on the company books. |
If throwing good money after bad is generally a bad idea, is throwing more money after good Ok? | To expand a bit on what TripeHound said in the comment section, past performance is not indicative of future performance, which is why the best advice is to ignore if you already own the stock or not. If the stock goes down, but you've done your research and think it will come back, then investing more isn't a bad idea. If the stock is doing well and it will continue to do well, then invest more. Treat investing more into a stock you already own as a new investment and do your research. TL;DR of your question, it's a very case-by-case basis |
Interest charges on balance transfer when purchases are involved | The 'common sense' in it is that they want the maximum money from you while still suggesting to a quick read that you get away free. Their target is not to make you happy, but to make money of you. |
How do I calculate what percentage of my portfolio is large-, mid- or small- cap? | The portfolio manager at Value Research Online does this very nicely. It tracks the underlying holdings of each fund, yielding correct calculations for funds that invest across the board. Take a look at the screenshot from my account: If you have direct equity holdings (e.g., not through a mutual fund), that too gets integrated. Per stock details are also visible. |
Side work and managing finances? | I've done various side work over the years -- computer consulting, writing, and I briefly had a video game company -- so I've gone through most of this. Disclaimer: I have never been audited, which may mean that everything I put on my tax forms looked plausible to the IRS and so is probably at least generally right, but it also means that the IRS has never put their stamp of approval on my tax forms. So that said ... 1: You do not need to form an LLC to be able to claim business expenses. Whether you have any expenses or not, you will have to complete a schedule C. On this form are places for expenses in various categories. Note that the categories are the most common type of expenses, there's an "other" space if you have something different. If you have any property that is used both for the business and also for personal use, you must calculate a business use percentage. For example if you bought a new printer and 60% of the time you use it for the business and 40% of the time you use it for personal stuff, then 60% of the cost is tax deductible. In general the IRS expects you to calculate the percentage based on amount of time used for business versus personal, though you are allowed to use other allocation formulas. Like for a printer I think you'd get away with number of pages printed for each. But if the business use is not 100%, you must keep records to justify the percentage. You can't just say, "Oh, I think business use must have been about 3/4 of the time." You have to have a log where you write down every time you use it and whether it was business or personal. Also, the IRS is very suspicious of business use of cars and computers, because these are things that are readily used for personal purposes. If you own a copper mine and you buy a mine-boring machine, odds are you aren't going to take that home to dig shafts in your backyard. But a computer can easily be used to play video games or send emails to friends and relatives and lots of things that have nothing to do with a business. So if you're going to claim a computer or a car, be prepared to justify it. You can claim office use of your home if you have one or more rooms or designated parts of a room that are used "regularly and exclusively" for business purposes. That is, if you turn the family room into an office, you can claim home office expenses. But if, like me, you sit on the couch to work but at other times you sit on the couch to watch TV, then the space is not used "exclusively" for business purposes. Also, the IRS is very suspicious of home office deductions. I've never tried to claim it. It's legal, just make sure you have all your ducks in a row if you claim it. Skip 2 for the moment. 3: Yes, you must pay taxes on your business income. If you have not created an LLC or a corporation, then your business income is added to your wage income to calculate your taxes. That is, if you made, say, $50,000 salary working for somebody else and $10,000 on your side business, then your total income is $60,000 and that's what you pay taxes on. The total amount you pay in income taxes will be the same regardless of whether 90% came from salary and 10% from the side business or the other way around. The rates are the same, it's just one total number. If the withholding on your regular paycheck is not enough to cover the total taxes that you will have to pay, then you are required by law to pay estimated taxes quarterly to make up the difference. If you don't, you will be required to pay penalties, so you don't want to skip on this. Basically you are supposed to be withholding from yourself and sending this in to the government. It's POSSIBLE that this won't be an issue. If you're used to getting a big refund, and the refund is more than what the tax on your side business will come to, then you might end up still getting a refund, just a smaller one. But you don't want to guess about this. Get the tax forms and figure out the numbers. I think -- and please don't rely on this, check on it -- that the law says that you don't pay a penalty if the total tax that was withheld from your paycheck plus the amount you paid in estimated payments is more than the tax you owed last year. So like lets say that this year -- just to make up some numbers -- your employer withheld $4,000 from your paychecks. At the end of the year you did your taxes and they came to $3,000, so you got a $1,000 refund. This year your employer again withholds $4,000 and you paid $0 in estimated payments. Your total tax on your salary plus your side business comes to $4,500. You owe $500, but you won't have to pay a penalty, because the $4,000 withheld is more than the $3,000 that you owed last year. But if next year you again don't make estimated payment, so you again have $4,000 withheld plus $0 estimated and then you owe $5,000 in taxes, you will have to pay a penalty, because your withholding was less than what you owed last year. To you had paid $500 in estimated payments, you'd be okay. You'd still owe $500, but you wouldn't owe a penalty, because your total payments were more than the previous year's liability. Clear as mud? Don't forget that you probably will also owe state income tax. If you have a local income tax, you'll owe that too. Scott-McP mentioned self-employment tax. You'll owe that, too. Note that self-employment tax is different from income tax. Self employment tax is just social security tax on self-employed people. You're probably used to seeing the 7-whatever-percent it is these days withheld from your paycheck. That's really only half your social security tax, the other half is not shown on your pay stub because it is not subtracted from your salary. If you're self-employed, you have to pay both halves, or about 15%. You file a form SE with your income taxes to declare it. 4: If you pay your quarterly estimated taxes, well the point of "estimated" taxes is that it's supposed to be close to the amount that you will actually owe next April 15. So if you get it at least close, then you shouldn't owe a lot of money in April. (I usually try to arrange my taxes so that I get a modest refund -- don't loan the government a lot of money, but don't owe anything April 15 either.) Once you take care of any business expenses and taxes, what you do with the rest of the money is up to you, right? Though if you're unsure of how to spend it, let me know and I'll send you the address of my kids' colleges and you can donate it to their tuition fund. I think this would be a very worthy and productive use of your money. :-) Back to #2. I just recently acquired a financial advisor. I can't say what a good process for finding one is. This guy is someone who goes to my church and who hijacked me after Bible study one day to make his sales pitch. But I did talk to him about his fees, and what he told me was this: If I have enough money in an investment account, then he gets a commission from the investment company for bringing the business to them, and that's the total compensation he gets from me. That commission comes out of the management fees they charge, and those management fees are in the same ballpark as the fees I was paying for private investment accounts, so basically he is not costing me anything. He's getting his money from the kickbacks. He said that if I had not had enough accumulated assets, he would have had to charge me an hourly fee. I didn't ask how much that was. Whew, hadn't meant to write such a long answer! |
Should I invest in a Health Insurance +1 policy from my Employer? | One thing to look into is if there is an extra fee for covering a spouse under you plan, if she is covered under her own employer's plan. I know that my wife's company charges around $100-$200 a year if I was to be covered under her plan, since I am eligible for the coverage where I work. As far as tax issues, there shouldn't be any. I think the choice comes down to the coverage offered by both plans. |
Since many brokers disallow investors from shorting sub-$5 stocks, why don't all companies split their stock until it is sub-$5 | Vitalik has mentioned this in a comment but I think it ought to be expanded upon: Companies that aren't already penny stocks really don't stand to gain anything from trying to prevent short interest. Short selling does not inherently lower the stock price - not any more so than any other kind of selling. When somebody shorts a stock, it's simply borrowed from another investor's margin; as long as it's not a naked short resulting in an FTD (Failure To Deliver) then it does not add any "artificial" selling pressure. In fact, shorting can actually drive the price up in the long term due to stops and margin calls. Not a guarantee, of course, but if a rally occurs then a high short interest can cause a cascade effect from the short "squeeze", resulting in an even bigger rally than what would have occurred with zero short interest. Many investors actually treat a high short interest as a bullish signal. Compare with margin buying - essentially the opposite of short selling - which has the opposite effect. If investors buy stocks on margin, then if the value of that stock decreases too rapidly they will be forced to sell, which can cause the exact same cascade effect as a short interest but in the opposite direction. Shorting is (in a sense) evening out the odds by inflating the buying pressure at lower stock prices when the borrowers decide to cover and take profits. Bottom line is that, aside from (illegal) insider trading, it doesn't do businesses any good to try to manipulate their stock price or any trading activity. Yes, a company can raise capital by selling additional common shares, but a split really has no effect on the amount of capital they'd be able to raise because it doesn't change the actual market cap, and a dilution is a dilution regardless of the current stock price. If a company's market cap is $1 billion then it doesn't matter if they issue 1 million shares at $50.00 each or 10 million shares at $5.00 each; either way it nets them $50 million from the sale and causes a 5% dilution, to which the market will react accordingly. They don't do it because there'd be no point. |
Where can I find historic ratios by industry? | If you would like to find data on a specific industry/market sector, a good option is IBISworld reports. You can find their site here. You can find reports on almost any major US sector. The reports include historical data as well as financial ratios. In college projects, they were very useful for getting benchmark data to compare an individual business against an industry as a whole. |
Pay off car loan entirely or leave $1 until the end of the loan period? | In some states there are significantly higher automobile insurance costs and higher coverage requirements for vehicles that have a lien on them. I suspect this is not your scenario, or you probably would not be considering holding the loan open. But it is something to consider. If you live in a state where insurance coverage and costs depend on a clear title, I would certainly recommend closing the loan as soon as possible. |
How is the time-premium on PUT options calculated | According to Yahoo, AAPL was trading at $113.26 at 1:10 PM on 11/13/15, which is the approximate time of your option quote. You provided a quote for AAPL at 4:15, and the stock happened to keep going down most of the that afternoon. To make a sensible comparison, you need to take contemporary prices on both the stock and the option. The quote on the option also shows the "price" being outside of the bid-ask range, which suggests that the option was trading thinly and that the last price occurred sometime earlier in the day. If you use a price in the bid-ask range ($21.90-$22.30) and use the price of AAPL at the time of the put quote, you'll come up with a price that's much closer to your expectation. |
What is the smartest thing to do in case of a stock market crash | I suggest to just invest in index funds, these are low risk with high reward stocks that can survive even the worst of stock crashes but are still extremely profitable when the stock market is booming |
Should I really pay off my entire credit card balance each month or should I maintain some balance? | You should pay things off every month. You don't want to be paying 10%-25% interest if you don't have to. If you regularly use you card, the credit agencies can't tell the difference. The way it works is that every month, they send the credit agencies your current balance and if you paid the last bill on time. There is nothing that indicates if this is a standing balance, or if you charged all of it since the last payment. Any business that you legitimately owe a debt to can report that to the credit agencies. Not all of them do. This includes utilities, cell phone companies, landlords, etc. If any of them report overdue items it will show up on your credit report, and your credit card company can use that to raise you interest rate. Some cards will automatically raise you credit limit. They are basically looking to make money fro you. If you often charge near the limit, and pay the minimum balance each month, they may raise your limit to get you to charge more, and pay more interest. You can also call them and ask. They have some internal rules to decide if, based on your history with them and your credit history, if you are a good risk. |
How to avoid maintenance fee when balance drops below minimum? | Looks like you have three options: Outside of this you might need to look for a different type of account. Hope that helps. |
Should I buy or lease a car given that its not a super luxury car and I only drive 15 miles/d on avg? | I have a few recommendations/comments: The trick here is to make it clear to the dealer that you will not be getting a new car from them and their only hope of making some money is to sell you your own car. You need to be prepared to walk away and follow through. DON'T buy a new car from them even if you end up turning it in! They could still come back a day later and offer a deal. Leasing a new car every 3 years is not the best use of money. You have to really, really like that new car feeling every three years and be willing to pay a premium for it. If you're a car nut (like me) and want to spend money on a luxury car, it's far wiser to purchase a slightly used luxury vehicle, keep it for 8+ years, and that way you won't have a car payment half the time! |
What's the best way to make money from a market correction? | What's the best strategy? Buy low and sell high. Now. A lot of people try to do this. A few are successful, but for the most part, people who try to time the market end up worse. A far more successful strategy is to save over your entire lifetime, put the money into a very low-cost market fund, and just let the average performance take you to retirement. Put another way, if you think that there is an obvious, no-fail, double-your-money-due-to-a-correction strategy, you're wrong. Otherwise everyone would do it. And someone who tells you that there is such a strategy almost surely will be trying to separate you from a good amount of your money. In the end, $80K isn't a life-altering, never-have-to-work-again amount of money. What I think you ought to do with it is: pay off any credit card debts you may have, pay a significant chunk of student loan or other personal loan debts you may have, make sure you have a decent emergency fund set aside, and then put the rest into diversified low-cost mutual funds. Think of it as a nice leg-up towards your retirement. |
Company is late in paying my corporate credit card statement - will it hurt my credit? | According to an article on Bankrate.com from 2011, yes, it can hurt your credit: With individual liability accounts, the employee holds all responsibility for the charges, even if the company pays the issuer directly. Joint liability means the company and employee share the responsibility for payments, says Mahendra Gupta, author of the RPMG survey. In both cases, if the card isn't paid and the account becomes delinquent, it will pop up on the employee's credit report and dent his or her credit score, says Barry Paperno, consumer affairs manager at myFICO.com. It doesn't matter if the company was supposed to make the payment; the repercussions fall on the employee. "It will impact your score no differently than if you were late on one of your own accounts," Paperno says. Usually, with corporate credit cards, the employee is liable along with the employer for charges on the card. The intent is to provide the employee with an incentive not to misuse the card. However, this can be a problem if your company is late in paying bills. In the distant past, I had a corporate credit card. I was not supposed to have to pay the bill, but I did receive a bill in the mail every month. And occasionally, the payment was late. In my case, these late payments never showed up on my credit report. I can't remember now whether or not this card was reported on my credit report at all. And I remember being told when I got the card that I was jointly responsible for the card with the company. However, your experience may be different. Do the on-time payments show up on your credit report? If so, that may be an indication that a late payment might appear. |
What is a “fiat” currency? Are there other types of currency? | A "fiat" currency is non-convertible paper currency that a government establishes as legal tender. Most countries today are using fiat currencies. The rest have currencies pegged (or convertible to) US Dollars (which is a fiat currency). In the past, money was usually based on precious metals such as gold or silver. Until the end of the gold standard, you could theoretically go the the US Treasury with a US Note or Federal Reserve Note and convert the note into a fixed quantity of gold or silver (depending on the note). The US had a bi-metallic currency policy for political reasons, which means that money was backed by both gold and silver. |
Is this legal: going long on call options and artificially increasing the price of the underlying asset seconds before expiration? | This can be done, you can be prosecuted for some forms of it, in any case there are more riskless ways of doing what you suggested. First, buying call options from market makers results in market makers buying shares at the same delta as the call option. (100 SHARES X DELTA = How many shares MM's bought). You can time this with the volume and depth of the shares market to get a bigger resulting move caused by your options purchase to get bigger quote changes in your option. So on expiration day you can be trade near at the money options back and forth between being out the money and in the money. You would exit the position into liquidity at a profit. The risk here is that you can be sitting on a big options position, where the commissions costs get really big, but you can spread this out amongst several options contracts. Second, you can again take advantage of market maker inefficiencies by getting your primary position (whether in the share market or options market) placed, and then your other position being a very large buy order a few levels below the best bid. Many market makers and algorithms will jump in front of your, they think they are being smart, but it will raise the best bid and likely make a few higher prints for the mark, raising the price of your call option. And eventually remove your large buy order. Again, you exit into liquidity. This is called spoofing. There have been some regulatory actions against people in doing this in the last few years. As for consequences, you need to put things into perspective. US capital market regulators have the most nuanced regulations and enforcement actions of worldwide capital market regulators, and even then they get criticized for being unable or unwilling to curb these practices. With that perspective American laws are basically a blueprint on what to do in 100 other country's stock exchanges, where the legislature has never gotten around to defining the same laws, the securities regulator is even more underfunded and toothless, and the markets more inefficient. Not advice, just reality. |
For very high-net worth individuals, does it make sense to not have insurance? | I think the key to this question is your last sentence, because it's applicable to everyone, high net-worth or not: How would one determine whether they are better off without insurance? In general, insurance is a net good when the coverage would prevent a 'catastrophic' event. If a catastrophic event doesn't happen, oh well, you wasted money on insurance. If it does happen, you just saved yourself from bankruptcy. These are two separate outcomes, so taking the 'average' cost of a catastrophic event (and weighing that against the more expensive insurance premiums) is not practical. This is a way of reducing risk, not of maximizing returns. Let the insurance company take the risk - they benefit from having a pool of people paying premiums, and you benefit because your own life has less financial risk. Now for something like cheap home electronics, insurance is a bad idea. This is because you now have a 'pool' of potential risks, and your own life experience could be close to the 'average' expected result. Meaning you'll pay more for insurance than you would just replacing broken things. This answer is another good resource on the topic. So to your question, at what point in terms of net-worth does someone's house become equivalent to you and your toaster? Remember that if you have home fire insurance, you are protecting the value of your house, because that loss would be catastrophic to you. But a high net-worth individual would also likely find the loss of their house catastrophic. Unless they are billionaires with multiple 10M+ mansions, then it is quite likely that regardless of wealth, a significant portion of their worth is tied up in their home. Even 10% of your net worth would be a substantial amount. As an example, would someone worth $1M have only a 100k home? Would someone worth $10M have only a $1M Home? Depends on where they live, and how extravagantly. Similarly, if you were worth $10M, you might not need extra insurance on your Toyota Camry, but you might want it if you drive a $1M Ferrari! Not to mention that things like auto insurance may cover you for liability, which could extend beyond the value of your car, into medical and disability costs for anyone in an accident. In fact, being high net-worth may make you more vulnerable to lawsuits, making this insurance even more important. In addition, high net-worth individuals have insurance that you or I have no need of. Things like kidnapping insurance; business operation insurance, life insurance used to secure bank loans. So yes, even high net-worth individuals may fear catastrophic events, and if they have so much money - why wouldn't they pay to reduce that risk? Insurance provides a service to them the same as to everyone else, it's just that the items they consider too 'cheap' too insure are more expensive than a toaster. Edit to counter concerns in some other answers, which say that insurance is "always a bad idea": Imagine you are in a kafka-esque episode of "Let's Make a Deal". Monty Hall shows you two parallel universes, each with 100 doors. You must choose your universe, then choose a door. The first universe is where you bought insurance, and behind every door is a penalty of $200. The second universe is where you didn't buy insurance, and behind 99 doors is nothing, with one random door containing a penalty of $10,000. On average, playing the game 99,999 times, you will come out ahead 2:1 by not buying insurance. But you play the game only maybe 3 times in your life. So which universe do you choose? Now, you might say "pfft - I can cover the cost of a 10k penalty if it happens". But this is exactly the point - insurance (unless already required by law) is a net good when it covers catastrophic losses. If you are wealthy enough to cover a particular loss, you typically shouldn't buy that insurance. That's why no one should insure their toaster. This is not a question of "average returns", it is a question of "risk reduction". |
Can rent be added to your salary when applying for a mortgage? | I can answer Scenario #3. If you are purchasing a property with buy-to-let intentions […] can you use the rental income exclusively to fund the mortgage repayments? Yes – this is exactly how buy-to-let mortgage applications are evaluated. Lenders generally expect you to fund the mortgage payments with rent. They look for the anticipated monthly rent income to cover a minimum of 125% of the monthly mortgage payment. This is to make sure you can allow for vacant periods, maintenance, compliance with rules and regulations, and still be in profit (i.e. generate a positive yield on your investment). However, buy-to-let (BTL) mortgage lenders also generally expect you to own your own home to begin with. It's up to them, but rare is the lender who will provide a buy-to-let mortgage to a non-owner-occupier. This is because of point 2 above. The lender doesn't want you to end up living in the property because then you'll need to repay the loan capital, since you'll always need somewhere to live. This makes the economics of BTL unfavourable. They look at your application as a business proposal: quite different to a residential mortgage application, which is what your question seems to be addressing. Bottom line: You're right about scenario #3 but it sounds like you're trying to afford a home first, whereas BTL is best viewed as an investment for someone who already has their main residence under ownership (mortgaged or otherwise). As for Scenarios #1 and #2 I can't offer first hand answers but I think Aakash M. and Steve Melnikoff have covered it. |
What is a bull put spread? | Bull means the investor is betting on a rising market. Puts are a type of stock option where the seller of a put option promises to buy 100 shares of stock from the buyer of the put option at a pre-agreed price called the strike price on any day before expiration day. The buyer of the put option does not have to sell (it is optional, thats why it is called buying an option). However, the seller of the put is required to make good on their promise to the buyer. The broker can require the seller of the put option to have a deposit, called margin, to help make sure that they can make good on the promise. Profit... The buyer can profit from the put option if the stock price moves down substantially. The buyer of the put option does not need to own the stock, he can sell the option to someone else. If the buyer of the put option also owns the stock, the put option can be thought of like an insurance policy on the value of the stock. The seller of the put option profits if the stock price stays the same or rises. Basically, the seller comes out best if they can sell put options that no one ends up using by expiration day. A spread is an investment consisting of buying one option and selling another. Let's put bull and put and spread together with an example from Apple. So, if you believed Apple Inc. AAPL (currently 595.32) was going up or staying the same through JAN you could sell the 600 JAN put and buy the 550 put. If the price rises beyond 600, your profit would be the difference in price of the puts. Let's explore this a little deeper (prices from google finance 31 Oct 2012): Worst Case: AAPL drops below 550. The bull put spread investor owes (600-550)x100 shares = $5000 in JAN but received $2,035 for taking this risk. EDIT 2016: The "worst case" was the outcome in this example, the AAPL stock price on options expiry Jan 18, 2013 was about $500/share. Net profit = $2,035 - $5,000 = -$2965 = LOSS of $2965 Best Case: AAPL stays above 600 on expiration day in JAN. Net Profit = $2,035 - 0 = $2035 Break Even: If AAPL drops to 579.65, the value of the 600 JAN AAPL put sold will equal the $2,035 collected and the bull put spread investor will break even. Commissions have been ignored in this example. |
Magazine subscription leads to unauthorized recurring payment | In 2010, the Restore Online Shoppers' Confidence Act was passed, which prohibited certain activities, most of which had to do with online sites sharing your CC info with third parties. However, the final part of the act deals with "negative option" marketing, which is basically what you're describing - "We will charge you unless you say no". It requires three components to allow a negative option: If you did not explicitly enroll in automatic payment, and made the initial purchase online (or made your most recent purchase online, I suspect) then it sounds like this was a violation of this act. On the other hand, the act isn't terribly careful about defining terms, and is really quite vague in a lot of places, so it's possible they would argue they are not using a 'negative option' scheme but instead simply charging your bill similar to how your phone company might use autopay. If it was not online, then this probably doesn't apply. Instead, the FTC's rule on Negative Option with regard to sale of goods applies. Title 16 Part 425 covers this; this law is much less limiting as to what the marketer can do. |
Are stock index fund likely to keep being a reliable long-term investment option? | Stock index funds are likely, but not certainly, to be a good long-term investment. In countries other than the USA, there have been 30+ year periods where stocks either underperformed compared to bonds, or even lost value in absolute terms. This suggests that it may be an overgeneralization to assume that they always do well in the long term. Furthermore, it may suggest that they are persistently overvalued for the risk, and perhaps due for a long-term correction. (If everybody assumes they're safe, the equity risk premium is likely to be eaten up.) Putting all of your money into them would, for most people, be taking an unnecessary risk. You should cover some other asset classes too. If stocks do very well, a portfolio with some allocation to more stable assets will still do fairly well. If they crash, a portfolio with less risky assets will have a better chance of being at least adequate. |
Do investors go long option contracts when they cannot cover the exercise of the options? | I do this often and have never had a problem. My broker is TD Ameritrade and they sent several emails (and even called and left a message) the week of expiry to remind me I had in the money options that would be expiring soon. Their policy is to automatically exercise all options that are at least $.01 in the money. One email was vaguely worded, but it implied that they could liquidate other positions to raise money to exercise the options. I would have called to clarify but I had no intention of exercising and knew I would sell them before expiry. In general though, much like with margin calls, you should avoid being in the position where the broker needs to (or can do) anything with your account. As a quick aside: I can't think of a scenario where you wouldn't be able to sell your options, but you probably are aware of the huge spreads that exist for many illiquid options. You'll be able to sell them, but if you're desperate, you may have to sell at the bid price, which can be significantly (25%?) lower than the ask. I've found this to be common for options of even very liquid underlyings. So personally, I find myself adjusting my limit price quite often near expiry. If the quote is, say, 3.00-3.60, I'll try to sell with a limit of 3.40, and hope someone takes my offer. If the price is not moving up and nobody is biting, move down to 3.30, 3.20, etc. In general you should definitely talk to your broker, like others have suggested. You may be able to request that they sell the options and not attempt to exercise them at the expense of other positions you have. |
Cannot get a mortgage because I work through a recruiter | As a follow-up, I was able to find a bank that gave me a loan. I just called several banks listed on Yelp, and one ended up working with me. It is also possible that the previous banks misunderstood me and assumed I was 1099 and not W2. I made it very clear to this guy that I was W2, and there was absolutely no problem. Also, it turned out the recruiter I work for has special paperwork their employees can give to lenders to verify W2 employment. So, I have been in my condo since January. And, the condo was a little under $250K. Anyway, I still think it's ABSOLUTELY RIDICULOUS that banks would not give a loan to a web developer who is in super high demand and making well over 100K/year -- even if I am 1099. I have never, ever in my life been late on a single payment for anything, and I have an 800 credit score. To even question that I could not make payments is ludicrous. Whenever I put my resume on monster.com (just one web site), I receive about 20 phone calls daily -- and I am not exaggerating even slightly. |
Gym membership tax deductible? | Assuming its in the US: No, it is not, and such things are usually treated as "red flags" for audit (and no, golf club memberships are not deductible either). The food expenses are not deductible in their entirety as well, only up to 50% of the actual expense, and only if it is directly business related. From what you've described, it sounds like if you have an audit coming you'll be in trouble. The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. |
Thinking of doing an MBA: Is an $80K top MBA school better than a $24K online MBA school? | I met two MBA graduates from Harvard - both made VPs at large Canadian companies (i.e. $1B or greater annual revenue) after working 2-5 years as management consultants post-graduation - one is now a divisional president making over $500K in salary along. When I asked one of them (one that is not yet making $500K in salary) about the Harvard MBA difference, he said the brand-name and the network probably set it apart from others, since most MBA schools now uses the same material as Harvard's. I tend to agree with his thoughts - I never did felt the caliber of my professor had much to do with my ability to apply what I learn to practical use. In my own MBA education, the professor did more facilitation than "teaching". Apparently that is the norm, as MBA is less about being fed information than it is about demonstrating the ability to analyze and present information. Back to M.Attia's question, I would go with the highest ranked MBA education I could afford (both financially and lifestyle). A friend of mine was able to get his employer to pay for the $90K tuition fee from Rotman, along with job security for 5 years (not a bad idea in this economy). I settled for Lansbridge University in Fedricton because the flexibility of distance learning and cost was important to me, though I was able to get my employer to pay for the MBA after I started (I switched group within the company shortly after I started my MBA and my new boss was able to get the approval without locking me in). |
Dormant company, never paid taxes, never traded in UK - should I have notified the HMRC? | You don't have to register for corporation tax until you start doing business: After you’ve registered your company with Companies House, you’ll need to register it for Corporation Tax. You’ll need to do this within 3 months of starting to do business. Since you haven't needed to do that yet, there also shouldn't be any need to tell HMRC you've stopped trading. So it should just be a question of telling Companies House - I guess it's possible they'll first want you to provide the missing accounts. |
What is the preferred way to finance home improvements when preparing to sell your house? | You could take on more work. Pizza delivery, lawn work, babysitting, housecleaning, etc. None of those are much fun, but all are better than opening a credit card bill. |
Do I need to file taxes jointly with my girlfriend if we live together? | In Ontario, common law marriage requires 3 years of cohabitation, and doesn't give rights to property (which remains separate). I'd say in your situation you can still file as single, but I'd suggest asking your tax accountant to be sure. |
Should I pay cash or prefer a 0% interest loan for home furnishings? | There are lots of good points here already, but something that hasn't been mentioned yet is what would happen if the purchased items break or are somehow defective? Depending on the warranty and how trustworthy the company is, there could be an advantage to not having fully paid for the item yet when a defect is discovered, as it might incentivize the company to be more attentive to your warranty claim, since they are faced with knowing that you could stop making payments if they don't act in a timely manner. Note I'm not suggesting you stop making payments in this case, just that companies (and banks) are oftentimes more willing to work with you when you owe them money. |
Paid part of my state refund back last year; now must declare the initial amount as income? | If you get 1099-G for state tax refund, you need to declare it as income only if you took deduction on state taxes in the prior year. I.e.: if you took standard deductions - you don't need to declare the refund as income. If you did itemize, you have to declare the refund as income, and deduct the taxes paid last year on your schedule A. If this year you're not itemizing - you lost the tax benefit. If it was not clear from my answer - the taxes paid and the refund received are unrelated. The fact that you paid tax and received refund in the same year doesn't make them in any way related, even if both refer to the same taxable year. |
Will I be liable for taxes if I work for my co. in India for 3 months while I am with my husband in UK | For information about the UK situation, check the government website at http://www.hmrc.gov.uk/incometax/tax-arrive-uk.htm It all depends on the time. If I read it right (but you should check yourself) you can stay almost six months at a time, but at most 3 months on average over 4 years. Above this limit, you should either avoid the situation, or get professional advice, because things will be complicated. |
How is not paying off mortgage better in normal circumstances? | There are several reasons: |
Variable Annuity inside a Roth IRA? What is this and how can I switch it to something else? | Your financial advisor got a pretty good commission for selling you the annuity is what happened. As for transferring it over to Vanguard (or any other company) and investing it in something else, go to Vanguard's site, tell them that you want to open a new Roth IRA account by doing a trustee-to-trustee transfer from your other Roth IRA account, and tell them to go get the funds for you from your current Roth IRA trustee. You will need to sign some papers authorizing Vanguard to go fetch, make sure all the account numbers and the name of the current trustee (usually a company with a name that includes Trust or Fiduciary as shown on your latest statement) are correct, and sit back and wait while your life improves. |
How does Vanguard determine the optimal asset allocation for their Target Retirement Funds? | While the Vanguard paper is good, it doesn't do a very good job of explaining precisely why each level of stocks or bonds was optimal. If you'd like to read a transparent and quantitative explanation of when and why a a glide path is optimal, I'd suggest the following paper: https://www.betterment.com/resources/how-we-construct-portfolio-allocation-advice/ (Full disclosure - I'm the author). The answer is that the optimal risk level for any given holding period depends upon a combination of: Using these two factors, you construct a risk-averse decision model which chooses the risk level with the best expected average outcome, where it looks only at the median and lower percentile outcomes. This produces an average which is specifically robust to downside risk. The result will look something like this: The exact results will depend on the expected risk and return of the portfolio, and the degree of risk aversion specified. The result is specifically valid for the case where you liquidate all of the portfolio at a specific point in time. For retirement, the glide path needs to be extended to take into account the fact that the portfolio will be liquidated gradually over time, and dynamically take into account the longevity risk of the individual. I can't say precisely why Vanguard's path is how it is. |
How credible is Stansberry's video “End of America”? | Others have covered this pretty well, but as someone who once worked for the company that allows Stansberry to publish, let me confirm that their business is about getting you to buy into the financial worldview they promote so that they can sell you more and more "newsletters" and "services". Nothing else. It's a marketing company, and Stansberry is nothing more than a copywriter. |
Should I pay off my student loan before buying a house? | IMO student loans are junk debt that should be dealt with as soon as possible. Buying a house comes with risks and expenses (repairs, maintenance, etc) and dealing with a student loan at the same time just makes it tougher. Personally, I would try to pay off at least a few of the loans first. |
Using stable short-term, tax-free municipal bond funds to beat the bank? | Banks' savings interest is ridiculous, has always been, compared to other investment options. But there's a reason for that: its safe. You will get your money back, and the interest on it, as long as you're within the FDIC insurance limits. If you want to get more returns - you've got to take more risks. For example, that a locality you're borrowing money to will default. Has happened before, a whole county defaulted. But if you understand the risks - your calculations are correct. |
When looking at a mutual fund, how can you tell if it is a traditional fund or an ETF? | An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock. To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol. Traditional mutual funds have ticker symbols that end in "X", and ETFs have ticker symbols that do not end in "X". The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF. JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example. This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF. (In the example of JPEM above, they put "ETF" right in the fund name.) If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the "investment minimums" of the fund. JFAMX has a minimum initial investment of $1000. ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is. So if you look at the "Fees and Investment Minimums" section of the JPEM page, you'll see the fees listed, but not any investment minimums. |
What are the reasons to get more than one credit card? | In the case of reward cards, different cards may offer different rewards for different kind of purchases. For example, in the UK, one of the Amex cards offers 1.25% cashback on all purchases, whereas one of the Santander cards offers 3% on fuel, 2% or 1% on certain other transactions, and nothing on others. Of course, you then have to remember to use the right card! Another reason is that a person may use a card for a while, build up a good credit limit, and then move to a different card (perhaps because it has better rewards, or a lower interest rate, etc) without cancelling the first. If it costs nothing to keep the first card, then it can be useful to have it as a spare. |
Canadian in California - filing taxes as a non-resident | What do you mean by "Canadian income"? Was it income paid to you as wages for the job you did in the US? Or rental/interest income in Canada? If the former - then it doesn't go to NEC, it goes to the main part of the return. If the latter - it doesn't appear on your NR return at all. Yes, it is to validate your residency status. It has no other effect on your taxes. |
Can a company have a credit rating better than that of the country where it is located? | BlackJack's answer is technically correct: government credit ratings are independent of corporate credit ratings. The rating should reflect the borrower's ability to repay its obligations. One reason the book you read may have stated that corporate credit ratings cannot be better than the government's credit rating is that the government, unlike the corporation, can steal (or in government parlance "tax") from anywhere or anyone. So if a government finds itself in financial difficulty it could simply take the cash from corporations or people with high credit ratings by a variety of methods: implement windfall profit taxes, take over industries, take peoples gold, tax pension savings, or simply take peoples pensions or retirement savings. This increases the risk of doing business in a country with an over-extended government. Over extended governments do not die gracefully. They only die when there is nothing left to steal. |
I want to invest in a U.S.-based company with unquoted stocks, but I am a foreigner. How to do this? | Life would be nicer had we not needed lawyers. But for some things - you better get a proper legal advice. This is one of these things. Generally, the United States is a union of 50 different sovereign entities, so you're asking more about Texas, less about the US. So you'd better talk to a Texas lawyer. Usually, stock ownership is only registered by the company itself (and sometimes not even that, look up "street name"), and not reported to the government. You may get a paper stock certificate, but many companies no longer issue those. Don't forget to talk to a lawyer and a tax adviser in your home country, as well. You'll be dealing with tax authorities there as well. The difference between "unoted" (never heard of this term before) and "regular" stocks is that the "unoted" are not publicly traded. As such, many things that your broker does (like tax statements, at source withholding, etc) you and your company will have to do on your own. If your company plans on paying dividends, you'll have to have a US tax ID (ITIN or SSN), and the company will have to withhold the US portion of the taxes. Don't forget to talk to a tax adviser about what happens when you sell the stock. Also, since the company is not publicly traded, consider how will you be able to sell it, if at all. |
What can I take from learning that a company's directors are buying or selling shares? | You can learn very little from it. Company directories are often given share options or shares as a bonus, and because of that they are unlikely to buy shares. When they sell shares, you'll hear people shouting "so-and-so sold his or her shares, they must know something bad about the company". The truth is that you can't eat or drink shares. If that company director owning shares worth a million dollars wants to buy a new Ferrari, he will find that Ferrari doesn't give free cars to people owning lots of shares. He actually has to sell the shares to get the money for the car, and that's what he does. |
What taxes are assessed on distributions of an inherited IRA? | All transactions within an IRA are irrelevant as far as the taxation of the distributions from the IRA are concerned. You can only take cash from an IRA, and a (cash) distribution from a Traditional IRA is taxable as ordinary income (same as interest from a bank, say) without the advantage of any of the special tax rates for long-term capital gains or qualified dividends even if that cash was generated within the IRA from sales of stock etc. In short, just as with what is alleged to occur with respect to Las Vegas, what happens within the IRA stays within the IRA. Note: some IRA custodians are willing to make a distribution of stock or mutual fund shares to you, so that ownership of the 100 shares of GE, say, that you hold within your IRA is transferred to you in your personal (non-IRA) brokerage account. But, as far as the IRS is concerned, your IRA custodian sold the stock as the closing price on the day of the distribution, gave you the cash, and you promptly bought the 100 shares (at the closing price) in your personal brokerage account with the cash that you received from the IRA. It is just that your custodian saved the transaction fees involved in selling 100 shares of GE stock inside the IRA and you saved the transaction fee for buying 100 shares of GE stock in your personal brokerage account. Your basis in the 100 shares of GE stock is the "cash_ that you imputedly received as a distribution from the IRA, so that when you sell the shares at some future time, your capital gains (or losses) will be with respect to this basis. The capital gains that occurred within the IRA when the shares were imputedly sold by your IRA custodian remain within the IRA, and you don't get to pay taxes on that at capital gains rates. That being said, I would like to add to what NathanL told you in his answer. Your mother passed away in 2011 and you are now 60 years old (so 54 or 55 in 2011?). It is likely that your mother was over 70.5 years old when she passed away, and so she likely had started taking Required Minimum Distributions from her IRA before her death. So, You should have been taking RMDs from the Inherited IRA starting with Year 2012. (The RMD for 2011, if not taken already by your mother before she passed away, should have been taken by her estate, and distributed to her heirs in accordance with her will, or, if she died intestate, in accordance with state law and/or probate court directives). There would not have been any 10% penalty tax due on the RMDs taken by you on the grounds that you were not 59.5 years old as yet; that rule applies to owners (your mom in this case) and not to beneficiaries (you in this case). So, have you taken the RMDs for 2012-2016? Or were you waiting to turn 59.5 before taking distributions in the mistaken belief that you would have to pay a 10% penalty for early wthdrawal? The penalty for not taking a RMD is 50% of the amount not distributed; yes, 50%. If you didn't take RMDs from the Inherited IRA for years 2012-2016, I recommend that you consult a CPA with expertise in tax law. Ask the CPA if he/she is an Enrolled Agent with the IRS: Enrolled Agents have to pass an exam administered by the IRS to show that they really understand tax law and are not just blowing smoke, and can represent you in front of the IRS in cases of audit etc, |
Can I open a personal bank account with an EIN instead of SSN? | According to IRS Publication 1635, Understanding your EIN (PDF), under "What is an EIN?" on page 2: Caution: An EIN is for use in connection with your business activities only. Do not use your EIN in place of your social security number (SSN). As you say your EIN is for your business as a sole proprietor, I would also refer to Publication 334, Tax Guide for Small Business, under "Identification Numbers": Social security number (SSN). Generally, use your SSN as your taxpayer identification number. You must put this number on each of your individual income tax forms, such as Form 1040 and its schedules. Employer identification number (EIN). You must also have an EIN to use as a taxpayer identification number if you do either of the following. Pay wages to one or more employees. File pension or excise tax returns. If you must have an EIN, include it along with your SSN on your Schedule C or C-EZ as instructed. While I can't point to anything specifically about bank accounts, in general the guidance I see is that your SSN is used for your personal stuff, and you have an EIN for use in your business where needed. You may be able to open a bank account listing the EIN as the taxpayer identification number on the account. I don't believe there's a legal distinction between what makes something a "business" account or not, though a bank may have different account offerings for different purposes, and only offer some of them to entities rather than individuals. If you want to have a separate account for your business transactions, you may want them to open it in the name of your business and they may allow you to use your EIN on it. Whether you can do this for one of their "personal" account offerings would be up to the bank. I don't see any particular advantages to using your EIN on a bank account for an individual, though, and I could see it causing a bit of confusion with the bank if you're trying to do so in a way that isn't one of their "normal" account types for a business. As a sole proprietor, there really isn't any distinction between you and your business. Any interest income is taxable to you in the same way. But I don't think there's anything stopping you legally other than perhaps your particular bank's policy on such things. I would suggest contacting your bank (or trying several banks) to get more information on what account offerings they have available and what would best fit you and your business's needs. |
What is a negotiable security and how are they related to derivatives? | As Dheer pointed out, Wikipedia has a good definition of what a negotiable instrument is. A security is an instrument or certificate that signifies an ownership interest in something tangible. 1 share of IBM represents some small fraction of a company. You always have the ability to choose a price you are willing to pay -- which may or may not be the price that you get. A derivative is a level of abstraction linked by a contract to a security... if you purchase a "Put" contract on IBM stock, you have a contractural right to sell IBM shares at a specific price on a specific date. When you "own" a derivative, you own a contract -- not the actual security. |
I carelessly invested in a stock on a spike near the peak price. How can I salvage my investment? | The worth of a share of stocks may be defined as the present cash value of all future dividends and liquidations associated therewith. Without a crystal ball, such worth may generally only be determined retrospectively, but even though it's generally not possible to know the precise worth of a stock in time for such information to be useful, it has a level of worth which is absolute and not--unlikely market price--is generally unaffected by people buying and selling the stock (except insofar as activities in company stock affect a company's ability to do business). If a particular share of stock is worth $10 by the above measure, but Joe sells it to Larry for $8, that means Joe gives Larry $2. If Larry sells it to Fred $12, Fred gives Larry $2. The only way Fred can come out ahead is if he finds someone else to give him $2 or more. If Fred can sell it to Adam for $13, then Adam will give Fred $3, leaving Fred $1 better off than he would be if he hadn't bought the stock, but Adam will be $3 worse off. The key point is that if you sell something for less than it's worth, or buy something for more that it's worth, you give money away. You might be able to convince other people to give you money in the same way you gave someone else money, but fundamentally the money has been given away, and it's not coming back. |
Is it possible to know the probability that a trade is successful? | If you had a trading system, and by trading system I mean the criteria setup that you will take a trade on, then once a setup comes up at what price will you open the trade and at what price you will close the trade. As an example, if you want to buy once price breaks through resistance at $10.00 you might place your buy order at $10.05. So once you have a written trading system you could do backtesting on this system to get a percentage of win trades to loosing trades, your average win size to average lose size, then from this you could work out your expectancy for each trade that you follow your trading system on. |
Ongoing things to do and read to improve knowledge of finance? | The best learning technique for me is not to dredge through books in order to gain a better understanding of finance. This is tedious and causes me to lose interest. I'm not sure of your tolerance for this type of learning. I tend to learn in small pieces. Something piques my interest and I go off reading about that particular topic. May I suggest some alternate methods: |
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